A thriving business as a lasting legacy

First published in the Financial Times on 7th August 2012.

How capitalists establish fitting memorials

We may not all yearn to be immortal but I don’t believe anyone wants to be forgotten after they die. This isn’t simply vanity but a deep, instinctive urge. For most of us, this longing is satisfied by having children and seeing our genes passed on through the ages.

But others, especially ambitious men, seek to leave a material mark on the world. No doubt this is because they cannot give birth; so they seek to create something else as a substitute. I suspect entrepreneurs fall into this category – as a breed, they possess a powerful desire that their accomplishments outlive them. They agree with Pope John XXIII’s advice: “Do not walk through time without leaving worthy evidence of your passage.”

Yet most tycoons fail in this aspiration, because their business empires tend not to survive for long after their demise. And often they are more famous for amassing a fortune rather than making the world a better place.

One industrialist who avoided that fate was Alfred Nobel, the Swedish explosives magnate. In 1888, he was mistakenly reported dead and a French newspaper published a damning obituary, dismissing him as a “merchant of death”. Nobel read this indictment, and decided to dedicate the bulk of his estate to the funding of the Nobel Prizes to escape such a fate. Even though he made money inventing dynamite and gelignite, he is today remembered for honouring great scientists not as a munitions and arms maker.

Inventors in general have a far better chance of being commemorated than those who are simply good at business. Quite a few of the greatest technical geniuses died penniless but are still honoured. Charles Goodyear patented the vulcanised rubber process yet never profited from his innovation; Nikola Tesla saw the advantages of AC electricity before others but was a ruined man on his death; and Johannes Gutenberg invented the printing press but died bankrupt. Others benefited financially from the insights of Goodyear, Tesla and Gutenberg, but those exploiters have been consigned to oblivion by history, while the real pioneers are recalled.

Certain entrepreneurs are imaginative enough to forge their commercial empires into institutions that can outlive them and prosper long into the future. Perhaps this deprives their descendants of inherited wealth, but it means their life’s work is more likely to endure.

John Spedan Lewis is a classic example: he founded the John Lewis Partnership because he believed in employee ownership, transferring control of the retailer to its staff. Similarly, Henry Wellcome’s will vested the entire share capital of his huge pharmaceutical concern in the Wellcome Trust, now perhaps the world’s largest biomedical charity – thanks to his generosity and foresight. In the cases of Lewis and Wellcome, their philanthropy succeeded because their businesses grew enormously after their deaths.

Other rich entrepreneurs sell up and simply use their wealth for dedicated good causes. Andrew Carnegie built the world’s most profitable corporation in the steel trade in the late 19th century. He sold it for cash to JPMorgan, and proceeded to give almost the entire amount away, the equivalent today of billions of dollars, constructing thousands of libraries and endowing educational establishments. He wrote: “A man who dies thus rich dies disgraced.” In a similar vein, I suspect one day Bill Gates will be better known for his charitable activities than for co-founding Microsoft.

I’ve no doubt that great composers, artists, writers and performers are more likely to be celebrated after their deaths than any business leader. But by building companies that furnish jobs, that generate riches for stockholders and sell products that improve people’s lives, capitalists can establish memorials to their efforts that are much more than tombstones. Prosperous family businesses passed down the generations are living epitaphs to the talents of their founders.

By their nature entrepreneurs upset the status quo, introducing change to the existing order. Such non-Establishment figures are often more renowned posthumously than those who meekly conform all their lives. As General MacArthur put it: “You are remembered for the rules you break.”

Posterity judges risk takers more kindly than their contemporaries do.