If you have any interest in politics, you’ve likely read the front page, above-the-fold article in The New York Times about how just 158 families account for half of all funds collected by presidential candidates thus far.
In case you missed it, here are some of the key findings:
The 158 families and the companies they control have donated $176 million in contributions of at least $250,000.
Geographically, these families are clustered in New York, Miami, Houston/Dallas, Los Angeles, and San Francisco.
By industry, most of their wealth comes from energy and finance, and it comes from entrepreneurs rather than the corporate elite or from inherited wealth.
These are the essential findings in the story, which bemoans the size and concentration of cash that mostly finds its way to Republican candidates.
Full disclosure: I’m a loyal Republican who, from the get-go, has been backing Senator Marco Rubio. I tend to follow the Bill Buckley rule of supporting the most conservative candidate who’s electable. I like the cut of Marco’s jib, his fluency and forward-looking foreign policy positions, and his competitive edge with crucial young and Hispanic voters.
Not surprisingly, my takeaway from the Times article is very different.
First, there are many parallels between raising seed capital for a business or fund and raising money for a political campaign.
The toughest part is the early money because it’s viewed as more speculative. But the flip side is that it earns the highest return if the venture turns into a success.
Therefore, I applaud families who are willing to step into the arena and back the candidate of their choice. I noticed in the article that one family had donated $5 million to Governor Rick Perry, who then withdrew from the race. That family took a total loss!
Furthermore, the finding that a majority of these families are entrepreneurs involved in finance and energy is neither surprising nor troubling to me in the least. In both of those industries, founders need to put up capital in volatile markets where the losers always outweigh the winners.
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Unlike corporate royalty who enjoy high salaries and perks like golden parachutes that cushion downside risk, these wildcatters often roll the dice with no net beneath them.
As I’ve opined in the past, the basis of capitalism is weighing potential rewards against risks, making a decision, and then putting capital to work.
Taking risks shouldn’t be confused with gambling but rather careful calculation of the probabilities of success against the sobering possibility of going “back to the drawing board.”
It’s vital to remember that risk isn’t a four-letter word. On the contrary, without taking risks, nothing of lasting value can be accomplished. All of America’s scientific and commercial achievements were driven by risk-taking individuals who often pursued their vision in spite of daunting odds.
Finally, economic growth only happens when capital is allowed to flow to its most productive uses – and that means to people and companies taking on these risks in the business and political world.
In closing, there’s one aspect of the article that does trouble me a bit – the fact that so many of these families dwell in just five or six cities. In fact, none of the families were from cities such as Denver, Milwaukee, Minneapolis, or even Seattle.
My message to these cities and all families in them with the capital to make a difference is to wake up, get moving, and get involved. We all need to get behind the candidate of our choice, but we’re also counting on your financial leadership.