Imagine
You leave a comfortable job to start a business. Your boss discourages you from doing it. You start the business from your garage. Nobody knows your business. You work really hard at building it. You employ staff. You move to bigger premises. You bring investors on board. Over time, the business grows from strength to strength. The world knows your business.
Wealth
Today for every R 16 000 of wealth that your business creates, you get R 1600 and the other shareholders get R 14 400. Honestly, how will you feel about this arrangement? Will you be thrilled, dissatisfied, perhaps even angry about it?
From experience, most entrepreneurs will negatively view this arrangement for the following reasons
1. Equity
You own 11% and the other shareholders own 89% of the business that you started.
2. Employed
If you are getting a tiny slice of the wealth, you may feel that you are really an “employee” in the business that is running it. And the shareholders are reaping the financial windfall.
3. Losing
It can feel that no matter how well the business does in future, you will still be losing, even ripped off by the other shareholders. After all, R 1400 for every R 16 000 seems like a paltry sum for your contribution.
Real life
What happens when you add more zeros to the numbers that I shared above? In real life, this has been the best arrangement for one of the world’s richest entrepreneurs, Jeff Bezos.
The market value of Amazon is $1.6 trillion (around R 24 trillion), of which $ 1440 trillion (around R 21.6 trillion) goes to shareholders,. holding 89% of the shares.
Jeff is doing exceptionally well, having amassed $160 billion (R 2.4 trillion) for his 11%.
In his last letter to shareholders, Jeff says,
“If you want to be successful in business (in life, actually), you have to create more than you consume. Your goal should be to create value for everyone you interact with. Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out.”
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