Ownership has profound significance in economic life. When a child says ‘the crayon is mine’, and snatches it from his sibling or friend, he does not mean he wants to own it in any
adult possessive sense. He means that he has something to express and for this he alone needs to ‘own’ or have exclusive right to use the crayon. He cannot draw his picture at the same time as someone else. The uniqueness of our individuality is
thus at work here.
In any enlightened economy, this should be taken very seriously. Our concern should be to ensure that every human being has access to the things he needs to ‘own’
in order to express his unique contribution, which might be to play music or to bake bread or to make a car. We do this when we capitalize his balance sheet, providing thereby the finance with which he can acquire the assets necessary for his activity.
Just as, on the one hand, economic life is based on meeting one another’s needs, so, on the other, is it based on unfolding our unique contributions in service to one another. A truly modern
understanding of ownership, therefore, leads to a more enlightened basis of investment. Thus it is that in Rare Albion we invest in order to provide human beings with the capital needed to unfold their contributions, for it is this, not the fact of owning
capital or merely managing it, that we regard as the source of any real return to capital.
Outside Rare Albion, by and large people invest for a return, without real thought for the effects
their investment can give rise to. ‘Ethical investors’ temper this lack of awareness by preferring certain types of activity and by taking, in some cases, lower rates of interest. Often, however, they still reckon that one has a right to a return
whether or not it is economically feasible. Here, however, returns are not dependent on an abstract right, but on the ability of the borrowers to pay them.
This is the important difference between lending at interest and buying shares. It is the latter, therefore, that we regard as the true sign of ethical investing. This is not to argue against lending, so much as to encourage more direct and
It means, however, that we do not rely on banks to ‘discipline’ borrowers, a problem obviated by the fact that people in Rare Albion are schooled in finance.
They are trained in the arts of bookkeeping and proper accounting. Financial uncertainty and upheaval are often the result of people not understanding finance and not in fact knowing where they are financially. So for us risk assessment and risk management
amount to ways of identifying exactly where someone is in financial terms, often bringing into the picture details that the person himself may either not have noticed, had chosen to leave out, or had over- or under-estimated.
We approach capitalization from the side of the borrower. The type of borrowing is various, of course, depending on what the business is about and how its risk is managed. We believe that the more risk there is the more
one should capitalize with shares, rather than loans. Here, debt, especially bank debt, is kept linked to the ability to repay out of liquidity. The length of borrowing is also decided with regard to the possibilities of the borrowing project, not only the
lender’s wishes. Matching is thus a crucial consideration, particularly in the fledgling area of new business.
We take special care that new businesses, especially those of young
people, do not begin with too much debt by capitalizing them with shares. We also have special structures to ensure that the ‘ownership’ of the business stays with the entrepreneur and does not pass into the hands only of those who provide capital.
Where relevant, we also employ bond financing, investing with an eye to income streams and therefore meeting needs rather than investing in assets. For it is when one loses sight of real needs that economic activity begins to go awry.