David Singleton's Diary

Taking All The Chips

I met recently with a venture capitalist, who was telling me of a recent investment. He bought the majority share in a company for $500,000, and has since somewhat deviously muscled out the other founders, including the man who created the company. In his words “If there are chips on the table, I take them all”. He now stands to make perhaps $50 million on a successful flotation. What is more surprising is that investment carries absolutely zero risk, as he has also paid himself $500,000 a year as chairman of the board for the last five years. So he has already earned $2,500,000 even if the company folds tomorrow.

What do I make of this? If this were a board game (Monopoly springs to mind), I might congratulate him on being a master tactician. I am generally comfortable in a capitalist society. And I have no doubt that since time immemorial, robber barons and the super-rich have indeed taken all the “chips on the table”. Which leads to the troubling question. Are those of us who espouse the “ethical company” – Honesty, Responsibility, Equity, Goodwill – just the naïve suckers bringing a pocket knife to a gunfight? It would be wonderful to believe that the principle of taking all the chips on the table ultimately fails, but I have no doubt that history shows otherwise.

This encounter has brought two things into focus for me: The first is the realisation that I have never been entirely comfortable making money out of money. It is one thing to do work, hopefully be extremely well paid for it, and then use the money you receive to buy other things you need. Money as some form of token of exchange. It is something quite different to simply have money and use that money to generate more money. I have no ethical problem with those who do that, but it is a game that I have never understood or wished to play. Probably a very good thing therefore that I did not follow many of my contemporaries at university into the City of London! I own absolutely no shares and stare in bewilderment at the value of the stock market. And even more so at the stratospheric rise of Bitcoin et al, for which the only justification I can see is that everyone believes the value will continue to rise. I am sure that I am blinded and blinkered, but all I see are houses built on sand. A classic Ponzi scheme.

I did have a personal pension, which was almost criminally mis-managed by a large pension fund, who would no doubt have invested it in the stock market. But I have since removed everything, and now manage my own pension, investing it in a share of the building which houses DGM’s office. My pension fund is therefore partly the landlord for our company and a few others. And as landlords, we practice honesty, responsibility, equity, goodwill, including offering a rent holiday where it was needed during the pandemic.

The second realisation (which may come as no surprise given my evident complete lack of understanding of the world of finance) is that those things I really value fall outside the monetary system. How, for example, would my artistic life be changed in a world of “taking all the chips on the table”. Simple. There would be no DGM Ltd. I would not be working there, and the recent King Crimson would have been unlikely to have achieve more than a couple of years. All of these would have been unlikely to succeed over the long-term were it not for complete equity, everything being shared equally.

Which is not to say that I do not have more than my fair share of the chips. As, in fact, I suspect does virtually everyone reading this. Shockingly, the average yearly income globally is only something like $1,500. More than about $40,000 a year puts us in the top 1% globally. So, returning to that meeting with the venture capitalist that so troubled me, perhaps I am more like him than I wish to admit. He simply plays Monopoly more aggressively than I do.