The winning formula

<strong>The Second Bounce of the Ball: Turning Risk Into Opportunity

</strong>Ronald Cohen <em>We

It is hard not to feel admiration for Sir Ronald Cohen. A successful businessman, he spent more than 30 years building his company Apax Partners, becoming one of the founding fathers of the European private equity sector. By its very nature, private equity, or the process of investing in unquoted companies, is not conducive to transparency, clarity and explanation. These masters of the new financial universe have little incentive to divulge their modus operandi. Yet, in this book, Cohen does just that.

Born in Egypt, Cohen moved to the UK when he was 11. He studied at Oxford University and Harvard Business School. For a short while after that, he worked at McKinsey as a management consultant. Cohen left the relative comfort of blue-chip salaried employment to set up a company with some Harvard colleagues. They called it MMG, and the idea was to provide advisory services to entrepreneurial companies. This outfit would eventually become Apax Partners, but not before encountering a string of significant obstacles: partners dropping out, lack of stock markets for unlisted or early-stage companies, economic recession, and a strict European regulatory environment.

It is hard for someone as successful as Cohen not to lecture in telling this story, but he manages to avoid it - partly by being as candid about his failures as he is about his achievements. The Second Bounce of the Ball has many tales of successful venture-capital investment and mature company buyouts involving prominent firms such as Apple, Waterstone's, Virgin Radio and Yell. But Cohen's less successful ventures, such as his attempt to set up Easdaq, a Nasdaq-like stock market in Europe, are not glossed over.

With these experiences as its base, the book sets out the principles of successful entrepreneurial behaviour. One can think of this text, organised around ten chapters, as a detailed cookbook - making Cohen the Delia Smith of the entrepreneurial world. Some of the advice is practical: "Draft a business plan that can cope with unexpected problems and test it hard"; use a decision tree to consider different options; "do not be afraid to recruit people who are better than you at their jobs".

But where he excels is in giving guidance about attitude: "Stop worrying about failure and put that energy into winning the race"; "your business will grow to match the size of your vision"; or "investors back jockeys, not horses". Indeed, much of the book feels like a pep talk that will leave you pumped up and ready to start your own business empire.

Even with the right tools and the right attitude, the context matters. Picking the right idea, with a big market potential, at the right time is not easy. Everyone sees the first bounce of the ball. There is little uncertainty. The second bounce is harder to call - but "where there is uncertainty, there is the possibility of great success".

Critical readers will question Cohen's treatment of luck, which he claims plays a limited role in most success stories. His theory is that investment opportunities are not distributed randomly, but are there for those with sufficient ambition or foresight to pick them up. You can put yourself in a situation where you will be lucky, as "probability in business is not verifiable in the way it is for a lottery ticket. It is dependent upon the characters of the people involved, the nature of the opportunity and the challenges of the business plan."

This seems a little too convenient. It is easy for society's winners to characterise the process as one that relies only on effort and ability. Cohen does not dwell on the implications of his meri tocratic view of the world for the political economy. There is a short and single-sided passage where he defends the role of innovators as the wealth-creators in capitalist societies - a valid argument, but hard to balance against the commonly held perception that private equity investors are little more than "locusts".

Another excellent contribution in Cohen's book is the discussion of ethical investment. He devotes a chapter to describe how private sector solutions, based on norms of management and efficiency, can help achieve socially desirable goals. His record on this front is exemplary.

He founded the Portland Trust to address the Palestine-Israel issue, and Bridges Community Ventures to invest in the poorest areas in Britain. There is little to fault in The Second Bounce of the Ball as a book about entrepreneurship. But if you are looking for an insight into the multifaceted man that is Sir Ronald Cohen, you may find this book less than revealing.

This article first appeared in the 03 December 2007 issue of the New Statesman, Russia’s fragile future