Anyone can do it. The American Dream. The glory of Britain’s new meritocracy. Isn’t it all true? One of the perils of reading the financial press, or exposing your brain to any of the mainstream media, is that you begin to believe the hype (and the misery, as The Escape Artist points out this week in his blog). When it comes to business, the message is that you too could become the next Alan Sugar, Duncan Bannatyne, Michelle Mohan. You could build a business from scratch into a multi-million concern. They’ve done it, you could too. What’s stopping you?

The Barely Acceptable Face of Capitalism

I was recently flicking through the pages of Moneyweek when I saw a profile of “The Reluctant Barista Who Made a Million”, Sahar Hashemi, co founder of Coffee Republic. It wasn’t quite a “rags to riches” tale, signified by the fact that she attended City of London School for Girls, but I read on. Seemingly, she’d  had the idea for her coffee shop on returning  from a trip to New York (as you do) and was unable to source the skinny lattes she enjoyed so much in the Big Apple.

So she set up a coffee shop, and quickly opened more with the funding help of an “angel investor”. Seemingly the banks wouldn’t lend the money needed to fund the expansion. No wonder the banks passed on the opportunity. Coffee shops are notorious business quicksand for anyone trying to make a buck. Just take a quick look at any local businesses for sale in your area. The money you can make from even a relatively successful one isn’t good. The money you can make from fifteen, in London, in the right areas, well, that’s a different story.

So who was the “angel investor”, I wondered? I nipped onto Google to find out, largely because I was beginning to smell a rat. My friends run a coffee shop. It does okay, but it’s only borderline profitable and they work like demons to keep it going. Would an angel investor step in to help them with a £600,000 injection for expansion? My arse they would.

My quick Google search revealed nothing, so my suspicions heightened. Who did she know? An old school friend, perhaps? A friend of the family? A helpful business associate from mummy and daddy’s network? Where were the connections that brought about a 600k investment? In a coffee shop?

Sahar Hashemi is now an OBE and is held up as an example of British entrepreneurship. I don’t really want to knock what she has achieved because she’s clearly good at what she does. So are many of us though, but not all of us get the breaks. I hadn’t heard of her before I read this article, but I had heard of Alan Sugar, Duncan Bannatyne and Michelle Mohan, people who really did build businesses from nothing, with no connections other than to hard graft. Why have I heard of them and not Sahar Hashemi?  Perhaps it’s because these are the aspirational role models the media like us to focus on, to show us that “Anyone can do it” in modern Britain. Yes, true, in the same way that anyone can win the lottery. Mind you, if you can buy six hundred thousand tickets, instead of one, you have a better chance.

The media don’t want the masses to focus on the real back story to a lot of business success. Networking. Connections. The right schools. Who you know, rather than what you know. Why? Because many of the owners, proprietors and directors are from that background themselves. They’re happy to let one or two “normals” slip through the net to keep up the pretence that we’re a meritocracy, as long as the majority of the ranks of highly well paid executives are peopled by their own.

If you’re interested in looking further into this, try reading “The Establishment” by Owen Jones. No, I can’t be bothered with his left-wing posturing either, but his book gives you a glimpse into how the real world often works in Britain today.

The other big factors influencing success is being surrounded by some great people, being in the right place at the right time and having some lucky breaks. There are very few entrepreneurs, however, willing to champion these factors as explanations for their success. Generally, it’s all down to them. Malcolm Gladwell wrote a book exposing the fallacy of individual entrepreneurial flair, “Outliers“, which is great if only because ego-mad entrepreneurs hate its conclusions (for example, read Peter Thiel’s book “Zero to One”. It’s clear that Thiel hates to think his success as a Silicon Valley Billionaire can be down to anything other than his own greatness, and he takes a few paragraphs to have a proper go at Gladwell’s book.)

The more we question and poke what the media tells us about “business success” the better and more realistic we will become. “Anyone can do it”, maybe, but the more information you have about the real world and how it really works, the better chance you’ll have.

One of my favourite financial journalists is Merryn Somerset Webb who writes the editorial for Money Week magazine. This week, she stated the following:

“It is hard wired into the UK financial brain, rightly or wrongly, that capital must not be spent – only income can be spent.”

She’s right, but I need to adjust this wiring. Although I’m not a big fan of being as transparent on my finances as some of my fellow bloggers seem to be – and I kind of admire them for it – I will make this admission: in order to retire early with the lifestyle I want, I need to pretty much burn up my capital reserves between now and 65. (At 65, a combination of a generous defined benefit pension scheme, my other half’s DB pensions and state pensions all kick in. I also think my expenditure will be way lower as I head into my late sixties. No more cocaine parties at that age.)  

So, I’m looking at spending, over the next fifteen years, what some other people may call their “life savings”. Well, if they are “life savings” shouldn’t they be used to enjoy life? I’m heading off on holiday soon and am resisting trying to bite my lip over the money I’ll be spending. Shouldn’t I be sitting hoarding that cash as a protection against potential future penury? Accumulating the interest?

I heard Dave Ramsey on a podcast the other day advise a caller as to how to build his savings to a point that he’d accumulate over five million dollars in his bank. At that point, the caller would be 85 years old. Well, I hope he farging enjoys it at that age. He can buy a gold plated zimmer frame. More likely, as an American, he can continue handing it over to medical companies to manage his incontinence. I mean, come on, what exactly are we saving for? Repeat, You can’t take it with you. Yes, you can give it to your heir(s), but is that sensible for them, never mind you? My wife and I will inherit pretty much zero financially from our parents and so what? You could argue that this knowledge spurred us on to make a financially secure life for ourselves. Having our parents around was all the “reward” we needed from them. We’ve made our own way financially in life, and so should our offspring.

This financial bravado takes me only so far, all the same, because I AM as hard wired against spending my capital as much as the next miser. It’s hard to change the habits of a lifetime and, even when I don’t know exactly what I’m saving for, I still like to save! The pain of cashing in investments just to live from month to month is almost physical. As I push the heavily reluctant mouse to click “Sell” on the Fidelity web page, it takes a massive effort of will to do it. I hate the thought of doing this going forward on a monthly basis, I really hate it. In fact, I hate it so much, I spend a lot of retirement time figuring out how to go back to work and earn money! Even though, rationally and logically, I don’t think I actually need to. But my hard wiring seems to be a lot more hard wired than I thought.