DOING SYSTEM IN ITALY. THE ROLE OF FINANCE AND THE FUTURE OF BUSINESS ACCORDING TO GIOVANNI TAMBURI
This interview was done after the experience exchange meeting among business leaders organized by ISVI on September 24, 2024 in Bocconi University’s Sala Consiglio entitled “Making a System in Italy,” which is also the title of the latest book by Giovanni Tamburi, Chairman and CEO of Tamburi Investment Partners. We started precisely from some assessments of the role of finance to address the issue of the future of business.

In your book you talk about the “enormous power of finance” as a problem. Can you elaborate on what you mean?
In recent years, finance has gained disproportionate power, and this has become a problem. Finance should be a tool to support business, but today it has taken on too central a role. One of my hopes, as I also express in the book, is to see a scaling back of this power. It is enterprise that moves the world, not finance. It is entrepreneurs who create the value added that makes the economy work.

So has finance lost its original role? Has it become a kind of “big puppet master”?
Exactly. Finance was supposed to be a service, but it has turned into something too dominant. It needs to be returned to its original function, downsized. Fortunately, central banks around the world seem to have realized this, having made the mistake of keeping interest rates too low for too long. Money is a commodity and, as such, must have a price.

Speaking of which, what do you think of the economic measures taken during and after the pandemic?
During the pandemic, immediate intervention was correct, but the problem came later. Trillions of dollars were distributed without logic: 7 trillion in the United States, 800 billion in Europe. This phenomenon inflated the financial markets, especially in America, where people invest in the stock market almost with their eyes closed, following Wall Street trends as their only compass.

And what do you think of the increasing polarization of wealth?
This is a serious problem. A few earn too much, while most continue to earn too little. This imbalance is leading to paradoxical situations. Today, a huge amount of liquidity pours into the markets, sometimes irrationally. Stocks are bought at exorbitant prices, but real wealth remains concentrated in the hands of a few.

In your book you mentioned private equity as one of the excesses of the system. Can you elaborate on that?
Over the past two decades, private equity in general has brought benefits in terms of employment and development, but it has also created damage through excessive borrowing by many funds. Now, with interest rates likely to fall only gradually, this knot will come to a head very soon. This could create opportunities for solid companies that want to invest more rationally, without competition from funds that, in order to show that they employ money, have sometimes offered exorbitant amounts.

So is it shaping up to be a favorable season for businesses?
I believe that as early as these last months of 2024 we can see a positive season for solid and courageous companies. Entrepreneurs will be able to make acquisitions without competition from those funds, which, relying heavily on debt, often offer more than makes sense. This will restore centrality to industrial and commercial enterprises, which will be able to become market players again.

In your book you talk about “phony growth.” Can you elaborate on this concept?
“Phony growth” is the haphazard growth that is also illusory in some cases. We see over-indebted companies cutting costs in the wrong way instead of investing. Right now, the engine of the world economy is Asia, not the West. There is a growing demand for consumption and investment there, while we tend to cut back instead of investing more.

In your opinion, what should businesses do in this context?
Today businesses should increase investment, not reduce it. And, moreover, not only should they never cut staff drastically, but rather increase wages and salaries to retain employees. Also because many people are less willing to work long hours but eager to earn more money, so cutting costs let alone staff is not the solution.

How do you assess the attitude of banks in this scenario?
Banks are making a lot of money, distributing dividends and doing buy-backs, but they are not lending. This, combined with the lack of new stock market listings and the slowdown in private equity investment, creates a liquidity gap for companies. I believe, however, that new IPOs will resume soon, because it is the healthiest and most logical way to finance a business. I hope that this scenario will be realized soon, because I think it would be good for our businesses and the economy in general.