Kenneth and William Hopper are the brothers that wrote “The Puritan Gift” in 2007. For details please visit our book website www.puritangift.com.
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Kenneth and William Hopper are the brothers that wrote “The Puritan Gift” in 2007. For details please visit our book website www.puritangift.com.
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Whilst the sentiments of your thought solidifying book echoed both with my experience and heritage (my Edinburgh grandfather’s admonition still rings in my ears: “less polish, more effort, son”), the concluding chapter left me uneasy.
The finance metric driven, self obsessed management cohort that now reigns, seemingly unchallenged, has been supported by the dominance of the investment intermediary on the equity register, as you correctly pointed out. A true shift in management practice will not be possible until the instituional investment industry places capital primarily on the appreciation of management quality rather than on anticipated short term price performance. Your comments on what might occasion such a change could have calmed my unease, for I do not see how the Clapham omnibus investor can be rescued from the confidence trick that is investment intermediation as generally currently practised.
Your positive comments on the growth in private equity were also of concern. Rather than evidence of a return to Puritan principals, I would put its growth down more to the possibility of increased debt leverage afforded by Greenspan’s “get out of jail free” regime and short term performance driven investment bankers dripping with other folks’ money. Most private equity deals appear to have as their driving ethos not the long term health of the entity, but the short term financial gain afforded by leverage, whittling to the bone and exiting based on multiples concoted by our aforementioned investment intermediaries, rather than the installation of managerial precepts along the lines described in your book. “Private equity” is just good ole fashioned LBO mutton dressed up different.
I close with a thought of my own. For the life of me, I have never understood why a financial dividend in the form of interest should attract a tax liability write off. Let us level the debt versus equity playing field. Anyway, as some unfortuneates are finding out, the Wall Street shell trick can turn debt into equity in the twinkling of a writ.
Thanks for the book,
Kevin Mitchelson
Comment by Kevin Mitchelson — August 20, 2008 @ 2:51 am |
Dear Kevin,
As authors, my brother and I have a lot of sympathy with what you say. We were probably too kind to private equity (PE) in our last chapter. We will review this aspect for the paperback which is due in February. The group of undesirable practices known as ‘financial engineering’ (also known as ‘greed is good’ and exemplified by extraordinary ‘debt leverage’) prevails in both the listed and the unlisted (PE) market. See for example the funding of the British Airports monopoly. The one big advantage that the unlisted market enjoys over the listed market from our point of view is that it is not dominated by the tyranny of the quarterly statement, but that is only one part of a complex picture.
Assuming that we all agree that there were good practices in the past and that the world should revert to them (the basic thesis of our book), then the question is: what should we do about it? I think the answer is threefold.
• the tide is probably already turning, as we describe in the last chapter — see the words and actions of the likes of Jeff Immelt of GE.
• we hoped to speed it on its way by writing our book, which has been a ’slow burn’ but is starting to make an impact. Ken and I are now being asked to address conferences. Both the FT and the BBC have shown interest in our ideas.
• we would like to set up a think tank called the CCS Institute — named after the Civil Communications Section of General MacArthur’s command (see chapter 10) — towards the end of the year to promote our 25 Principles. This idea will be discussed at a seminar in Dublin on October 9/10. This body would be designed to teach the world the lessons that our Three Wise Men taught to the Japanese.
I hope that provides at least a partial answer to your question.
Will (also for Ken)
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Comment by William Hopper — August 25, 2008 @ 8:11 pm |