Capitalists Beat Merchants Everytime

European Straits #35

Dear all,

I’m spending a few days in Tallinn (Estonia), where I’ve been participating in a bootcamp organized by the INET’s Innovation Working Group. I also dedicated some time to meeting local entrepreneurs, investors, and government representatives to get a better grasp of the local entrepreneurial ecosystem.

Among the highlights of the bootcamp—which included talks by Erik S. Reinert, Carlota Perez, Dan Breznitz, and Bill Janeway—was a presentation by Mary O’Sullivan of the University of Geneva (Switzerland). Mary gave a fascinating talk on capital as discussed by economists throughout history. To make a long (and stimulating) story short, two lessons can be drawn from her reasoning:

• If you want to learn more about capital, talk to capitalists (those who invest in and run businesses—people like us) rather than to economists.

• Capitalists mostly care about return on assets (RoA) and return on equity (RoE), which enables them to take the larger view. As they’re focused on capital asset ve…