Yesterday in the op-ed column of the NY Times Thomas Friedman wrote,

“If we want to bring down unemployment in a sustainable way, neither rescuing General Motors nor funding more road construction will do it. We need to create a big bushel of new companies — fast. … Good-paying jobs don’t come from bailouts. They come from startups. And where do startups come from? They come from smart, creative, inspired risk-takers. How do we get more of those? There are only two ways: Grow more by improving our schools or import more by recruiting talented immigrants. Surely, we need to do both, and we need to start by breaking the deadlock in Congress over immigration, so we can develop a much more strategic approach to attracting more of the world’s creative risk-takers.”

He goes on to point out that all of the new jobs created in the last twenty five years in the US were created by firms less than five years old. That’s 40 million jobs.

Well, welcome to the UK. In the last ten years new jobs came from four places in the UK: construction driven by the housing boom, the financial sector, the growth of the government and small business. Looking back this year studies have shown that the only jobs that endured were the ones created by small business or by government. But we all know that the government payroll is unsustainable and those jobs are going too. All that’s left are the real jobs; the ones that were created by smart risk-takers creating new prosperity.

We are in the same position as the US. We must grow more entrepreneurs and we must import more by recruiting talented immigrants. In order to recruit talented immigrants we should not forget the advantages we have.

There are very few nations in the world where English is the first language. There are fewer countries that have financial centres. There are even fewer that are major economic powers and global trade giants. And there is only one that is truly multi-cultural, multi-racial and tolerant. And it is not the United States of America.

For the last fifty years the UK has maintained a special relationship with the US. Within the last 10 years that relationship died. What the US has become is what it has always been: a very very attractive place for disaffected, talented people who bring energy and prosperity with them. But the US has made it more and more difficult to cross its borders.

The UK by contrast has poured money into its Universities, its educational system is the most exported in the world. It is the centre of global trade and finance. London is arguably the most central and cosmopolitan capital in the world.

Around the world there are talented young people who come to the US and the UK for their education. In the US they stay if they can or go home. The same is true here. It must change.

The realization we must make is that entrepreneurs are vital, are central, are the only thing that matter if we want to re-grow our economy. We need to stop the madness of our current drift.

• Our schools must be meritocracies.
• Our universities must be funded to stay global class.
• The economic freedoms that start-ups and small businesses need must be restored and protected.
• We must break the oligopoly of the large banks and create a new class of entrepreneurial banks.
• We must liberalize the flow of small capital between family and friends to engender a thousand new start-ups
• We must stop worrying about roads and rail and start worrying about broadband. Digital Britain cannot roll out in a decade: it must begin now.

And finally, we need a visa, an entrepreneur’s visa. If you come and create a business and hire people we want you.

We have a new special relationship with the US: we are its competitor. They are not so large that they cannot fail. They are not so special that we cannot also lure dreamers. The time has come for Britain to raise its flag and acknowledge what it is: the centre of the free world and the home for aspiring entrepreneurs.

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Yesterday I attended and participated in an event hosted by UKTI, The Prime Minister, and Lord Mandelson. The purpose of the event was to communicate directly with the CEO’s of some of the world’s most important large companies who already have a presence in the UK or who are considering inward investment into the UK.

The message from the Government was unambiguous: The UK is still open for business and intends to remain so. The Government brought out all its heavy hitters and used them liberally; Gordon Brown held a private breakfast for 25 or so key figures (and a couple of not-so-key people like me) at Number 10; the PM opened the conference, Michael Porter the celebrity Harvard business Professor was the keynote, Lord Mandelson spoke more than once, took questions and networked; unusually enough for a Chancellor close to a budget, Allistair Darling also spoke. Mervyn Davies, the trade minister, compered the event. There were panels with a variety of heavyweights including Lionel Barber who chaired a feisty group with Richard Lambert the Director General of the CBI. My panel in the early afternoon was about the Future Consumer and I admit, given my rather vocal critique of the government’s policies regarding small business support, I thought it was interesting that I was asked.

What made the event impressive, far more than the obvious display of willingness by the government to put its most senior people forward, was the attendance record itself. The attendees individually are all major players and in sum made up a display of corporate gravitas that said something itself about the day. These people run crowded schedules. For some reason, it was important for them to come.

Why is that and what does it say about the UK?

Well, I think it is good news actually. This government put on a display of competence and re-assurance for key stakeholders in its well being. It did so in a way peculiar to the UK. The UK has a manner about it that is very different than other countries and cultures. It uses its great buildings and imperial facilities in a casual sort of way that takes the formality out but keeps the seriousness of purpose in place. Republics, like the US and France, tend in the opposite direction. We big things up and in the doing so make things seem a bit imperial. Thus breakfast at No.10, a day long event at the Saatchi Galleries finished by drinks at St.James’s Palace hosted by the Duke of York who cheerfully manned the floor was a seamless piece of marketing for the UK.

And it worked. I spoke with two CEO’s of key corporations who have decisions to make and each, when asked, was characteristically, straight forward. The first, a Canadian, said “I get what they were trying to communicate, and I’m sold.” The second, an Asian, said that he had come over specifically because they had invited him. He had come because it was the courteous thing to do but he would leave reminded why he had chosen the UK before and would likely do so again.

The Government was at work yesterday doing its job. It did it well. It provided re-assurance to the large end of the real business sector that the flow of inward capital is still good for the people whose capital it is.

For me though it is a bittersweet thought. That this group of people could accomplish so much, so artfully, on behalf of the nation and its enterprise, and yet has so few comparable successes in its cap for small business, new business and entrepreneurs in general.

I can only hope they apply the same new found skill and competence to their efforts to drive entreprenurialism as they do to tending the large corporate stakeholders, who are merely the few and large, along the continuum of businesses upon which the country’s well being depends.

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The essence of the article turned around two points in the Manifesto.

First, that I am simply incorrect in my assertion that it takes too long to start a business in the UK and second that it is inappropriate for the Government to imitate the US set-aside for small businesses in federal procurement.

It takes too Long….

Every year the World Bank sponsors a report that attempts to create an objective measure of how easy it is to start a new business in every country in the world. The report is available as an interactive database at www.doingbusiness.org.

One of its principal measures, though not its only measure, is the amount of time it takes to start a new business. The UK ranked #9 in the world in the 2009 report and #16 in the recently published 2010 report, down 7 places.

The report‘s calculation highlights that the primary drag on starting a new business is the time involved interacting with the various government departments. Interestingly, the largest amount of time is spent registering twice at HMRC once for VAT and again in a duplicate, though parallel process, for National Insurance and PAYE. This of course is the same department that now houses the national Business Link website.

Thus apparently without irony, the labour Councillor, Stephen Alambritis, who is also the Head of Public Affairs for the FSB, said that the Government has reduced the barriers to setting up a business.

“They have simplified the obstacles people face setting up a business, but if you want to grow the business, for example, by moving from self-employed to employer status – then it can be more difficult.”

Alambritis also agreed with a Government statement that people can set up a business in the UK in less than a day.  “We have one of the easiest regimes in the world for setting up a business, but it is the ongoing regulations that are a burden.”

I am not sure which of his two hats he was wearing when he agreed with the Government, but I would have been a bit surprised if he had disagreed with the government, given that he IS the government. But he is also disagreeing with the World Bank, not me. I merely quote them.

A Department for Business, Innovation and Skills (BIS) spokesman said that research from the European Commission found that it takes, on average, less than a day and costs only £20 to register a company in the UK, compared to a European average of £382.

As for the BIS spokesman, I appreciate his quoting an un-named study which provides such a convenient quote, but I have always found it more useful for public debate to name one’s sources.

The World Bank’s Ease of Doing Business Index is the most highly regarded comparative analysis on this question in the world. My links above let anyone see my source.

Finally, for those of you who think this is a somewhat pedantic conversation, I remind you of this. We must count key indicators as a proxy for larger underlying issues. I am quite mindful that how long it takes to start a business is not the sole measure, and perhaps not even the most important measure of our issue; but it is where it begins and was merely one of many points the Manifesto raises.

If people choose to dispute the Manifesto and the Declaration on such a direct basis on one of its more easily substantiated and less important points, I wonder if its no more than a deflection from their desire not to address the more fundamental issues raised later on.

Mandated Set Asides for Small Business in Government Procurement

“However, the BIS spokesman argued that a similar proposal was considered in the Government-backed 2008 Glover Report and rejected. “The review found that small firms want to compete on an equal basis and on the basis of quality rather than have special treatment,” he said. “They decided that efforts should focus on addressing problems and removing barriers, not on meeting targets.”

I have a great deal of respect for Anne Glover who chaired the group whose report and conclusions are being quoted. And I nevertheless strongly disagree with their conclusion that there should be no set aside. I agree wholeheartedly with the entire set of proposals that the Glover Report does recommend, but it falls apart at the point of voluntary compliance. Facts are facts and the impact that the set-aside has had in the United States has been transforming and, elegantly simple.

It thrusts the responsibility for compliance on industry and in essence forces the large government contactors to bear the burden of proving compliance.

I stand by my contention. Left to its own devices the government will not change its practices and a clear target draws the bright line that it apparently needs to see the issue.

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A masterclass in business from Doug Richard

The Journal – February, 4 2010
Entrepreneur and television Dragon Doug Richard visited the region yesterday on a mission to create more businesses and said the region was the perfect place to start up.

Doug Richard launches business manifesto

More tax breaks for start-ups

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(Download The Entrepreneurs’ Manifesto and Declaration of Rights PDF)

The Entrepreneurs Manifesto is a public declaration aimed at supporting the UK’s 4.4 million small business owners and entrepreneurs.

Authored by Doug Richard, the high profile entrepreneur and former TV ‘Dragon’, the manifesto calls for a new deal for entrepreneurs as a “recession buster” solution for the UK.

The document consists of two sections:

• The Entrepreneurs Manifesto
  A statement of principles highlighting the challenges that the UK must overcome to truly harness the potential of its entrepreneurs
• The Declaration of Rights
  A series of practical recommendations for the current and incoming Government to clear the path for an explosion in entrepreneurial activity

Doug Richard will be speaking about the manifesto at the major social enterprise conference Growing a Successful Social Enterprise at the Royal Institution, London on Tuesday 19th January 2010, hosted by the University of Essex and supported by the Transformation Fund of the Department of Business, Innovation and Skills.

The Entrepreneurs Manifesto

And what it held
stood ready to be loosed
with all the power that being changed can give.
Philip Larkin

A spectre is haunting the United Kingdom – the spectre of Capitalism.

As a nation we fear that nothing has changed; that greedy bankers will continue to be rewarded for their failure, that amoral corporations will continue to put profits in front of people and the environment, and that the State, however bloated and costly, is not only unable to control the beast but must compete with other nations to be its servant at an unbearable cost to itself.

We have banks so large that they dwarf the very governments whose guarantees they rely upon for our trust. We have become hostage creditors to their uncoupled risk taking. And worse, as nations we are reduced to acting like market stall vendors shouting our best price louder than the adjoining shopkeeper hoping they will purchase just one more night. They are not just too big to fail. They are too big to even let leave.

The largest corporations pit our tax systems against each other. Their capital alights like a wind born leaf ready to whisp away on the slightest breeze of taxation. In the failure of a global commons their profits shoulder a fraction of the costs of the infrastructure and shared society whose foundations support them.

The environment has no voice, the consumer has no collective;  thus the largest corporations are neither charged for their cost to the world nor rewarded for building products that endure.

Yet our State continues to grow. It has devoured every pound of taxation and growls for more. Our civil servants earn uncivil wages. When the economy grew, it outgrew the economy. Despite a decade that has seen more than a 40% increase in welfare spending (i), our rates of poverty and joblessness have continued to climb.  One in four UK citizens live in poverty; nearly three million children do (ii).  Over the last ten years our index of production has fallen more than 10%. In the last two years our index of services has fallen over 5% as well (iii). Our national debt is now 60% of our GDP (iv). We are demonstrably poorer as a nation. The system does not work.

In their fear, and amplified by their impotence, our politicians rail against the excesses of the global financial system, the greed of the corporations and the system that drives it: capitalism.

Their fear reflects the real power of capitalism. It is the acknowledged force that respects no nation’s boundaries and no politicians’ calls for fairness.

But the current economic downturn, precipitated by the credit crisis in the financial system is neither proof of the failure of capitalism nor an endorsement of the profligate spendthrift ineffectiveness of our government.

It marks the first recession in a globally connected economy and the speed by which local folly is amplified into a global crisis. It demonstrates the short‐sightedness of permitting investment banks to co‐habit with retail banks thus coupling the low risk savings and loans business that underpin our citizens to the high risk and volatile business of financial inventions and speculation. And it is a vivid demonstration that much of what we call financial services adds little or no economic value to the nation.

Unleashing the wealth creators

But, the wealth of this nation, and of every nation rests on the shoulders of entrepreneurial activity. The innovators who open new markets, create new products, deliver new services and change the processes of business itself; by the very act of creation, destroy less efficient industries, create greater productivity and as a direct result create all new wealth.

The State is not our society.  It is the largest servant of our society and to the degree it intends to deliver greater benefits and services to all of its citizen’s in equal measure the greater its moral obligation to ensure that it harnesses the power of the entrepreneur  to constantly improve the delivery of its services. The size of the State, itself, is not the enemy. Thus focusing on its size will not lead us to a solution. “Societies that try to reap the gain of creative destruction without the pain find themselves enduring the pain but not the gain.” (v)

The tax receipts that flow from the entrepreneurs’ efforts pay for all the services we receive. Yet the services we receive are not beneficiaries of that gale of creative destruction. The State, often operates from the flawed assumption that if it’s the State’s obligation to ensure we are safe, healthy and educated, then only the State can deliver a fair service. That notion of fairness is the fairness of the least: that no one can benefit more than the least the state can deliver. Thus, everyone gets the least, we cannot improve until we can improve everyone and we end up improving no one.

But to the smallest degree that the State aspires to deliver more than it can afford; it has no choice at all: it must recuse itself from the monolithic delivery of all services and create playing fields upon which entrepreneurs can be unleashed. Harness the collective creative self‐interest of our entrepreneurial output for the benefit of meeting our social objectives and we can ensure that they will improve at the fastest possible pace. We will see a flowering of ideas, a manifold unfolding of new approaches and a gale of creative destruction that sweeps the Kafkaesque bureaucracy and sclerosis from the implementation of government.

Beyond the state, the promise for the United Kingdom is to lead the world, not follow. To create the economic freedoms necessary to nurture innovation and entrepreneurialism and to realise that entrepreneurs, like teachers and doctors are key contributors to the healthiest societies. That is the promise of entrepreneurship. That is the opportunity for the United Kingdom.

The Entrepreneurs Declaration of Rights

We stand at a crossroads. The United Kingdom has the potential to remain a central economic and political power amongst the world’s nations or it can sink slowly beneath the weight of its problems and the impotency of its remedies.

We are a nation that has everything it needs to enter the 21st century on a wave of growth and prosperity. But to do so we must harness the only force for growth, for prosperity and for fairness and social justice that exists: the entrepreneurial culture.

This is not about capital. This is not about the few getting rich at the expense of the many. This is not about the preservation of privilege. If anything it is the key to the opposite: the creation of ladders of social mobility, and increasing of the wealth of the nation so we can afford the services we believe are the rights of our citizens: to be healthy, to be educated, to be safe and to remain free.

But harnessing entrepreneurialism first means understanding it: an entrepreneur takes on the risk of innovating in the expectation of being rewarded for success. Reducing the incentives of being rewarded, increasing the obstacles to create new enterprises, limiting the shape and type of entrepreneurial activity and not investing in the key infrastructure upon which the next wave of innovation will depend, all combine to emasculate our nascent entrepreneurs.

Thus we call for our government to change its priorities.

We must increase economic freedom for new businesses and small businesses and all businesses that take new business risk. We must cut the time it takes to start a new business. We must radically streamline the effort of complying with government regulation and exempt the smallest businesses from many of the regulations entirely.

We must sweep clean the entire government funded industry of business support and leave behind solely an institution whose remit is to expedite and simplify the effort of small business to manage the burden that government places upon it.

We must free up the savings of our families, friends and communities so that they may give, invest or lend their own small capital into the nascent businesses of their children, their friends and their communities with credits and exemptions that radically encourage the activity.

We must stop paying people to be un‐employed and begin to share the cost of them being taught to be employed. Apprenticeship is not solely for the trades; it is for any job in any company. We face a lost generation of students and young graduates with no hope for jobs whilst employers have no means to underwrite the period they need to make those students into productive employees.

We must recognize that the largest customer in the UK is the government itself. The government must adopt a requirement that a specific percentage of all of its procurement will be through small and medium businesses. It must place the responsibility for compliance with industry and at no cost to itself drive revenue to our entrepreneurs and open the doors of government to innovation.

We must broaden the scope for social entrepreneurs by creating new legal frameworks that explicitly encourage a broad range of social businesses from co‐ownership models such as John Lewis to for‐profit businesses that seek to achieve a social bottom line as well as a traditional profit.

Finally, we must recognize the centrality of connectedness in the competition amongst nations. The United Kingdom must wire itself and do so urgently. Just as our roads and trains are a public service and a natural monopoly; so too is true broadband. True broadband is not 1MBof information trickling down to some of our homes. It is 100Mb to every doorstep in this country. It is the key infrastructure that will kindle a wave of creative destruction and increased wealth that will match the industrial revolution. It will reduce the stress on our crowded transport systems, it will re‐vitalize neglected sections of our nation, it will place the key tools in place to amplify and distribute scarce resources in education and health care. And it is achievable now.

Finally, we must understand that we do not understand. People are not empowered to step out on their own, take risk, hope for reward, and move on from failure. The corrosive impact of an overprotective State is not merely the loss of our sense of responsibility to a civil society; it is the even more profound loss of our sense of capacity to change society, to have an impact, to be, in short, an entrepreneur.

Entrepreneurship can be taught and must be learned.

About Doug Richard

Doug Richard is a successful entrepreneur with 20 years’ experience in the development and leadership of technology and software ventures, Doug featured in the first two TV series of Dragon’s Den. He is the Founder and Vice‐Chairman of the Cambridge Angels and Chairman of the Conservative Party Small Business Task Force.

Between 1996 and 2000 Doug was President and CEO of Micrografx, a US publicly quoted software company. Prior to that he also founded and subsequently sold two other companies: Visual Software and ITAL Computers.

Doug holds a BA in Psychology from University of California at Berkeley and a Juris Doctor at the school of Law, University of California at Los Angeles. In 2006 Doug was an Honorary Recipient of The Queen’s Award for Enterprise Promotion. In 2007, Doug became a fellow of the RSA. In 2009  he received an honorary Doctorate from the University of Essex for his contributions to the teaching of Entrepreneurship.

Doug has always been a champion for startups and small businesses. Even before founding School for Startups he actively mentored, coached and supported many entrepreneurs. In 2008, after teaching a one‐day class in entrepreneurship, Doug decided to found an enterprise dedicated to helping people start better, more profitable, businesses. Since 2008 he has taught thousands in face to face and online classes across the UK.

His wry, candid, practical and ultimately upbeat courses in how to start a business quickly, with a minimum of outside investment and how to market and grow a business efficiently make him a sought after speaker.

As Doug says, “Entrepreneurship can be taught and must be learned.”

Sources

i   Centre for Social Justice report ‐ “Dynamic Benefits: Towards Welfare That Works”

ii  Households Below Average Income (HBAI) survey for 2007/08

iii Office of National Statistics – Index of Production & Index of Services charts

iv  Office National Statistics – November 2009, UK public sector net debt was £829.7 billion (59.2% of National GDP)

v   Joseph Schumpeter, economist

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1. Entrepreneurs’ Manifesto Press Round-Up
2. The Entrepreneurs’ Manifesto Has Been Released
3. Dragon says Birmingham’s Entrepreneurs can fire up economic fight back

The Manifesto has been made available for early review on this website.  

Register here & log into in our forum to tell us what you think. We hope you will join us in the important national dialog about innovation, new enterprise and government support for entrepreneurs in the UK.

Related posts:

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2. Download The Entrepreneurs’ Manifesto & Declaration of Rights
3. Manifesto response requires a fact check