I have had a chance to have a good look this weekend at the
Nesta proposal and
watch the videos from the presentation and I thought I would make some comments on what I think about attacking the recession and how I think the UK might better equip itself to do so.
Firstly the concept of attacking a recession is a great one, there is both a real and present threat to the UK and more opportunities now for motivated people to really make a difference to their own futures and to the future of the UK as a whole as we enter this new recession. In general it is in my nature to strongly oppose government intervention like the banking bailouts, the pay greedy people's mortgages for a year because they overstretched plan and even the new £1bn investment in start-ups plan and there is a very simple clear reason for this opposition which is that the government, just like pension funds is an awful investor.
The sums of money they are dealing with and the long line of consultants waiting to help them deploy their lazy capital by working with start-ups confused by the red tape for a fee of course. Makes this £1bn investment a complete waste at worst and a very inefficient way of dealing with the problem at best.
So what is the answer then well I think it's all pretty simple but I am going to give you an example of how the government is monumentally failing in this area as I have been looking into it. The answer is that instead of thinking it can help it's people and attracting all the lazy give me some money non-value adding consultants it usually pays for advice. It should try and attract smart, motivated hard working people who just want to turn a profit and advance society. But how does it go about doing that?
Again it's pretty easy, smart motivated people want to get on in life, they don't like handouts and they work 10x as hard if they actually have to and want to at the same time. What they tend to like is equity in their businesses, and a feeling of making a difference for that they need customers not investment. What Nesta needs to realise is that with the greatest of respect pre-revenue businesses are nonsense and we shouldn't be investing in them as taxpayers because they don't make any money!!! Leave that to the experts! Just like we shouldn't be investing in banks who are pre-realisation that tier 1 capital ratios actually matter! Instead we should look to Silicon Valley.
Silicon Valley was built on the US Army as a big initial customer paying for radio technology the US was fighting a war and at the end the big customer was gone but it didn't matter because lots of other customers had come along who wanted to buy the technology.
So all Nesta has to do is help government departments put money in the front door as revenue to companies instead of in the back door as investment. It especially needs to help the most inefficient arms of government buy from companies who show a commitment to re-investing profit in R&D. This simple change of thinking inside government will provide all the necessary stimulus to our economy that we need and make us world leaders.
What else can the government do? well potentially a lot more but here are some realistic suggestions that will help it get the UK where we need to be:
1. Reform and heavily promote Supply2.gov.uk put it at the heart of the revitalization strategy. Supply2.gov.uk is a procurement portal for government to buy things from private companies in principle this is a great idea but there are some massive problems with it. Firstly it is so heavy on policy that when as an entrepreneur I went to tender for
a contract with Portsmouth city council in our area of expertise we were not invited to tender even though we own our own data-centre, host and advise on some of the largest web sites in the UK and have loads of cash in the bank and employees to deliver the contract for the PCC we fell short by 100 points! This is not just us loosing in the tender process which might be understandable this is us not even being invited to tender despite completing a 16 page pre-qualification questionnaire about ourselves. I am not going to be that bothered if we don't get government work as a business because fortunately we don't need it. I did it as a test after reading the register article I link to above. But I was genuine I would have liked to have been considered and I did express an interest and what's more I think we could have done the job very well or at the very least made the council more aware of the costs involved which are probably exaggerated by incumbents who are just out to rip government off and know how to score more points in a badly defined tender process.
This is the second huge problem government is not a great investor but it is not a great buyer of services either, this comes partly from the fact there are so many competing interests and no strong leadership saying what is needed and will be bought but also from the fact that they is corruption and lazy but large private firms who have dealt with government before tend to get all the work from government rather than smaller more innovative firms who would love to work with government if it would only stop bean counting everything badly and let them tender for work!
Apart from this private firms have to pay to join supply2.gov.uk if they want more areas and this is crazy! If the government should do anything for free it is tell its people and companies openly and transparently what it wants. I also think the entire tender process should be fully transparent for maximum competition this means that as a company I have to publish at least the pricing and full description of services offered part of my tender so my competition can see it and try and undercut me on the contract and I can be held to account by other interested parties and tax payers at large who will ultimately be footing the bill for my services.
Then there needs to be a recognition that entrepreneurs don't mind filling in well thought out forms we just hate pointless ones that inexperienced procurement admins think up which comprise 80% tangental questions that don't have any bearing on if you can deliver the contact or not and yet comprise most of the point score! It's accountants who get their kicks from that kind of thing and that is because they get paid by the hour to fill it out! When did they last save the British economy?
So what can be done to achieve this? Well start by setting an example, there are lots of great small businesses who would love the chance to reform supply2.gov.uk. I think a more transparent community lead web site could be built in about 6 months by a team of
very clever people for less than £250,000 and if they don't want to help government
Fubra will and I am sure there are other companies equally if not more qualified for this who should post a comment on my blog to bid for the project perhaps the government could express and interest by leaving a comment and give us all an address to send our tenders to?
2. Pass legislation that specifically heavily discourages the third sector from entering into inefficient contracts.Companies who are bidding will of course need to make a profit but often the key problems that keep smaller private businesses out of the running is that big deals are done with huge contractors for 3 and 5 year terms. These projects inevitably fail, overrun and generally cost much more because big companies are so inefficient. What we need is the government buyers having to apply a ratio just as data centres are starting to do with DCiE = (IT equipment power)/(total facility power). which will be the core metric for determining if a company is suitable more or less suitable for government work. Using accounting systems like
Clearbooks this could be quickly inspected and I would propose that the metric should be:
GCEN (Government contract efficiency number)
=
Number of stakeholders above the average national wage inside the business, includes directors, shareholders, staff and contractors who are not working more than 80% of their time on qualifying R&D projects. Based on cash payments share based payments attract a fifty percent discount as long as shares are not allowed to be sold within 5 years of being awarded.
This simple number shows how many people in a company are being over paid vs its peers and has a leveling effect that does two things. One it means that if large companies want government work they have to reward their highly paid staff in equity not cash and invest heavily in qualifying R&D which creates a natural motivation for efficiency from within the businesses management. Two it means that small companies will right away have far lower and more attractive GCEN's than their larger counterparts and therefore as long as government legislates well to ensure all third sector work must heavily weight the GCEN as part of their assessment of a tender I would suggest it should be 50% of the points then this could be transformational for the way government buys things.
This means huge pay cuts for middle managers and people who add little value everywhere unless they can show their stuff and improve company efficiency no more lazy money.
3. Choose what the country needs to buy and start buying right away!My business partner Paul wrote a post about
Obama's new apollo project, although I am not sure how the investment will work and I would fundamentally oppose direct investment I have described above if the UK follows America and decides to spend more of the government budget on energy transformation then that is a scientific catalyst. What is needed is not just one large area like this but more of them where the government specifically commits to buying things which don't exist yet at the required efficiency IF and only IF private companies can deliver them to that standard.
I can tell you one thing I have learnt in business is that when the government says we are going to invest or buy things with no pre-condition nothing changes. But is is a very different matter if the government lays down the gauntlet to capitalists and scientists by saying, Solar energy is crap right now the cost per Watt is just too high but if you can produce it for £X/ Watt then we will buy it from you. Can you imagine the innovation that would drive? I am getting excited just thinking about it both as a challenge and an opportunity.
4. Reduce the welfare stateThis is the hardest for a Labour government and completely clashes with their ideals but fundamentally welfare is a huge disincentive to innovation it is the curse of nationalised risk which should be on the shoulders of a countries people if it wants to progress not being passed on to harder working creditor nations as huge national deficits. The government needs to recognise people are like a bird who hasn't taken its first flight yet, they need pushing out of their comfort zone and for lots of the population who are not naturally excited or positive about life they actually need to need to innovate not just want to before they actually will. So cutting out or down benefits or even channeling them towards progress rather than living expenses would be a huge move forward for the UK. I am convinced if I was on benefits and they halved in cash terms but the other half was still there it's just it could only be spent on science, maths, IT lessons and equipment then as a nation we would begin to realise where the governments priorities lie and I have every faith that as a nation we will also start reacting to them positively.
5. Believe in open source, lightweight standards and collaboration. Patents and complex standards protect the lazyThere needs to be a realization that small companies are not going to be as good as large ones at business processes, health and safety, accounting and lots of other things but they are good at delivering the end product and far cheaper than their larger counterparts. But what has changed dramatically with the Internet is the ability for small companies to compete and Government has yet to wake up and realise that. Look at the tools they have now from new
project management tools, to
accounting tools to
customer service tools, to
hosting, all of these online tools are making it easier for companies who could never have afforded to before to compete with much larger ones for a few hundred pounds a month in costs. Technology has made things cheaper and more Government attention towards getting involved with open standards and policy setting which in theory it could be good at, if it realised that is its core role. This should mean that small companies have an even larger advantage.
In fact this is the economic dream that everyone can be self supporting because the tools are out their to help them achieve the things that they can't on their own and connect with others who can help them allowing them to specifically focus on adding the maximum value to society through their own unique or valuable specialist talents. It's getting closer but if we don't take this recession as a huge opportunity then other countries will beat the UK to it and we will end up stuck as a nation of shopkeepers or should I say buy to let landlords which is so much worse than the napoleonic accusation! We need to realise we are at economic war and if we loose we will be all be the poorer for it so Nesta got something very right we need to fight the recession!
As a final remark we need less egos in power, put doers in power not people who say things like we have made this progress and that bit of progress in an attempt to justify their own existence. We are not doing well we are doing terribly that is why we are in a mess and even if we were doing well telling everybody we are makes us all feel lazy. That's what's so great about recession fear is a very powerful motivator! So lets start acknowledging that we are not doing well, that risk does exist and that everything won't just be ok if we all freeze up and do nothing. Instead lets all actually start to choose to work harder and pull together as a country to get out of this mess.
Labels: Government policy, innovation, investment theroy, nesta