Newman are all, I’m happy to admit, better looking than I am. But how much better looking? We’ve all got the same numbers of eyes, noses, mouths, and ears. None of us are deformed or have a skin condition or any startlingly displeasing physical feature. The differences in our physiognomies come down to tiny differences in the exact weight and balance of our features – a matter of millimetres here, a shade of colouring there.
When it comes to money, these happy resemblances are entirely absent. A careful cross-country study of household wealth conducted in 2000 put the median household wealth in the United States at about $39,000. (Median is the ‘man in the middle’ way of looking at averages, so that exactly 50 per cent of households has total wealth above the median level, and exactly 50 per cent has total wealth below that level. The British median household wealth, by the way, was a few thousand dollars higher than in the United States. America is richer in aggregate, but wealth in Britain is more evenly spread.) Now, $39,000 is a perfectly nice amount of assets. You yourself may be poorer or richer than that, but, almost by definition, the chances are that you know somebody whose household is not so far off that level of aggregate wealth. Unless you are a hermit, or hang out exclusively with the very rich or the very poor, then you can’t help bumping into somebody who’s on or around that median level.
To Bill Gates, however, that $39,000 is an entirely trivial sum. He’s worth around $60 billion. That’s almost two million times better off than the ‘man in the middle’ median. If Usain Bolt was that much faster than me, he’d be running the hundred metres in one one-hundredth of a millisecond. If Jude Law was that much better looking than me – well, he just couldn’t be. Most ordinary human attributes just aren’t scalable in that way. Because financial wealth is conjured from far beyond the reach of biology, aggregating profits over the entire globe and then capitalizing them to reflect a value of all future profits too, it produces outcomes that nothing in nature has ever accustomed us to. Evolution simply hasn’t given us a template for dealing with a message which, crudely interpreted, reads ‘you are two million times worse than that geeky bloke with the unfortunate glasses’. And, naturally enough, humans being human, we tend to react to the unfamiliarity of that message in the simplest possible way: by disliking the unfortunate person who delivers it.
There are other reasons why business types are generally unloved. The good that entrepreneurs do goes largely unnoticed – even by themselves. When I spoke to entrepreneurs and asked them about their own contribution to the wider public good, they all, every one, began by talking about their charitable and philanthropic work. Money donated, time given, organizations put to work. And they all missed the point. Missed it by a mile and two hundred and thirty-something years, because back in 1776 Adam Smith wrote:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.
These lines can’t be too often repeated. Entrepreneurs don’t have to be nice guys to do good. They do good by being entrepreneurs.
An example: one of those I interviewed was a serial entrepreneur called Martyn Rose, a vigorous fifty-something who’s donated a large amount of time and cash to a number of charities. Back in the 1970s, Martyn made his first investment in a company that made waterproofing chemicals. He invested during a recession – invested everything he had and borrowed heavily on top – and discovered that waterproofing chemicals sold well in times of hardship. Instead of chucking stuff out when it started to leak, consumers bought something to patch it up and keep it going. The investment did well. He reinvested his profits. He improved his products. He made some efficiency savings. The company grew and went on to make his fortune. (His first fortune, that is; he made a few more after that.)
In speaking about, and disparaging his achievement, Martyn said that if he hadn’t done what he’d done, then someone else would have done it and that, in any case, it was only waterproofing materials, for crying out loud. It wasn’t a cure for cancer. It wasn’t cheap energy. It didn’t put food in the mouths of the starving.
That’s all true, but Adam Smith teaches us to think differently. When Adam Smith wrote, the world around him was desperately poor. Poor in all kinds of things including, as it happens, cheap and effective waterproofing materials. The lack of those materials wasn’t a particularly significant part of the problem. You could have made a list of the hundred things that the world back then most needed and waterproofing materials would not have been on the list.
Yet, even if things only matter a bit, they still matter. We value those things enough to want to buy them, even though we have only a limited budget and plenty of other things we could spend our money on. Add up all a company’s sales, knock off the cost of its inputs (raw materials and the like), and you have a fair measure of how much value – as measured by us, the buyers – that company has brought into the world. And the magic of capitalism is its win-win nature. It’s not just consumers that are made happy by all their tins of waterproofing kit. It’s the people who make them, who are given a decent wage in exchange for their labour, who are able to raise their families without want or worry. And, magic upon magic, the whole merry-go-round whirls round happily enough that the government can take its share of everything in tax, so that schools can be run and roads built and soldiers paid and the sick cared for.
That’s a pretty mighty amount of good, yet it’s a contribution that doesn’t fit our model of what do-gooding should look like. Martyn didn’t personally nurse the sick or bring soup to the homeless. And his motivations were never selfless, based not on ‘our necessities’ but on his ‘advantages’, advantages which ended up making him a wealthy man. Because his contribution didn’t fit our, essentially pre-capitalist, model of what these things should look like, we tend simply to ignore it.
But if the good that entrepreneurs do seems invisible, the harm that they do is very much in evidence. Sometimes workers have to be fired or factories moved. Sometimes competitors are put out of business or raided and broken up. If the benefits of capitalism are so diffuse they become almost invisible, the costs are often painfully obvious and personal. That’s not a good recipe for universal love.
It gets worse. Senior management types are renowned for a kind of cheese-paring pettiness, always inclined to quarrel over pennies where any decent person would just show a little human generosity. Examples are legion. Call a phone company – a company whose business is based, you’d have thought, on permitting two humans to communicate by phone – and yet you have to plough your way through a million menus to get through to an actual human and by the time you do, you’ve got so lost that you’ve been pressing buttons at random and end up being put through to the Major Emergency Response Team when all you ever wanted was to change your calling plan. Or you can maintain a positive balance with your bank 364 days a year, then you go into overdraft for just one day by just one measly pound and you’ll all of a sudden see a whole spatter of charges arise that you probably gave your theoretical consent to somewhere sometime, but whose sheer gall still takes your breath away.
These things are outrageous, at least in the sense that I personally get regularly outraged by them. Yet, in my rational moments, I know why these things happen. Where consumers are happy to measure things in pounds, business types are forced to measure them in pence. A typical phone company might make a net profit of only 7p in the pound, a supermarket more like 4p, a bookstore maybe 2p. An airline is lucky to make anything at all. A bank has a return on assets of around one-third of a penny in the pound. If companies like these start being generous about trifles – a fifth of a penny here, a quarter of a penny there – they’ll destroy their profitability at a stroke.
The British cycling team knows a thing or two about winning. British cyclists destroyed their competition at the 2008 Olympic Games and they’re expected to do the same again in London in 2012. Their performance director, David Brailsford, summarizes his philosophy of success very simply as the ‘aggregation
