Capitalism , Private Enterprise and the Free Market economy.
Call it what you will, it’s one of my passions in life, and I’m thrilled to be here tonight to see some of the next generation of entrepreneurs take their first steps along the road, I hope, to running their own successful businesses.
Young Enterprise is a great organisation.
In my view, schools don’t do nearly enough to encourage and promote the study of business, private enterprise, and economics, and so YE fills a much needed gap.
And why is business so important. Well, to answer that, you have to start by asking “where are we ranked in Britain on the ladder of human wealth?”
Well, we are one of the richest countries in the world, ranking 22nd out of 200 countries overall. Given many of the countries below us have significant populations (China, India, Indonesia, Russia, Brazil), the average Briton is probably in the top 5% of the world from a wealth perspective.
So why are we so rich in Britain?
I believe there are three reasons, which have their roots in our rich history as a nation.
The first reason is the creation of Limited Liability companies. These allow you to invest in an enterprise, knowing that if all goes wrong, you will not be made to pay for all the debts of that company. That’s important, because if you thought that any company you backed could end up with its creditors chasing you for the company’s unpaid debts, and that you could therefore go bankrupt – you’d never invest in anything, especially anything risky, even if it had potentially high rewards. This concept of limiting someone’s liability just to the money they invest was a critical innovation that allowed risky enterprises to flourish after it was invented.
The earliest recognized company was the Company of Merchant Adventurers to New Lands, chartered in 1553 in London with 250 shareholders – and the definition of “Adventurer“ is a businessman who ventures capital – i.e. invests money. I love the fact that adventure and business are linked terms. And you can see why we needed limited liability. Putting ships to sea to explore strange lands to bring back exotic gems, spices etc – hugely risky – but potentially very rewarding. We needed a mechanism to let these explorers fund their adventures – and this was it.
Trade between nations flourished because of these companies. Great trading cities like Hong Kong, Singapore, and Shanghai sprang up because of these new found links
The second Innovation was the industrial revolution
This was a period from 1750 to 1850 where changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the world. It began here in the United Kingdom, and then subsequently spread throughout Western Europe, North America, Japan, and eventually the rest of the world.
In the two centuries following 1800, the world's average per capita income increased over tenfold, while the world's population increased over sixfold. And Great Britain provided the legal and cultural foundations that enabled entrepreneurs to pioneer the industrial revolution.
The third innovation is the fact that the intellectual underpinning for the concept of “The Free Market” also sprang from the United Kingdom, with Scottish philosopher Adam Smith’s book “The Wealth of Nations” being arguably the first modern work of economics. Smith’s description of the invisible hand remains, today, the most powerful descriptor of how free markets work.
He said “......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 own necessities but of their advantages...”
Whilst we rightly revere the english language itself, Shakespeare and the concept of parliamentary democracy as some of our greatest cultural exports, I would also say that the establishment of limited liability companies, the Industrial revolution, and the intellectual underpinnings of the Free Market represent a trio of British exports to the world which stand head and shoulders above anything else in terms of their effect on global living standards
So – we need business to maintain and increase our wealth – and we need you guys to be in business to carry that torch forward to the next generation, and to continue to create that wealth for us all to enjoy. So I want to spend the next few minutes talking to you, the finalists, to encourage you to think about making business your career.
Why should you choose business, and not become a doctor, teacher, architect, or any of the other professions your parents probably want you to pursue.
The first reason is – you just might not have a choice in the matter. If you have discovered that starting businesses and running them is your passion in life, you simply must do it.
I believe we must all strive to lead great lives – not just good lives or OK lives – but great lives. And that starts with passion. Only by pursuing your passion can you lead a great life, and if you are genuinely passionate about business and enterprise – we need you to pursue that passion at all costs for everyone’s benefit.
As well as passion by the way, you need perseverance, resilience and a positive mental attitude. I think you need those three traits to lead a great life in whatever path you choose – but you most certainly need them if you are choosing the path of the entrepreneur. You won’t meet too many successful businessmen who aren’t passionate about what they do, give up easily, or who feel miserable most of the time.
The second reason why I’d encourage you to go into business is because it’s great, competitive fun. There’s much talk of the need for competitive sports in school. But not everyone is good at throwing a ball. However, collectively we can all apply ourselves to competitive enterprises. And that is what business is. The daily pursuit of competitive advantage over ones rivals.
O2 competes with Vodafone every day. Apple with Samsung, Coke competes with Pepsi. Lloyds competes with Santander; Free Radio competes with Capital FM.
And this rivalry has two effects.
Firstly, if you are competitive, it makes it stimulating to go to work – and I can tell you there are many supposedly “good” careers out there where you will not be stimulated every day. And secondly, it produces benefits for the consumer. Every day, in every great business, the people who work there are thinking of ways to outsmart their rivals – and that inevitably means thinking of ways to increase the benefits for customers – exactly as Adam Smith predicted back in the c18th.
The third reason to go into business is that it teaches you teamwork – and this is particularly why I think more emphasis should be placed on business in schools. You simply can’t build a great business alone – you have to be able to recruit, retain and inspire the people who work alongside you. That requires you to develop skills in emotional intelligence. Being able to manage teams, and inspire them to great things, is integral to business, and certainly gives me a thrill when I see it happening in my own company.
One other benefit of running your own business by the way is that you don’t have a “boss” to answer to – which for some people is reason alone to start their own firm.
Another reason is giving something back. Businesses don’t work in a vacuum. We are all part of society. And whilst I dislike the term “Stakeholder” and the increasing view from government that they can “force” businesses to be social partners, many, many businesses do engage in socially useful activities off their own bat – because they want to.
My company organises a series of charity walks each year. There’s one here – walking from Warwick to Coventry on Sunday June 23rd, and it’s sponsored by this great University we are in tonight. There’s another in Brum, one in Wolverhampton and one in Worcester. Last year over 20,000 local people took part, and raised over £750,000 for local charities. We hope to beat that this year. It takes us a lot of time and effort to organise these – but we do it because we can, because we want to, and because it helps us help others.
Finally, you should go into business to make money.
Let’s be clear – being in business and being successful means making money. Money is the scorecard – and if you are successful you should expect to earn great rewards. And if you’ve created jobs for others, improved the lot of your consumers, and given something back to the community in the process – there’s nothing wrong in you enjoying material rewards too.
I don’t want to belabour the financial point – because, in Britain at least, discussing money is quite often seen as “not the done thing”, but it is precisely because the butcher or baker wants to make money that he offers us the ingredients for a good dinner. So we should all want these young people to make money – because by doing so they will make us all richer as a result.
And the end result of amassing great wealth quite often turns into the creation of huge social benefits. Just look at Bill Gates and Warren Buffet. Two of the world’s richest men, who have not only pledged all of their money to a foundation working to alleviate poverty and illness – but they are busy persuading many, many other rich businessfolk to follow them in putting their money to good work.
Starting and running business is hugely challenging. Raising capital, dealing with banks, sorting out the legalities of it all, finding customers and suppliers, all difficult, all challenging, sometimes even frightening.
But it’s also one of the most exciting and important things anyone can do. Aspiring to lead a great organisation – like Richard Branson, James Dyson or Steve Jobs – creating jobs, creating new products and services is a worthy goal – in my book entering business is on a par with entering medicine, finance or law. Well done to all of you for achieving the goal of being here in tonight’s finals. You should all be rightly proud of what you have done so far, and I hope this experience has given you the appetite to “take on the world” by starting your own business.