Casino Mogul Stanley Ho Leaves Behind Crucial Economic Insights
Back in 1991, and while on a Semester at Sea (SAS) voyage as a student, SAS's S.S. Universe ship docked in Hong Kong’s Victoria Harbor. Notable about Hong Kong is that SAS was founded by a prominent businessman from there by the name of C.Y. Tung. His goal with this highly unique semester abroad program was to promote greater global understanding among young people from around the world.
Hong Kong on its own was a revelation. Everywhere you looked you saw gleaming, extraordinarily tall buildings. This formerly depressed city had morphed into the financial capital of Asia. Crucial about the why behind Hong Kong was that it was a wholly free city. No red tape. Other than tariffs on cars and tobacco, the city was a completely duty-free zone. Which at least partially explained its staggering wealth.
You see, Hong Kong the city-state was fully open to the world’s production even though the rest of the world wasn’t fully open to Hong Kong’s. Yet the city-state thrived despite this most “un-level” of playing fields. Except that the joke is on those who would conclude just that. In truth, those operating in the most open of markets are always in the most advantageous of positions. They have the whole world lined up to meet their needs, and they can take in the world’s production without paying taxes on it. Which explains why openness to foreign plenty just “partially” explains great wealth.
What helps complete the picture has to do with what it means for people who can consume the world’s production tax free. Precisely because they can, they can specialize their work. Since others are producing for them, Hong Kongers have the greatest odds of doing the work that most complements their skill sets. And when people are doing what uniquely elevates them, they’re much more productive in concert with a much greater capacity for work.
After that, Hong Kong is a rock. No natural resources other than free people working in frenzied fashion. If government ever tried to tax away their production, the source of Hong Kong’s wealth – the people – would leave.
As for the use of “was” with regard to Hong Kong, unknown is whether its past freedoms will remain. A part of China since 1997 after 156 years of incredibly hands-off British rule, lately Beijing has begun asserting its sovereignty. Some in Hong Kong are protesting. Hopefully Chinese leadership understands that Hong Kong is an important symbol to the rest of the world of the genius of freedom and free markets. It would be sad on many levels for the world to lose this shining symbol, and it would similarly be sad for China. Brilliant as the country’s modern rise has been, Hong Kong at some level must represent aspiration to everyone in the country in terms of what free people can achieve.
The Hong Kong story is being written as this is being read. Its conclusion is still unknown.
Back to the aforementioned 1991 visit, while there I traveled with a friend to a small, Portuguese territory called Macau. It’s a very brief ferry ride from Hong Kong, and was known even then as a gambling mecca; albeit a shabby one in the early ‘90s relative to Las Vegas.
Macau’s raffish casinos were a site to behold. Each chair at each gaming table was filled. What amazed us, however, was that there lines of gamblers seemingly five deep behind those seated. They were betting on the bettors. Needless to say, we didn’t get to gamble that day.
Chances are we were in a Stanley Ho-owned casino. The billionaire many times over died on Tuesday at the age of 98. In his New York Times obituary, Jonathan Kandell credited Ho with “the transformation of the tiny territory of Macau” into “the world’s most lucrative gambling destination.” Ho’s life story surely explains many important economic principles, and a few will be discussed here.
For one, it plainly didn’t hurt Ho’s gaming businesses that they were so close to thriving and market-free Hong Kong. Economic freedom normally correlates with enormous wealth creation, and copious amounts of disposable income to enjoy. Macau’s location near Hong Kong was and is ideal, not to mention that per Kandell, “the world’s most passionate gamblers” are of Chinese descent.
Still, Ho didn’t just wait for the gamblers to come. He made it easier for them. In particular, he “financed a fleet of hydrofoils to carry gamblers to the casinos.” No doubt we rode on one of his from Hong Kong to Macau in 1991. That Ho did this is a reminder that with or without government, there would still be roads. Businesses exist to meet the needs of customers, and as Ho’s story attests, they’ll finance ways for customers to reach them. It’s a long or short way of saying that assuming the most barebones of governments in California and/or Washington, D.C., there would still be numerous freeways between Los Angeles and San Francisco. And there would be internet too. All economic progress has been defined by entrepreneurs making it easier for people to transact from longer and longer distances.
And while Britain’s reign over Hong Kong ended in 1997, Portugal’s 442-year colonial rule over Macau ended in 1999. This rates mention for two reasons. For one, it hopefully provides positive signals as to the ideology of authorities in Beijing. Kandell writes that in 2002 Beijing “ordered that Macau be opened to competition from foreign casino companies.” This meant that American casino moguls like Steve Wynn and Sheldon Adelson could enter the market. Readers can take from this what they want, but it says here it’s a signal that the Chinese are more open to American production and competition than some want to believe.
More useful about Macau’s opening concerns what Adelson boasted to the Times in 2007. “Stanley Ho’s not going to do very well. He’s never had to compete in a real market.” Except that Ho prospered. The competition forced him to “modernize his operations and build new luxury hotels.” Competition improves us. Always. It’s a lack of it that weakens us. Whether it’s China, Japan, Germany, or any other country with skillful producers, the biggest risk to U.S. prosperity is that they cease producing. If so, we lose twice for us lacking extra hands dividing up labor, plus fear of lost market share forces us to up our game.
So while the world lost a great businessman on Tuesday, hopefully Ho’s story lives on. He’s a reminder that true entrepreneurs don’t need government to build them the proverbial and real bridges to customers, nor do they need protection from those same governments. What they need is freedom.