These exponential times

Faster innovation. More churn? But no egalitarian paradise.

1.  A plummeting Coasean floor means we can do more things outside of traditional organizations like businesses.

Here’s a question that I try not to ask in earshot of my bosses.  Instead of employing me on a salary, why don’t my firm put out a tender for every piece of work I deliver?  In an open market, with other people competing to perform broken down chunks of my job, my company could end up paying less.  Reassuringly for me, Ronald Coase explained why in The Nature of the Firm in 1937.  It is because of the additional transaction costs that my firm would incur – in particular of finding a contractor and enforcing a contract for every piece of work I currently undertake. We can describe these kinds of costs as the cost of cooperating.   Companies exist in order to manage these cooperation costs.  They do things like employ managers and pay for HR departments  – and create, for the most part, hierarchical organizational structures – because, for the activities that they’re engaged in, this is a more effective way of directing a workforce than an open market.  But of course this management has a cost, much of it fixed.  Firms exist, therefore, when the costs of employing and directing staff to undertake a particular activity are less than the potential gain from that activity.

But what if those cooperation costs exceed the potential gain of an activity?  Continue reading These exponential times

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No more money? No bad thing

Part 3 cont’d from Batmanghelidjh vs. Batty Boy

In Part 2 we looked at two versions of new types of schools.  We can debate whether either of these models constitute good schooling.   I think it’s exactly this debate (essentially on structural change in education; about how schools could be reorganised) that is good news for UK education.  It’s because of this debate, and my hope for the fruits of it, that I believe we may even be about to see a Renaissance in UK education.

A Renaissance?!

Yes.  Because the time – the next few years –  in which this debate will occur, and its fruits grow (gosh this is a cheesy metaphor)  has got some good things going for it:

1.  A good place to start from

The foundations for a renaissance are pretty strong.  Education today is reaping the benefits of the increased spending of the Blair years.

We have a teaching profession who have been feeling pretty good about themselves.  They have a better status and more money than for sometime before ’97.  And the profession has lots of new, young, motivated teachers (including recently some new maths teachers fresh from the banking sector).

But for some time we’ve been getting close to realistic limits on education spending.  It isn’t clear that more money would make much more difference.

Well now we can’t spend any more and everybody knows it.  The debate has to move.

It will be the new entrants, I think, the Young Turks, who will prove instrumental in achieving structural change.

2.   Education 3.0

You can’t make a point about anything these days without referencing the social media-internet-tech revolution.  And, yes that does have lots of practical and game-changing implications for the classroom.

But what I really mean builds on the Young Turks point above.  Is it just me or do my generation look admiringly at the boot-straps, start-up attitude of Silicon Valley et al, in a way that maybe previous generations in Britain haven’t looked at entrepreneurialism before?

What is exciting about education at the moment, for sure, is the talk of hacking or disrupting it (the A VC blog talks a good talk on this).  Education 3.0 (yes, that is my tongue slightly in my cheek for the silly name) is about taking that Silicon Valley attitude of entrepreneurial disruption into the school system – one of (the?) most conservative and outdated of institutions.

What if we looked at the fundamentals of education and found a more efficient way to make it work?  Those in the education Renaissance are in a good position to do for education what Amazon did for retail or Apple for music.

Ps. There’s not a bad track record of disruption coming out of recessions.

3.  Change is a-comin’

Amazingly the Tories may be talking some of the right ideas.  They want a focus on outputs.  They seem to want to break down the monolith – making it easier to start new schools.

And it looks pretty likely that they’ll be winning the next election.

Plus, we live in grassroots days.  Bottom-up movements have been inspired by Obama and the power of the internet.

I think we could be about to see pressure for structural change in education coming effectively from both the top and the bottom.

………..

Nasty Nick and the Zimbabwe economy

Still new in my job I was a mute number two beside my boss in the second row of the Rainbow Tourist Group’s annual general meeting.  In row one sat Nasty Nick van Hoogstraten.  Nasty Nick is notorious back home in Britain for conducting his business violently (with a grenade through a window) or allegedly violently (with hired hit men committing murder).  He’d managed to get himself into a position, by stumping up a large amount of cash to underwrite a rights issue, in which he believed he was owed a portion of Rainbow Group shares that had found their way into the hands of a shady Jewish consortium who’d made their money in Romania.

 

With the votes attached to his remaining shares Nasty Nick attempted to block all but one of the motions proposed.  He called the Jewish non-executive director an illegally elected carpet bagger.  The representative holding the shares for the National Indigenisation Trust told Nasty Nick that a white man like him should jolly well pipe down and remember who’s in charge now (not, I think, implying the Jews).  Nasty Nick’s chummy relationship with the old man Mugabe didn’t appear to carry any weight this time, because in an easily won proxy vote the government’s block of shares went with the Jewish director and the rest of the board and against van Hoogstraten.  Nasty Nick vowed to see them all in court.

 

It begs the question quite what is going on in Zimbabwe when such corporate shenanigans generate such heat.  I mean, I thought this was a country with no economy left.

 

It clearly isn’t.  At a lunch a week before with some financial friends the announcement in the Herald, the propagandist government paper, that an ‘indigenisation’ bill was on its way caused a ripple of concern.  But a ripple only, because talk of such a bill has come to nothing before.  This time, though, word was that it had gone through parliament and was just awaiting the old man’s sign-off, or had got his sign-off and was just waiting to go through parliament…With no idea whether the Herald was on this occasion the voice of Zanu-PF, or exercising its well honed ability for utter fabrication, this bit of news was after all still a rumour.  What ‘facts’ there were amounted to the probable requirement that all companies would have to be 51% indigenously owned.  There was confusion over definitions.  Whilst, as far as it could be fathomed at all, the bill was explicit in its use of the term ‘indigenous’, the word ‘local’ had also been bandied about.  For the white Zimbabweans I was having lunch with, although not for Nasty Nick, this, of course, would make the world of difference.  The point was made, not for the first time, that when in such cases the word indigenous is employed, what it really means is black.  Historically shifting populations anywhere render the word indigenous pretty defunct.

 

A certain amount of satisfaction was evidently taken in accusing Mugabe’s men of racism, but the conversation quickly moved on to practicalities.  Would ‘51% of companies’ end up being expanded to include trusts, what about property?  One of my lunch companions, to avoid some previous piece of legislation or the threat of it, had established a company, as a ‘front’, which owned all his property.  Would he need to make plans to install a dummy team to take over 51%?

 

What struck me over lunch then, and observing the Rainbow Group hoo-ha, was that among an awful lot of Zimbabweans the economic and political situation as written about in the west is regarded completely without dramatic sensation.  Of course, I’m in the capital, and in the case of that lunchtime and that AGM my companions were Hararean money men – stock brokers and deal makers for whom the current bull market is reaping rewards.  (The stock market is for many the preferred form of investment since saving cash is clearly crazy and for other assets, like property, you need US dollars and anyway will probably be outbid by an aid worker or expat.)  But they were not all party men, nor callous profiteers (except maybe Nasty Nick), nor the kind of people who if the country was about to enter its self destructive apogee you’d expect to remain ignorant.  Despite the economic situation and the indigenisation rumblings, business in Harare is not in a state of panic.

 

It remains to be seen if Nasty Nick will have his way with those Rainbow Tourist Group shares.  But interesting, nonetheless, that in a country whose economy is reportedly on its knees there should be such an impassioned fuss over who owns a small portion of shares in one of its hotel chains.

Latest Malawi postcard – entrepreneurialism in response to volatility

I was reminded me of an Economist article I’d read discussing Jacob Hacker’s The Great Risk Shift.  Hacker argues that in the US (although not confined there) over the last thirty years income instability has been rising whilst the ‘social safety net’ has been wearing thin.   Hacker explains this situation as caused by a shift in economic risk from government and companies to families.  Whilst Hacker is pretty downbeat about this increasing volatility for ordinary people, the Economist reminded readers that one person’s volatility is another’s dynamic, mobile society.  It is probably good for most of us that there are more jobs in Tesco than on ships.

The effects of volatility in Malawi are, of course, far greater than in the US, although the causes are different.  For the last two years lack of rain led to famine.  This year we’re lucky that the rains have fallen heavily, but at the moment people are still poor until the tobacco and maize harvest can be sold in the spring.  I was interested in how people respond.  There’s a ‘booze pub’ in Kasungu that encapsulates a couple of responses.  One is that of the customers drowning their sorrows.  Another is the owner’s.  He serves cheap ‘shake-shake’ beer and vicious spirits – not much profit on each sale, but the bar is packed seven days a week, all day.  And he’s diversified.  There’s a brothel out the back which makes a tidy profit minus a bribe for the police, but that’s recouped in the bribes he receives as one of the only people in Kasungu licensed to issue MOT certificates.  The owner’s response to volatility has been to recognise opportunities and to diversify and insure against the future. 

It is a little facetious to use the criminal bar owner as a positive example of how to cope with an uncertain world.  But he highlights the way that many Malawians I’ve come across use entrepreneurialism to manage economic risk.

However, the poorest Malawians, who could most benefit from such a response, are often the least able to engage in anything other than subsistence (or near-subsistence) agriculture.  For them, accumulating any assets is practically impossible.  One reason for this is that the majority of crimes in Malawi are crimes of need – poor people robbing poor people, causing a cycle of crime and poverty.  Added to this is the fact that, as the 2004 ‘Malawi National Crime Victimisation Survey’ says, ‘poverty is characterised…also by an inability to devise an appropriate coping or management strategy in the face of shocks and crises’.

The ideal way to manage economic risk is through a dynamic and mixed economy of the kind I witnessed in Cape Town.  We’re a little way off that in Malawi, but the MicroLoan Foundation, where I’m working, is perhaps helping the country take a tiny step in that direction.  Through the provison of capital and business education the charity helps the poorest to set up the kind of enterprises that give them at least a chance to take the initiative and prepare for what is, at the moment at least (and probably always will be as the modern world increasingly extends its reach), inevitable economic volatility.  

Entrepreneurship and education in Malawi.

The core of my second Postcard from Malawi, without the anecdotes and illustration: 

The nuclear family it seems, despite its much reduced social network, is a more efficient economic unit.  This is perhaps one of the brakes that slow up Malawian entrepreneurship.  It is an interesting observation that while small scale native Malawian enterprise is evident everywhere, large scale enterprise isn’t, and it is the Indian and immigrant populations who have most visibly built small businesses into large companies and who have become the entrepreneurial business class.   Of course many factors help explain this situation.  Malawian history plays its part; Hastings Banda’s regime can’t be said to have stimulated free thinking entrepreneurs.  Lack of access to capital is also obviously crucial.  Less obvious, and more deep-rooted, is the lasting effect of colonial and missionary influence on education.  In schools you find even now that white collar occupations are valued and initiative is positively discouraged.

These factors combine into and are magnified by a further factor, a feature, I suspect, of poverty anywhere in the world:  a bias in favour of the immediate, the today, and against planning for the future.  This is partly a response to reality; subsistence living by definition does not leave any slack for insuring against or capitalising on the future.  Even when living is somewhat above subsistence, however, the mindset persists – fatalistic, short termist, suited to survival but not to aspiration.

This is the greatest, and most delicate, complaint levied against the Malawian situation.  I hear it everywhere and observe its effects.  It is a delicate complaint because it tight-ropes between reality, stereotype, and patronising western attitudes.  But if things are to improve Malawians must learn the lessons of commercial
Blantyre and the Indian entrepreneurs.  Personal aspiration may be better served by entrepreneurship than handouts or politics.

Entrepreneurial literacy?

I was reminded of the importance of ‘literacy’.  I don’t mean specifically written/read English, but literacy in the way it has come to be used in Education, as ‘competency’ in whatever subject or field.  I was working with a colleague in Malawi who had no literacy in using Excel.  What struck me wasn’t that he was struggling with various functions, formulas etc. – I was too.  But that he simply was not familiar with the basic operations underlying the use of Excel.  He struggled with highlighting cells, copying and pasting etc.etc.  In fact, he was having real difficulty with the kind of basic operating procedures that are essential to use Microsoft Office.  How to save files, what to click to minimize etc.  Why?  He’s a bit slow, yes!  But, he was learning from scratch something that most of us under a certain age in the UK have learned almost implicitly through exposure.  I don’t remember many specifics of my IT education. I’ve always had to learn or relearn processes whenever I’ve done anything substantial on the computer.  However, what my IT education has provided me with implicitly is the underlying familiarity, competency or literacy.

What then are the essential literacies of the C21st?  The question has something of a tired, clichéd ring about it, but is nevertheless pretty important.  I’ve suggested ‘literacy’ in citizenship and entrepreneurship is important for citizens.

‘Literacy’, I suppose, consists of a body of knowledge and the competent application of that knowledge.  It doesn’t mean knowing everything, but, crucially, knowing how to approach problems in a specific field (knowing what the paradigm is?).  There is ‘literacy’ in citizenship.  Is there literacy in entrepreneurship?  Perhaps it’s in a familiarity with acting on initiative, risk, and capitalising on the future?

I read something by Anita Roddick questioning the value of MBAs for entrepreneurs.  She was suggesting that entrepreneurship is about risk and obsession (I think she used the word obsession, it might have been dedication), and that these are qualities that can’t be taught.  Perhaps you’re even just born with them.  Certainly she suggested they’re not best taught by business schools which are bastions of stats quo.

I think I would caution Roddick’s fatalism.  Business schools may not best teach entrepreneurship, but that doesn’t mean we can’t create conditions in which entrepreneurship can flourish.  Although how to teach literacy in entrepreneurship is a slightly different question to how to teach the equally important literacy in IT (or just plain literacy), I suggest the clue to the answer is in implicit learning (see also previous posts) and in the value of experiential learning.