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Economics is Trumping Politics – The Entrepreneurs *could* go on strike

Julie Meyer Monday, 26 January 2015.

Excerpted from Welcome to EntrepreneurCountry, authored by Julie Meyer

In late 2011 and early 2012 Republican primaries, a curious thing happened. Ron Paul, the 76 year old, some would say, crusty old libertarian, who has been beating the drum for 4 decades about small government became not just a contender for the Republican nomination for the American presidency, but a hero to America's young people. His approval ratings amongst the young are high. Clearly the next generation are thinking differently about the role of government in our lives. Imagine if the entrepreneurs went on strike?

Julie Meyer 4I. Numbers Don't Lie
Every month in EntrepreneurCountry, David receives the management accounts from his Finance Director. He may have done them himself. He may have outsourced to an accounting firm. But once a month, David and his 4.8 million fellow small business owners in the UK look at the numbers - with a stiff drink, a cigarette, a coffee - or whatever makes them feel motivated to keep going.

And the numbers don't lie.

He can't print more money if he's short. He can't change the interest rate on his overdraft if it doesn't suit him. The Goliaths who are his customers sometimes don't pay on time, but don't get any penalty or interest for messing up his cashflow. If he reduces headcount to live within the company's means, he could get done by an angry employee who takes him to an employment tribunal .... just to see whether he or she can get the £65,000 payout.

HMRC will demand their National Insurance and PAYE - most likely the largest fixed costs that David has to pay every month, whether or not any client has paid on time, or whether employees have met their numbers. HMRC appear to do deals with the large firms like Vodafone and Goldman Sachs - letting them off paying tax and interest because they hire fancy lawyers.

In short, it can be soul-destroying.

• The Balance Sheet will tell him whether the company is worth anything.
• The Profit and Loss will reflect whether they are living in a sustainable fashion, or heading for a near death experience.
• And the Cash Flow Statement ... ah yes, the Cash Flow Statement. It shows whether he's going to have to duck and dive again this month. Basically, whether he'll get any sleep.
There are a couple of things that David knows.
• Debt destroys. It will lead to becoming a less valuable, and probably doomed business.
• Don't count your chickens before they roost; until the money is in the bank, it's not in the bank. Payment terms can mean the difference between survival, and well, ....
• Anything that you can do yourself, you do more cheaply than if you outsource it.
• And no one spends other people's money in the same way that they will spend their own. Although there are some very good, honest and hard-working people, who come close.

David drives the train. He's responsible for making sure there's fuel to travel, food to eat, and that the engine has been properly maintained. Frequently, he's caught between receivables not coming in on time, and payables demanding ... well, payment. He learns to keep up appearances, and learns how to make promises to calm people down. He takes the tension of the system onto his shoulders, and internalises the back and forth. If there's bad weather, the train still must arrive on time. He can't blame anything or anyone.

He may have his house as a security against the company's overdraft, and his spouse may not always get the enormity of the pressure. Although there are a number of husbands and wives who are heroic in their support for their business owner spouse.

Of the 4.8 million small and medium size businesses in the UK, 10,000 or so are fast-growing. These are roughly 6% of the UK's businesses. And yet, they create 54% of all new jobs. Quite literally, David and his firm are the engine of the economy. They are not Plan B; they are Plan A. David knows it. So what?

But he's not on TV, and not on any government entrepreneurship panel. He wouldn't know what to do with a Dragon if he met one. And he's probably never called himself an entrepreneur.

He just drives the train. He creates those jobs. He absorbs the daily shocks in his shoulders. He doesn't have work-life balance. His pension is his company.

And every month, he sits down with a stiff drink, a cigarette, or a coffee, and he looks at the numbers.... which don't lie. And he takes decisions. He's accountable for the simple reason: he has to be.

David asks himself very simple questions:
• Do people buy what we sell?
• Are we charging enough?
• Is everyone pulling hard on the team?
• Are we fooling ourselves on any part of our business?
• What are the next dozen near death experiences we could meet and what would I do about them?
• What's coming around the bend in terms of new tech, new processes, new models?
He doesn't go on holiday. He checks the bank balance daily. He knows every contour of the train's carriages, and anticipates every turn in the track.

There is nothing glamorous about building a business. If you think there is, you are in the wrong movie.

But this is where we must start. There is no other starting point than David, those numbers, and the contour of the train.

II. Our Inalienable Right to Our Data
Young, fast-growing UK firms like MoneyDashboard, which gives you a digital dashboard to manage your money, and PatientsKnowBest, which helps you manage your health data, understand a fundamental aspect of the future.

Your data is yours. More than that, it has an economic value. More than that, you will either share in the upside of that value, or you won't share that data in the future.

Why is this important?

Understanding behaviour can only really be understood by analysing the data. Those pesky numbers don't lie. If we could, for example, identify the highest users of emergency rooms, we could focus on treating them more effectively, and reduce their demand for one of the most expensive parts of the NHS. But this isn't being done today.

If you could see how much money you are losing to interest on credit cards or mortgages daily, you might decide to spend or save differently. Most people however, think only about whether they can pay their bills, not whether they are reducing their indebtedness.

Google and Facebook earn billions of pounds off of the use of our data - albeit aggregated and anonymous - and share none of the economic value with us. Even a good Goliath doesn't tend to understand data, and if they do, they get wrapped up in who owns it and the Data Protection Act.

David knows that
• data doesn't lie,
• it's yours
• and it has economic value.

The European Commission from time to time threaten this company or that company with penalties for the violation of our privacy, but that doesn't even start to compensate us for the lack of economic value that we are leaving on the table.
I would have no issue with my data being used in my neighbourhood to provide cleaner streets, better schools, and safer neighbourhoods, if...

• as a result of recycling, I could pay lower council tax; I would never miss an opportunity to recycle.
• as a result of using less gas and electricity, we could have more policeman walking the streets at night; I would religiously turn off my lights, and never wash a half load.
• as a result of me and 500 others in my neighbourhood working at the soup kitchen, shelter, or hospital one Saturday afternoon a quarter, I knew that the primary school had a special sports program they could afford; I would give up my precious Saturday.

....You get the point.

Make it in my interest, and show me how I have a stake in the outcome, and you have my attention. I may give you access to my data and change my behaviour.

III. The New Feudalism
In early 2012, assessing the ruins of the financial crisis, the role of government in the world governing, the financiers who have forgotten than finance is a service industry to industry, one might be inclined to ask a very simple question:

"Who serves who?"

• If Capital really does follow Ideas, and money flows to where it gets the best return,
• If David is driving the train, more accountable and transparent than big business or government, creating 54% of the new jobs,

• If 'entrepreneurs backing entrepreneurs' is the new model of the financing of entrepreneurship, and Individual Capitalism is the force for the 21st century,
• If David and Goliath are dancing through this new world of innovation, digital business models, and creating ecosystems out of yesterday's industries,
... then, where does government come in?

Gone are the days of deference where you gave your money to the state and you were more or less certain that they would more or less provide for the populace. The world is being redesigned at this time. A new social contract between government, Goliath and David is being written up. The tablets won't come down from the mountain with Moses. They won't be devised in the halls of Brussels. Westminster will come to know about it later too. They will be written in your neighbourhood, at your temple/church/mosque, in your family, by that new free school down the road, by the private firms who are taking over failing hospitals, and by bloody-minded people with heaps of feminine strength who persist in thinking that the best days of this country are yet to come. They are being written by the transactions that you do, and the incentives that you pursue; your behaviour, your saving or spending, your decision to work hard, or to play - all factor in to how robust the contract will be.

It takes a special kind of person to look at a mess and say, "time to clean up; what comes next could be really, really interesting."

This is a bottom - up, grassroots, people power demand for a system which enables all parties to understand the rules, and to play a new game.

But this is not Occupy St Paul's Cathedral. This is not a game of Monopoly. This is not Anger Anonymous. It's time to get out the drawing kit. A new blueprint needs to be written.

The only business models, and yes, I meant business model, for society which have legitimacy are those which enables everyone to be on the train.

• Am I driving the train? Can I, in the future, if I do well with other tasks?
• Are there openings for passing out the coffees and teas?
• I'm really good at
    o ticket collection,
    o maintenance of the train,
    o orientating the new employees,
    o cleaning the loo's, or
    o writing the blueprint for the train tracks.
• Where do I apply?
• I have a new idea for a supersonic train, a green train, a different kind of petrol.
.... You get the point.

For the country has a set of numbers - a Balance Sheet, Profit and Loss, and Cash Flow Statement. And the Individual Capitalists and David's won't stand for not knowing what they are. There will come a time very soon where every salary, every expense, every government transaction will be online and easily searchable. And we will think back to a moment where we hid these things, and ask ourselves, ....

..... who were we hiding this information from?

For this is our money. These are our numbers. This is our train.

Government has been (through the last social contract, written after World War II) a feudal landlord. I'll take care of you. In exchange, please work hard, when you feel like it, but don't worry your pretty little head with how it all stays afloat.

Today, the power has shifted to the individual who wants to keep his/her money in order to spend, build, or invest as they see fit. In fact, the individual, David, the individual capitalist, will demand to keep his/her money, and pay much less to the government, for much less.

The numbers won't lie, and all parties will come to know - what David knows already - that:
• Debt destroys.
• Don't count your chickens before they roost; until the money is in the bank, it's not in the bank. Payment terms can mean the difference between survival, and well, ....
• Anything that you can do yourself, you do more cheaply than if you outsource it.
• And no one spends other people's money in the same way that they will spend their own. Although there are some very good, honest and hard-working people, who come close.

And small, local, adapted for purpose, bottom-up, grass-roots will become very sexy indeed.

IV. The Wealthy Will Always Be With Us
The world is about to get a whole lot more unfair unless we build this new social contract. I have moved past the discussion about whether this is good or bad. I know from my interactions with people who are ultra-HNWI's that by the time they have made £200 million, they have fairly complex structures in place to keep that money from other people's clutches.

I also know that those who are building digital businesses are winning twice. First they will reap the rewards of their business which will create the new digital ecosystems, enjoying network effects of growth. But they will also position themselves in the new global business elite which is emerging.

I know hundreds of very wealthy entrepreneurs who have turned their focus after having made their fortunes on solving deep social problems. And I believe that the bastards who are both wealthy and don't care about social problems are less than 5 per cent, but others would disagree, and say it's closer to 25 per cent. In my experience, people who have made money by building their own businesses (as opposed to being employees in banks for example) have a profound understanding of the help that they have received along the way. They are naturally inclined to send the lift down. I see examples of human greatness and care at every bend.

And, I want to live in a Carrot world, not a Stick world. But I also recognise that by Carrots work better than Sticks too. And in a network-oriented world, Sticks are ineffective almost entirely.

When dealing with a HNWI, you must appeal to their natural self-interest, and demonstrate why it's in their interest to:
• fund the primary schools of Bristol, or
• clean up the housing estates of Brixton, or
• create jobs programs in Clapham, or
• work with ex-convicts in Durham, or
• travel the country speaking to enterprise societies about how to build businesses, or
• donate to a cancer hospital in Earl's Court, or
..... you get the point.

When you do, you remind them of their experience of being on the receiving end of people who helped them as they were facing their near death experiences. Sometimes you trigger their patriotism; or their guilt; or their ego to have their name up in lights as the John Doe Primary Schools of Bristol. Unfortunately, when you try to hit them with a Stick, you rarely get a good response. Today, with a good lawyer, and two weeks, you can change nationality, residence, or location. Everyone loses.

So we don't accept that HNWI's pay less tax and stay in their gated communities. We make them feel very welcome. We want their money, but we want a lot more from them as well. We want their ability in building £200 million companies across the nation as well as solving social problems. And we want their money.

Is this good? There are - frankly - elements which grate considerably. But those of us who go to entrepreneurcountry every day live in a world where reality takes over from the world in which we would like to live. We build a sustainable world by engaging the economic forces through alignment of self-interest into social, common good. It's hard work as at every bend of the train track, there's a temptation to get ideological and extreme. There are frankly lots of people in entrepreneurcountry that you might not like. It's easy to say - "if I had all that money, I'd do so much more good with it." But that doesn't get us anywhere. The challenge is to create a set of incentives which inspire an ultra HNWI as well as the comfortably well-off to feel obliged to contribute to the system from which he or she has benefitted. And you know before you start, you won't win 100 per cent of the time.

In entrepreneurcountry, we have even created a new dictionary to reflect the old English meanings of words we remember from our youth:
Fair - you get out of life, what you put into life; reward for effort
Equality - There are only Discounts and Premiums, and we apply them to ourselves, and either accept or reject those that are imposed on us.
Sustainable = profitable; if you aren't making money, you are either a perpetual supplicant for cash, or on your way to becoming bankrupt. There is no global Sugar Daddy in the sky.
Individuals = Independent Beings, and you must be independent before being interdependent
Investment - measured by a return quantitatively, not just spending
Free - there is nothing which is free
Middle Class - what everyone can achieve with the right behaviours and attitudes.

If government has a role to play, it is first and only as a servant of the people. It is to be above reproach - not in a deference society - but one of radical transparency and accountability - such as exists in entrepreneurcountry. If government has a role to play, it is as an expression of the people's wishes to

• have a sustainable future,
• where they are cut in on the economic value of that which they create
• and everyone feels empowered to design their individual futures.

V. Think Big, Start Small, Move Fast

In early 2015, the coffers are bare. The West's economies' credit ratings are crashing. There is no pinata to crack open. There is only a very interesting, shared challenge. And the champagne is still on ice for when we crack the problem.
• Can we design a world where it is in everyone's interest to sign up to the new social/economic contract?
• Can we agree that
    o people who are revenue centers are set loose through much lower taxes and less regulation to grow revenue? Carrots not Sticks

   o folks who are providing public services have to think lean, fresh, local, small and influence their communities to participate?
   o HNWI's need to choose their social contribution, but that's going to be their choice, and there is a small % of them who are real bastards
   o politicians manage the disagreements, codify the rules which society requests, and communicate the new social contract to the nation?
   o everyone has a stake in the outcome, and
   o no one must be allowed to be a free-rider.

Entrepreneurs always invest at the point of maximum pessimism. That's what they know how to do best. They go out and create a market storm. If they're good, they have the best insights into how particular markets are developing; they're in the eye of the storm. They think differently. They choose to live abnormal lives to bring the future to life. They feel compelled to make stuff happen, often simply because they see what they think is inevitable and they see that it doesn't exist yet and they feel compelled to make it happen. Sometimes that blind faith leads to catastrophe, but more frequently it creates the step changes in how markets and industries operate.

When you go to EntrepreneurCountry every day, you are challenged to Think Big, Start Small, Move Fast.

Never have those 6 words been so literal.

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