Great City Ken Costa
One of the city’s leading men, Ken Costa, is one of the few prominent investment bankers who was a Marxist.
While a student in his native South Africa, he was active in the struggle against apartheid and met Nelson Mandela several times. Costa says he is “probably the only banker” to join the Black Lives Matter march.
Appropriately at Christmas, a time when generations come together, he is concerned about the growing divide between old and young.
Costa believes that this is one of the most pressing problems facing the Western world. He believes that if the gap between generations widens, this could ultimately lead to “the destruction of capitalism and the market economy.”
It is estimated that in the coming years there will be a massive £55 trillion transfer of wealth in the US alone, as young people inherit from their parents and grandparents. The figure for the UK is expected to reach around £5.5 trillion over the next three decades.
It is believed that these huge transfers will significantly reshape the financial system and force companies to change their behavior in line with the values of young people.
He is convinced that people under 45 want to see radical change. For them, he says, “today’s older bankers and wealth managers in their ivory towers are like modern-day curmudgeons.”
Costa believes that this unprecedented shift in wealth will force change in the business world whether officials want it or not. He says: “It is not an exaggeration to say that we are experiencing a generational conflict.”
The “greed is good” slogan that characterized capitalism in the 1980s has largely faded in the minds of young people today. Perhaps ironically, our conversation took place in a luxurious conference room near Paddington Station in London with the city skyline in the background.
Under Fire: Dove soap maker Unilever has been repeatedly attacked for prioritizing certain values over making money
Costa, 74, began his banking career at investment bank SG Warburg in London in the 1980s. His mentor was the legendary financier Sir Sigmund Warburg, one of the principal architects of commercial banking.
This was followed by a stint at Swiss banking giant UBS where he rose to become head of Europe, the Middle East and Africa. He left UBS in September 2007 — a timely exit as the global financial crisis began to gain steam — to become head of asset management firm Lazard for four years.
He currently heads Helios Fairfax, Africa’s largest private equity firm.
His clients included the super-rich Wallenberg family in Sweden and the billionaire Oppenheimer family in South Africa. Major deals include the sale of the famous Harrods department store in London to the Qatari royal family in 2010.
A devout Christian, his charitable works include creating a TikTok club, which has raised £50 million for Great Ormond Street Children’s Hospital in London. He was also a trustee of the Nelson Mandela Children’s Fund.
“I think spirituality is very important,” he says, noting that while many younger generations “don’t trust” the established church, there are still “tremendous levels” of people who want a spiritual connection.
“We are human beings,” he says. “We are made up of different parts that some would like to separate, but we will always be together.”
Although he identified as a Marxist when he was a student, Costa says he believes capitalism is “the best way to secure freedom and prosperity for all” and believes this was a factor that allowed his native country to end decades of state-sanctioned racism.
In his view, the “intensely personal” views held by many young people on issues such as climate change provoke clashes with older people.
Young people also want to see wealth managers and companies respect the principles of social justice. “This is not just another fad,” he insists. “It’s here to stay.”
Costa believes these issues will become more important as wealth is transferred across generations.
He argues that many young people are firmly convinced that baby boomers grew up in a period of wealth and prosperity compared to the crisis and decline that has characterized most of the twenty-first century.
“They assume that the older generation doesn’t really understand it,” Costa says.
But he points out that he and his peers have one important advantage: hindsight.
“My generation has gone through cycles and crises,” he says. We saw the oil boycott in the 1970s. We have seen inflation and recession.
In contrast, he says the strength of young people is that they are “less afraid” of change – especially advances in technology.
As a result of the growing monetary power of young people, Costa says companies will eventually end up committing to social issues and turning them into a core part of how they run their businesses. This will accelerate as today’s youth move up the corporate ladder.
It is a difficult time to promote such an idea. Many business leaders and investors oppose the environmental, social and governance values embraced by many companies.
Dove soap maker, Unilever, has been repeatedly attacked for prioritizing these credentials over making money.
Costa fears that the generational divide will further undermine confidence in the system, already badly damaged by a series of crises. “Right now, it’s all just slander and it’s not helping,” he says. “This is why the capitalist system begins to collapse.”
The effects of the financial crisis, and more recently the pandemic, have accelerated the development of a “community spirit,” he says.
Costa believes this spirit can be harnessed if younger generations have better access to financial markets. But, of course, not every young person will benefit from an inheritance or from Mom and Dad’s bank.
“The question is how to ensure that the younger generation participates in the market,” he says. “If they don’t have money, they won’t be able to buy homes or other assets. You can’t be a capitalist without any capital.
This tension, and how to resolve it, forms the core of his book “The $100 Trillion Wealth Transfer,” published earlier this year. Despite his history of working with the old guard, Costa is now completely behind the new generation and wants to do everything he can to help, apparently to save capitalism from itself.
He believes that capitalism has helped in the fight against apartheid and that it is “the best means of securing freedom and prosperity for all.”
He says his generation needs to think about the world they are leaving behind. “This massive movement of wealth is a global phenomenon,” Costa adds. “But this is not something that will happen in ten years. It is happening now.”
“We need to help shape our destinies collaboratively, just as Scrooge opens himself to compassion and kindness.”
Read Ken Costa’s full op-ed at www.thisismoney.co.uk/kencosta
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