A Capital

Critique
sunshine, espresso and 35 hour week attitude is ultimately selsh. Generational inequality sits at its heart. It is about somebody sitting somewhere comfortably and failing to build a future. Your medicine in the book seems quite modest when compared to the diagnosis was it the short end of the wedge? I think people always have this tendency to think of very dramatic, draconian solutions to x things. I prefer a far more surgical approach. One of our biggest problems is short-termism, it prevents investment in research and development and capital expenditure, i.e. preparation for the future. It must be tackled at its source: shareholders and CEOs. Firstly a two tier tax system should be established. Short term investment should be taxed at a higher rate than long term equivalents. Secondly, rewarding senior executives on a one to three year basis is outrageous; the term does not cover a cycle in any business. This should be increased to a minimum of ve years. Thirdly, stock prices have lost their relationship with the real performance of a business. Look at the US over the last three years, the value of the stock market has increased by around 60 per cent yet the earnings of businesses have stayed at. The instruments and measures of a shopkeeper should be brought back, we need to go back to basics. Your reference to the Swedish Handelsbanken in the book is intriguing; do you think something similar would be possible over here? Absolutely but unfortunately the management at the big banks have not yet realised why they fail. They have forgotten that you need to trust your employees. Currently there is a pyramid system. All decisions have to go up, they are centralised. But centralising risk compounds it at every level. Risk could be lowered by decentralising. Credit should be personal; agents of a bank should be made

Daniel Pinto is chief executive and founding partner of Stanhope Capital, one of Europes largest independent investment rms. Named by Spears as one of the top ve wealth managers in the UK, he founded the New City Initiative (NCI), a think tank whose members (with combined assets under management in excess of $350bn) implement many of the values talked about in Daniels new book: Capital Wars. Henry Hopwood-Phillips catches up with the star nancier to see if his account of Western capitalism holds any water

Your advocation of family business is unfashionable; as you say in your book, it is conventionally perceived as merely a stage of a business development, why do you think this isnt the case in Germany with its Mittelstand (small and mediumsized enterprises)? Mittelstand are just the best known case in Germany. Even if you look at the very largest companies, Volkswagen or BMW for instance, families may not have a controlling stake but they have a large one and everybody knows that they are behind the company. The pendulum has swung too far in the West. From family rms dominating the FTSE 100 in the 1960s to 2014 when less than 10 per cent of the UKs big rms are familyowned. The best format must sit somewhere in between. The fourth or fth generation of families can sometimes lack oomph and motivation but the reverse in which investors keep stocks for ve months cannot be right either. In a West where low-skilled manufacturing is dead, what do unskilled people do? White collar jobs are being eradicated by new developments in technology. The conundrum for the West is that the foundation of our democratic society is the middle class. If that class is nancially disenfranchised, this threatens the basis of our society. I do not think the political class have taken this into account. Once absolute poverty has been eradicated there seems to be little correlation between a societys happiness and its economic growth. Should we therefore see degrowth as positive? If you are looking at it from a philosophical viewpoint it is probably right but more practically, I think people are in denial about what is happening. I suspect many Italians are happy with their country becoming a museum but this

responsible for failing or succeeding in managing risk. The New York Times recently ran a column referring to Britains bright young things now becoming consultants, art dealers and hedgefunders or put another way, oligarchs valets. Is there much of a future for a nation that acts in such a myopic and mercenary manner? I have noticed that over the last 10-15 years educated young people increasingly dream about instant recognition. It is all about being the next Mark Zuckerberg. The captains of industry who led their companies through thick and thin, the business creators who took 20-30 years to build up something in a very painful way have gone. Were seeing shortermism even in ambition. This is dangerous because if it does not happen or something fails then the rst headwind will blow potential entrepreneurs over. It is an unsound and unhealthy attitude. You mention in your book that a football star ethos has entered banking attitudes. In your experience is this talent real? And if so, why dont emerging nations seem to be trying to poach it? Emerging powers have their own problems but their perception of both the role of nance and time is spot on. Finance is there to serve, to enable, to pass the plates; its useful as long as it doesnt become the tail that wags the dog. In the West the banks are advisors, principals and underwriters; they are everywhere in the chain. Its been noted that parts of London have become disneyed. Scratch a grand British facade and youll nd a Qatari fund. Is this a standard feature of late capitalism or a peculiarly British foible? It is particularly pronounced in the UK. The absence of a nationalistic approach to the economy has always intrigued me as a continental. You may view it as a quality but in reality it is completely neutral. When the going gets tough, the rst thing that foreign companies do is retreat from

foreign markets. Americans do this a lot and so I think the UKs approach has increased the scope for booms and busts. It is making the economy more cyclical. Having said that, unemployment is quite low at approximately seven per cent the EU gure sits nearer eleven per cent so it can cushion busts too. Capital Wars by Daniel Pinto, Bloomsbury, 25

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