Martin Sorrell: Hero of unbridled capitalism

March 18, 2015

Sir Martin Sorrell is a global superstar of entrepreneurship and hero of unbridled capitalism. But is he likely to become an election asset in the UK?

His business success is grounded in his deals that resulted in an acquisition of a wide range of the largest international advertising agencies, including Saatchi & Saatchi, and J Walter Thompson. His track record as entrepreneur and capitalist is noteworthy.

Although his business empire is built on creativity, his own skill is as a high-level financial innovator who found ways of releasing creativity of others in highly profitable ways.

As a Harvard MBA, and a governor of London Business School, his leadership makes a nice business school case.

This week [March 15th 2015] he made headlines with an annual bonus taking his earnings to £40 million.

The Independent reported:

Sir Martin Sorrell’s pay package is set to top £40m for last year after WPP, the advertising giant he founded, said that he was given £36m-worth of shares last week.

The shares were granted under a controversial long-term bonus plan called the Leadership Equity Acquisition Plan, or Leap, and which shareholders voted to abolish in 2012. The latest grant covers the five years from 2010 to 2015, when Sir Martin and 16 other executives received the maximum of five times their original investment in the scheme.

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Will new leader Allen Leighton introduce Bill Gate’s creative capitalism to the Co-op?

February 25, 2015

Rochdale PioneersSUBSCRIBERS ARE ADVISED THAT THIS POST WILL BE UPDATED REGULARLY

Newly appointed chairman Allen Leighton faces an existential battle at The Co-operative Group which may serve as a case study for the kind of creative capitalism proposed recently by Bill Gates

Bill Gates has recently called for more efforts directed towards creative capitalism. This raises the immediate question: what is it? At very least, there is need to examine institutions such as The Co-operative group which challenged capitalism yet attempted to create structures within the capitalist system rather than seeking its violent overthrow.

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Did Hyman Minsky anticipate creative capitalism?

March 25, 2014

Bill Gates has called for a more creative form of Capitalism. The work of Hyman Minsky is being reappraised as relevant after the 2008 financial crisis

Minsky’s ideas were taken up by Paul Krugman, and later by other influential figures such as Janet Yellen, now head of the US Federal Reserve bank. They offer an explanation for the irrationalities of economic boom and bust, though inherent instabilities rather than temporary distortions. As such it relates to the Animal Spirits of John Maynard Keynes.

What is creative capitalism

Some posts ago I asked what is the nature of creative capitalism. The question arose after Bill Gates called for it, without exactly joining up the dots. My best shot was a suggestion that thinkers about capitalism were rewriting the map to deal with the uncertainties of the global economic climate. Under such uncertainties, creativity in thought and action becomes important. Mr Gates suggested that Capitalism needs to refocus its energy on social issues including the environment. Minsky suggests how this might come about.

Minsky’s destabilization hypothesis

An interesting article on the BBC website [March 2014] and a subsequent Radio Four broadcast outline why Minsky’s ideas might be relevant.

It seems that the relatively unknown Minsky has attracted attention recently for his theory of inherent instabilities of financial markets. Stock Market bubbles are inevitable as turbulent flow of water from a high pressure hose or water boiling in a saucepan on a hob through induction heating.

Minsky’s three stages

Minsky describes three stages within the process. The hedge is the stage in which the innate caution of professional investors dominates. The hedge offers possibilities for more risky gains, and the famous animal spirits kick in. In Wall Street jargon, the animal spirits move from those of cautious bears to those of Raging Bulls.

The ghost of Ponzi

Conventional wisdom is that bears and bulls eventually damp down irrational blips in the market. Minsky argues that after the speculative stage comes a fraudulent stage he termed the Ponzi stage. This honours or maybe I should say dishonours the schemes of Charles Ponzi, [1882-1949] the infamous modern inventor of a huge pyramid-selling scam.

To be continued

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