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Engineering the Financial Crisis: Systemic Risk and the Failure of Regulation
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On Human Rights
The Second Bounce of the Ball
The Mind of God and the Works of Man
In 1967 Ronald Cohen won a Henry Fellowship to fund the first year of his MBA at Harvard. One of the judges on the panel was Isaiah Berlin. This chance encounter is suggestive. Like Berlin before him, Cohen came to England aged eleven when his Jewish parents sought refuge from political upheavals abroad. Like Berlin, he spoke no English when he arrived, but seven years of state education in London combined with a supportive home environment was sufficient to propel him to Oxford University.
While Berlin stayed in Oxford and became a star of the academic world, Cohen devoted himself to the business world, principally the development of the private equity market in the UK. His new book is not a biography, but a primer on entrepreneurship. However, he uses his own career and experience to illustrate the lessons he wants his readers to learn. The message and the man are not easily separable.
His theme is uncertainty: specifically, the opportunity that uncertainty creates, which allows the successful entrepreneur to take an advantage that others have not seen or understood. Louis Pasteur once observed that, "chance favours only the prepared mind". Cohen's book has been written to prepare the minds of budding entrepreneurs, thereby increasing the likelihood that they might find fortune's favour.
As a genre business books tend to be repetitive in content and over-exuberant in tone. Second Bounce of the Ball has neither of these faults. Written with help from Terry Ilott, the themes are clearly laid out, the central points are well made and the examples proffered do not require financial expertise to be understood. Due attention is given to the personality of the entrepreneur, the importance of team work, the risk of egotism and the ethical dimensions of business culture.
There is plenty that will be of value to someone considering starting their own business as well as those who have already taken the plunge. For the general reader the book offers insights into why the role of the entrepreneur has grown in importance in contemporary business culture and, likewise, why the private equity market has become so successful.
Cohen himself was an unusual sort of entrepreneur: his insight was the possibility of changing the way companies could be financed and his skill was the identification of new businesses opportunities that offered significant potential for profit. His firm - Apax Partners - became successful by identifying other successful entrepreneurs and investing in their businesses. As the global economy prospered so too did entrepreneurial firms, many of which quickly overtook the older, more-established companies with whom they competed. Not surprisingly, the man whose firm had financed many of these new businesses flourished with them.
But businesses do not exist in a vacuum: they are greatly affected by the tax and regulatory regimes in which they operate. Cohen commends the pro-business sentiment of Mrs Thatcher's governments, but notes that they did little in practice to promote entrepreneurial investment. By contrast Mr Blair's government is applauded for changing things that made such investment more likely: encouraging institutional investors to make allocations to private equity on the demand side, and a tax regime that favoured capital gains made on the sale of business assets on the supply side.
Although he is a donor to New Labour and has been described as a close friend of Gordon Brown, there is no discussion of politics in this book. Cohen does not tell us how often his opinions have been solicited nor whether his advice has been heeded. The recently announced changes to the Capital Gains Tax regime give the impression that his arguments for fiscal arrangements that support entrepreneurial activity have been drowned out by the loud complaints of the GMB and the Daily Mail that the rich were not paying their fair share of tax.
Perhaps the skills that make someone a successful entrepreneur are not the same as the skills that make someone a successful political advisor: running the country is not the same as running a business. Or, perhaps, when the current furore over private equity has died down, a more reasoned policy discussion will occur in which his thoughts will carry more weight. His book certainly suggests that he is a man who has been patient in achieving success over the longer-term.
Ronald Cohen retired as Chair of Apax Partners in 2005 and has since devoted himself to a new career as a philanthropist and social entrepreneur, which he describes in the final chapter of his book. He was chair of the Social Investment Task Force and chair of the Commission on Unclaimed Assets. He founded Bridges Ventures to raise capital to invest in the poorest areas of Britain, and the Portland Trust that seeks to support economic initiatives that will improve the lives of the poor in Palestine and Israel, thereby aiding the peace process in that region.
His social philosophy is one of self-help: "The most compelling way to effect economic improvement in the long term is to create businesses that will pull people out of poverty, and empower them to take leadership in their communities and to take responsibility for their own lives" (p. 267). It is a philosophy that fits well with his own life, which combined personal ambition and energy with intelligence and tenacity; but a life that has been lived, since boyhood, in a supportive environment of home, school and - increasingly - accommodative public policy with respect to business activity.
During Cohen's working life Britain has become a far more attractive location for the ambitious and the entrepreneurial and London has re-established itself as the leading global financial centre. These represent significant steps forward, not just for the leading players in business, but also for members of society more widely, whose range of working opportunities have grown as a consequence. It is for this reason Ronald Cohen himself is an interesting exemplar: not simply in terms of the current discussion around taxation, but also in terms of the wider political debate around immigration.