entrepreneurial capitalism
DESCRIPTION
This is a lecture on capitalism, entrepreneurship, and international finance. The seminal ideas came from Dick Smick who is privy to many events and upheavals in intl finance. He had a book on "The World is Curved" He describes in broad stroke the role of entrepreneurship in international finance , and how finance shapes entrepreneurshipTRANSCRIPT
Entrepreneurial Capitalism
Entrepreneurial Capitalism
What moves the world now
Theme of book The World is
Curved by David Smick
David M. Smick
Broad theme of entrepreneurial capitalism
is present in modern international capital and
finance
Flow of capital is bigger and more
important than flow of goods
Trillions of dollars can move across the
globe instantly
This ocean of cash does not have
boundaries, political nor religious affiliations
It simply follows the dictum for capital
Return on capital and return of
capital
Some history
Deutsche Bank established by Georg
Siemens in 1870
A bank for entrepreneurs:find entrepreneursfund entrepreneursforcing organized
management techne
JP Morgan in US
Growth of entrepreneurial capitalism in US
under Pres. Reagan
Reaganomics – supply side economics
Jack Kemp, Charlie Wilson
and Kemp Roth Act of 1981
According to a Forbes article, Jack Kemp, a NY
representative and Charlie Wilson saved USA!
This was proven true under French President Sakorzky of France and in UK when they imposed higher taxes on the
rich
Lowering of capital gains tax:(from 28% to 20%)
Growth in number of VC (2x)DJIA averaged 11% Returns
form l983 to 2003
vs only 1% from 1965 to 1983
The Laffer curve
Fall of Berlin Wall in l989
Reunification’s impact on German currency, business
and economics
Mergers and acquisitions forced many German
companies to reduce costs and be competitive; work around pro Labor policies
German companies were forced to be
entrepreneurial by new capital
Reason for the strengthening of German
deutsche mark
Why Japan lags behind in entrepreneurial activities?(even IMF is worried about Japan’s huge debt vs GDP)
Japan’s fiscal outlook – another pending tsunami?
Large conservative banks in Japan do not lend to entrepreneurs
Conservative Japanese banks
Japan’s sumo sized debts
US continues to attract capital because it is perceived to be
the leader in entrepreneurship
Role of Venture Capital and Hedge
Fund
Venture capital
Venture capital structure
FUND PROVIDERS VENTURE CAPITAL FIRMS INVESTOR FIRMS
Money
Limited PartnersPension Funds
IndividualsCorporation
Insurance CompanyForeign Endowments
80% ofCapital Gains
+Principal
Source: Bygrave and Shulman (1988)
3% Annual Fee
General Partners
20% of CapitalGains
IPOs/Mergers
Equity
Money
EntrepreneursInformation
Information
Top VC firms
Hedge funds lead in entrepreneurial capitalism
Hedge Fund StructureWhat Does Each Party Bring to the Table?
Outside Investors(Limited Partners)
General Partner(LLC)
Firstcominvest, S.A.
(LLC)
Investment A
Investment B
Investment C
Investment D
Hedge Fund(LP)
Portfolio
Cash
Cash
Strategic Direction
Trades
Viewed as the riskiest and difficult to regulate financial organization
Hedge funds preferred strategies
Growth of hedge funds
Rising anti entrepreneurial public policies
• Overregulation• increasing employment
cost• increase of taxes• intrusion into privacy• limits to foreign ownership
Growing protectionism
Anti trade policiesRising protectionism
Class war thru taxation
Protectionism on the rise
Governments are puny to control capital flows
Asset size of Central Banks vs capital funds (hundred trillions of
dollar)
China and entrepreneurial
capitalism
China’s Central banks and role in China’s
entrepreneurship
China’s investment worldwide (not just private investments!)
China’s state enterprises
Government entrepreneurship:
• Singapore• Malaysia
• Discovery Fund in NYC
Charles Millard of NYC Economic Development Council
Koh Bon Hwee – former CEO of Singapore Telecom,
Singapore Airlines, Singapore Development Bank
Credit
Prepared by:
Prof Jorge Saguinsin
Ateneo Graduate School of Business
www.profjorgeentrep-jorge.blogspot.com