Stuff Matters: Genius, Risk and the Secret of Capitalism. Harry Bingham
Free health care for all! Put humans on Mars! Make me live to be a hundred! Low cost air fares, cheap motoring, and no climate change, please!
I’m not against those kinds of ambition. On the contrary, I’m entirely in favour of demanding a lot of ourselves, but what’s stunning is that we can voice these kinds of aspirations without sounding crazed. Human history can, if you like, be divided in two phases. The first phase lasted for approximately 199,750 years, and represents mankind’s existence in a world marked by generalized, extreme, brutish poverty, by horribly compromised life expectancy, by illiteracy and innumeracy, by men and women almost universally failing to achieve their potential.
The second phase, which has lasted 250 years so far, represents mankind’s experience of extremely rapid self-enrichment. The world we live in now is one where things are made in China, ordered by laptop, and delivered in an eyeblink; a place of iPods and cornflakes, hedge funds and research labs; a place where roofing materials are no longer cut from hedges and scythed from fields. This world – Kat’s world and ours – is mystifyingly complex, but somewhere in that complexity lies the philosopher’s stone which turns lead into gold.
Alchemy, however, has its dark side and on the weekend of Kat’s visit, that dark side was alive, well and destroying a bank near you. As London and New York convulsed in panic, I realized something shocking. I was a financially literate chap. I’d been an economist, a banker, and (in a very small way) an entrepreneur. Yet there was a respect in which I understood nothing at all about how the world works. I could sketch out supply and demand curves and explain the laws of comparative advantage. I could even have told you what an Asset Backed Security was and how Credit Default Swaps worked and how Lehman Brothers went bankrupt.
But all this was an understanding of the intellect, an understanding that left the rest of me entirely blank. The fact that I understood my own tiny niche in the capitalist system had blinded me to my massive ignorance about everything else. I hadn’t generally felt that ignorance, because my background had enabled me to sketch demand curves and blather about different types of security. Nevertheless, the extent of my unknowing was profound. It was though I’d read a million books about Italy without ever having been there.
In the weeks after Kat left us, as governments and central bankers started to mop up after the hurricane, I realized that I wanted to write a guidebook about the world of money. I wanted to understand, and not just at an intellectual level, the magic of the alchemy that has plucked the human race from extreme poverty to its current position of ever-expanding riches. I wanted to understand the storms that blow up out of nowhere, seeming to threaten every assumption which we once took for granted. I wanted to meet the people who make that world turn: multimillionaire entrepreneurs and Indian shift-workers, small-time manufacturers and big company CEOs. I wanted to get to the heart of the miracle, the miracle that has transformed a poor and brutish world into an ever richer and more liberated one. And I wanted to explore the culture of this world, the deep rhythms that make it tick. Above all, I wanted to come to know it the way that a traveller might, with time, come to know Italy.
This book is the outcome of that exploration. The businessmen and women I’ve spoken to have led companies collectively worth hundreds of billions of dollars. The bankers I’ve spoken to have handled well over a trillion dollars’ worth of mergers and acquisitions transactions and have invested uncountably huge sums on the world markets. But I’ve also met some of the little guys; the ordinary people doing ordinary jobs who nevertheless play their own crucial part in keeping this precarious alchemy afloat. In short, I wanted to find out about everything an economics degree does not cover, that ten years in the City never gets close to.
I still don’t know how to refine oil, smelt metals, extrude plastic, etch silicon, write program codes, or do any other of those fine things that makes Kat’s world the rich and prosperous world it is. But I do now have an almost bodily sense of how the whole thing hangs together. I’ve learned how extraordinarily commonplace financial crises are and how the miracle of capitalism goes on happening nevertheless.
And my journey, unexpectedly, has gone further than that. It’s all very well going places and meeting people, but I came to see that the alchemy of wealth happens inside each of us as well. We have strong feelings about money. We are alternately avaricious and ostentatious, greedy and generous, fearful and optimistic. My journey to the land of money wouldn’t have been complete unless it stepped inside our own hearts and minds, our own hubbub of powerful emotions.
This book offers an account of my travels. It’s given me a sense of the alchemy that turned our world from what it was to what it is, a man-made miracle of creation. It’s also taken me to the heart of the paradox that lies at the heart of capitalism, a paradox by which money is both the most important thing there is and something that doesn’t matter an iota. I came to see that economics, as taught at university and as reiterated by any number of economics bestsellers, is a fraud, a subject that purports to explain everything but doesn’t even understand the thing that lies at its very heart: the human relationship to money.
But those things lie ahead of us, at the journey’s end, not at its start. Because this is a trip that starts the only place it can: in the mind and instinct of the entrepreneur.
Men wanted for hazardous journey, small wages, bitter cold, long months of complete darkness, constant dangers, safe return doubtful. Honour and recognition in case of success.
– Advertisement placed by ERNEST SHACKLETON in 1914
It begins with character. Character and a moment of risk.
The risk takes no single form. Perhaps to most of us the moment comes and goes without our even noticing. A conversation overheard; a difficult client with a wild-eyed plan; a death; an idea; a throat irritation.
Most of us, and I include me, look for the life more comfortable. Great wealth would be nice, of course, but we’ve learned by now that wealth doesn’t make home visits. It’s an animal to be hunted, not a guest to be entertained. Our desire for comfort – the regular pay cheque, hearth and home, keeping our capital somewhere safe – may not be an overwhelming compulsion. We may be ocean-sailors at the weekend, even if we’re wage-slaves during the week. But it’s there, the need for security. The poet Philip Larkin called it a Toad, ‘its hunkers…heavy as hard luck, and cold as snow’, a Toad that squats there asking us how we’d feel with our capital committed and our income gone. How we’d feel, talking in the pub with our mates, them with their steady jobs and their career progression, and we with a scheme that looked so smart once and so insanely optimistic now. Accordingly, the moment comes and the moment goes and because we’re not on the lookout for it, we don’t so much as notice its passing.
Most people aren’t like that. One in a hundred? One in a thousand? It’s not that they overcome their Toad, that they wrestle the beast into submission, it’s that they don’t have the Toad at all. William Knox D’Arcy was born to a well-to-do English family in 1849. He was educated at Westminster School, an elite public school located in the rambling embrace of Westminster Abbey, where every British monarch since 1066 has been crowned and the final resting place for seventeen of their kingly souls. In 1866, when their father went bust, the family emigrated to Australia to start all over again. They ended up settling in Rockhampton in Central Queensland, which isn’t exactly a big place now, but back then it must have seemed a million miles distant from the Abbey bells.
The young D’Arcy followed his father into law and joined the family firm. A lifetime of prosperous colonial Toad-following seemed to beckon. Then one sunny day in 1882, three brothers entered D’Arcy’s office. They were rough men, miners, and they had been sent down the road from the local bank. They brought two things, a story and a lump of rock. The story was quickly told. The three men, Frederick, Edwin and Thomas Morgan, had been prospecting for silver in the Dee valley. They had found no silver and, as we now know,