In this insightful interview, Alexander Hoare shares the secrets behind the 350-year-old family bank's success, emphasizing the importance of purpose, simplicity, and long-term thinking. Discover how their contrarian approach to growth, technology, and relationships creates a resilient and enduring business model.Key Topics Long-term family business successContrarian approach to growth and technologyRole of unlimited liability in decision-makingImportance of relationships over transactionsSimplicity and diseconomies of scale in banking Long-term stewardship and legacyThe concept of obliquity and its application in businessBuilding and maintaining trust and reputationImpact investing and societal contributionThe importance of culture and values in bankingChapters00:00 The Unconventional Success of C. Hoare & Co.11:40 Contrarian Approaches in Banking16:33 The Legacy and Governance of C. Hoare & Co.21:20 The Role of Partners and Succession Planning31:22 Unlimited Liability: A Unique Perspective39:21 Consequences of Limited Liability44:19 Simplicity vs. Complexity in Business49:19 Building Relationships Over Transactions57:47 The Power of Word of Mouth01:14:54 The Banker's Banker: Trust and Reputation01:21:20 Investing in Meaningful Impact01:28:45 Trust as an Uncommoditizable Asset01:33:14 Making Your Own Luck: The Role of Judgment01:38:49 The Importance of Staff and Culture01:43:12 Quality Over Quantity: The Data Dilemma01:48:24 The Value of a Large Family Network01:52:49 Navigating Wealth: Parenting and Money01:57:40 Environmental Stewardship: The Seagrass Initiative02:04:51 Faith, Family, and the Inner Life02:19:22 The Emotional Aspects of Money and Philanthropy My new book The System Gambit has C. Hoare & Co. as a case study: In 2008, as the world’s largest banks collapsed or were nationalised, one smaller bank on Fleet Street had the opposite problem: too much money was arriving at its door. C. Hoare & Co., founded in 1672 and older than both the Bank of England and the United States, came through the crisis with barely a scratch, its deposits swelling as frightened money looked for somewhere run by prudent people with a clean balance sheet. For decades the bank had been doing the very things every consultant and textbook had told its eleventh-generation partner not to do. As Alexander Hoare recalls in Impact Banker, “many people told me we were mad to carry on in the modern litigious world with unlimited liability, but in 2008 when the Great Financial Crash hit, people looked around for honest bankers with a clean and conservative balance sheet, and the deposits piled up.” In the year conventional wisdom was put to the ultimate test, the man who had ignored it for decades was suddenly the most sought after. Alexander Hoare is a nonconformist, and a cheerful one. “It has pleased me,” he writes, “to do many things wrong from a conventional point of view.” He kept unlimited liability when the whole City fled to limited liability. He keeps his bank deliberately small while everyone worships scale. He turns away profitable customers, has “never aimed to maximize profits,” and once sold a good, growing business in order to become smaller. He quips that his job “is to keep the family poor.” And he states his conviction clearly: “I see maximizing short term profits as the wide gate to failure.” The word nonconformist is apt. In England a nonconformist was someone who declined to worship at the established church, not from revolt but from conviction, and many of Britain’s most durable enterprises were built by people of that temperament. Alexander calmly declines the established church of contemporary finance: scale at all costs, short-term shareholder-value maximisation, limited liability, and the eternal myopia about the next quarter. It would be easy to dismiss this as nostalgia. But examined closely, nearly every one of his tenets is the same structural principle: he re-couples a feedback loop the industry has, for short-term greed, deliberately decoupled. * Action to consequence. * Price to value. * The firm to its community and society. * The present to the future. Decoupling those reinforcing feedback loops window-dresses the numbers in the short-term but re-coupling them is better for the business, and over three and a half centuries, have shown it is also what better-for-the-world looks like. 1st tenet: actions have consequences Begin with the nonconformity that sounds most reckless. Every partner of C. Hoare & Co. stands to lose everything they own if the bank fails: homes, savings, including their children’s inheritance. To most financiers this is complete lunacy; the entire architecture of the limited-liability corporation exists to prevent it. Alexander inverts the frame. The natural order is for actions to have consequences; it is in fact the contemporary arrangement that is the aberration from historical pattern. Until Big Bang in the late 1980s nearly every City firm traded on unlimited liability, and “my word is my bond” was an enforcement mechanism, not just a slogan. What followed its abolition was an era in which executives could half-bankrupt a country and walk away unscathed. Unlimited liability, by contrast, “focusses the family on a culture of excellence, not scale.” Through a first principles systems thinking lens the argument is obvious. Any successful system needs feedback: consequences must return to the actor and shape the next action. Limited liability severs that loop, capping the decision-maker’s downside at zero while leaving the upside unbounded. A diversified shareholder optimises the ensemble average across many companies; while a partner with unlimited liability and a more than 350-year time horizon must optimise the time average, the single path of history where ruin is permanent. A bet with a glorious expected value and a small chance of ruin is excellent for the ensemble and fatal for whoever gets ruined. This is why the book’s risk philosophy is so unfashionably simple: “banking is quite straight-forward if you merely avoid the mad and the bad.” 2nd tenet: perpetuate, do not maximise The mission statement the older partners first mocked is seven words long: “to perpetuate a profitable family business.” It “does not say anything about conquering or winning,” and its ambition is bounded: “we want to survive as a family business for perpetuity. This means being just big enough, not vast.” To the modern mind this is a category error: surely the purpose of an enterprise is to grow? Here Alexander deploys the most counterintuitive finding of his forty years, borrowed from John Kay’s notion of obliquity: “We have never aimed to maximize profits or to grow dramatically, and it turned out that not aiming at these things can be very effective at delivering them.” Kay’s cautionary tale is ICI, which adopted shareholder-value maximisation as its explicit goal and destroyed itself pursuing it. Aim at excellent banking and profit arrives as a by-product; aim at profit directly and you strip the institution that produces it. Donella Meadows identified the goal of a system as one of its highest leverage points: change the goal and everything downstream follows. Set it to maximise short-term profits and the system rationally destroys its future to grow the current quarter; set it to perpetuate and any gain that imperils survival is no gain, because the future is the whole point. Extraction generates large early terms in a series that is then truncated. This is best illustrated by the average lifespan of an S&P 250 company falling from 60 years in the past to just 15 years now. The perpetuator generates decent terms forever, and a series that never terminates beats any short burst that does. Eric Ries, in Incorruptible, names the force this resists: financial gravity, the pull on every company exposed to the capital markets toward short-term extraction at the expense of mission and survival. 3rd tenet: small is beautiful, & KISS principle Early on, Alexander adopted “two handy mantras: first, ‘small is beautiful’, and secondly ‘KISS’ (Keep It Simple Stupid).” He concedes the apparent absurdity: “Academically this is faintly ridiculous – a small bank should not out-compete, or even survive, against much larger competitors.” Yet it does, because the textbooks model only half the phenomenon, “the diseconomies of scale: the back-stabbing as executives climb the greasy ladder... and many, many other dysfunctions of large organisations.” Complexity behaves like entropy: generated spontaneously, bottom-up, by every well-meaning patch and product, and never decreasing on its own. The ideas Alexander refused “would have made us more money, but they would have built in a complexity premium further down the line.” Because complexity is born decentralised, only the top-down can reduce it, by someone with the authority and the stake to overrule a thousand local optimisers. That is what “stick to the knitting” really is: top-down work against organisational entropy. Here the tenets interlock. Keep the bank small enough for an owner to truly understand, and they can hold it in their head, take responsibility for it, and hand it on intact. Let it outgrow comprehension and two failures follow: the next generation sells the incomprehensible behemoth, and the owners demand limited liability, because no one accepts unlimited responsibility for something they cannot even fathom. Scale destroys comprehension; lost comprehension severs feedback loops; severed feedback ensures the eventual blow-up. Smallness is not an aesthetic preference but the load-bearing condition that keeps every other loop closed with high signal quality. The clearest proof is that a decade ago the bank sold its profitable, growing wealth-management arm and shrank headcount by roughly a fifth, concentrating IT, compliance and the partner
