The Entrepreneurs Network in 2017

The Entrepreneurs Network, which sits within the Adam Smith Institute, works in three ways in support of one aim: to make Britain the best place in the world to start and grow a business.

First, we are the voice of entrepreneurs in the political process. We have a strong and growing network of thousands of entrepreneurs, from which we can find out how the laws and regulations of the land impact their ability to start, run and grow successful businesses.

We fuse this practical knowledge with the latest research to lobby for specific changes to law. We are critical when governments are getting it wrong (e.g. the sclerotic visa system, historically poor planning policy, regulatory creep etc.), but supportive when they get it right (e.g. the introduction SEIS and EIS, smart crowdfunding regulation, the Northern Powerhouse initiative etc.). In 2017, we will explore these and other issues impacting entrepreneurs through the All Party Parliamentary Group for Entrepreneurship.

Second, we help explain what is happening in Westminster and how it will impact entrepreneurs’ businesses. What’s the point of the government launching a new tax break if Britain’s business owners don’t know about it? And when a new regulation is going to burden businesses, we help explain its potential impact. Where appropriate, we even partner with the government – for example, with the Department for International Trade on their Exporting is Great strategy – but we will never take government money because doing so would undermine our independence.

Third, we are very much a do-tank (to steal a phrase from Madsen). Whether it's the Leap 100, a select group of some of the UK’s most exciting, high-growth companies, or projects like the Female Founders Forum, we are increasingly helping entrepreneurs in a practical way. In 2017, we have a new project that will help connect the founders of Britain's leading companies with the next generation of entrepreneurs – particularly the most talented young entrepreneurs who wouldn’t otherwise have access to our remarkable network of business owners and experts. For those familiar with the Adam Smith Institute, it will be like The Next Generation for entrepreneurs.

We will do much else besides – including our annual Parliamentary Snapshot that polls MPs on their knowledge of policies impacting entrepreneurs – and Regional Roundtables, which get us out of London for events up and down the country. It will be a busy year!

The latest terror to befall society - exercise inequality

As we all know social practices and idiocies, but we repeat ourselves, start over there and cross the Pond with a perhaps decade long delay. We should thus gird ourselves for the latest of these, the terrors of exercise inequality. 

Early on weekday mornings, I often find myself panting and sweating beside strangers in a dark room. Riding stationary bicycles with nightclub music blaring in my ears isn’t my idea of fun. But I turned to Flywheel’s spinning classes after the YMCA next to my office shut down, and now I’m hooked.

The draws for me are the ruthless efficiency of 45 minutes of grinding interval work and the fitness returns — running is a lot easier since I started spinning. The studio is also just a short walk from my house.

Lately, though, I’ve been questioning my reliance on this luxury studio, and wondering what exclusive gyms like Flywheel and SoulCycle mean for America’s epidemic of physical inactivity.

We are told that the poor take less exercise than the rich. Without any adjustment being made for the higher probability of manual labour among the poor of course. Those upper middle classes seem not to realise that some do still earn with the sweat of their bodies, not just their brains.

Then we have the laments about how the poor don't have as much access to leafy parks as the rich - entirely true, richer areas do tend to be better provided with such. Rather because richer people move to such areas but still.

And then the insistence that this is an inequality that should not stand. Why, to join one of these gyms might cost $100 a week (yes, we know, Veblen Good or what?) and the poor are just left with no parks and only the dangerous streets to cycle upon.

At which point we might note what it is that the privileged are actually exercising upon. A stationary bike in a room. A stationary bike costing some $130 these days when not on sale. And we're really pretty certain that the boom box for the music is a pocket money sort of cost these days.

No, it isn't true that the poor are left gaining their only exercise possibilities in dodging rent collectors. Thus this idea of exercise inequality is one of those American imports we can probably do without. But sadly, we'll get it anyway, won't we?

In Defence of Uber (again)

This morning’s Tube Strike brought chaos to the Capital, and people are (understandably) unhappy. A colleague at work took over two hours for a commute that usually takes just 20 minutes, and a friend ended up walking all the way from Paddington to Canary Wharf in the rain. Looking out the window as I write, the traffic hasn’t abated much and London has brought a new definition to the word sluggish.

In response, mobile taxi app Uber, renowned for its efficient and cheap service, has hiked its prices for a ride. Over four times the normal rate in fact. People flocked to social media to vent their despair, describing Uber’s behaviour as both “disgusting” and “disgraceful”.

But what such cross commuters fail to recognise is that Uber is actually doing us a favour. By using the surge pricing model that is responsible for the high fares, Uber are able to send an economic message to drivers, to lure them into London so that there is no shortage. Further, the higher prices ensure that the service isn’t completely inundated with requests to drivers, so that some drivers are likely to be available to those who are willing to pay.

This may not sound comforting though. One may well think that in hiking its fares, Uber is simply giving speed and efficiency to the wealthy, with no regard for the poor, who might be condemned to trudge the pavements of London. This may seem so, but what it also means is that the service is available for those who have an emergency on their hands. What’s £45 if it means you can make your job interview? What does £50 matter when you have a crucially important business meeting to get to, or have to rush your dog to the vet? Those who deem their punctuality sufficiently important (and who see Uber as sufficiently speedy) are able to get their ride. This would not be the case if such apparently “disgusting” and “disgraceful” behaviours were banned.

So rather than jab fingers at Uber, as businessman Roger Charteris did, tweeting “@Uber you are cashing in on people’s misery”, we should stand by them and their decision to raise prices, and defend their acting in their self-interest.

iPhone anniversary

Apple CEO Steve Jobs was a visionary who wanted to put a computer – and a cool, easy-to-use one at that – not just into everyone’s home but into everyone’s pocket. Ten years ago, on 9 January 2007, he succeeded, launching his “magical” iPhone at MacWorld in San Francisco.

Everyone knew that Apple was ‘getting into the telecoms business’. But he did not just promise his audience “a revolutionary mobile phone”. He promised them two other new products: “a widescreen iPod with touch controls”, and “a breakthrough internet communications device”. It was only after a few moments that he made his audience realize that these were all the same device. “Today Apple is going to re-invent the phone,” he said. “It will revolutionize the industry.” And it did.

Apple stock soared. But I doubt that even the visionary Steve Jobs anticipated just how much his invention would change our lives. The iPhone did not just revolutionize the telecoms industry. It revolutionized the conduct of all industry. Take banking as an example: we now routinely move money and pay for our coffee with a tap of a finger or a phone. I can’t remember the last time I actually went into a bank or saw a paper statement: the retail banking industry has gone almost entirely digital, and increasingly, almost entirely mobile.

For five years now, smartphones have been outselling PCs. It is reckoned that 5 billion of the world’s 7 billion population have a mobile phone – pretty well everyone except the infants, in other words. And half of those are smartphones.

We each carry in our pockets an entire warehouse-full of useful tools: a phone, a camera, a movie camera, a map that tracks you (like in James Bond’s Aston Martin DB5 in Goldfinger), a calculator, a radio, a stopwatch, a timer, an alarm, an address book, a notepad, a health monitor, a music store, a complete set of train timetables, a torch, an itinerary to anywhere you want to go, and one that avoids traffic too, a credit card, a compass, a thing that wakes you up when you reach your station on the train… well, the list goes on and on.

As Apple’s ingenious marketing team noted, whatever you want to do, “there’s an app for that”. Indeed, it is estimated that there are 2 million iPhone apps, and perhaps 2.2 million apps for its Android competitors.

And remember, that all this is in the hands and pockets of over a third of the world’s population, while another third have something that looks more and more like it every day.

This is, truly, a miracle of capitalism.

I often wonder what might have happened if the telephone industry were still in state ownership, as it was here in the UK until Mrs Thatcher privatized them in 1984, and had decided to produce portable phones. I can’t believe that they would even now be any smaller than the brick that Sean Connery had in Doctor No (and just like the map, even that, at the time, was merely a figment of the director’s imagination).

And if, ten years ago, some government department or quango had been charged with developing applications for a smartphone, how many do you think there would be today? I would guess maybe six, with another fifteen in development. 

But we have millions of apps, precisely because their development is not centralized, but is spontaneous and competitive. Millions of people have good ideas and it is cheap to promote them as apps. If other people find them useful – or even just fun – they will gladly pay a dollar to have them. It’s the very essence of capitalism – except that you don’t necessarily need much capital, just vision and determination, to create a bestselling app.

I doubt that even we, ten years later, can anticipate just how much Steve Jobs’s invention, and its successors, will change our social and business lives over the next decade. But that’s capitalism for you – always surprising us with new wonders.

Doing Business with China

In the post-Brexit world, with Sino-USA relations becoming more fractious, China will become still more important for British business people, be they exporters, importers or investors. Those who see the glass as half full believe the UK does well in China; on the other hand, the UK is not one of China’s top ten trading partners (China Daily. February 19, 2014) and as the value of our exports to China is about the same as the Netherlands.

If there is a single reason for UK under-performance, it is our failure to understand China and its people.  The Americans, Australians and Germans, for example, are much better briefed.  I have met British expatriates there who arrived without having read a single book about China.  Yes, some Chinese business practices now look more like those in other countries but that is superficial.  China is unique.

The highly successful Steven Wang, the founder of a $700M investment fund in Shanghai, when asked in 2016 what he wished he had known before he started, replied “the people dynamics”. And he is Chinese.

Relationships, be they with suppliers, employees, customers, business partners or government officials, are even more important than they are in the West.  Those relationships are also different in nature.  A - maybe the - key concept is guanxi, a relatively modern word meaning something between friendship and mutual dependency.  In America, one does business with people who may become friends.  In China one makes friends with whom one may later do business.  Commercial law is rapidly coming into place but it is a new concept in China.  Contracts may not be worth the paper they are written on.

Homework is essential and yet too rarely undertaken.  Of course becoming a China expert (if there is such a person) can only come from experience in China but, to get to first base, one should have some acquaintance with the basics.  The Chinese are not impressed by visitors with no knowledge of their history, customs and ways of thinking.

To fill some of this gap, Morgen Witzel and I published Doing Business in China in 2000 (Routledge). Chao Xi joined us for the third and fourth editions, the latter published in January 2017 and widely available in the UK, USA and, interestingly, Hong Kong.  An introduction to the subject, it maps out the paths the newcomer may wish to explore further.

Doing business in, or perhaps with, China has changed immensely in the last 20 years.  Deng Xiaoping only allowed the theory and practice of marketing back into China in the 1980s.  Distribution was reserved exclusively for the Chinese and foreign businesses had to be joint ventures until recently. China today is far more international. Chao Xi is a law professor in Hong Kong and is particularly interested in the development of commercial most of which has taken place since 2000.

With all these changes and the huge expansion of China’s GDP we expected the 4th edition to be a substantial revision.  In fact it wasn’t.  We note all the significant changes, people in key posts have come and gone and half of the 14 case studies are new. At the same time, the country and the people are much the same and, as ever, things are rarely as they seem.  The book is a guide to what to look out for.

Of course we should use consumer pressure to beat fake news

An interesting proposal over in the New York Times - itself something of a novelty -  about how that menace of fake news might be beaten. We, as consumers, should complain to the advertisers who place ads on such and thus cut the practice off at the wallet.

Yes, of course, consumer power is almost always the answer to things we don't like

Mr. Phillips had just engaged in a new form of consumer activism, one that is rewriting the rules of online advertising. In the past month and a half, thousands of activists have started to push companies to take a stand on what you might call “hate news” — a toxic mix of lies, white-supremacist content and bullying that can inspire attacks on Muslims, gay people, women, African-Americans and others.

In mid-November, a Twitter group called Sleeping Giants became the hub of the new movement. The Giants and their followers have communicated with more than 1,000 companies and nonprofit groups whose ads appeared on Breitbart, and about 400 of those organizations have promised to remove the site from future ad buys.

Some might think that Breitbart isn't quite the right target there - but it is, it really is. Not because the site is any better or worse than any other but because consumer pressure is indeed the solution to things we don't like.

Note that it doesn't matter what it is that we don't like. If someone is doing something we don't like then it is not just our right but getting close to our duty to remove our money from those people. It is, after all, our money. The spending of our money being one way that we can shape the world in our desired image. The aggregation of how we all spend our money being that intensely democratic process by which we do indeed change the world into something closer to what we collectively desire - the collective being weighted by the accumulation of those individual votes and actions.

If someone is doing something you don't like then don't spend your money there. Ask that those you do spend money with do not too. Similarly, if you like something then spend more, encourage others to do so there. This just is what consumer sovereignty is about.

So, when do we get the British government to stop spending our taxes on job ads in The Guardian? After all, they do still at least occasionally employ a known KGB agent of influence and recipient of Moscow Gold, don't they? Such hateful behaviour really should not profit from our money, should it?

And yes, as the cookbooks do point out, sauce for the goose is indeed sauce for the gander.

 

We think leisure's a good thing too but we do note that it is a luxury

The results of the latest interesting little experiment in Sweden are in. Yes, shorter working hours make people happier. It's also more expensive for people to have shorter working hours and the same income. We're not entirely sure that an experiment was necessary to discover all this but this is what was discovered. Thus follows the usual insistence that we really shouldn't be looking over there:

A six-hour working day results in happier and healthier employees. It also leads to a higher quality of welfare services and a more sustainable and equal labour market. Despite what some news reports may have indicated, these are the findings from Sweden’s trial of six-hour working days.

A shorter working day is often portrayed as a utopian dream that would be too costly to realise, much as previous work reforms were portrayed in the past. But what if working less is the key to a more sustainable working life?

The problem being that expense thing:

Sweden’s experiment with a six-hour work day may be doomed after a two-year experiment showed that the costs outweigh the benefits.

The scheme saw 68 nurses at an old people’s home in Gothenburg have their eight-hour days cut in a bid to improve staff satisfaction, health and patient care. 

Preliminary results concluded that it achieved all of these aims, but the city had to employ an extra 17 staff, costing 12m kroner (£1.4m).

At which point we really need to start beating around us with the standard economic cluebat. Leisure is indeed desirable. And so are many other things in this life such as beer, bacon, boogie and even bedpan emptying for the old folk. We also have scarce resources to meet all of the desires for these desirables. The task is thus to allocate our resources so as to maximise human utility--which of these various things do we desire the most, at what point do we say lagom on the beer, the bacon or the boogie and then devote more resources to the bedpans? Or any other combination of desires?

A number of different methods of this come to mind from government allocation through to the free market just leaving people to decide. But whatever method is being used still has to deal with that basic idea of opportunity cost. More bedpans means less beer, bacon....well, you get the idea. We cannot have more of everything until technology has advanced to create more of everything from our resources. At any moment in time we have to give up some of something in order to have more of something else.

More leisure for nurses is an entirely admirable goal but it is also a cost. Someone else, somewhere else, must economise on boogie to the tune of €1.4 million to provide it.

Or as we can also put it leisure is a luxury good, something which we quite naturally spend more of our higher incomes upon as incomes rise thanks to that technology increasing the productivity of our scarce resources. This is why we work 8 hour days now, not the 10 or 12 of a century and two ago - we're richer. And as we become richer off into the future we will, no doubt, continue to take more of our wealth in leisure.

But what we should not be doing is trying to force the issue, insisting that these people here should gain more leisure at the expense of the other desires of those people over there. That's just theft, not liberal progressivism.

It's a good thing we're leaving this European Union, isn't it?

A quite extraordinary intervention here into the appointment of an EU Commissioner:

Oettinger, previously the digital services commissioner, was named in October by commission chief Jean-Claude Juncker to take on the budget and human resources dossier from Bulgaria’s Kristalina Georgieva after she left for the World Bank.

The last one has moved on to another gravy train so a new one must be appointed. OK so far. And then we get this:

Germany’s EU commissioner Günther Oettinger is unfit to run the human resources portfolio because of his divisive record of racist, sexist and homophobic remarks, rights groups have said.

In an open letter to the European Parliament, which will publicly question Oettinger on Monday, NGOs including Oxfam International and Transparency International said Oettinger was not suitable for the new job.

Those NGOs are, of course, major beneficiaries of the budget process. So the claim here is, at heart, that the people receiving our money should be determining who it is that gives them our money? Perhaps he is all of those things alleged but we don't allow prisoners to appoint governors and if we want a decent body politic we don't allow the special interest supplicants to appoint the politicians.

Good thing we're leaving this mess of a system behind really, isn't it?

Let’s make sperm donation easier

Right now, British sperm banks are facing a crisis. Serious sperm donor shortages mean long waiting lists, with about a third of sperm coming from foreign countries to fill the gap. As the chief executive of the National Gamete Donation Trust, Laura Witjens, puts it, Britain “has failed to keep pace with the dramatic increase in demand for sperm, particularly from lesbian couples and single women”. Although some of the 50-something sperm banks in the UK have enough sperm, many clinics are struggling to give would-be parents (particularly those of ethnic minorities) what they want.

The consequences of this sperm shortage are far from laughable. Many women are resorting to ‘DIY fertilisation’ with donors they know personally – either with at home artificial insemination with menstrual cups or even through intercourse. Problems arise as women cannot screen the donors for disabilities or disorders, or when the DIY donor demands custody (sperm donations made through a clinic have no legal claim to their offspring). Equally, the DIY donors themselves are at risk of later being asked to give financial support.

So why the shortage? Surely there are millions of men across the world that would leap at the chance to be paid to give away their semen and spread their genes without any strings attached?

The problem is, donating to a sperm bank is a massive commitment. Once donors have got past the rigorous and time-consuming screening process, they have to make an eight-month commitment to weekly visits to a clinic to donate. Donors cannot be adopted, under the age of 18 or over 41, too sexually promiscuous, a recreational drug user or have ejaculated in the past 48 hours before each donation. It is illegal to pay a sperm donor, aside from a maximum of £35 per visit to cover travel expenses. Many British men are put off as they are no longer guaranteed anonymity: their biological offspring may find out who they are when they turn 18.

In fact, the controls on sperm donors are so tight that out of the sample of 100 men that were screened as potential donors at the NHS-funded National Sperm Bank, only five were cleared. Although of course we wouldn’t want anything other than proper medical checks for donors, we’ve got to recognise that something else has to change on the sperm supply side of things to keep up with this increasing demand.

One option could be offering more money to donors to recruit more donors. In 2012, after a regulator allowed egg donors to receive £750 instead of the previous £250, the average waiting time for fertility treatment halved. The key objection to paying donors anything more than for travel expenses is that it incentivises men to hide their medical details for money, however the reality is that most would still primarily donate out of good-will and the screenings should be thorough enough anyway to prevent any diseases being passed on.

Another option is to increase the number of children each donor may have. In the UK each donor is allowed to give to up to 10 families worldwide, however other countries are more relaxed: Canada allows for 25 children per population of 800,000 and the USA advises up to 25 per 850,000 of a population. This means that those lucky men with extraordinarily fertile and disease-free sperm who have managed to clear the medical checks can help even more childless adults.

Currently the NHS offers up to six cycles of IUI (intrauterine insemination - fertilising a woman with donor sperm) for free for couples that cannot conceive naturally. Although more than half will fall pregnant in that time, the rest are forced to either give up or fork out roughly £500-£1000 for each cycle of private treatment. Moreover, IUI is not available for free on the NHS for single women, and even those who can access it are subject to a postcode lottery with waiting times varying hugely in different areas. As time is of the essence with fertility (there is a 0% IUI success rate for women over 44), these waiting times can mean the difference between parenthood and childlessness.

Liberalising sperm donation laws - for most of us - may not be up there with Article 50 and the deficit, but changing the regulation would have a massive effect on the happiness of thousands of people in the UK.

The ASI's solutions to everyday problems in 2017

Politics can be alienating to those it most acutely affects, so this year at the ASI we want to give some more attention to the everyday things in life and try and solve some of the problems, barriers, and government inefficiencies that are affecting people up and down the country.

We’ll be looking at the whole life cycle, from going out on the tiles, to simplifying marriage laws and reforming sperm and egg donation, to childcare legislation getting women who want to work back to work, opposing meddling food laws that make us poorer and fatter, and bringing back the atmosphere at football grounds with safe standing terraces and cheaper tickets too.

Childcare reform:
Childcare costs in Britain are the highest in the Western world, with parents spending over a third of their income on nurseries and childminders – three times as much as in France and Germany. Some recent moves to subsidise childcare have been ill devised, driving up costs for middle income families by subsidising the industry rather than giving the money directly to the parents who need it.

Sky high childcare costs means that both parents going back to work often doesn’t make economic sense, and more often than not it’s women who end up staying at home. Philip Hammond has vowed to slash red tape surrounding childcare this year, and we’ll be keeping a keen eye on his progress, but an immediate improvement that we’ll be pushing for is the relaxation of the legally required staff-to-child ratios.

Currently in the UK one adult is required for every three babies, four toddlers or eight children over three years old – driving up staffing costs for crèches and consequently the financial burden on parents. In countries like Germany and Denmark there is no mandatory requirement, and they still manage to produce world standard childcare. It’s a small reform that could save people an awful lot of money and make it easier for women to return to work after having children.

Safe Standing:
The UK has had an effective ban on standing sections in top tier football since the Hillsborough Disaster, but as the inquest came to an end last year the fault was found to lie with poor management and policing, not with the fans on the terraces.

Research consistently finds that fans overwhelmingly support the reintroduction of standing sections in football stadia as a way of increasing atmosphere both in the ground and for those watching televised matches. Standing can also increase densities meaning that a broader range of ticket prices can be offered by clubs, giving more variation between the cheapest and most expensive ticket. Premier League clubs offering the levels of standing apparent in European clubs could cut the average season ticket by 57% - a potential saving of hundreds of pounds a year for avid fans.

The paper we released in 2016 with the help of the Football Supporters Federation, urged the Minister for Sport, Tracey Crouch, to intervene and lift the ban - a ministerial act that requires no additional legislation. It had a great reception in the press and with fans alike, and since then the likes of Manchester United and West Brom have started to consult fans on the issue. It's looking increasingly likely this might be an early goal in 2017, we’re certainly hoping to get it in the back of the net. (sorry)

Reforming Noise Laws and boosting the nighttime economy:
In 2015 London lost a third of its small clubs, the intimate venues that incubate touring talent, leaving the city with just 88 in total according to the Music Venue Trust. Last year we saw nightlife stalwart Fabric shut down because of drug misuse, only to be allowed to reopen again based on adherence to 32 new conditions and payment of Islington Council's £320,000 legal fees. The UK's nighttime economy is being strangled by red tape and regulation.

In cities the pressure to build more housing has caused a surge in venue closures with the spaces above being turned into residential flats. Despite the venue predating the apartments, it can make evening performances impossible at standard sound levels because of noise complaints by new residents, and generate noise-abatement notices that can cost thousands of pounds to contest.

This year we’ll be looking at practical policy solutions to address the rapid closure of London’s nightlife, from letting the burden be on developers to soundproof new builds next to venues, to root and branch noise law reform.

Liberalizing marriage laws:
If you managed to hold on to your partner through an unquestionably divisive 2016 you may be thinking of getting hitched to this political soul mate. Well let’s hope you’re not planning on a garden wedding as under the current UK law you must wed indoors, or at the very least in a pagoda. The Law Commission have been looking into sorting out the mess of UK marriage law, that limits not only where you can marry but what time of day and all sorts of erroneous other elements, but have been making limited progress. This year we’ll be pushing the idea that you should be able to marry whoever you like, wherever you like and leave the experience in the certain knowledge that you are in fact legally wed – which is currently not the case.

Liberalizing fertility laws:
Despite a steep increase in the number of women having children later in life (perhaps hoping to get far enough in their careers that they can afford the eye watering child care costs in store for them), a stark increase in same sex partners looking to conceive following the legalization of gay marriage, and one in seven UK couples having fertility problems, the UK egg and sperm donor market is…drying up.

Britain’s first national sperm and egg bank, backed with taxpayer money, has stopped recruiting new donors just two years since opening, but not because they’re full to bursting. The bank found that despite their best efforts to attract donors through altruism alone, people weren’t coming in and increasingly UK couples were looking abroad for donors and even on sites like Gumtree.

In 2017 we’ll be looking at ways we can liberalize sperm and egg donation to make having children more accessible for the increasing numbers of desiring couples. From raising the money offered to donors to help stimulate some altruism, the £250 offered to sperm donors for two visits to the clinic a week for four months isn’t pulling them in shockingly, to relaxing regulation to allow one man’s sperm to be used for 10+ families.

Those born through sperm and egg donation since 2005 will be able to know the identity of their donor parent come their 18th birthdays in 2023, and this will significantly alter the current discussion around incest risk from repeat donors.

---

These may not be typical areas for an economic think tank to tackle, but we think they're important. We hope that by the end of 2017 you'll be able to stand at the football on Saturday afternoon, dance till dawn on Saturday night, marry whoever you please in a night-time open air affair if you so wish it, have your pick of a wide array of affordable donor choices, and be able to pay for someone to take the resulting baby away for a few hours a day so you can maintain your sanity and go back to work. That's the dream for 2017.