At the Library of Law and Liberty’s site — Stephen Hicks discusses Leonidas Zelmanovitz’s ambitious work in the philosophy of money:
The CEE Web Log
Interview conducted at Rockford University by Stephen Hicks and sponsored by the Center for Ethics and Entrepreneurship.
Hicks: I’m Stephen Hicks, executive director of CEE, and our guest today is Dr. William Kline, an expert on David Hume, the 18th-century Scottish Enlightenment philosopher. He spoke today at Rockford University in the Ethical Theory class on Hume’s contribution to the foundations of moral and political thought. Why, in the 21st century, should Hume matter to us?
Kline: There are at least a couple of reasons. One is Hume is very concerned with the origin of property rights and how and when they apply, which I think is is perennially important. I also think, two, there are certain questions that arise about the extent to which free and self-directed human interaction should be allowed to the extent that it’s beneficial for us all — basic questions of liberty — and I think Hume painted a picture that deserves to be examined.
Hicks: If we paint that picture in broad strokes, certainly Hume’s conclusion is a conception of a society that is just. For him, justice is a fairly expansive concept. What are the major constituent elements of the just society that he would like us to work toward?
Kline: Well, his theory of justice is actually going to be constrained to basically property, trade, and contract, which is consonant with writers that have come before him, whether Hobbes or Locke. So, those who want look at a more expansive view of social justice aren’t going to find all of those elements there. But with that said, Hume focuses on this because he thinks that they are central to any society, that they are necessary, and that they have to be stable. And that point you do find even reflected in people saying, like John Rawls in A Theory of Justice, the basic rules of justice have to be stable. And so, in that sense, his project is the same. Another reason to read Hume for today.
Hicks: So part of the just society is going to be a set of stable principles. But in terms of content, respect for property, respect for trade, respect for contract is going to be essential, firm principles that we have to realize. Now if we go back to the beginnings or foundations of Hume’s philosophy and his moral thinking, he has a reputation — how deserved or not is subject to interpretation, though — for being a radical subjectivist in his moral theory. So, there is obviously a big gap that has to be bridged if you are starting from radically, subjectivist foundations to ending up a fair, relatively firm, socially-wide conception of a just society. How deserved is Hume’s reputation for being a subjectivist in his moral theory?
Kline: Well, he is a subjectivist in the fact that moral approbation will be in the eyes of the beholder. The disconnect happens when people don’t realize is that the subjectivity is going to be some sort of intersubjectivity, it is not going to be, it’s not a solipsistic argument, that somehow moral judgments are just generated by me, by my passions, by my sentiments, not in reference to anybody else. That’s not going to be his argument. In fact, the whole reason you want society is you can’t even live like that. So, whatever subjectivity we are going to talk about is going to be in an intersubjectivity of human beings that have a certain nature and have certain needs to be met and have to figure out how exactly to do that.
Hicks: So, if we then start the process where Hume says certain principles will emerge, even we do start off more atomistically or more individualistically each with our own subjective evaluations, how does some sort of coordination, right, emerge or some principles emerge with? Can you sketch that process?
Kline: And I think it’s good the way you said it too: Hume began and definitely it ends with a sort of methodological, subjectivist, individualist in almost like an economist would begin. And you find this approach reflected in modern game theory. You’ll find people like Axelrod, Brian Skyrms, Robert Sugden, asking ‘Here are individuals with their own subjective preferences interacting with other such individuals, what kind of solutions to different problems can they find?’ In Hume’s case, he is going to talk about property. And the upshot of it is that the strategy people find is that if I leave you alone, and you leave me alone, we are both better off. And I will leave you alone if you leave me alone. And there is a lot of traction to be gained from that. Hobbes doesn’t see this as a possibility. Hobbes thinks we are just going to attack each other and we need Leviathan to stop us. Hume doesn’t. Hume says we can actually learn from our mistakes and we can actually learn to conditionally structure our activities, much as Axelrod tells us today, that if I cooperate with you, and you cooperate with me, I will keep cooperating with you.
Hicks: So this is in keeping them with the rest of Hume’s empirical philosophy, where it’s a matter of learning through trial and error, as opposed to a priori principles being dropped upon us to which were supposed to conform. So the idea then is that individuals can’t start out with their own subjective preferences, but through the process of trial and error learn that through cooperation and respect for each other’s stuff they will be better off?
Hicks: So at least we’ve gotten past the bootstrapping, right, the initial moment, we’ve got some principles here. But, as you mentioned in your talk, at this point, it’s still based on self-interest in a narrow sense and there is no reason why people won’t defect, say, or just see the mutual backscratching and mutual respect as something that is short-term and not necessarily to be extended to all of the members of society, and so on. So, how do we get from these initially emergent agreements among individuals to where Hume wants to end up, which is to say, with social-wide or all-of-society agreed-upon principles that are firm and binding? What do we need to add?
Kline: Yeah, and this is a problem too, historically. It occurs in Plato, and we find it in Hobbes as well, where you start out with this methodological individualism, it’s run by self-interest, self-interest is all I recognize, it is on self-interest to leave you alone, you recognize this in yourself interest leaving me alone, and everything is all alone and good until you say ‘Wait a second, what about these cases where you realize it’s not in your self-interest anymore’? Maybe I am way more powerful than you, maybe you’ve turned your back and I can get something and you don’t know it. If all it is is self-interest, it would seem that, well, then, that’s what you should do, take the ring, go kill the king and make the queen your wife. You would be a fool to do otherwise and there’s certainly no moral rules stopping you.
The point is that Hume’s takes methodological individualism up to convention, but then after that, conventions are really what is running the game. I think that Hume does think, just as Aristotle, that we are social creatures. We are not these solipsistic creatures, right? We are social creatures and these conventions, once they are running — once we are respecting each other’s property, once we are trading, once we’re recognizing that these mutual strategies are beneficial, we are interacting as the social creatures we are meant to be — this has an effect on our psychic makeup, just like cause and effect does, where the repetitive, constant conjunction of continuous objects, whether they are pool balls or whatever, in principle upon our minds, that, well, that’s going to be happen again. We develop the same expectations, but it’s not a rational calculation, we develop the same expectations with regards to other people. And also we begin to put this into language. And once we start having concepts of mine and thine, if you will, and language that says those certain actions — and this is actually his terminology in the Enquiry — ‘certain actions are odious’. These then now apply in a general fashion, it goes beyond me. Odious means to anybody and that’s what we are really then go beyond. It’s now no longer about whether it’s in my self-interest or not, it’s whether the activities is odious.
And if I can add one more thing here, it’s a very interesting article by John Rawls, called ‘Two Concepts of Rules’, and really what Hume, I think, is arguing is how summary rules, which are conventions, they are rules of thumb, that have a general utility become practice rules, and a practice rule is something that actually defines the practice. That one is not free to violate based solely on self-interest. So, the rules of baseball has certain rules that are practice rules, I don’t care how much is it in my self-interest, I am now allowed to go to first base unless I do certain things to earn getting to first base.
Hicks: So, you mentioned, historically, a connection from David Hume in the 18th century to the 20th century figures such John Rawls, Axelrod, both of them you mentioned. Are there other important figures in the transition from Hume’s generation to ours, who are carrying on the Humean legacy, Humean approach?
Kline: Well, Smith, definitely. Adam Smith takes, I think, Hume’s analysis of how conventions are formed and then applies it to economics. Smith says things work once you have property, trade and contract in place. And Smith’s natural liberty as allowing people to pursue their self-interest for their own ends within those constraints, mirrors agents pursuing their own ends and making a property. Of course, that’s not recent, that’s 1776. More recently, Robert Sugden, Brian Skyrms. Hayek draws on Hume, greatly draws on him. And those are the ones that I can think of right now that have a huge influence in Hume.
Hicks: All right, so Hume’s influence is alive and well in the late 20th through the early 21st century.
Kline: It is, and I think it is getting better, but there was a time, and it stems from Rawls, Rawls is very Kantian and admittedly so, and you look at a lot of Rawls’s students that graduate from him, they get key positions at key universities, so, if you really look at the decades from the mid-80s up and through pretty much even now, academia, I mean, there is an emphasis — Kant has it right, Hume opened Kant’s eyes, but Kant is the one that had it right, Hume didn’t. I think that is changing slightly. There certainly have been big names that have championed Hume, but you would be hard-pressed to go to the literature and find a Humean theory of justice. Find Kantian, Rawlsian, utilitarian, Hobbesian, all defended as correct systems of justice, but it’s really hard to find one that defends a Humean theory.
Hicks: Thank you for your lecture today.
Kline: Thank you, I had fun.
[The video interview with Dr. William Kline follows.]
Interview with Professor Alexei Marcoux, conducted at Rockford University by Stephen Hicks and sponsored by the Center for Ethics and Entrepreneurship.
Hicks: My guest today is Dr. Alexei Marcoux, who spoke at Rockford University on moral partiality in business practice. Dr. Marcoux is a philosopher by training. He teaches in the business administration program at Loyola University in Chicago.
Alexei, in your talk today you were defending moral partiality in business practice, but, as you started you pointed out that most or at least a majority of business ethicists take business ethics to be about impartiality in ethics, and you took Norman Bowie to be your primary foil in the argument today. So, what is impartiality in ethics and why does Bowie think it’s a good idea?
Marcoux: Well, Bowie is just following the general trend in moral philosophy, which is to view ethics as being fundamentally concerned with impartiality. And for many ethicists, they view ethics just as teasing out the implications of impartiality for our actions. What Bowie is arguing — and what I am arguing is actually mistaken — is that impartiality lies at the very core of ethical business practice. And, I think if you actually look at business practice, and if you actually look at the considerations that he offers for why that is so, it actually shows that partiality, loyal service to another, is what is actually at the root of ethical business practice.
Hicks: You also walked through the arguments you constructed from Bowie, and you said he gave three considerations or three arguments on behalf of the impartiality. The first was that business is or should be characterized by arm’s-length transactions. How does that argument work?
Marcoux: What Bowie says is “Look, business should be conducted at arm’s length, and to let personal, that is, the interest of friends or family intrude, is often wrongful in a business environment.” And I am saying that that is true, that is true, but it doesn’t show that impartiality is at the core of ethical business practice. That is, we aren’t under a general duty to bargain at arm’s length. I can go through my whole life giving sweetheart deals to others, buying only from my friends, selling only to my family and so on, and it would be very strange to say that I am acting wrongfully. There is no general duty to engage in arm’s-length transactions, nonetheless, there is a special duty that occurs frequently in business for us to engage in arm’s length transactions. So, the question or the conundrum that needs to be answered is: how can we simultaneously be under no general duty to engage in arm’s-length transactions, but frequently under the special duty to engage in arm’s-length transactions. And the answer is found in agency relations, that is, we are duty-bound to bargain at arm’s length, when we are bargaining not on our account, but on account of others. And in that situation, we bargain at arm’s length as the best way to serve the interests of those others. But what that just shows is that when we are duty-bound to bargain at arm’s length, we are duty-bound to do so as a way of acting loyally, that is to say, partially to our principal. So, the arm’s-length transaction consideration doesn’t show that impartiality is central to business practice. If anything, it shows that partiality is.
Hicks: Right, so we can look at lots of business practice, there are people who go into business with their families, so they hire family members, they might do significant deals with family members or extended family members, friends, suppliers and customers and so forth, so, none of those are arm’s-length transactions that require impartiality. Those are all partiality relationships and so Bowie is insisting that all business transactions not fall into that category is just missing the business facts on the ground.
Marcoux: Well, that’s what he seems to be saying, and I think I said in the talk, if you take what he is saying, you know, as given, you’d have to conclude that all family business is morally suspect, because, a family business is a business in which you hire labor through other than arm’s-length transactions.
Hicks: Another argument that Bowie makes is the idea there are conflicts of interest in business, and the way we solve conflicts of interest is by making oneself impartial — not allowing one’s interests to dictate inappropriately how one should be behaving. So, why don’t conflicts of interests as a phenomenon show that impartiality is important?
Marcoux: Undoubtedly, in the world, there are conflicts of interest that are cases of being, or having an interest in being, partial to some, when we are actually duty-bound to be impartial. Think, for example, of a judge in a competition. If a judge in a competition favors one of the competitors over the others, that judge is acting wrongfully and the wrong is being partial when you are duty-bound to be impartial. But, of course, judging a competition isn’t doing business. Now, in business, there are examples of that too. Government contracting is an example. Government purchasing agent is duty-bound to all who will do business with the government to bargain at arm’s length. The problem is that this is very much the lesser part of business. In any basically capitalist economy the great bulk of transactions are not between the government and private business, or the government and private individuals, but transactions among and between private people. So, conflicts of interest in those cases tend to be cases of agents not faithfully acting loyally towards their principals. In other words, favoring the interests of some when they are duty-bound to favor the interest of others. So, what I am saying is, in the middle 80 percent of cases of conflicts of interest in business, the wrong of a conflict of interest is acting, or having an interest in acting, partially to some, when you are duty-bound to act partially toward others.
Hicks: Because of your agency relationships.
Marcoux: Because of your agency relationship. And so that doesn’t show that impartiality is at the center of ethical business practice.
Hicks: You also mentioned Bowie’s arguments about fiduciary duties and fiduciary obligations. How is that to, on Bowie’s view, provide support for the impartiality view?
Marcoux: Well, that’s what is actually hard to discern. In his book Business Ethics: A Kantian perspective, he treats this all very quickly en route to getting what he wants to say his Kantian business ethics consists of. So, when he observes that to favor family or friends may put a manager in violation of a fiduciary duty, again, that’s true, but how that shows that impartiality is central to business ethics is mysterious, because a fiduciary duty just is a duty of partiality, like the duty of an agent to a principal. So, a fiduciary duty is a duty of partiality and so, if you violated that duty by favoring family or friends, that’s another case of being partial to the interests of some when you are duty-bound to be partial to others. So, Bowie does a great job of identifying the considerations that bear on ethical business practice. I could hardly do better than to say that arm’s-length transactions, conflicts of interest and fiduciary duties reveal the character of ethical business practice. What is not at all clear is why he thinks that those show that at its core ethical business practice is impartial when all of those — when we have duties to avoid violating fiduciary duties, to avoid conflicts of interest and to engage in arm’s-length transactions — we have those as a result of duties of partiality to the others we serve.
Hicks: The subtitle of Bowie’s book is ‘a Kantian Perspective’, and that indicates there are some heavy-duty ethics, theoretical issues at stake here. And the usual foil to Kant in contemporary literature is John Stuart Mill and you do appeal to John Stuart Mill’s utilitarianism as guidance for how to think about these issues of partiality and impartiality. How does Mill come to rescue, so to speak, or at least how does Mill provide guidance on these thorny issues?
Marcoux: Well, the way Mill provides guidance here is through his distinction between fundamental and secondary moral principles. This isn’t really so much a utilitarian versus Kantian distinction. In fact, you can see the two-level structure of morality that Mill talks about in Kantian deontology itself. What I am saying is that the way out of the confusion is to recognize the distinction between fundamental moral principles, which are principles of justification versus secondary moral principles, which are action-guiding principles. I am saying, fundamental moral principles, that is what moral theory is, but applied ethics, of which business ethics is a part, is mostly about identifying action-guiding principles that we can follow. And so, I think the mistake that lies at the root of Bowie’s argument is that — when he says that if the impartiality requirement applies anywhere, it applies in the ethics of business practice — he is taking a fundamental moral principle, a principle of justification, and treating it as if it’s a secondary moral principle, a principle of action guidance.
Hicks: So that is different from saying that the requirements or duties of impartiality are a small subset of normal business practice whereas rules of thumb of partiality are the majority?
Marcoux: Well, I think that the best way to say it is this: the impartiality requirement in ethics is a requirement to reason from an impartial perspective. It’s not a requirement to act impartially. In other words, we can have impartially-derived reasons to act partially. And we do so very often in business, as well as in other walks of life.
Hicks: So the other part of the argument then is a secondary, like that, if you look in the business facts on the ground, partiality is the dominant mode of business practice, the impartiality cases are a subset, secondary case, and that’s a supporting argument.
Marcoux: That’s it, okay, because business is a web of agency relations.
Hicks: I want to make a connection to one of the major debates as characterized in business ethics literature for the last generation or so, and that’s the stockholder-versus-stakeholder debate. I want to ask whether your distinction between the partiality positions on the impartiality tracks onto to that in the following sense: that stakeholder theorists will often say that the way business managers should think about proper action in a business context is to identify all of the stakeholders in the business — there are employees, there are customers, there are investors, there is society at large, and so forth — and that to be moral one should be impartial with respect to the interests of all of the different stakeholders. And the stockholder position, by contrast, says: there are a lot of stakeholders, but nonetheless is morally fine for business managers to be partial primarily to the stockholders’ interests, the others are derivative, secondary interests. So, is the debate between you and Bowie — say, in this case here — also the stockholder-or-stakeholder debate in another form?
Marcoux: Well, the way I would put it is that the stockholder/stakeholder debate is a particular instantiation of the general thing that I am talking about in paper, which is that the stakeholder theory basically is an attempt to take practice, in this case, the management of enterprises, which is governed at law and by custom in partialist terms — that is, managers or firms are to act as fiduciaries for the stockholders — and turn it into an impartialist one. You know, one of the ways I put in the paper is that ethical business practice is less like judging, and more like lawyering. The judge is supposed to be impartial, a lawyer is supposed to zealously represent the interests of his client. So, really, the stakeholder argument is an attempt to fundamentally change business practice. It doesn’t give an ethics of business, it is a new ethics for business. In other words, we want business people to do something else. That’s what the stakeholder theorists are saying.
Hicks: So they, in your judgment, have an idealized conception of what business practice should be.
Hicks: Your argument is that methodologically we should be starting empirically and realistically about how business does operate and work within that framework to figure the moral principles.
Marcoux: Yes, I think only that is applied ethics. What is being done under the guise of stakeholder theory is moral philosophy, under — excuse me, I would say normative political philosophy, under a different name. These people want to design new economic institutions, and that’s fine as normative political philosophy. But, as an attempt to tell business people who work within a given set of institutions, what it is to act ethically within those institutions, I think it’s a failure.
Hicks: If we kick things upstairs to normative ethical theory or normative political philosophy, another debate between egoist and altruist on ethical principles. And one form of altruism, if we take it very strongly, says that one should be selfless in moral considerations. And that means not allowing one’s own personal interest to guide anything that one does. Instead, one should selflessly see oneself as a servant or the needs of other people, the needs of society at large. And that strikes me as pushing in the direction of a strong impartiality, and the egoist position by contrast, says it’s fine to be partial to one’s own interests and that we are all mutually seeking our own self-interests in a market economy. So, is there, then, a tracking between this impartiality/partiality debate as you see in the business ethics literature to the longstanding debate over egoism versus altruism? I do note that, ’just in passing, that Norman Bowie also wrote a strongly critical argument attacking ethical egoism, so I was just wondering if you see the connection there, as well.
Marcoux: I think there is clearly a connection. I mean, the particularly stringent form of altruism that you just laid out would preclude anyone appointing an agent to act on their behalf. Because, if you can’t act on your own behalf, how could you appoint an agent to act on your behalf? And similarly would be hard to be an agent in those circumstances, because, to be an agent would be to be partial to some as opposed to others, whereas the essence of altruism is to serve all. So, an altruistic ethic can’t underwrite things like agency relations or fiduciary duties.
Hicks: Alright, then, once again, if one is — prior to doing business ethics — committed to a strongly altruistic ethic, that would then mean your business ethics has to attempt to be transformative, and not take business practice as is, but rather try to change it into a radically different kind of moral practice.
Marcoux: I think it’s constrained to do that.
Hicks: Do you suspect that that is what Bowie is doing?
Marcoux: Well, I suspect that is what Bowie is doing, I suspect that that is what the mainstream of the field is doing and has been doing since its conception.
Hicks: All right, fair enough. Fascinating material. Thanks for being with us today.
Marcoux: Thank you for having me, Stephen.
[The video interview with Dr. Alexei Marcoux follows.]
[This is the full interview with Lall Singh which was published in our Kaizen newsletter.]
Lall Singh on Entrepreneurial Finance in England
Lall Singh is CEO of Capital Instruments based in London, England. Capital Instruments is an investment consulting firm that provides finance, management, and marketing expertise in several European companies as well as projects in Canada and Dubai.
Education and early career
Singh: I was born in England in a little town called Solihull back in 1969. That makes me 44 this year.
Kaizen: Where is Solihull?
Singh: It’s near Birmingham, which is the second largest city after London. It’s between there and Manchester — there is always a competition Birmingham and Manchester about which is the second largest city. But both are growing cities. Solihull is just on the outskirts of Birmingham, which is located in the west midlands. We aren’t too far from Meriden, which marks the center of England.
Kaizen: Your parents came from India?
Singh: That’s right. They emigrated back in 1960 from Punjab, which is north India, from a little town called Jalandhar.
Kaizen: What brought them here?
Singh: Partly it was the farming communities and partly the attraction of increased income, the ability to work and make a living. And with the prospect of returning to India after retiring, which was the case. My parents did indeed decide to retire early and head back to India. You know, you always heard the old record that once you come here, you’re stuck here. This isn’t the case, of course. There’s nothing stopping them from going back. We suggested that they take an early retirement and go back to India. The funny thing is that they stayed there for about nine months and decided that “home” is where the heart is. They decided that they would spend most of their time here in England and perhaps two or three months a year in India.
Kaizen: What was your schooling like?
Singh: My schooling was predominantly here in England — in and around Birmingham, the major city. You start with nursery here, equivalent to your kindergarten; then junior school, and then secondary education.
Kaizen: By the time you were into secondary education,, did you have some career ideas? Or were your parents nudging you in a direction?
Singh: At that stage, I would say about the age of 11, I wasn’t probably thinking about any career or definite decisions about them. But business in general or some money-making aspect were attracting me. We came from a very poor family here in England — general working class. And, obviously, with my parents being immigrants and starting off on the first rung of the ladder, so to speak. My father worked as a dress welder, as it’s called, for one of the aerospace companies here in England. It was really economizing and watching the pennies. So in those days, I suppose, I was attracted more toward business as a means of making good money and living a lifestyle most people cherish.
Kaizen: Were particular types of businesses attractive?
Singh: Originally I was interested in economics. It was essentially looking at current affairs and looking at the micro and macro perspectives.
Kaizen: This would have been when you were a little older?
Singh: A little older, from age 12 and into my teenage years — when you are really trying to decide what it is you really want to do. I suppose the people around me were more interested in the sciences. I was a bit different. I remember that of most of the options that you have when you are about 14, the ones I leaned toward were more of the mathematical type, probably at that stage heading more toward a career in accounting.
Kaizen: You were good at math from a young age?
Singh: That’s right. Yes.
Kaizen: You went to King Edward VI grammar school in Birmingham. What kind of school was that?
Singh: It’s referred to as a select education. So it is endowed with quite generous funds. However, they tend to restrict the number of entrants, and they have an entrance test. In those days, it attracted about 2,000 people, but they could only offer 200 places. So if you were in the top 200, you would get in.
Kaizen: Did you get a good, basic education?
Singh: I was very privileged to have made the place. It was rated something like fourth-top in the U.K. It is still, I believe, one of the top schools in the country.
Kaizen: You went through A-levels, which the equivalent of high school in the U.S.?
Singh: It’s actually the continuation of secondary education, which is referred to here as sixth form college.
Kaizen: College prep years.
Singh: That’s right.
Kaizen: Then you went to Birmingham University. How old were you when you started university?
Singh: About 18.
Kaizen: You mentioned an interest in business and economics in your teens. Did you go in with a firm major in mind?
Singh: I had done economics and accounting at A-level, so at that stage I opted for a broad major in accounting and finance. With the view to perhaps combining with economics at a later stage. But my major was essentially in finance.
Kaizen: Accounting and finance?
Singh: That’s correct.
Singh: At that stage, it was one way to get into looking at businesses from an accounting perspective. It gives you an appreciation for how businesses function. My attraction was more toward management accounting as opposed to accounting in practice. The difference being that accountants in practice tend to compile numbers in order to fulfill statutory obligations of compliance; whereas management accounting has more to do with management decisions, where you are looking at investments, ways to reduce costs, and it is essentially looking at a business and how better it can function in terms of productivity, operations, how it can utilize its own funds better.
Kaizen: So using the accounting as a set of tools for management decisions?
Singh: Accounting as a feedback tool as well as looking at what options are available given to you given the financial restrictions.
Kaizen: The other side was finance. What was the attraction of finance as a major?
Singh: I was interested in capital markets, looking at ways of leveraging different types of gearing ratios, and how businesses can function and grow through the use of finance.
Kaizen: Is “gearing ratio” a technical term?
Singh: It’s the debt-to-equity ratio. You look at your own capital you are putting into the business, or shareholders are putting in, in proportion to what sort of debts the businesses are taking on. And over the years, you find different gearing ratios tend to be better given high interest rates — you want to have high debt with low equity; given low economic times, such as now, you tend to have a high gearing ratio, which is easily at one or two percent.
Kaizen: At university, did you take courses in the science, arts, or humanities? Or was it a more narrow education?
Singh: When you are in England, up until the age of about 14, you take a very broad range of subjects, which tend to cover what is called O-levels, which is the precursor to A-levels. Across those, in fact, I took a lot of the sciences: chemistry, physics, math, English, of course, and geography. After that, with the A-levels you can start specializing. So at A-level I went for more of a math, accounting, economics route. But we also do a general studies course as well at that stage. So that was my combination. I suppose it gave me the platform to look towards specializing further in accounting and finance. At that stage, I chose accounting and finance, but later on I decided to undertake an MBA where I got more interested on the marketing side. And that’s once you actually work for companies, you get an appreciation for it.
Kaizen: What was your first job after graduating from Birmingham?
Singh: My first job was actually for a publishing company. In fact, before then, I did work for an accountancy practice, Coopers and Lybrand, which is now part of PwC (PricewaterhouseCoopers). I had shied away from that, knowing that practice accounting would meant laborious three-year contract, looking at mainly statute reporting. Instead, I looked to publishing as a training accountant, and I specialized in management accounting as opposed to practice accounting.
Kaizen: Then you decided to go for an MBA?
Singh: That’s correct. I worked for a few years and then I opted to go for an MBA at Aston Business School. Given that I had already experienced accounting and finance, I decided — I was self-funding at this stage — I was going to make the most of the whole course and decided to specialize in marketing, which was something I didn’t have that much exposure to. I became particularly interested in market segmentation.
Kaizen: What was interesting about marketing to you?
Singh: I have always felt that accountants are shielded from looking at ways to moving business forward in terms of how to innovate and how to generate more business. Yet they’re more in-tune with costs and how to reduce costs. And I think accountants sometimes get blinkered, but combine it with a marketing approach, where you know it is essential for a company to breathe and grow by looking at different markets, how to nurture them, how to grow them, how to invest money in order to get returns on your capital. I think that’s a skill where you find that any company with corporate governors you have a board, you find that the accountants and the marketers are always at loggerheads given that accountants want to reduce costs and keep everything contained and marketers want to spend more and have a marketing campaign in order to generate business. I think what that gave me was a unique insight into both areas where you could actually have a cross between knowing the accounting function as well as the marketing function.
Kaizen: At this point, still in your twenties, were you thinking that you would be working independently or within existing firms?
Singh: I couldn’t imagine myself, at least at that stage, working independently. I was really trying to build a career and to align myself with better qualifications so I could offer that little bit more in general management for some of the larger corporations.
After my MBA, I ended up working for a conglomerate, which was looking to create companies from the old East European block where, for instance, in Romania they were privatizing a lot of the state-owned assets. Some of them were quite large: pharmaceutical companies, aviation companies, engineering companies, etc. We looked to acquire these companies and put Western-style management in there. For instance, we looked to bring a pharmaceuticals company we bought up to Good Manufacturing Practice (GMP) status. That allowed us to subcontract to some of the majors like SmithKline Beecham, producing some drugs in a very cost-effective way.
Kaizen: What years were you working in Romania?
Singh: That was from about 1998 onward. I worked for a company called Litchfield Continental. Eventually it was reversed into a shell company on NASDAQ, and we floated the whole structure. That gave us access to capital markets and a shareholder structure with institutional investors, which allowed us to expand and continue to the next stage.
Singh: I originally was the head of finance, but then it became more of a strategic role as the Chief Financial Officer. I oversaw all of the subsidiaries and I was responsible for raising the financing in order to continue to acquire other companies. Also, we were restructuring a lot of those companies in terms of making them more efficient and making sure that we could produce goods, such as aircraft, at a price that was quite competitive.
Kaizen: That requires a number of skills, including finance and management. How did you acquire the management skills?
Singh: With Energy Publishing, once I qualified, I moved as an accountant to general management. That’s when I felt that I needed to sort of prop up my skills with an MBA to get more broad experience in operations. It was after the exposure to a lot of the conglomerates and looking at turning around some of those companies that I actually learned some general management. In fact, I also studied a qualification we have here in England, which is an economic chartered director, which is mainly corporate governance. It was quite a new qualification in those days, but now it is quite popular here in the U.K. as a means of showing that you have the corporate governance skills that is required to govern from a private to a public company. I was one of the first handful of chartered directors in the U.K.
Kaizen: What is a chartered director?
Singh: It’s a qualification. Anyone can start their own company as director of the company; but to standardize the qualification, they put together the program. We have a well-established institution here in the U.K. called the Institute of Directors. They decided to produce a qualification very much like being a chartered accountant or chartered engineer. To be chartered means you have your own set of by-laws.
Kaizen: This would be like a managing director’s position — acquiring the skills and knowledge to do that?
Singh: Yes. It gives you the whole breadth of skills. There is also a panel interview where they assess whether you have the skills.
Kaizen: How does that compare to being a company president in the United States? Or a CEO?
Singh: A company president or CEO would give you the basic skills in corporate governance required for people management, managing a board, finance, operations, and marketing. This would bring them together in coordinating activities.
Kaizen: To go back to the Romanian operation — in addition to the management and finance skills, there were also cultural issues.
Singh: Yes. Also language barriers.
Kaizen: Also political issues: dealing with people who have been trained under a communist regime and trying to change their culture to be more market-friendly. How did you handle that?
Singh: In fact, we had nuclear scientists who were working on the shop floor because hard currency was hard to get in those days in Romania. We had a surplus of skilled labor. To manage that, we had our own operations people. Most were from London and some of our own people in Bucharest. We had translators to assist with the cultural differences.
In terms of dealing with the politicians, at that stage, Romania wanted to become part of the EU, so it was obligated to privatize a number of their industries. In fact, that is one time where the state was actually trying to help us. [Laughs] They helped us with introducing Western-style management and practices, making the companies competitive, and embracing Europe as an open-market. It was really introducing a capitalistic extension into Romania, which helped the economic circumstances by employing a lot of people.
One of the engineering companies we took over had something like 4,000 employees. It was almost a town in itself with its own little railway station. They made clutch parts for Mercedes-Benz and, obviously, Mercedes-Benz controlled the quality. They rubber-stamped them as Mercedes parts, but they were actually manufactured in Romania. So we were quite impressed with the quality they were bringing out.
It was essentially turning that from a communist regime to where they have the normal more profit-oriented objectives: generating profits, keeping business goals in sight, having a vision of the company in terms of quality, where they position themselves in the market, and looking at values that they deliver and how they are going to deliver that. The people are a huge aspect, and for them it was quite a privilege working for a Western company — and one of the forefront companies, especially in the pharmaceutical buyer’s market. It was one of the more prestigious pharmaceuticals that had been long-established. We also bought Romero, which is part of the aerospace company and that was part of Bucharest Airport at that time. That brought in a lot of joint-ventures. For instance, we had an Israeli company that was interested in importing MiGs from the Russians, putting in an electronic platform, and then selling them off to the Romanian Air Force.
Kaizen: Did you say Russian MiG airplanes?
Singh: Yes. Obviously, putting in a lot more technology. And they sort of bought in to Bucharest Airport and some of the hangars there in order to process the orders.
Kaizen: So the British conglomerate that you are working for is running a number of operations in Romania: pharmaceuticals, some biological enterprises, Mercedes parts, and so forth.
Singh: That’s correct. It was also a U.K. operation that was mainly insurance-oriented. Lloyd’s of London, a subsidiary we bought called McCall’s, and also biotechnology, which was more in Manchester and included looking at different ways to use innovative biotechnology.
Kaizen: And the overall company was Litchfield?
Singh: It was originally Litchfield that bought the assets; but once it was floated, we used a NASDAQ shell, which essentially is a company that was called — in those days — Global. You can buy a shell on NASDAQ where you can actually clean up and then you can get that to take over your company, which was Litchfield. And what Litchfield would do in exchange is to have a convertible debentures over the stock of the company and eventually it buys out. The debenture is converted into stock. So we had a controlling stake in the shell company, which is a little easier to list on NASDAQ than having to go to the traditional IPO structure, which means you have extensive up-front costs in terms of producing the prospectives and complying with all of that.
Kaizen: How many years were you with this organization?
Singh: A good four years.
Kaizen: In the late 1990s?
Singh: That’s correct. Into 2000.
Kaizen: At some point you left there. Is that because the Romanian operations were finished? Did other opportunities come along?
Singh: There were a lot of opportunities that I was faced with, and a lot of them were smaller projects that got me really interested. Many of my colleagues left to look at financing different projects, and I saw their success mushroom. I thought that I should try a hand at it. So I left that company to move on to Capital Instruments.
Kaizen: In 2001?
Singh: That’s correct.
Kaizen: Is this an entrepreneurial firm?
Singh: Yes. We specialized in raising funds for small-to-medium size companies looking to grow. We have a number of investors that we have who are looking for investing into small-to-medium size enterprises with the prospect of growth. We essentially marry the two.
Kaizen: Who is the “we” early on?
Singh: A network of financiers I work with. They all have their specific expertises. If there is a project, for instance, a biofuel plant or a harbor project or an aviation project, we can assemble a team and relative expertise and look to champion either raising finance or find certain investments.
For example, one of my earlier projects when I started off as a financier was to look at insurance assessors. This was a small-size English company, which had insurance assessors up and down the country who would go out and value your vehicle after you’ve had an accident. This was very early on when we had in England the third party loss-recovery market beginning to take hold. What we did was develop that company and combine it with in-house assessors that the insurance company was wanting to off-load to reduce their costs. So we created a national, insurance assessing business, which in itself was quite innovative in those days.
We could quite easily use IT and technology. Our team had a certain number of people who were more IT-literate. The way we grew the company was the insurance assessors had in those days what would probably be equivalent to an iPad. A gadget with its own cradle in his car. They would do off their report when they would see a vehicle. It was similar to the internet in that the cradle sent a signal through the phone back to the mainframe; it would turn around the reports quite quickly. We combined that for what we called the litigation departments and with the insurance companies as well; so we could actually cover both markets. Before it was bought out, it became a key player in the British insurance market.
Kaizen: At Capital Instruments, you came in as CEO in 2001 and put together financing for small-to-medium size companies. Your value-added is your network of people who have the financing available and how to structure finance for these organizations. In some cases, you implemented the management practices — putting together a team of people to make the company better-financed and better-operated.
Singh: That’s correct.
Kaizen: So it’s actually a combination of financial and management consulting.
Singh: Yes. And the marketing aspect as well because in order to attract investment, investors are really looking to companies that are in the growth phase; they are looking to grow. So it is essentially marrying the two. You have a very good project; you have management in place; you’re overseeing their investment; they are looking to grow their investment. So it was quite a mutually-beneficial relationship that we were brokering.
Kaizen: How would the compensation work? Would it be a percentage of the overall financing deal? Or are you taking investment positions yourself?
Singh: Sometimes a combination. Sometimes we could negotiate a private placement ourselves and sometimes we would get paid in equity as well as cash compensation. And sometimes it was a case that we would see two or three companies in the same field and see ways that we could create synergy by combining the companies. So we would look to approach venture capitalists and banking relationships ourselves to put together a financing package to buy two or three companies. Then we would be the nominees to the board to oversee the company. Once it was where we wanted it, we would spin it off for sale or continue having some sort of a stake in it.
Kaizen: A small-to-medium size company — can you put some numbers to that?
Singh: Anything from a £2 million turnover to £10-15 million.
Those were the initial-sized companies; later on the numbers got a lot bigger. We had hotel developments, such as the Brussels Sheraton. That was getting the investors to finance a purpose-built structure for the likes of Sheraton or the CORE Group, which do InterContinental Hotels, and then lease it back.
Kaizen: How do deals come along? You did insurance-adjusting in Britain and then a hotel in Belgium. How do you find projects as diverse as that?
Singh: Essentially, we built up good relationships with lawyers, bankers, venture capitalists, and private equity. And there were a lot of opportunities — like one of the key developments in Brussels in the Prince Royal area, which was essentially a strategic plot of land; it was a sale on a bankruptcy where we identified the site. It was in the right location where we thought this could actually be built. It was a case of us putting together the deal. This came to us by way of one of the bankers looking to refinance the site because they were struggling. We took the problem away from the bank and made it profitable ourselves.
Kaizen: So through the grapevine?
Singh: Yes. Through the bankers who made the referral to us. In early 2000 a lot of companies had over-expanded and the banks were looking to foreclose; so it gave us opportunities to go in with our management and successful track record. That was quite unusual because while the banks were willing to foreclose on existing proprietors, they were willing to lend to you to make that a success operation. It was really quite interesting in that a lot of deals could be picked up like that.
Kaizen: So the banks are making a judgment about your management and business skills. They don’t think that the existing people can pull it off. Fresh ideas and so on.
Singh: That’s right.
Kaizen: So even though you have no hotel experience per se, it’s the general business experience that is important.
Singh: Yes. Absolutely. Also, certain expertise can be brought in. Like in this case with the hotel experience.
Kaizen: That can be a commodity that you bring in.
Singh: There was a colleague I worked for who was part of a property development company that had already done small-size hotels, so he had the mechanics already in place as an expertise. Once we brought him onto the property, he was looking to create a purpose-built hotel, but the problem was financing. In fact, we got Kuwaiti funds. They were willing to finance the structure of the hotels, then this leads obviously to an operator, in which case he would share in some of that.
Since then we’ve acquired, as well, hotels back in Nottingham, leased to CORE Group, which again has very successful operations. We have other recent developments that are revolving structures — 55-story skyscrapers in Dubai. We also have an Indian company interested in doing something similar in India; that is an exciting type of project.
Kaizen: So the first decade of this century, what other projects were you involved in?
Singh: Some of the larger ones included a biofuels plant in Canada that was producing ethanol from biomass, which is very innovative.
Kaizen: In northern Ontario?
Singh: That’s correct.
Kaizen: How did that one come across your horizon from all the way across the Atlantic?
Singh: We built a lot of relationships in New York, having had a listed company on the NASDAQ exchange. We knew a lot of the banks and consultants there. I also had to be familiar with the federal security laws and the SEC practices. So we came across the project in Canada by way of a referral. At that stage, you in the U.S. had started feeling the pinch in 2006 and 2007. Capital was drying up. So they were looking towards European banks and they saw me as someone they already had a relationship with who had an established relationship with European banks. They signed me on a retainer to say that if I was able to finance this project in Europe, then they would be willing to compensate us. However, we actually felt that the engineering company that had actually designed it wasn’t actually capable of seeing the plans come to fruition.
Kaizen: So Americans were financing this project in Ontario, but American funds were drying up in the lead-up to the financial crisis. So they came to you in Europe.
You mentioned the engineering expertise. You need to get other consultants who have the engineering expertise because you don’t know biofuels personally, right? Although, you can read up on it.
Singh: Absolutely. I was quite fortunate that one of my colleagues had a Ph.D. She was an expert in sustainability. She went on tour for one of the major fuel companies. They were very interested in the project. I have another colleague of mine from a capital fund, who were interested in the project itself given that it was a sustainable project.
We had U.S. and European banks because they saw this as a way of legislation, because at one stage 10 percent of ethanol formed a part of the fuel pumps — most Americans don’t know that, but they actually pump 10 percent ethanol and they were looking to increase that to 20 percent. So they knew that there was a huge market for it. Corn prices — ethanol being from corn — were going through the roof in the Corn Belt. So that was very unpopular. But here we had innovation and technology, and we had Foster Wheeler at the forefront of developing commercial processes in order to convert biomass into ethanol, which is a tricky process.
Kaizen: What do you mean by “biomass”? Tree bark and whatever is left over from lumbering operations?
Singh: That’s right. Whatever is left from lumbering operations or from natural waste in the forest that needs to be cleaned up. Also some woodchip derivative parts. In Canada there are huge sites accumulated over years and years. We inspected one site that was something like 100 hectares. They were seen as dump sites and they didn’t understand why we were interested in them. [Laughs]
Kaizen: Free raw materials.
Singh: Yes. Free raw materials. That’s one of the reasons the pension funds were interested: we were getting our raw materials free and producing a product.
Kaizen: Were these U.S. or British pension funds?
Singh: Canadian. And we had one of the Netherlands banks.
Kaizen: What dollar value is this operation?
Singh: That was about $320 million (USD).
Kaizen: Much larger. What years were you working on this one?
Kaizen: Was it an R&D project primarily, or was the R&D done and it was more an engineering issue to make it happen?
Singh: The R&D was completed. However, upscaling to mass production was a problem that needed specific expertise. That came from a British company, in fact, Foster Wheeler. Wheeler is known more in the petroleum industry for resolving problems using mass furnaces.
Kaizen: When did this project come to completion?
Singh: It’s still partly financed because we had a project that was taken over by a drawback of Scotland. Things pretty much came to a halt at that stage. Now with financing again becoming more available, we are hoping to move again.
Kaizen: You are working on a project in Ireland involving a port?
Singh: Yes. That’s correct.
Kaizen: How did you hear about this one?
Singh: This came from one of my clients who looked to finance this development and thought that it was far too large for them in Ireland — he’s based in Dublin himself. He asked whether this would interest me; it was a marine project at that stage. While I was in London, I floated the idea to the banks, one of the banks being the European Bank of Reconstruction and Development. It was quite fascinating because it qualified in the European Union grants for an infrastructure project since we were developing a port. But the scale of it didn’t actually allow it to qualify for some of the larger grants; I was told at that stage that it was probably easier to procure larger numbers from European investment as opposed to going for something smaller.
Kaizen: Is this Euros? Sterling?
Singh: Sterling. So instead of trying to finance something for about £25 million, they were asking us to look to upscale the project.
Kaizen: So they can loan you more money. [Laughs]
Singh: That’s right. And here in Europe it qualifies as a sort of private-public partnership, where private money is being matched by public grants and loan financing. This was essentially driven by EU legislation: mandated fishing vessels — mainly Spanish fishing vessels — shipping in the Irish waters have to dock for a certain number of hours after each fishing trip, which meant that they would have to travel all the way back to Spain; but here they could put a facility that was localized. On top of that, we had a wind farm and rigs off-shore, near the facility, without having to go to Dublin or Cork. This would justify having a base there. Also, on the West Coast there is a lot of tourism, which attracts cruise liners and so on. So it mushroomed into a much larger project.
Kaizen: The projects you’ve worked on are quite geographically diverse: Romania, Belgium, Britain, Ireland, and even Canada.
Singh: [Laughs] There are a few developments in France as well.
Kaizen: Fair enough. [Laughs] There doesn’t seem to be a pattern there. It seems it is more of the matter of when and where a deal comes up.
Singh: That’s right.
Kaizen: The projects are also in all sorts of different areas: insurance, hotels, biomass, and so on. Of all of the deals that are possible, what makes one attractive to you? It doesn’t seem to be geography or industry specific. What are the features that interest you?
Singh: I’m quite privileged to receive more projects than I could possibly allocate my time to. The projects that attract my interest … it really is about the people I’m working with. I have a great admiration for our management; it’s really the people who make the projects happen. I tend to pick and choose projects with people I can really work with and see their passion. Also, I even find that even though it’s across different industries, the mechanics of making a project work are quite fundamental. The mechanics distill down to good marketing, good numbers, an eye on the numbers, good productivity, a business plan that is realistic, and so on.
Kaizen: That is more abstract than the particular product or place.
Singh: Yes. I’ve developed those fundamentals having come from a management background, combined with marketing and corporate governance. It’s about how to oversee a project and how to take that “pilot” or strategic view. You can make it happen from start to finish and you have the people and elements in place.
Kaizen: The first thing you mentioned was the people that you get to work with. You deal with a wide range of people in many different countries. It’s not always the same financiers from private equity and venture capitalists. Is it people that you know and you’ve worked with before?
Singh: Actually, you look at the merits of the project and you know your own resources of people. Also, with some projects you look at the existing management already in place. What’s their passion? Where are things going wrong? Where do they lack the skills to do it themselves? And where can we make it a mutually-beneficial relationship? So I’m very interested in who actually spearheads the project itself.
For instance, we were quite fortunate in the Ireland project. We have someone who has 25 years of experience in the industry. He’s built up a family business, which has gone pretty much as far as it can go, because you can’t break the threshold of a family business into a more corporate structure, which takes structured financing and attracting the likes of what we would call “merging capital.” It would be highly capital-intensive and then dealing with a lot of the blue chips to get relationships to make a support development work. It’s beyond their agreement. But you have the people on the ground at the local level who are there and willing to see it through with you at the end of the day.
Kaizen: How much of this can you do from your home office? How much of it requires you to travel — boots on the ground?
Singh: In the early days, I used to travel a lot. But now I try to manage remotely, being a family man. [Laughs] But it is difficult; I’m still traveling.
Kaizen: Do you have more junior people whom you can farm the travel out to in order to do the leg work?
Singh: Yes, we do. We have a lot of junior people who’ve come through the ranks who have worked with us on several projects. Also, technologies such as Skype and so on make it so much easier.
Kaizen: The company is still Capital Instruments?
Singh: It certainly is, yes.
Kaizen: How many people work at Capital Instruments?
Singh: About 25 people.
Kaizen: You’re CEO of the organization?
Kaizen: With 25 people, how many projects in an average year?
Singh: We take on a variety of projects. Some years it may be like 12 projects, which might be fairly small. And some years we may take as little as two or three projects in a year because they take a lot of time and are a lot more involved. It really depends. Some of the companies may be in high-growth fields, like biotechnology, which doesn’t really need too much key-input, but they do want the ability to raise financing. We’re pretty much putting together their business plan and pitching for them to banks and helping them in an almost hand-holding approach that isn’t so resource intensive. Whereas if you are developing a completely new project, like with the port development, for instance, we have to sort of scrap the original plan to look at something far bigger that involves some key players that we have to resource or to incentivize to work with us in order to bring to fruition.
Kaizen: So the 25 people who are part of your staff, how many of those people would be finance? How many would be marketing? How many would be management? Or does that breakdown even make sense?
Singh: Most of us are all-rounders. Either we have a financial background or a marketing background, and sometimes an operations background. We come from a particular industry where we’ve managed either to grow a company or projects within a larger company where we’ve had hands-on experience. We’ve been through the “mill,” as we say, having experienced capital-rationing problems, problems with not having enough resources — human resources and so on. So most of the people are quite experienced.
Kaizen: You mostly hire people who’ve been through the fire.
Kaizen: Do you recruit out of universities for junior people?
Singh: We do recruit from universities. A lot of the younger chaps are post-graduates. Some of the research, especially the desk-based research, we do resort to Ph.D.-level students who we can contract.
Kaizen: Speaking of a Ph.D., you spent some time at Warwick Business School pursuing a Ph.D. while you were also doing your full-time career. What was your motivation for pursuing the Ph.D.?
Singh: I had a professor who was very interested in my MBA dissertation who convinced me that I should develop it more and make a dissertation that would be worthy of a Ph.D.
Kaizen: What was your thesis?
Singh: I was looking at specific market segmentation in the leisure industry. In order to motivate myself, the subject had to be marketing, some aspect of segmentation, and it would also have to involve an area that I really haven’t looked at, but interested me. It ended up being the leisure segment. I went through the academic side of it, but I was still very much working and I was pulled away by certain projects. Unfortunately, that has been shelved for the time being. I would love to go back to that.
Later Career and Advice
Singh: Yes. That’s right.
Kaizen: You are in a good situation now. You are in your middle 40s; you have a prosperous company; you have more deals in front of you than you can handle, so you can be choosy. What do you see yourself working on for the next few years?
Singh: I think the mix of projects at the moment with the port development, the new, revolving skyscraper …
Kaizen: Yes, we do need to come back to the revolving skyscraper. [Laughs]
Singh: [Laughs] That’s kind of interesting, yes.
Kaizen: So the port project in Ireland, a revolving skyscraper in Dubai, and a project in India, is that right?
Kaizen: Those will keep you busy for a couple of years.
Singh: Yes. Those are the immediate projects. The biofuel project is also coming back on-stream. So those will keep me busy for a while. I’ll have to light a candle to try to fit my Ph.D. in between.
Kaizen: Let’s talk about Dubai, where all kinds of engineering marvels are happening. How did you get involved in this project?
Singh: This was from an old business associate who went out to Dubai. He had been there for a number of years and sold something to the tune of $200-$300 million in property there; so he became quite a significant property dealer there in Dubai. He was involved in Jumeirah Beach Resorts, which is one of the prime lands in Dubai. We had a very good relationship there. He based himself in Dubai and is looking at a way of presenting something at the height of the highest structure in Dubai at the moment, Burj Khalifa.
Dubai was priming itself to be one of the major hubs that you can actually stopover when you are flying from, for example, Birmingham to the East. So when I take a trip to India, I have a chance to stop off in Dubai and have a chance to enjoy a lot of the 5-star and even 6-star and 7-star hotels they have there. As well as some of the water parks — they even have a ski resort there. It is a very exciting place. Obviously, they took a battering during the financial crisis and everything almost came to a halt. My business colleague there is struggling, having had a lot of boom years in property sales.
However, there is still a niche market of those interested in innovative property ideas. He’s working with Atkins Engineering to develop a revolving structure. What became popular is what is called “villas in the sky,” where people buy whole floors of a building in order to have an apartment that stretched across a whole floor.
Kaizen: So the idea for this one is that the entire building rotates?
Singh: It rotates, yes. He got the technology and wants to build on prime land as its first prototype. He approached me for the financing aspect because we have the hotel experience and the type of investors who may be interested being that it is at the forefront of innovation — that’s always a risky venture. He was having a difficult time financing, which is why he approached me.
Kaizen: How much is it to finance this project?
Singh: About $200 million. It’s a 55-story skyscraper.
Kaizen: Part hotel and part villas in the sky?
Singh: His idea initially was to have all residential. We changed to thinking that you are perhaps better off selling the first 15 or 20 floors to a hotel. At the moment we are working with the Core Group, who are quite interested in the first 15 floors.
Kaizen: This project is still relatively early and you are still working on the financing?
Singh: Yes. We have a Swiss group and an Indian group interested. We’ve acquired the land where it is going to be built, so we can put those stages together to satisfy both of the criteria and maybe bridge debt to finance the difference.
Kaizen: The engineering is a “go?”
Singh: Yes. Apparently the technology has been patented as a joint patent between Atkins and my business colleague.
Kaizen: Does the property have a name so we can keep our ears open for it?
Singh: Yes. You can look at the website; it’s Time 55. It’s very exciting. I can very easily imagine somewhere like Las Vegas having a revolving structure like that. It would be quite unique. Perhaps New York as well. In fact, the company itself, Time 55, wants to put a building on each timeline. I think that’s quite ambitious; at this stage we are focusing on getting the initial one off of the ground.
Kaizen: It could serve as a prototype for lots of others.
Singh: That’s right. So we are trying to get the prototype off of the ground, and once we know that’s done, to replicate it will be easier. Right now it’s about getting the prototype financed and workable and to make it a worthwhile hotel — to make it successful by having full sale on the residential as well.
Kaizen: So your major projects currently are a revolving skyscraper in Dubai, the biomass case in Canada, and a large port structure in Ireland. Your plate is quite full.
Singh: Yes. [Laughs] Of course, I’m not the only one working on these. We have a number of people involved.
Kaizen: Yes, a whole team of people. Of your 25 permanent people, are they divided among these three projects? Or is everybody doing a little bit on each?
Singh: They are pretty much divided. Each of them has their expertise.
Kaizen: And there would be a smaller group of you who are in a general oversight position — or perhaps just you?
Singh: The oversight I’m heading on each of those major projects; so I need to coordinate and orchestrate who’s working on those to make sure that we are still on target and things get done.
Kaizen: Over the twenty years or so since you finished schooling, what’s the thing you’ve enjoyed the most about all of the projects you’ve worked on? Is there one element you’ve liked the most?
Singh: The fact of the achievement. You see a very small company that grows. Like Biofarm Conglomerate has grown into something that has become very exciting because we started from a pharmaceutical company and then acquired a whole sequence of opportunistic acquisitions and ended up the life of the group at that stage. It was very fast, in a couple of years. And I enjoyed the bounce in our stock price — we went from $0.20 to $8.00.
Kaizen: Wow. That’s forty times the original price.
Singh: Yes. So the shareholders benefited — it made a lot of money for a lot of people and they were very happy. It was a very exciting time; reflecting back on it is very pleasant. But also seeing some of the smaller projects come to fruition are very good. The insurance assessors — when we became a major player in the market on a very small concern. A $2 million turnover went up to about $40 million. It was quite good. The growth is what I tend to reflect on.
Kaizen: It’s a happy measure.
Singh: That’s right.
Kaizen: Have you had any projects that ended in failure, projects that just didn’t work out?
Singh: Oh yes. I’ve had my fair share of deals that didn’t work out. Sometimes you do reflect on them and think, “Maybe if I had done it differently.” But that is part of the learning process.
Kaizen: Are there any common threads, things you’ve learned from those deals that fall through that inform your decision-making the next time around?
Singh: Sometimes it comes down to negotiations. Sometimes it’s best to try to find a common platform in order to make projects work. I’ve lost out on a fair share of projects where you try to get your shareholders the best deal, but it wasn’t quite right for everyone.
Kaizen: Over-extended? Too pushy?
Kaizen: So it has to be win-win. Though, going into negotiations, you’re both in a separate ballpark.
Singh: It’s usually very complicated and difficult to keep all of the connections.
I’ll give you an example. We owned an aviation subsidiary in the Isle of Wight and that was one of three manufacturers of aircraft here in the U.K. What we wanted to do was to take over a small concern in Yorkshire, where they produced single-pilot, two-seater aircraft. So you get these ex-military pilots to buy the fuselage first … this is a very nice plane where you can detach the wings, put them on the back of a trailer and reverse it into your garage. That really interested me.
Given that we had the production line in Romania and the Isle of Wight, we could actually put those into full production. And we had the usual federal licenses and CAA licenses for production. But in negotiations, it meant buying the company outright; we had some very tough negotiations there. Obviously, you are concerned about the risks you are taking. But upon reflection, I often think perhaps that would have come around. And those aircraft are still around, but not manufactured and not as popular if they were in full production, which would have lowered the price quite drastically. At that time we were looking at something like $10 million for the company, which was a lot of money at that time. But I wish we had acquired it at that time. That would have been a different story. So there are always difficult negotiations because you have lawyers there to represent your interests and you are almost negotiating with a whole team across the board. It’s very difficult. You wonder sometimes if maybe you could orchestrate a board that would do a little better. But it depends on timing and a lot of other issues as well.
Kaizen: Juggling a lot of balls.
Singh: And blades at that time, yes. [Laughs]
Kaizen: Thinking about younger people still in school. How important was your formal education was in enabling you to do what you have done? If someone has smarts and ambition but not the formal schooling, can he do what you did? Or is the formal schooling important?
Singh: You know, I think I ride the learning curve a lot faster. Formal education is the way to go. You have to load yourself with the key thinking. I found that originally — and this was having qualified as an accountant — you’ll still find yourself blinkered in the market because you don’t understand the marketing aspects; you don’t understand the operations; you’ll also get pigeon-holed in a specialization that is self-restricted. I broadened my horizons and tried to get better perspectives by looking at other areas and I became interested by accident in marketing; it wasn’t a subject that really appealed to me.
Kaizen: And that wasn’t until your MBA level.
Singh: Right. Nowadays in business to get ahead of the game, you need to be more of a generalist, but see the woods from the trees by having enough knowledge in the various aspects: numbers, accounting, managing operations, managing people, as well as being able to see a vision for the company in terms of goal setting and where you are positioning your company relative to the competition.
Kaizen: Two other things come to mind here. You consistently mentioned knowing people — having people bring things to you and having your own network of people you can call on. What goes into being the kind of person who can be a part of a network like that? Are personality and character important? And can they be taught?
Singh: I think in business your reputation is extremely important as well as your ability to deliver. And more importantly, as we say in England, an old phrase that is, unfortunately, being emptied of meaning: “Your word is your bond.” Integrity. Loyalty to your principles.
Kaizen: Developing a reputation as being someone who can deliver but also being a person who delivers what he says he’s going to deliver.
Singh: That’s correct.
Kaizen: Part of that is the skill- and knowledge-set, and part of that is being smart enough to have the formal schooling.
Kaizen: You mentioned that most of the deals you’ve put together have had common elements — you are able to see certain, abstract patterns. But in each case, since the industries you are so different, you have to plunge into the particulars of that industry. It strikes me that you’d have to be a pretty quick self-starter to learn about biomass, ports, pharmaceuticals, airplanes, and so forth.
Singh: Yes. That’s correct. That’s the interesting aspect. In terms of brokering a deal in order to make something grow, to make it appealing to shareholders, to make it appealing to the people who are going to buy the products, and to any stakeholders who are in the business — putting those elements together. The only term I can think of is cross-functional integration. You have to see the woods from the trees. You make everyone strategically coordinate in the same way. And sometimes it’s like marketing to move the company forward, but then you know the numbers fed back to you to see how you perform. I think I have a good mix of the two.
Kaizen: Some questions about Britain’s business climate and the European climate, more broadly speaking. From your perspective, there are opportunities all over the place.
Singh: There are always opportunities, yes.
Kaizen: Do you get the sense that Britain now has an entrepreneurial culture? In one sense, Britain is the birthplace of modern economics and has a strong entrepreneurial history. Is the climate healthy? In decline?
Singh: I think the entrepreneurial spirit in Britain has always been quite strong. It’s weathered the recessions and the booms that we experience here. We have a very good entrepreneurial structure here where people are given the freedom to look at developing and incubating new businesses. We are probably more risk-averse than the Americans are. When you are in New York and pitching a road show and people are buying your stock — the Americans are more risk-seekers. Obviously, you have to speculate to accumulate, but the British tend to be more conservative. We see that through venture capitalists.
The recessions and so on tend to polarize people. You get those who are looking for opportunities and are more risk-seeking, and you have some people looking at the austerity measures going on at the moment and are risk-averse. They draw their funds in more and securitize them in gold and silver and not be willing to invest at this stage. But there is still an entrepreneurial culture that has weathered the differences in available financing.
Kaizen: Britain traditionally has strong ties with North America and more broadly the Commonwealth. But also, due to geography, close connections with Europe. Are the American connections more important now, or the European?
Singh: The American relationship has always been great. For Britain, I think, that is a huge market that is readily available. The European market is a little more fragmented; it’s always been a little more difficult because it has essential differences all across Europe. But, again, it’s an open market, which will continue despite differences in the currencies or whether the Euro dies or whatever.
Kaizen: Europe’s temporary troubles. Britain is in some ways part of the European Union, but it does have its independent currency and it guards its sovereignty. To what extent do current troubles with the Euro affect business in Britain?
Singh: The Euro is a fluctuating market at the moment with the economic climate. But the British Pound is still really relatively strong. Although, for exports, it makes your price a bit more expensive across the continent.
Kaizen: Zeroing in on the so-called “PIGS countries” [Portugal, Italy, Greece, Spain], there is a current instability. Does that impact your decision-making about whether you take on investments there?
Singh: We certainly do because of the political instability. I would certainly be an advocate, but if all the debt was actually liquidated, it would be a lot easier to get the next generation to have it fall on their shoulders the burden to liquidate this debt bubble. Inflating each time isn’t the solution.
Kaizen: So solve the problem now?
Singh: I certainly would. In some ways it will come to the crunch because Greece is a recurring problem. You saw the problem with Cyprus, which is the first time 30 percent was just wiped off of accounts. It may well be that at this stage that Germany is not willing to further inflate and dilute their own currency, the Euro. This would create a domino effect where Portugal, Italy, Ireland, Spain, and Greece are all impacted, which might be the best thing that’s ever happened to Europe. But I think the most likely scenario is that they will hop-along. The austerity measures will be quite drawn out. I mean, we are having riots and so on in the various countries about this, including the U.K. We are, obviously, not sheltered from it here. It’s quite unfair. A lot of assets are being depreciated due to this bubble. And business perceptions are impacted. It’s a shame that it has to come to this. But this is the result if you want these cycles — and quantitative easing is actually adding to the problem and deferring the solution as opposed to offering a long-term solution.
Kaizen: Younger people. What advice would you give to those starting out in business? Do they need to work on personality issues? Character? Or acquiring formal knowledge? You also mentioned being able to see the forest through the trees, so cultivating a big-picture, abstract ability? Understanding markets? Politics?
Singh: I think people in college now have a lot more opportunities these days, especially with the information age where we have the internet.
Kaizen: Research costs are way down.
Singh: Absolutely. And we have readily available information through the internet. Researching opportunities and social networks are developing and have changed marketing in of itself. And communication can happen almost instantly across the globe. And we can almost travel anywhere in the world. I think it is a very exciting time for someone in college.
Kaizen: What from your college experience has stood the test of time?
Singh: I would certainly invest in knowledge-development by gearing yourself up through formal education. Also by looking at the common denominators of what make businesses work.
Kaizen: So lots of case studies.
Singh: A lot of case studies, which are, again, readily available. It’s almost gaining experience through someone else’s eyes without actually doing it. Because the best experience, I always say, is experience.
Kaizen: Also learning from failure cases?
Singh: Absolutely. Failure cases as well as successful cases. One of the big things I enjoyed in my MBA looking at was real companies that either got it right or wrong. And even some live cases. Or even simulations where you are designing a product — I think that is a very good way of learning. In those days we competed against each other in a marketing simulation and we had a product that was the equivalent of, let’s say, a 3D gadget like a navigation device. It gives you a good taste of business given that you can never have perfect information; you’ve got to make guesses sometimes. The other thing that you do learn is to follow reason through — everything has a cause and effect. To understand that and to build your character in terms of experiencing all the virtues we derive from reason.
Kaizen: So lots of experience whether through case studies or simulations, and getting internships and actual jobs as you can. Then combining that with high-level knowledge and judgment skills as well.
Kaizen: The internet is a boon in making tons of information available, but one still must sort through that information and say what counts and what doesn’t and then exercise good judgment.
Singh: Yes. You have to be able to make that meaningful to your own goals. The other aspect, which is very essential in the earlier part, is combining your personal goals with the goals of your organization. And self-development is something that you really have to invest in from the outset. Putting time aside to look at your weaknesses and how you can improve them. There is a lot of talk about positive thinking, but I always promote what I call “negative thinking.”
Kaizen: Objective self-evaluation is part of the process.
Singh: Yes. In terms of constructive negative thinking. With negatives, sometimes we have to overcome them. The positive things look after themselves.
Kaizen: When you were younger and your family was poor and working class, a big part of your motivation for going into business was to earn money. Now you are comfortable financially and wouldn’t have to work anymore if you didn’t want to. So the money is part of your motivation, but what also is motivating you to continue to work hard?
Singh: I think it gives you the emotional fuel in terms of knowing that you are valuable, that you can contribute and make a difference. I’m happy to grow businesses — to see our starting position and where we could make a contribution towards that business and make it grow. And if anything is attractive, it is probably the achievement from having done it — moving companies and making a difference. That excites me.
Sometimes you have a project that gets me thinking about how we could do it. I always find that if there are complicated financial project, many people don’t want to get into the messy details of finding a solution. But I’m wired in the way that it gets me excited to find a solution to it. From an early age, I tend to think about how I can make things work. Perhaps I can get certain investors or banks interested and maybe partly venture-capital financed. If I can break that project down to phases, then …
Kaizen: So you enjoy the process of problem-solving, seeing the problem solved and watching as the business grows.
Singh: Well, not always is it growing! [Laughs] Sometimes it is something you didn’t envisage and I think, “Why didn’t I think of that at the time!” But it is all part of the learning curve. You get better as you experience more.
This interview was conducted for Kaizen by Stephen Hicks.
The latest issue of Kaizen [pdf] features our interview with Lall Singh on the theme of Entrepreneurship in England.
Also featured in this issue of Kaizen are guest speakers Robert Garmong, Douglas Rasmussen, and Piotr Kostyło as well as our Entrepreneurial Education conference and a conference we hosted with the Austrian Economics Center.
Print copies of Kaizen are in the mail to CEE’s supporters and are available at Rockford University. Our next issue will feature an interview with Roberto Salinas Leon on the theme of Entrepreneurship in Mexico.
More Kaizen interviews with leading entrepreneurs are here at our site.
CEE Review: We Work Less, Have More Leisure Time, and Earn More Money | Sputtering Startups Weigh on U.S. Economic Growth, and more
News and Opinion
New wrinkles in the Uber-versus-the taxi-cartels wars. Business Ethics Highlights.
Bribery a way of life for companies operating in emerging markets. The Telegraph (via Business Ethics Highlights).
Sputtering Startups Weigh on U.S. Economic Growth. The Wall Street Journal.
We Work Less, Have More Leisure Time, and Earn More Money. Humanprogress.org.
How to Get Comfortable With Being Uncomfortable (According to a Green Beret). Inc.
Where Europe is most and least innovative, in 6 maps. Washington Post.
Maybe Companies Aren’t Too Focused on the Short Term. Bloomberg.
A conference on Eudaimonia—Human Flourishing is being held in Winston-Salem, NC, on April 20-22, 2017. This conference aims to promote high-quality, interdisciplinary theoretical and empirical research that develops a better understanding of eudaimonia, its determinants, and its institutional implications. The conference submission deadline is December 25, 2016. More information about the conference can be found here.
“The sad news is, nobody owes you a career. Your career is literally your business. You own it as a sole proprietor. You have one employee: yourself. You are in competition with millions of similar businesses: millions of other employees all over the world. You need to accept ownership of your career, your skills and the timing of your moves. It is your responsibility to protect this personal business of yours from harm and to position it to benefit from changes in the environment. Nobody else can do that for you.”
See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.
News and Opinion
7 things successful people need to do, courtesy of Ruth Bader Ginsburg. Inc.
Young Rural Women in India Chase Big-City Dreams. The New York Times.
Amazon: ‘Incentivized’ Reviews Get Higher Ratings, Now They’re Banned. Business Ethics Highlights.
7 Reasons the Best Employees Quit, Even When They Like Their Job. Inc.
Companies That Discriminate Fail (Eventually). Bloomberg.
The hidden adult themes in Beatrix Potter. BBC.
USA ranks 51st worldwide in ease of starting a business. See the rankings of the easiest countries to do business in at doingbusiness.org.
The Georgetown Institute for the Study of Markets and Ethics is hosting a symposium that will explore “Ethics and What Is Not Seen: The Effects of Remote Consequences on Ethical Analysis” on Friday, November 18, 2016. For more information visit their website.
See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.
Dr. Gregory Sadler, President and co-Founder of ReasonIO, will give three talks at Rockford University on Monday, October 31.
The Center for Ethics and Entrepreneurship is sponsoring the talks. Everyone is welcome to attend!
Here’s a report (in Spanish) on Professor Hicks’s lecture at Universidad Adolfo Ibáñez in Santiago, Chile, to a group of engineering students and faculty at the invitation of Professor Ruth Murrugarra.
He did a short follow-up interview (in English) with Andrea Millar Bruna, posted here:
AMB: Which are the essential skills for success nowadays?
SH: Most important is an entrepreneurial mindset — that is, being committed to actively seeking interesting challenges and working creatively to meet them. That mindset enables one both to enjoy one’s work and to become good at it.
AMB: What is your vision about Chile related to entrepreneur and ethics.
SH: Chile’s remoteness from major economic sectors and its sometimes dependence upon a few commodities — can be positives but also present challenges for integrating into the world economy. Entrepreneurship is all about meeting challenges. So Chile might think about adapting, say, the Finnish model of education investing in human capital and the high-tech sector, as both Chile and Finland are geographically distant countries with smallish populations and a narrower range of natural resources.
AMB: In your opinion, why are ethics and entrepreneurship so important?
SH: The only way to personal success in one’s business is by having integrity – being committed to doing quality work and following through. People who cheat or engage in hypocrisy may gain in the short-term but they rob themselves of the satisfaction of living with pride. Their “successes” are hollow. Ethics is also especially important for entrepreneurs, not only in their personal quests, but also since as founders they are most influential in establishing the culture of their firms.