America’s Capital Markets: An Agenda for Continued Success

 

 

This is my second appearance at an Equities Magazine conference, and I’m delighted to be back.

 

These days, everyone is talking about the subprime mortgage crisis. In fact, the reaction to this situation from our politicians, regulators, and fellow citizens tells us a lot about how they view capital markets.

 

It underscores a growing desire by many to try to eliminate all risk from investment. The market goes up, the market goes down. Some people make a little money or a lot of money. Some people lose money. That’s the way it is supposed to work.

 

Of course, there should be strong protecAmerica’s Capital Markets tions against fraud and manipulation in the markets. Reasonable regulations have an important role to play. Transparency is essential throughout the entire capital formation process. But not every investment loss, market downturn, or bubble should result in legislation, regulation, or litigation.

We need to get to a situation where we don’t try to eliminate all risk from what we are doing in our capital markets. For one thing, we have to change the mentality of American companies, which I call “80-20.” You go to a board meeting of a company of any size that is anywhere near the public market, and 80 percent of the time is spent on how do I protect my keister, how do I fill out the forms, how do I deal with the regulations, how do I avoid risks, and how do I make sure I don’t stub my toe. Twenty percent is spent on whether I should take a risk, make an investment, or introduce an innovation. We’ve got to get back in a hurry to at least “50-50,” or there is no way we are going to keep up with what’s going on around the globe.

If the goal is to eliminate all risk, then these markets will no longer be the engine that drives a growing economy and rising standards of living. That brings me to my primary topic and message today.