The new enterprise revolution that Whitehall can't see

What with Facebook and Google and Uber, you might be forgiven for thinking we were living in a great entrepreneurial age.

It is true that, in the UK, the number of startup companies rises every year – though the growth in London completely dwarfs everywhere else.

But in the USA, the number of successful company launches has been in decline now for fifteen years, and – since the UK always seems to copy the least attractive economic trends in the USA sooner or later – I’m sure the same will happen to us.

The academic researchers, and the Federal Reserve, who came to this conclusion have no idea why it is happening, but the Fortune writer and doyen of American business journalists Geoff Colvin put it like this:

"What happened? The academics don’t know and are trying to find out. Regardless of the explanation, one can’t help imagining that maybe these trends are contributing to several intractable problems in the U.S. economy: stagnating wages, long-term unemployment, low productivity growth, and overvalued unicorns as VCs compete for ever fewer high-growth startups. There’s no firm evidence yet. But to understand today’s business dynamics, let’s start by accepting this disorienting reality: At least for now, the 21st-century corporation is actually less likely to be a high-growth newcomer..."

I can also hazard a guess. The semi-monopolies have so many privileges they are harder to challenge. The international corporates, and especially those operating online, have huge tax privileges (they don’t pay it). The banks and unicorns and angels are scrabbling over a tiny few start-ups they think could scale up and may actually be getting in the way.But there is one other reason, and it appeals to me because I have been hailing a new entrepreneurial age: that the new entrepreneurs, and their new start-ups, don’t look like the old ones. They defy categorisation and may operate entirely outside the data.

Certainly there is little or no awareness of the new enterprises in cities, and the new entrepreneurs that are busting out of accepted political categories too.

The new divide is between those who want to wait, patiently or impatiently, for the Chinese to invest or until they clutch the national reins of government and launch a new regeneration programme to kickstart the local economy of our cities – and those who want to get on and do something themselves.

That means seeking out what resources are underused, whether it is people, ideas, money flowing through the local economy, or local energy or other kinds of local enterprise, and using them to meet local needs. It means taking back some responsibility for shaping local prosperity.

Together with my colleagues at the New Weather thinktank, I have been travelling around the country to find out, and then tell the stories, about some of this new generation of local entrepreneurs. And that was what they had in common: they didn’t want to wait.

They were not quite the conventional model of entrepreneurs, if indeed entrepreneurs ever really fell into that category. They were more along the lines that Anita Roddick used in her famous definition. Entrepreneurs, she said, are people who can imagine the world differently. Hence perhaps the failure of this kind of enterprise to register in the accepted categories of the Federal Reserve.

That is not to imply that the new generation of local enterprises are not interested in making a profit. Or that they don’t need to in order to reshape the rules of the local economic game. What they have in common is a denial that there is only a national economy, and all they have to do is wait for the tide to come in.

But it is strange, on the face of it, that national policy-makers haven’t noticed what is happening, even as power is devolved to Manchester (the next working day after Easter).

There are two main reasons, it seems to me, why national politicians – and even many local politicians – don’t understand this new enterprise revolution that is emerging.

First, they don’t measure it. They collect little or no data about where money flows through cities or about local enterprise, its health or its needs.

Second, they don’t talk about it – and, in particular, they don’t talk about it because they have no stories to tell about it.

Stories are the raw materials that politicians use, to think, communicate and take decisions. Without them, they don’t see things. That is why we have been meeting the new entrepreneurs so that we can tell their stories – of big ideas and hurdles and re-thought plans and frustration and success and the difference it can make.

Not as dry thinktank case studies, but to tell their tales in depth. The result is a book of eight stories, Prosperity Parade, funded by the Barrow Cadbury Trust, and a showcase of what is really going on at the front line of economic innovation. It is available as a free pdf here and on kindle here. I hope that politicians, local and national, will not just read them – that they’ll go on to tell them too.

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How services can prey on users

It so happened that my post about the 'failure demand' generated by the disastrous attempt to automate universal credit happened to coincide with a fascinating post at the New Statesman blog on the same subject - this time from a claimant at the sharp end (thank you, Brendan!).

It transpires that some corner of the Department for Work and Pensions appears to have been drumming up business for its expensive helpline (45p a minute on mobiles) by sending out letters - apparently at random - instructing people to phone up and provide more unspecified evidence.

The writer found that one call, immediately dismissed by the helpline, cost them over £7. By definition, callers don't have much spare cash.

What is so sad about this case, and outrageous, is that - if it is so - it isn't terribly surprising. It is an example of how targets linked to earnings transform public services from humane institutions dedicated to supporting the public, into narrow, corrosive machines that quite deliberately prey on their customers.

I'm not, at the moment - I'm glad to say - a customer of DWP. But I am of the NHS: I got a letter from my local health centre only on Friday saying that I had been chosen as someone at risk of diabetes, and could I therefore go in immediately for a blood test.

I'm not saying this is complete nonsense, only that I'm not overweight, don't drink alcohol and hardly eat anything sweet. Maybe there is some obscure reason why I may get diabetes shortly, but I suspect I'm the victim of failure demand driven by Goodhart's Law - the overwhelming shift of resources from providing useful services to meeting targets linked to cash payments.

So my health centre earns a little extra, and I have an extra visit there - I don't really mind. I'm middle class, so they don't charge me for turning up as they would if I called the DWP helpline.

It is a scary story - not just because of the corrosive shift in public services which began in the Blair years. It is also scary because of the huge waste of resources.

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The real sin of Iain Duncan-Smith (it isn't what you think)

The unexpected resignation of Iain Duncan-Smith has got all the political comentators in a big tizzy.  The best explanation I've heard was that he had initially decided against resigning but had a rush of blood to the head when he saw the Treasury's statement after the budget, trying to shift the blame onto him and his deparatment.

There is no doubt that, since the Cosnervatiev Party effectively divided itself in two - there being little effective politial opposition to them these days - it means that the insurgent coup plotters around Johnson, Gove and the Brexit advocates are able to wrap themselves in the mantle of social justice, which they have little right to do.

I know this is unfashionable to say so - except anmong Cosnervatiev Party spokespeople carrying knives - but Duncan-Smith has all the attributes of a political hero. He thought deeply about social justice. He had a series of hypotheses about why social exclusion remains ednemic when there's money and when there's not. He worried away at it.

I'm not saying he was always right: the invasion of Atos into the lievs of disabled people was a major mistake. But he did realise there was a problem that needed solving - that, all too often, the welfare state appeared to be trapping families and communities in dependence. At least he understood that the convetional Fabian solutions had been failing. His ability to ask difficult questions was in many ways his greatest attribute.

He also deserves credit for wrestling with the short-termism of the Trasury, who appeared to have little interest in his project. And for pushing ahead with bundling all the complex benefits into one universal credit - the first step, it seems to me, to bringing the tax and benefits system together into a basic income to underpin people's lives.

But he has made one serious mistake.

He isn't alone in making it. Whitehall has been making the same mistake over and over again. It dates back to the Blair years and, as I may have mentioned before, the coalition failed to look critically enough at the Blairite legacy in public services.

It is the faith, based on no evidence at all, that automating all systems - removing the human element - makes things more efficient and more effective.

This single mistake threatens to torpedo the whole universial credit policy, which would be a tragedy.

The truth is that, when you take the human element out of the system, and expect peope to interact with infleible systems - or keep the human element in and make them inflexible (another DWP mistake) - it can work for people who have standard problems, situations and reactions. But for anyone else, who doesn't fit into their assumptioms, starts bouncing around the system seeking solutions. And because there is nobody with the flexibiltiy to listen and act when they land, they create costs.

It is the absolutely classic  'failure demand' phenomenon identified by the system thinker John Seddon, who has his own things to say about universal credit too.

This is doubly tragic. Not only does it threaten to sink an important reform, it also adds huge costs to the system when there is pressure from the Treasury to cut costs, and those costs inevitably fall where they shouldn't - on people who need the money rather than on the stupid system that is too inflexible to be cost effective.

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Do the Lib Dems need a big idea? My answer is...

On Friday night, I was in York for the Liberal Democrat spring conference. A strange experience – no lobbyists, no sharp-suited corporate exhibitors, no thinktanks and no press. But a surprisingly large number of bright and energetic young people in search of a big idea.

These generally speaking, were not in great evidence at the Lib Dem History Group fringe meeting about Ideas that Built the Party – but the meeting was nonetheless lively and worthwhile.

I was dressed as much as possible like Nehru and speaking next to Nick Thornsby and Teena Lashmore, but found myself debating with the one person in the room I normally agree with – the former MP and Liberal thinker Michael Meadowcroft.

We argued about the need for precisely this Big Idea to progress the party.

And I agreed with him.  Big ideas can get fetishised, and usually do. They tend to miss the point, like targets. Michael was spot on when he said the essence of Liberalism wasn’t about big ideas; it was defence of the human spirit. He was right.

But I’ve been thinking about it since, as I took – by some terrible oversight – the Virgin Trains service back to the south (I had a book to finish writing and one or two things on my mind and I wasn’t concentrating).

And I decided there is something else to say.

Because there are also dangers about avoiding big policy ideas for Liberals. It makes us look as though we are not so much a crusade for the human spirit as a mild ginger group to agonise about it.  Or a sharp-suited policy to somehow finesse it in the corridors of power.

Without a Big Idea, Lib Dems are in danger of becoming what I sometimes fear they are already – a strange cult dedicated to the worship of existing institutions, without change. A sitting duck for whatever populist or petty Trump comes along next.

Big ideas challenge that perception.  And here’s a brief history of the Liberal big ideas since 1859 (so brief that it’s actually just a list):

Free trade (Gladstone etc)

Three acres and a cow (land reform) (Chamberlain)

Old age pensions (Asquith/Lloyd George)

We can conquer unemployment (Keynesian economics) (Lloyd George)

United Nations/European Union (Sinclair)

Social security (Beveridge’s original vision) (well, Beveridge, I suppose?)

The counterculture revolt against central planning (Grimond)

Proportional representation (Thorpe/Steel)

A penny on income tax for education (Ashdown)

The thing is that there is actually a big idea coming, one that can turn around the propensity for modern economics to concentrate all power into a tiny number of hands (and call it ‘efficiency’). I wouldn’t want us to agonise about it for so long, and compromise its power so that we look ‘realistic’ or ‘pragmatic’, that some other political tradition picks it up and enacts it. And does so like Beveridge's plan was enacted - badly, so it may not survive...

And I have a feeling that the big idea is going to be both a guarantee of Liberal economic diversity and a method of self-determination for everyone. It is a basic income.

I don’t know how it will be organised, whether out of taxation or created in the form of Quantitative Easing. I don’t know when it will arrive. It may not be until my dotage.

But it is coming. It is the next step forward in Liberal civilisation and it will provide real security and real dynamism far better than the retro attempt to seize the nation on behalf of a previous era by the Johnsongove.

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Sunday opening and Donald Trump

Never has the gulf between those who support the idea of free and open trade been so obvious and so misunderstood.

Most of all, by the government, which seems to have been pretty roundly defeated in its attempt to let local councils decide if supermarkets should be allowed to open all day on Sundays.

I'm a localist and I like the idea of local self-determination, but I'm not sure councils were in any position to resist the power of the big supermarkets. They would have succumbed. It would have been central administrative control replaced by central corporate control.

Thanks to the BBC, this issue has been widely misunderstood. It is also the source of some bizarre wishful thinking statistics bandied around by supporters of deregulation.  As if opening supermarkets for longer would do any more than redistribute earnings from the small to the big.

That's the test as far as I'm concerned. Would the measure lead to more diversity or less? Would it lead to a wider spreading oft he profits or a narrower one? Would it have increased competition or throttled it?

I don't think anyone would claim that it wouldn't have made the big dinosaurs of retailing richer and the small struggling niche players poorer. That isn't competition in any sense that I recognise. Nor is it free trade in the truly Liberal sense.

These issues are important but largely ignored, which is why Robert Frank could say that the US establishment has failed to understand the rise of a reptile like Donald Trump - who has risen on the back of a cocktail of racism, petty bullying and a constantly repeated critique of greedy offshoring corporates.

Because they haven't understood the difference between Liberalism and neoliberalism.  This is what he wrote today in the Guardian:

"Yet still we cannot bring ourselves to look the thing in the eyes. We cannot admit that we liberals bear some of the blame for its emergence, for the frustration of the working-class millions, for their blighted cities and their downward spiraling lives. So much easier to scold them for their twisted racist souls, to close our eyes to the obvious reality of which Trumpism is just a crude and ugly expression: that neoliberalism has well and truly failed..."

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The importance of cats in healthcare

I've always been fascinated about why the welfare state and the NHS are so expensive. Because it wasn't
meant to be like that. Beveridge suggested they would get cheaper because the underlying health of the population would improve - but, as we know, it didn't happen.

Regular readers of this blog (if there are any) will know that one explanation, for me, is the industrialisation of services - the fantasy (because that's what it is) that people's needs and hopes are one-dimensional and can be dealt with efficiently by a sort of assembly line process.

As we now know, thanks to people like Deming and Seddon, this kind of inflexibility simply creates systems that deal badly with human diversity. That makes the exceptions increasingly expensive to deal with, and we may actually all of us be exceptions in some way or other.

Partly it increases costs by misunderstanding our humanity. Industrial systems assume that human requirements are simple when they are actually not very simple. Sometimes social needs and loneliness express themselves in demands for drugs or other kinds of emergency attention - not because these help but because they are available.

That was anyway how I saw the research last year about people who go to their local Accident and Emergency department rather more than is comfortable. The usual definition of 'frequent attenders' is three times a year. I've heard of one patient in London who arrived by ambulance more than 200 times in one year.

I have to be quite careful here to make sure I don't say anything that might identify her, but it is a 'her' and a surprising number of these frequent attendees are young women. They get into the habit, when they feel a bit down, of dialling 999 and spending the evening with people they trust, who they get to know and will check them over.

It hardly needs explaining that this relatively small number of patients cause a great deal of expense. It isn't that they don't need anything, but the system is currently not well organised to cope with social needs of this kind - still less to understand them.

So I was fascinated when I was talking to a health professional this last month (I can't say where I'm afraid) - that they knew what had happened next to one of their most frequent attenders.

Most of the new systems set up to tackle frequent attenders are like those set up for other small groups that create the biggest costs in welfare services. They are given a more personal, flexible kind of care, by small units, able to take them out of the system and make it work.

It is the same for Casualty departments and, in the case of this patient, among the solutions has been providing her with a cat.  It has worked.

There are a number of lessons here. The crucial importance of informality and flexibility when it comes to tackling rising costs. The importance of solutions at a very local, face to face level. The impossibility of writing a Whitehall manual on the use of cats in healthcare. But one thing above everything else.

It is this. People may seem to need a great deal, but often what they need most of all is to give back - if not to people, to an animal. Give them that responsibility and it can transform their lives. You can find out more about this idea (though not the cat, I'm afraid) in my book The Human Element.

It is just one more aspect of human nature which conventional bureaucratic systems don't get...

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