Network Effects in Financial Services (#8)

Structural Shifts with Evgenia Plotnikova (Principal VC @ Dawn Capital); Martin McCann (CEO at Trade Ledger) and Oliver Prill (CEO at Tide Business Banking).

This podcast was recorded at FinTECHTalents’19 Festival and in it we’re exploring the potential of unleashing network effects in financial services. Ben Robinson is joined into the conversation by: Evgenia Plotnikova (Principal VC @ Dawn Capital); Martin McCann (CEO at Trade Ledger) and Oliver Prill (CEO at Tide Business Banking).


This podcast was recorded at FinTECHTalents’19 Festival, at Printworks, London (

What we’re essentially trying to do is create a network of quality data that provides the potential for innovation in terms of services which can be built on top of that data. But the problem we’re solving initially is that convenience and trust problem of both sides of the network. — MM

What we’d like to distinguish within our business is three things — network effects themselves, then the virality factor and economies of scale. […] in my view, you can actually create significant businesses without having network effects -EP

The platform generates a lot of data […] so we invest a lot in data science and machine learning to basically do all non-simplistic decision making. […] Every time you can’t make a simplistic decision, we deploy machine learning and machine learning gets better the more data points you get from different users because the models become whack. — OP

We’re internalizing, but I think other people who sit on our platform can externalize. So it’s too big a problem for anybody to solve, so we’re trying to do the bit that we know how to do really well, which is to organize the data services and provide them so that other people can create other business models on top of that. — MM

But the key for us at this stage, we don’t think too much about, I guess the detail of what the network effect will be. Because if we don’t get the momentum and the traction and the scale, we don’t get the opportunity to create the network effect. — MM

I mean we currently open more business current accounts than Lloyds or RBS group per month on a flow measure, and the reason for that is very simple that the network effects just don’t exist. There used to be a degree of virality, which really was just brand awareness. You would default to the Big 5, because you just didn’t know that was another. — OP

It’s the regulator. It could probably be more market share with network effects — because the winner takes most of the market — which is actually one of the debates we’re having with all the social networks, should the regulator not start to intervene because they have all of us, right? But we fundamentally believe in financial services. There may be niches where this doesn’t apply, but in general, 15 to 20% in any country exposes you to regulatory intervention risk. — OP

Platforms take a while to build. This is very different to a product vertical that you were talking, in Europe with 20+ countries or, you know Revolut that goes into 30–45 markets. Effectively, they are single product or similar product-centric propositions that very rapidly can go across borders because all they do is marginal change. — OP

There is nothing to stop us from creating a monopoly. So we’re not like a financial service provider. Whether we get to do that depends on the decisions we make about building up the business. A lot of that has to go back to what I said earlier about momentum and scale and the ability to keep creating additional value add and value adding services for the participants of the platform, in different regions. — MM

I love the fact that we’re a technology company. I mean, I would never want to be a bank because I think that model has so many constraints with it that you have to work within the system, whereas being a technology company, you’re completely unbounded and you can re-imagine completely what the value proposition in the marketplace looks like. — MM

I’d say in the beginning, it can be poor product that can accelerate network effects. You mentioned LinkedIn, you might remember So that kind of became a large business driven by network effects before LinkedIn came. And so I think that’s actually a case in point of eventually poor product falling on its own sword despite the network effects that existed there. And so for me, ultimately, it’s not about sort of internalizing and externalizing. Ultimately it’s about category dominance. And so the way that we think about opportunities to invest is we don’t just look at a market that’s large. We’ll look at a specific value chain and where the business positions itself within that value chain. — EP

Ultimately I wouldn’t say that you necessarily get a huge premium for the network effects. It’s more your ability to have your cost base being linear, whether it’s your revenue is exponential. And so whether it’s network effects that that got you there or whether it’s your virality factors or your go-to-market, ultimately the great businesses will get the right price tag, regardless of what made them get there. — EP

We’ve been raising money, we find that the investors we spoke to honestly couldn’t give a c*** about network effects. All they care about is financial fundamentals and team. That’s it. All they care about is how much money are we currently making? What’s our attraction and how fast are we going to grow our revenue? And when are we going to make profit and how are we going to make profit, and do we have a good team and do we believe we can execute? That’s all they care about. — MM

The Case for Techno-Optimism (#7)

Structural Shifts with Ian Charles STEWART, co-founder of WIRED

Our guest is Ian Stewart, known for being, among many other roles, the co-founder of WiReD Magazine. Together we discuss WiReD’s journey from zero-to-one(-to-two), the state and future of (centrist) media, China and the geopolitical consequences of its technological progress and also how the younger generation is applying entrepreneurial methods and business models to solving social problems.


Ben Robinson: Our guest for this podcast is Ian Stewart, who is best known for being one of the founders of WIRED, but it’s probably not an understatement to say that Ian has turned his hand to almost anything and everything. A photographer, a sailor, an Olympic volleyball player, Ian has lived all over the world including a long spell in China and has worked across a range of sectors — media of course, but also technology, fund management, the charity sector, and most recently academia. The challenge we have with interviewing Ian isn’t running out of things to say, but instead knowing where to begin. So Ian, maybe we could start you off by asking you what you like about living here in Switzerland.

Ian Stewart: Well, first of all, Ben, thank you for having me and it’s nice to be back in downtown Geneva where it reminds me of my time in Paris. The best thing about living in Switzerland is that everything works. It’s a place where obviously it’s physically beautiful and for someone who likes sports, it’s a great place to be based. It’s also central in Europe. I often say that New Zealand where I’m from is very much like Switzerland because it’s a small country with a large foreign population where there’s a lot of farmers and farms and sheep and cattle. The only difference between New Zealand and Switzerland is that Switzerland is surrounded by an ocean of people, whereas we’re actually surrounded by an ocean of water. Otherwise I find it a very comfortable place to live.

BR: Comfortable isn’t the same adjective as exciting. Do you miss the excitement of living in San Francisco or Beijing?

IS: You’re absolutely right. We tried at various attempts to get our 25 and 28 year old daughters interested in living in Switzerland, but they wouldn’t think of it. They are the big city kids that I grew up as and there is a certain lack of buzz. There are certain things happening here. The engineering and certain sectors of finance and pharma and certain areas of Med Tech are growing and booming, and that makes for an interesting environment for an investor or someone who’s an entrepreneur. But for a lot of the stuff that I do, which is consumer focused and technology focused, there isn’t much happening here, but it’s the center of Europe. It’s an hour to Paris, it’s an hour to London, and it’s an hour to Venice. It’s not hard to get around, and as a base at someone at this stage where I spend more time advising and investing, and less time actually founding or driving, it’s an okay place to be.

BR: A lot of people say that Switzerland could be the Singapore of Europe i.e. an open economy on the periphery if you like, of a large trading block that would become the sort of gateway and the concentration point for information flows into that block. Is that the government vision for Switzerland? Is that your vision for Switzerland? Is that a viable vision for Switzerland?

IS: I think there are big differences. Switzerland is not part of the EU, therefore there are constraints for trading goods and services across the border. In addition, Switzerland is comfortable and the population is not worried about anything in particular and that makes them less hungry. Singapore is the opposite. Not only is it part of the ASEAN region and has been accepted as a financial center hub for a number of years, decades now and therefore has a very clear position amongst its neighbours, it’s also worried about them all the time. Singapore is the smallest member of ASEAN. It’s a tiny physical country and it’s surrounded by very large neighbours who occasionally get into conflicts with themselves and each other. More themselves than each other. There are obviously cultural issues and religious issues that create tensions in and have created tensions in Malaysia, Thailand, Indonesia and the Philippines and that worries Singapore and I think that sense of concern helps create a nationalistic fervour and drives energy into innovation, which isn’t necessarily the case yet. People are comfortable in Switzerland. They’re happy in Switzerland. There isn’t that same drive, and again, as I said, Switzerland not being part of a clear trading block means there are barriers to using Switzerland as a base for innovation and new.

BR: Is Singapore still as hungry as it was because clearly it has found material well-being, standards of living have increased a lot. Is Singapore still as hungry as it was?

IS: The short answer is I believe so. The tension and concern about its neighbours has not dropped over the last 30 years. If you look at the incidences of problems in near neighbours, they’ve actually risen, not fallen as their time since independence for some of them has elapsed. So that tension still exists. Within Singapore itself, there are obviously tensions to do with the mixed races there, the relationship with China, the relationship with Hong Kong. Hong Kong, of course, their position has been radically changed since the handover to the Chinese and obviously more recently, and I think all of this plays into concerns about stability in the region for Singaporeans. So yes, I still think they are hungry and I still think they have this sense of I need to do things now rather than wait.

I come from a branch of economics where I believe that smaller systems work better than bigger systems, and that’s true of companies or countries. I think there are efficiencies of scale up to a certain size, but I think most things seem to grow beyond that and become lumpy and inefficient.

BR: To come back to Switzerland, two questions. Firstly, is it a mistake to not be part of the EU and to try to chart a different course? And then secondly, is it okay to be a comfortable nation? Can Switzerland as a comfortable nation continue to be as prosperous as it is?

IS: I think it’s dangerous to be comfortable. I’m all in favour of Intel who said that the appropriate attitude towards building anything is to be paranoid all the time. I think applied paranoia is a healthy attitude. So that question first it’s better not to be too comfortable because everything in life is attrition. So I wouldn’t assume that everything you have now you will have in 50 years’ time or 100 years’ time.

The first question is a political question. I come from a branch of economics where I believe that smaller systems work better than bigger systems, and that’s true of companies or countries. I think there are efficiencies of scale up to a certain size, but I think most things seem to grow beyond that and become lumpy and inefficient. So I’m not a big fan of the vision of the United States of Europe.

Europe as a loosely knit, coherent Federation of independent States makes a lot of sense to me. If there was a way to get to a point, and at some at one point at the beginning of the Brexit process, I was wondering if that would be an example so that they created a tiering system within Europe and went back to the original 1957 idea of a looser Federation of Independent countries. I thought that would be good, and then maybe being part of that made sense for smaller countries, but given the United Federalists stance of Macron and others to create a United States of Europe supposedly to compete with China and the US, I think I’d stand back and watch for a while.

I think small is good for reacting to change, and in general the fact that we’re small, the fact that we have governance systems that are devolved, the fact that tertiary education system that deals with some of the challenges we’re talking to are quite good. I think it means that Switzerland’s probably in a good place. So I’m not worried about Switzerland as a country given the changes. On the contrary, I think it’s probably well placed to do it.

BR: Given that it’s difficult to be Singapore without being part of the European Union, and given that you wouldn’t advocate for Switzerland joining the European Union, what is the economic model for Switzerland and with 8.5 million people, can it continue to be a very wealthy, prosperous, fast-growing nation? What’s the model?

IS: So Switzerland has a bunch of things going for it first of all. Central location is amazing. All right, so borders notwithstanding, being in the middle of everything makes a lot of things simple — meetings, transport exchanges are all easy from here. Its governance system works. It has this nice devolved governance for a lot of the things that make the Swiss system function, which I like. I’m not so sure that’s great for education because it’s slightly too much variation in education across cantons and communes, but in many other things it works really well. Its attitude towards taxation of foreign organizations, its attitude towards foundations and the set-up of both head offices and non-profit organizations is healthy. I don’t think Switzerland has many challenges. I guess what I’m saying to you is I don’t think Switzerland needs to be the Singapore of Europe. I don’t think it’s necessary.

I do think that there are things that we have to be aware of. I think there are things that are going to be challenges for Switzerland going forward and there is an issue both related to the EU plus what’s happening east of here, which may give Switzerland some concern at some point. Switzerland has been under a great attack from the taxation departments of a whole bunch of countries. The loss of the banking secrecy, whilst a good thing in some governance ways has been harmful in revenue ways, but I think that was always going to happen. It was just a question of time. So honestly I think Switzerland’s weathered pretty well some of the waves that have been crashing upon it over the last few years. So I’m not concerned about Switzerland.

Now if you want it to be a burgeoning, booming start-up center, that’s another question. I think as I said, there are challenges, because there’s no single home market because there aren’t many investors who’ve built successful companies to come back and become examples for the younger entrepreneurs. We don’t have that ecosystem here. The venture capital system is full of advisors and accountants and lawyers rather than entrepreneurs. I think that’s a problem, but I don’t think Switzerland as a whole will suffer because of that. There’ll just be that problem with the start-up ecosystem. That will always be a problem.

BR: I agree with you there’s very adaptive ecosystems in Switzerland, but if you believe that we’re going through a paradigm shift, are the incumbent organizations in Switzerland going to be capable of delivering the same growth and prosperity this country, or if a new generation of companies is needed? Is this Swiss environment suitable for building new companies and a sufficient number of new companies for Switzerland to prosper in the new era?

IS: If we break that question down, there’s three bits to it. One is to define what exactly the changes are, so that we know within what context we’re trying to judge the country’s ability to work within it. The second is the issue about new companies, and the third is the issue about existing companies and their ability to transition. If I deal with the first question first, the two main challenges facing forward are digital and loosely being labelled SDGs now. The SDGs are simply one way of shorthand of talking about it but concerned about environment, concern about waste, concern about the oceans and the rise in consumer populist icons that then seem to do a good job of driving activity change. Digital change plus concerns about our consumption model in general I think the two big drivers, and of course you’ve also got China and Africa and other things and immigration, but there’s a fair number of things and I think the two key things, unlike them, a lot of people think it’s China and immigration, I think digital and concerns about the consumption model I think are going to be bigger problems going forward.

Now within that context, Switzerland has a reasonable education system and has two very good tech schools. It has an awareness and appreciation for the need for adaptation to issues, and I think therefore that it’s not a better environment for people to think about these things. Actually doing them is something else. I do think there’s a problem with digital competence in the C-Suite level in Swiss large corporations. I think that’s a challenge, but that’s a challenge everywhere. That doesn’t put Switzerland at a lower standing than anyone else because of that.

I do think we originate a lot of good technology and technology ideas here. It’s just the market’s not big enough necessarily to create the companies here or run them from here, and the UK suffers from this as well. Right. The universities produce really good IP and good science, but practical implementation tends to happen in the US where a bigger home market makes it possible to try things out and make things work before they take them abroad or anywhere else. So I think Switzerland does have good science and it does have reasonably adaptable businesses. I don’t think it’s a problem. I don’t think it’s a bigger problem than it is for anywhere else. In terms of relative position advantages vis-a-vis the other countries, I think being small is helpful. I think being able to make decisions quickly is helpful. I think to be able to change their mind quickly is helpful.

If you look at the problems, just the mechanical problems of getting Brexit sorted out, everybody needs to agree for a change to happen. It’s very hard to do anything in that respect. We had the 30th anniversary of the world competitiveness report at IMD last week and it was pointed out that the country doing terribly well when we first issued it 30 years ago was Japan, and if you look at where Japan is now, it suffers from the same problem. It’s a small country, but it has big companies. It’s hard to change direction. Institutions are hard to change. So I think small is good for reacting to change, and in general the fact that we’re small, the fact that we have governance systems that are devolved, the fact that tertiary education system that deals with some of the challenges we’re talking to are quite good. I think it means that Switzerland’s probably in a good place. So I’m not worried about Switzerland as a country given the changes. On the contrary, I think it’s probably well placed to do it.

BR: Because it’s inherently small and adaptive.

IS: And smart and hardworking. Yeah. All of those things. The risk is political if there’s a war somewhere. Being small is not good in those circumstances, but it’s also smack in the middle of Europe so physically it’s hard to get to.

I also thoroughly enjoyed my time at business school, so it was a great year and it gave me tools that I didn’t have before, but more particularly gave me a sense of the world, which I didn’t have before. […] it was really the contextual stuff that I got out of the school, which was cool, more than the tools itself. I got a picture of the world. I came out understanding how the world worked and that was terribly useful.

BR: So if I’m not wrong, the thing that brought you to Switzerland in the first place was attending IMD, the business school in Lausanne, and I think that it was through IMD that you met Louis Rossetto and Jane Metcalfe, your two co-founders at WIRED. Is that right?

IS: Indirectly, yes. For a period of time I was a photographer from leaving university where I did Math, Particle Physics and Computer Science. I was a photographer for 10 years. In the last three or four years of that, I was in Paris and while I was in Paris, I worked for People Magazine, the American People Magazine, and photographed American celebrities in Paris and French celebrities and starlets and things, and the editor of People Magazine in Paris, Kathy Nolan was a great friend and still is. When I went off to business school to try and see if I could connect the two sides of my brain, the creative side and the logical side. It meant that for me, I was trying to find a way to marry the idea of business and business building. I’d been exposed to it from my years as a photographer with the fact that I was essentially a writer and a photographer at the time and wanted to create something, so I was already in that mind frame when I went to business school.

When I came out, Kathy contacted me. A friend of hers, Jane Metcalfe then, Ducette now had a sister who had a relatively new partner, Louis, and they had a magazine in Amsterdam at the time called Language Technology, which talked about of all things at that stage, machine translation, which isn’t a terribly sexy subject. Wasn’t a terribly sexy subject then, is more of a sexy subject now because it’s one of the facilitators for machine learning and AI, but Louis had used the technology as a way to talk about the world in ways that I hadn’t seen before. If I hadn’t been to IMD and done the MBA, I don’t think I would have been of use to them. I’m not sure Kathy would have suggested to Lane and Jane that they met me, so I think that IMD was certainly the catalyst for that. I also thoroughly enjoyed my time at business school, so it was a great year and it gave me tools that I didn’t have before, but more particularly gave me a sense of the world, which I didn’t have before.

And then as we realized that other technologies were coming along and as we became aware of the work of Marc Andreessen and his team at the National Center for Supercomputing of America in Chicago, we realized that there are a whole bunch of technologies happening and we all got very excited about how much the world might change because of that and we were really convinced that it would be changed, and I can tell you that no one else was at the time. Very few people were at the time and I think that’s what drove it.

BR: Did it succeed in fusing the right and left sides of your brain together?

IS: It helped a great deal. It allowed me to use both sides in trying to solve problems while I was at school, and I use the same attitudes of problem solving when I came out, but a lot of it was context understanding. My father was a political economic journalist at the New York Times, so we’d had discussions about how the world work when I was a kid, but in my own working life I was either just doing science or I was just taking photos and writing. IMD gave me a sense of the connections between government and society and companies and then finance and then marketing, all the rest of it. So it was really the contextual stuff that I got out of the school, which was cool, more than the tools itself. I got a picture of the world. I came out understanding how the world worked and that was terribly useful, and I think that’s what made me useful to Louis and Jane.

When we launched and through that period, Louis was always the editorial voice. He was the driver. It was his thing, and Jane was sales, front of house, advertising and more on the generating revenue side, and I was, I think my internal title was dollars and cents. I worried about money and people and processes. So I was the suit.

BR: Okay, so we know how you met Jane and Louis, and how did the idea come together? How did you know, how did you perceive that there was a gap for a magazine like WIRED?

IS: We met in 1988. That’s four and a half years before Wired launched and at that time Language Technology, as I said, was a really cool but slightly bizarre magazine talking about how machine translation would change aspects of society. So the attitude of WIRED, which was how technology impacts society rather than talking about the technology was already in Language Technology. As Louis and I talked things and we became friends instantly because we had similar attitudes and stuff, Louis, just to be clear … and I had also been an editor and Louis had also done an MBA, but in the balance of roles as it went forward, Louis was clearly the stronger editorial voice and I ended up doing more of the business stuff, at least at that stage, and I was helpful, I guess I think he said so himself in reorganizing the business model and the business plan, but Language Technology was the start. It then became something called Electric Word as desktop publishing came along and Louis realized the impact it would have on the ability of new voices to create platforms for messaging… desktop publishing was a very big deal to Louis.

And then as we realized that other technologies were coming along and as we became aware of the work of Marc Andreessen and his team at the National Center for Supercomputing of America in Chicago, we realized that there are a whole bunch of technologies happening and we all got very excited about how much the world might change because of that and we were really convinced that it would be changed, and I can tell you that no one else was at the time. Very few people were at the time and I think that’s what drove it. But we also realized together that you couldn’t do an English language magazine talking about world change from Amsterdam in the European market with all the languages that were there, and it became clear that WIRED needed to … well the new project expanded from Language Technology then Electric Word and then became a project which we called internally Millennium, needed to move to somewhere in the US and San Francisco of course was the obvious place since a lot of the work was taking place there. There was also good sources of venture capital. There was a lot of tech companies there and WIRED found its name and its home in San Francisco and we launched January 1993 with Issue 1. So that was four and a half years after Louis, Jane and I met.

there was enough demand that when it hit and because the product didn’t disappoint, we started receiving subscription checks to the tune of a thousand a week – where each check was I think $45 so that’s $45,000 a week coming in. We couldn’t rip those envelopes out fast enough, grab the checks and run down to the bank, and that’s what kept us going when we ran out of money after the first edition.

BR: So this is interesting because again, if I’m correct, I understood that you basically threw everything at the first edition, so much so that if it hadn’t actually had some decent pickup and some people subscribing to it, that you would have run out of money before you could have issued the second edition.

IS: It’s true. It’s partly true because we didn’t have very much money. Throwing everything isn’t difficult when you don’t have very much.

BR: I suppose it’s been turned into one of those sort of, you know, urban tales that — –

IS: No, but it’s largely true. It’s largely true. We had raised through basically a friends and family round, including Nicholas Negroponte of the MIT Media Lab who took money out of his own pocket rather than the fund he was a GP on. I’m not sure he told his wife about that.

BR: He probably did later.

IS: I think later when it was fine. It worked out fine, but so we raised a total of 250,000 US dollars. That’s nothing.

BR: Yeah, to put into a new magazine in those days.

IS: In those days, we assumed we needed basically 4 million to launch a magazine because it usually took you two years, maybe more to get break-even. So you needed enough runway to last that long. We had $250,000 and in addition we were using an eight color press, the most expensive press in the world. A lot of people would argue that wasn’t necessary. I think Louis’ argument and I saw it work, was that the more reasons people have to talk about the magazine, the more communities get interested in it and the more people talk about it. So we had this 8-color press. We had an extremely expensive print run and cost process in spite of the fact we were doing everything in desktop publishing, which saved costs elsewhere, and that meant that most of that 250,000 disappeared in the first month, and yes, we would have gone bankrupt if certain things didn’t happen, and we didn’t actually get Issue 2 out in February. It came out in late March.

BR: So you now teach entrepreneurship at the IMD business school. Is this a launch strategy that you would advocate for others? Because arguably it’s not counter-intuitive because the new world is one where in most markets you’re trying to trigger network affects, demand side economies of scale and you need a big bang because you’re trying to solve the chicken and egg problem. So at the risk of having sort of slightly over thought it, would you advocate for big launches and throwing everything at it trying to kick-start network effects?

IS: Sometimes. I think it depends on what it is you’re doing and I think it depends how dependent you are upon the timeframe. In our case publishing timeframe meant that we’re supposed to get Issue 2 out pretty soon after Issue 1, and if you have to take time to raise money, it’s a bit difficult. I think it depends. I think sometimes it’s good to have a big bang launch and other times you need to make sure there’s enough money in the bank to pay for Issue 2, or months 2 salaries and so on. So I’d have to say in general, no, but we were lucky. The thing that saved us were subscription checks. Now it’s important to understand that in the United States people didn’t, in those days, I think it’s still true, they didn’t subscribe to magazines because there were these massive magazine stores where everything that was being published in the country you could see on the shelves. You could pick and choose and you could have different things every month.

In the UK where my magazine experience, my publishing experience had happened, the stores were tiny because real estate was expensive and so the average store didn’t carry all the titles. So the only way to be sure that a niche new title was there was to subscribe because the news agent wouldn’t necessarily carry it every month. So we were not expecting subscriptions in the US but there had been such a pent up demand for it. Louis and Jane had been walking the streets of all over the US, Madison Avenue and publishing houses and the tech companies for two years before the launch, because Electric Word, we shut that down two years before we launched WIRED, and we had developed an awareness of what was going on. So by the time we actually launched it, we also had some crazy inexpensive bus poster campaigns, which people are very excited about.

But there was enough demand that when it hit and because the product didn’t disappoint, we started receiving subscription checks, which we just hadn’t expected to the tune of a thousand a week, where each check was I think $45 so that’s $45,000 a week coming in. We couldn’t rip those envelopes out fast enough, grab the checks and run down to the bank, and that’s what kept us going when we ran out of money after the first edition long enough so that we could raise external funding to get a few more issues paid for, but we were still scrambling. I mean, even the round we did in March wasn’t anywhere near enough to get us going through the two year cycle. It was nowhere near 4 million. It was a few hundred thousand more, but it kept us going for a few more months and that was because we weren’t a technology company. We were a magazine company talking about technology, so all the venture investors we were talking to would have been delighted to support us if we’d been developing our own tech, but had no interest in someone talking about it.

Now it changed a little bit later when we started developing Hotwired our search engine and the various other digital components and then it became easier to raise money and to hire people, but when we were just a magazine, no one cared. The consumers cared, fortunately and our subscriptions and readership just shot up and we won an American Advertiser Magazine Award in our first year, which is unheard of. So the product was good. We did super well with the product, but we should have died month one.

BR: I suppose it’s difficult sometimes as an entrepreneur to attribute success in part to luck, but do you think you had luck around this whole area of subscriptions because clearly in markets where subscriptions are prevalent, there’s a barrier to enter it because you’ve got to displace other people’s subscriptions. But maybe the lucky break was that since there wasn’t a subscription model in the US and you kind of introduced it, was that the lucky break?

IS: It did exist. It just wasn’t common, as common as it is in Europe. We’re certainly lucky and I have to say I’m a big believer in admitting that luck plays a role in everything. I remember A Tipping Point, the book talks about how it was fortunate that certain people were at a certain part of San Francisco at a certain time when a certain school was doing things and Rank Xerox was doing certain things, so Xerox Labs and their Xerox Park. So I think luck does play a role in everything. Who is it who did that study, was it last year of the top venture capitalists on Sandhill Road? So the home of venture capital outside of San Francisco, and the percentage of, even the best VCs of their success rate was really small. It was 5 to 10% because there were so many things that can make a company fall over even when you’ve got the right team and the right idea and the right money, and there’s a lot of things that you have to get through to make it work, and so, yeah, luck helps. Now I love the — — is it the Gary Player story where he was being interviewed after a big tournament and the interviewer said something about, gee, that was a lucky shot on the 15th, an eagle which gave him a two point lead and he won by one, and he was a little taken aback by the comment and his retort, well-rehearsed by other people now, is that “it’s a funny thing. He said, I find that the harder I work, the luckier I get”. So luck with a bit of effort and an ability to recognize the lack is terribly important, but yes, I think luck played a part in our surviving that first year.

BR: And then the stuff that isn’t luck. Can you bottle that up? Can you teach that to entrepreneurs?

IS: We try. We try as investors. We try as some mentors. We try as teachers. I think there are things you can do to increase someone’s probability of success. I’m afraid. I do believe that there are certain characteristics of being pig-headed and, and a believer in what you’re doing and wanting to convince everybody that really are either born or learned from family. The nature-nurture argument is not one I want to get into, but it’s certainly before you get to school and before you learn it at university or business school about how to do things. So no, I think there are certain personal characteristics that make it much more likely you’re going to succeed. Having said that, there are exceptions to everything…

BR: What would you say are the personal characteristics that positively correlate with success?

IS: Pig-headedness is one.

BR: Is there a better way of putting that? Maybe…

IS: No, I don’t have a better way than saying pig-headedness. I think here’s the thing. Personal drive, salesmanship, the ability to sell something. I’ve seen good companies with reticent CEOs fail and I’ve seen not very good companies with an inferior product do really well because the guy who’s leading it can convince anybody in the room, can carry a room and can lead people from front. So I think, pig-headedness and salesmanship are two very useful characteristics. I actually think they’re more important than anything else. Now you can learn finance. You can learn marketing. You can learn management. You can learn a whole bunch of other stuff. But I think pig-headedness and salesmanship are hard to learn from scratch.

BR: Let’s get back to WIRED. I mean, it’s famous for many reasons, but I think to my mind at least it’s most famous because it was so prescient in predicting the extent to which the internet would have an impact on society and on business. I mean, you coined a lot of the language that we use about the internet today. So forgive me if I’m wrong, but I think crowdsourcing was a term you came up with, the long tail, vaporwave. I think these are all words or terms that were originated from WIRED. So my question is how were you able to foresee so well what was coming, and secondly, what was it like to be in San Francisco at the time that the new economy or the foundations of the new economic model were being built?

IS: It was tons of fun. Louis has been threatening to write a book about the beginning of WIRED for a long time and hasn’t. He wrote a fiction book called Change is Good, which I recommend people read about. I think it’s about a week and a half in the life of a company putatively like WIRED or a technology firm, but it’s fiction, but if you know the period at the time, there is a lot of real things and real people in that. I think it was a time like … the second question first. It was a time of huge energy. There are all sorts of things going on and San Francisco became a place that attracted people to it, so our being in San Francisco helped. The three of us actually had similar interests in that we all had technology in our backgrounds.

Louis and I had both done a business degree and we were both media fans. In his case it was consuming television on Saturday mornings as a kid where he says he learned more from Saturday morning television than he learned from school, and for me, my father was a journalist, my mother was a magazine fanatic and so I grew up loving print. So we were naturally disposed towards being interested in the impact of technology upon media in general and then the world as an extension came from that. But Louis was absolutely the core driving voice in that. But then once we were in San Francisco, we became this lighthouse and people came towards us. We had a fabulous team. You know, Kevin Kelly was on board pretty quickly. John Battelle became a managing editor, but also a lot of the writers in the region, both fiction and nonfiction writers were attracted to us because we were the first place that took that attitude.

Now there were other magazines around at the time. They were either more business oriented or more new era world oriented, a little bit more about lifestyle than they were about how the world worked. We were, I guess grounded in practical things, but very excited about real change and we attracted to us fantastic writers so that helped us. The core team, the core editorial team was Louis as editor, Kevin as executive editor and Jane, but John Battelle as Managing Editor and that was the core which helped us manage our environment, but we had the best writers in the world come to us. It was just fabulous. Editorial meetings were tons of fun. The stuff was either all over the wall or all on the floors, but the discussions in the rooms on the surface was just, it was amazing. I didn’t spend enough time there. I was out trying to do business deals in the UK and elsewhere, but every time I came in, the place was just tremendously exciting. So it was great fun. It was a roller coaster for all the business and other reasons and that we messed up our IPO and other things, but it was just tremendous fun. I never felt that that period was work. Never.

BR: When you look back at that period and the kind of companies that were built at that time, was it obvious that they were going to be the giants that they have become? So I guess one example right from the very beginning that was, I wouldn’t say dismissed by public markets but where the full potential of the company wasn’t immediately appreciated would be something like Amazon. Right? So back then, given the extent to which you guys understood the new world, and I’m just going to quote you from the first edition, a line that I read from the first edition, which is so, so prescient. The digital revolution is whipping through our lives like a Bengali typhoon written in 1993 so did you know that Amazon, for example, was going to be such a big company?

IS: Louis is really good at those lines. Louis created the best strap lines in the world. He was able to create imagery in a single sentence, which is glorious. The answer is yes and no. We could see what was going on. We could feel what was going on, but it’s never easy to pick winners even if you know what you’re doing. So I’m not sure I could have told you which of the people we met was going to be driving this forward in a massive way. But then I would qualify that by saying the same thing that every investor, every investor who’s lost and made money over a period of time says. It’s not the idea and it’s not the company. It’s the people. It’s the individuals, the drivers. Are they pig-headed and can they sell something? So I think Jeff, it was evident from the beginning that he had this drive, although selling books online wasn’t the sexiest idea around at the time. There were lots of other sexier ideas.

But if I look back and think about the people we met and the individuals concerned, it’s a bit like I think, someone said to me yesterday, he was an Italian, a successful entrepreneur and investor. He said that he can tell when things are happening, waves are happening, but he knows from personal experience it’s hard to choose which, so he just invests in all 30 in a sector and he knows that some of them will do really well and if the sector is good, most of them will do okay, but it’s very hard to choose the best even if you think you’ll know what you’re doing. I would have biased my choices if I had any money, which I didn’t in those days and invested in probably some of the better ones. But I also know now that the right thing to do would have been to invest in a whole bunch because it’s hard to tell who the winners are going to be.

Remember that Amazon has done a bunch of turns left and right and up and down since that starting point, and that ability to change direction and develop new ideas and create a culture within his company that encourages exploration and trying new things is what has enabled him to become and create what he’s done today. Jeff was kind enough to turn up at our party last year. We had a 25th anniversary party in San Francisco organized by Conde Nast, in October last year, and Jeff turned up personally with his retinue and celebrated with us, which was pretty nice.

BR: And when you think about Amazon, for example, and some of the other companies at that time that would go on to change the world, but that potential hadn’t yet been spotted by public investors. Do you think we can draw a parallel between what’s happening today, i.e. the disconnect between private valuations and public valuations and the difficulty companies are having traversing from private to public ownership?

IS: The principal difference with today’s market and the problem they create for themselves is that the private market is holding onto the companies longer. That’s partly because there’s so much money available. The cash available in the private equity space now is just extraordinary and so because they can avoid scrutiny, avoid public market scrutiny and because it’s an easier process to go through, a lot of companies choose to continue growing from private market sources. What that means though is a lot of the growth that the companies can experience both in revenue and therefore value takes place before they go public and the result is visible in the public markets in the fall of a great many of the IPOs over the last two years, because too much of the value has already been captured within the private equity space and the public debt markets simply don’t offer the upside that they used to. It’s too late in the cycle. That’s a big issue with public market appreciation of the start-ups that are coming to market today. I think they’ve been held in the private markets too long.

BR: So you think there’s the principal disconnect, which is …

IS: I think there’s too much money in the private equity sector and they’re holding on to the companies too long. In the old days, there was a limited amount of money in the venture capital sector and nobody got an exit until it went public, so there was a hunger to flip the company, if you will, give it its money, get it to a point where it was earning enough revenue, although in some cases in the 1990s of course, none of these companies had revenue and were already going public. You were only liquid when the IPO had happened and so people want to be liquid as soon as possible. I think partly there was a sense that things were a bit crazy and valuations were a bit nuts. So the sooner you got out in the public sphere, the sooner you could get out of the investment.

BR: Just to press you on that with a couple of real examples then. So we think about some of the companies that have come to market and where they haven’t seen the normal post-IPO pop like Uber for example and Lyft, those might fit into the phenomenon that you’re talking about, which is where most of the value creation happened before they went public.

IS: Or at least a large chunk of it, which means there’s less leftover and there may be more for these companies, but at the moment the market doesn’t think so.

BR: But if we think about another example like WeWork, is that the same issue that all the value creation happened where it was private or is that just an isolated case, or is that an example of where what public investors are looking for is different from what private investors are looking for? Maybe a business model question.

IS: So I think there’s a couple of things. First of all, I do agree there’s a bit of a bubble in the venture side at the moment in general, in the same way there was through the ’90s. I think it’s more disciplined than it was. I think people are more careful. But yes, there’s the same sort of… well there’s some of the irrational euphoria that was taking place in the ’90s is also taking place now. But I think there’s more learning. They’re more smart. There’s more professionalism in the companies and we’ve learned to scale much better. If you look at some of the companies that come out, valuation aside, the ability to scale a model is stronger than it was 20 years ago. So you have to be impressed at the way Uber has grown across markets, across countries, notwithstanding challenges in China and elsewhere, but those are as much cultural business issues as they are anything else. A lot of things about how we build companies today are better.

But yes, there are issues when it comes to the discipline that is imposed by a public market and the scrutiny of the press and investors and analysts commenting everyday about how well a company is doing. In the private sector, no one comments so that’s partly why valuations can get pumped up in a closed room setting in the private markets, and why you get, I think overvaluations of companies before they become public. WeWork is a different case though. WeWork had some of the same advantages of being in the private space and therefore being able to push valuations without necessarily the analyst and/or public market scrutiny that they would have had if they’d been public earlier, and so that was a benefit of course for anybody riding that train or that rollercoaster up until the recent IPO fiasco, and I think it really is a question of how you view things.

There are questions, of course. Many people have written about how they don’t understand how WeWork could describe themselves as a technology company when it’s a real estate play. There are technology components. There is a start-up company component within the environment. There’s a lot of support for start-ups. WeWork also ends up with equity in many of the companies that they support, but in essence it’s a real estate play, and so the valuation that they were aiming for was based on all comparables in the space too high, and again within the private market space where you’re only convincing a bunch of people in to two boardrooms — in this case, Japan and Saudi Arabia — it was okay for a while. You didn’t have a whole bunch of other people questioning an IPO document for two months prior to a launch to set a price, and it was clear when they started talking to intermediaries and potential institutional investors about their model based on true numbers that there wasn’t going to be support in the public market space.

I think one of the things we didn’t talk about enough was what that would do to politics, the ability to become isolated within a political sphere because there was no longer an editorial voice deciding what was and was not appropriate within either a newspaper, a magazine or on television.

BR: To change directions slightly here because the internet has disrupted lots of businesses, a lot of industries, and clearly one of those industries that it disrupted was the industry in which you worked, the media industry, and it did so by lowering distribution costs so that anybody could publish anything and reach anybody, and the economics as a result were completely changed, and so the question I guess is did you foresee this and is that one of the reasons why you sold WIRED when you did?

IS: It didn’t have an impact on our selling. That was purely a function of problems with our IPO because we were supposed to go public and the fact that having set a spending schedule and an investment schedule, assuming that influx of money from the IPO, we suddenly found ourselves with a cash problem very, very quickly and had to take what we called vulture capital money to stop us going belly up when the IPO didn’t work.

The IPO story is another story in itself, so we actually no longer had full control of the company from that point forward. So our timing and our decisions were not entirely our own. There was a battle inside the firm for the two years following that until we eventually sold. So no, it wasn’t a question of market timing and thinking, oh, media is changing. On the contrary, we thought we had a model and we thought we had an understanding of how multi-channel communications both for readers and for advertisers and for other third parties who might get involved. We thought we had an image of how that might work that would have carried us forward through what eventually became the downturn in the beginning of 2000. But yes, on the question of what we saw and what we didn’t see. We saw some of the things. I don’t think we saw all of them.

We talked about the fact that obviously, and it was part of the original idea when desktop publishing came along, but then when online media came along and there was almost zero…certainly zero marginal cost of producing an article and almost a very low cost to actually creating a platform which you could publish. That was obviously something we talked about a great deal. We also started to talk about literally the fact that actually it put more power in the hands of the consumer than the publisher because search allows you to search for anything. So if you’re mad keen on fly fishing and you can’t get a fly fishing magazine, you can find everything you want to know about fly fishing online. I think one of the things we didn’t talk about enough was what that would do to politics, the ability to become isolated within a political sphere because there was no longer an editorial voice deciding what was and was not appropriate within either a newspaper, a magazine or on television.

The fact that anybody could publish anything meant you got extremist views — North, South, East, West — which were absent from general media, and it meant that the consumer no longer had someone editing for them. It also meant that you could read only what you liked because it was very rare. It would have been impossible for publication to only published extremist views around the world. In those days, the cost would have been prohibitive. Online you could do that. So suddenly people found themselves happily in their information ghettos only reading what they wanted to read, only conversing with people who agreed with them, and that polarization, which was one of the two big causes of polarization in the media today, I don’t think we talked about enough. The second is the advertising click-through.

BR: Yeah, I was going to say, even where you have publications that still have editors, there’s been a general move to sensationalism anyway because in an effort to attract eyeballs in an industry that’s funded by advertising, there’s the general sort of move to sensationalist and debasement of truth. So what you’re saying about the fact that anybody can publish anything leads in general to sensationalism, but also within organizations that still have editors, there’s a move to sensationalism as well.

IS: Sadly so. Even within good media and the mechanics of it, people don’t always understand, and again, in the old days, you not only had an editor decide what was worth putting in the paper, but they also decided what was on the front page and what went on the op-ed page and how the magazine was or newspaper was balanced. So whether they were left wing or right wing, whether they were a North or South paper in terms of development…

BR: What do you mean by North and South?

IS: So the North is traditionally the term was used for the developed nations versus the South developing nations, whereas left and right across the political spectrum. Whichever part of your particular spectrum you sat on, you decided what you thought was appropriate and you genuinely got rid of dross and you generally did fact checking and you generally created a reasonable quality product.

BR: Reasonably balanced.

IS: Yes. Now, some of it was entertainment oriented, so News of the World in the UK and The Post in the US and other places. There were magazines and newspapers which were particularly aimed at essentially sensationalism even before the internet came along. So they existed beforehand. What you’re talking about is the impact of click through. In the old days, the Times of London used to sell its advertising at 3,000 pounds a full page, and the Financial Times used to sell its advertising at 27,000 pounds a full page. That difference was because of the readership. We could define the readership based on who our subscribers were. Subscribers filled in a form and we knew more or less who they were. Telling the advertisers who our subscribers were was enough to justify the 27,000 pounds. That’s not enough anymore. They want to know, did they actually look at the article?

Did they click through to see the article? It’s not enough to say, give us the money for every page we put in our newspaper or online periodical because we’ve got great readers. The advertisers want to know did they look at it now. If you have to make sure that they looked at it, you want to make sure they look at it. To make sure they look at it, it’s hard to avoid tweaking the headline. It’s hard to avoid the words that are slightly more sensationalist. It’s hard to avoid if you’re ability to pay bills at the end of month is dependent upon advertisers saying yes because your readership has clicked through. It’s hard to avoid skewing and that’s unfortunately what’s happening in traditional media today.

BR: How worried are you about that as a media person, and also how do we get back? Can we set the clock back? Is the genie out of the bottle, and because I suppose if you’re an optimist, you might say that in the immediate reaction to Donald Trump’s election, you saw a big spike in the number of people subscribing to publications like the New York Times, like The Economist. Do you think its readers were starting to appreciate the importance of fact checking and started to appreciate that the truth costs money?

IS: I’m generally an optimist. I think one of the things that characterized — -one of the things at our birthday party last year with Conde Nast in San Francisco when Anna Wintour was on stage and asked us, had they done a good job of stewarding our magazine since they bought it, and was there a big difference between the magazine now and before? Louis’ response quickly was that the big difference was optimism.  When WIRED launched, we were optimistic about what the new technologies would do for our world, for our societies, about the positive things. Today, if you read articles about technology anywhere in the world in WIRED and elsewhere, there tends to be this concern — concern about privacy, concern about abuse, concern about all sorts of things. So it’s a very negative world. The two differences were optimism versus pessimism and I still remain optimistic. Everything comes in waves and there are all sorts of things that will eventually change. Certainly I start to see whether it’s on YouTube or whether it’s in certain small media, an attempt to tread a middle road, to define what really is news rather than opinion and then show what the opinions are and reflect both sides. Louis and I talked about the timing for a return to the center for whoever wanted to produce centrist media.

At the moment, the biggest market, the market you would logically launch an English language medium in would be the US because it has the biggest English language home market, but the space is still occupied by the television stations. They still garner a very big chunk — I’m not sure of the numbers anymore. I’m out of date — but they still collect a bigger chunk of the advertising revenue than the audience they attract with support. So their percentage of viewership is down to X percent and I think they’re earning one and a half to two X, whatever the numbers actually are, and the reason for that is it’s much harder to duplicate that by buying up a whole range of alternative media. It’s an easy way to get to a broader audience very quickly, and that advertising revenue is hard to attract until they go.

So if the three big broadcasters in the US fail, then I think you’ll see people jumping into the center again with alternative, both online and offline media combinations, and as I said, I already see an interest among friends and online for people to have something which isn’t so polarized. How much of that will remain, how much of this we’ll go back to the center and how many of us will prefer to sit in our left and right bubbles is too hard to say, but no, generally I’m an optimist and I see this as just waves and I see it actually as an opportunity for someone who wants to do something more balanced.

BR: And what’s the equivalent of Europe of the cable stations? Who occupies the center ground and who needs to be displaced in order to put in place sort of digitally upgraded centrist voice?

IS: The first thing to say is, of course is Europe isn’t Europe. It’s a whole series of countries and I hope it never becomes the United States of Europe because I like the difference of countries and food and cultures and attitudes and approaches and even governance. But within that environment you’ve got a whole bunch of different things. So the Swiss for example, had that vote. It was a year and a half ago about whether to keep funding central media and as someone who is interested in the idea of creating new media, you might’ve expected me to vote against it to clear the ground so that you could create something of value because it’s clearly a costly exercise to have a national news organization that transmits in three languages, but I didn’t, I voted for it because it provides national coherence. It provides a center ground basis for news that the US doesn’t have anymore, and there are other countries that are the same. The BBC is not bad. Every country in Europe has different national news stations and private organizations, so non-government supported that I think do a better job of holding middle ground than elsewhere at the moment.

BR: Is truth a public good? If we define public good as an economist would define a public good, i.e. something which is generally good for the public and if you create a bit like street lighting, whatever, it’s difficult to exclude other people from using it once created, and also it doesn’t diminish with more usage. So if it’s a public good and public goods are generally provided by government, would you advocate for the truth to be provided by governments? I can see how already framing it in that way could lead to a slippery slope, but where do you stand on that and the question of governments providing some level of public information?

IS: So governments are still collections of people and people are flawed and people have their views. I think allowing any one group — government or private or social or religious or political — to have the monopoly on truth or monopoly on the idea that they are the truth isn’t necessarily healthy for society. I also don’t think truth is easy to define. No matter what people say, everything is opinion to a degree, and I think truth is found by triangulation. So I think the right thing to do if you’re trying to have a society in which people are given information, which allows them to work out what the truth is to have multiple voices, but clear and fair and reasonable arguing the point and then we work out what’s truth in the middle. Very hard to find absolute truth, either in current media or in history, because it’s always written by someone with a point of view.

BR: Just want to go back slightly because you said that you’re an optimist, and one of the big differences between WIRED as it was and WIRED as it is now is around optimism.

IS: Optimism about the application of technology.

BR: Exactly because we would say that, I don’t think this is our term, but you’ve got this tech backlash, which is in general a lot of voices in society have said that tech is a bad thing. Tech is taking us in the wrong direction.

IS: I’m surprised people aren’t talking about the new Luddites yet.

BR: Yes. The neo-Luddites. Yeah, so my question to you is, I like you am an optimist and I think if you stopped believing that society’s getting better, then that’s when you get Donald Trump. That’s when you get Brexit, and so my question to you is, what’s the positive narrative that we should be injecting around tech? Could you make that for us in a very sort of short, pithy statement, if that’s not putting you under too much pressure?

IS: Let me do the easy stuff first. I’m of course a subscriber to the notion that tools are tools and it’s all about who uses it rather than the tool itself, and so there’s very little in technology. In fact, I can’t think of anything in technology which is normatively bad or frankly normatively good. It all depends on who ends up picking it up first and using it first, and so our perceptions about how things are affected by how someone uses it, and in the case of Facebook and Cambridge Analytica having a clear and open story about one company misusing, and it’s both Cambridge and Facebook in allowing them to use the data. That one story very quickly made people worried and that worry has stayed because we haven’t seen a lot of evidence to the contrary that our data is being protected in any way.

So we are in an environment where, because it’s early, because some people on the not-so-good side, are faster at adopting something and then other people on the good side, again, — let’s define those things some time over a drink — are faster at adopting something, you have this wave of good and bad in application of technology. The reason I’m generally an optimist has nothing to do with the technology. It’s that generally I think people are good. So if you imagine it’s a wave of people going backwards and forwards, some bad people, some good people trying to make use of technology and there’s a lot of these than the only thing overarching that is if you think there are more bad people in the world, then it’s going to be generally negative. If you think there are more good people in the world, it’s going to be at some point generally positive, and because I think generally people are at heart good. I’m not worried about the technology because it’s neutral and eventually the number of good users is going to outweigh the number of bad users.

BR: Want to move to China? Because having lived there for so long, we’re very interested in hearing your perspective about China, and maybe we could start by trying to create a link between the conversation we’re having around media and China because one of the big differences we note between the Chinese internet model and the US internet model is that the US internet model is really predicated on advertising revenues and the Chinese one isn’t because the Chinese one is really built on micropayments. Which model do you think is more sustainable and don’t really want to get in the route of value judgment, but which model do you think is better?

IS: So first of all, I would question the initial premise.

BR: Ha, ha. You’re not allowed to question the question.

IS: There is advertising in China and there are micro-payments in the American system. So Amazon wouldn’t have survived if there wasn’t the ability to purchase things and some of the Chinese models wouldn’t survive if there wasn’t the availability of advertising to promote products on third party sites. So they both exist. But you are right that there are clear differences between the two models and they are as much based on cultural and economic contexts as they are in actual business model analysis. There was a great need for access to product, especially in regions outside the big cities which online suppliers provided in China. China is itself a massive market with very great differences between the poor areas and the rich areas, the areas that are more rural versus more city, because not all the rural are poor and not all the cities are rich. So that context means that certain things are more attractive to consumers than others.

Also there’s control of certain things. So much of the American, the beginning of the internet and the usage was about news and information and that’s heavily controlled in China, and so there wasn’t the space to attract news or enter information or enter entertainment oriented. There wasn’t the space allowed by the government to allow these companies to build, to DOE and some of the others notwithstanding. So it really was a transaction oriented market from the beginning, because information was controlled. So it’s the cultural and economic context and the governance context of the country which defined what business models were used first, and I don’t think either one is better. I think they’re both interesting. It does mean that the Chinese are greatly advanced on some of the eCommerce stuff compared to us because they just did that sooner and did it better and they have low tech with interesting high-tech components in it.

Now the telephone industry was fascinating when I first went there in the year 2000, 2001, 2002 when I saw very low tech telephones doing things that our smartphones weren’t doing yet, and that’s because that was the demand for transactions, for money, for payments and so on. So I don’t think you can say one is better than the other. I just think that they came at it from two different directions and there will be components of both going forward in both environments.

BR: If we believe that, again, coming from different directions, the US internet model is one where free speech is potentially under attack and the Chinese model where free speech was depressed, but where potentially there’s a big fight to open it up, how tenuous is free speech in the internet?

IS: It’s a good question. One of the reasons that we have the craziness on the internet in the United States is because it’s free speech, so people can say anything, which means you get all sorts of garbage at either end of the political spectrum, and that’s unfortunate for those people who are unable to judge whether it’s garbage or not, but it’s the fact that free speech is there that actually gives us the problems. Some would argue that the Chinese control would have never allowed that and therefore you wouldn’t get the polarization in politics that the US has if they had the Chinese model. Having said that, it’s also very clear that carefully stated and carefully presented, there is much more free speech in China now because of the internet than there was. It’s done in sometimes it’s an allegory. It’s done very carefully also. It’s very clear in spite of the increase in the monitoring of the internet that’s taking place in China and it’s constantly increasing both through applied machine learning and also people, they have also gotten looser in some areas. So it’s possible to be critical of certain things in China, which weren’t possible 15 years ago, and so there’s an interesting play. If you watch what they stamped down on and what they allow, it’s interesting and partly it’s because there are certain things that they would want to change in regions and by having the people talk about it rather than the government provides a push which is acceptable within the Chinese political sphere, which otherwise might be resisted by local governance in the region. So there are things going on which are interesting, but it is again a question of where each one started and what was allowed by the governing principles of the country at the time that defined where we’ve ended up. I’m not worried about free speech per se for the same reasons I’m not worried about the application of the internet in general because I think there are good and bad uses of it.

I do think what we need to do is provide a way for people to navigate. We talked a little bit earlier about the missing editorial role in traditional media. I think that’s starting to be played by individuals on the internet. So if I monitor, I still monitor Chinese media, both English language and Chinese language, but my Chinese language is not as strong as some, and so I have friends who have now built their businesses on monitoring Chinese media and providing external views for third parties, and I think that’s going to continue on, and those individuals act as editors because they provide a sense of what is sensible, what’s not and what the extremes are saying, and I think these independent editorial voices which allow us to navigate either languages we don’t know, but potentially subject matter or political areas where we’re a bit fuzzy on I think is a plus. And I think that’s the return of editorial guidance in the absence of a structure only possible because on the internet you can have independent revenue streams.

BR: And you think if we extend that analogy, this would be the equivalent of like having a blue tick on Twitter. These are people that have been independently verified as trusted sources.

IS: The problem with the blue tick is that Facebook decides who gets it and who doesn’t, and there are people I know who deserve one that don’t have one, and there are people I think don’t deserve when they do have ones, and Facebook’s decision about who gets the blue tick seems extraordinarily arbitrary at times, and also Facebook remember is driven largely by communities. If you read the legal text as I always do on these things, it’s community guidelines that decide as much as it is Facebook individuals, and if you get a very vocal community, whether it’s the religious community or an angry community, they can drive policy on Facebook because Facebook just simply doesn’t have enough staff to monitor it. So I don’t think it’s like the Facebook model. I think it’s more like the buyer ratings on Amazon or eBay or Taobao because the consumers themselves rate it, and it’s like book ratings. Although again, you get manipulation of book ratings, but…

BR: How would that get round this sensationalist problem, which is the things that get most read today are the most sensational? How would you get consumers to bid up sources based on their accuracy?

IS: So the sensation problem occurs when you’re going for mass numbers, absolute mass numbers. If you’re providing an editorial service, you’re not going to attract the mass people because they’re not interested. So the only people are gonna come to you are those people interested in editorial voice, and so in the first instance, you’ve naturally selected because of what you’re offering as a service. The others don’t care. They don’t want to look at it. But if you start providing a service, which is editorial, so you’re not writing, you’re not reporting, you’re just saying what’s worth reading and what’s not and why. You may be gathering the opinions around a particular area in a way that makes it understandable to people. That’s a worthwhile service and people are going to say yes, I liked it or yes, we don’t and if you offer example slightly biased towards one way or another, it’s going to be evident in the ratings very quickly. If you’re biased towards the left, the left is going to love you and the right is going to hate you. If your comments, negative and positive, are balanced, it’s a pretty good indication you’re doing a good job. I think in a subset, it’s mass media that suffers from the trolls and the noise and the inherent bias in trying to attract mass numbers. If you start to do it in a more segmented way, I think the problem is less.

BR: Do you foresee a world where everything is smaller?

IS: I do think we’re going to get segmented media. Yeah, definitely. In a sense, we already see this in consumer groups. Not in a big way yet. I expected to see more by now. I would have expected Facebook to be niched more than it has been and we still all use Facebook even though we complain about it, if nothing else as a means to review the media that we’ve signed up for. But yes, I expect more niche media to take over groups from the big mass media and that doesn’t mean they’ll die. It just means that we’ll have some niche media as well.

I, for example, one of the first media groups I look at in the morning is CNBC because it is business focused and because the headlines there are more attuned to the investments I have made and other things I want to worry about. And then I go to more general media afterwards and I have a bunch of things like that. There are even things I paid for. I’m a racing sailor and there’s not very many sources of racing sailor news available, so I subscribe and pay for the ones that are of interest to me. I think they’ll be more of that.

BR: You think there’s a future for you in the local newspaper you’re helping?

IS: I think there’s definitely a future for local news. I think there’s a future for niche news. The concept that we used to talk about in the magazine world is addiction. You want to be able to generate addiction on the part of your subscribers because they need to have that issue every month. They need to have that buzz of whatever the subject matter is that you’re talking about that they can’t get as well from anywhere else. Whether you’re able to do that depends on staffing and management and all the other things that go into building and keeping a company around, but I absolutely think there’s a market for it.

BR: Going back to China, the big news at the moment is Hong Kong, the Hong Kong riot. What’s your interpretation of the Hong Kong riots within a Chinese context? Because I suppose the simple lead for us is this is the autocracy of China under attack, but I think it’s probably much more nuanced, if you really understand that region.

IS: It’s complicated, of course. The 1987 agreement, which turned into the 1997 signature and handover between the British government and the Chinese government created a period of 50 years during which Hong Kong was supposed to have a semblance of independence, but it was always clear from the beginning that as soon as China was in control that they assumed it was going to be a transition of a time, not a 50 years on their own and then click… be part of China. The 50 years was hoped to give Hong Kong time whilst China evolved. At the time of the handover, China was much more closed than it is now post, but it was still much less the China of today, much less developed, and so there was the hope that, at the time when Hong Kong became fully part of China, that the transition will be less painful.

Clearly there are concerns. There have been concerns for some time, but they were elevated by one particular case. The notion that a Chinese citizen would be taken to China, extradited to China for prosecution that worried locals and is not an unreasonable concern, and China allows us certain leeway for certain places because they’re outside the boundaries. By the same token, they can’t be seen given it’s a big country and hard to manage to accept too much from anyone space cause they’re worried that would spread. And Hong Kong has a special case because of this arrangement and because it’s on a different side of the border and because Hong Kong’s position is clearly special within China, within Asia, but there’s a limit to what they’ll accept and the violence is, it’s a risk for Hong Kong. It’s a risk for Hong Kong’s people in general because at some point it becomes embarrassing and Chinese government doesn’t like embarrassment.

I’m surprised It looked like they were gonna come across the border with tanks a few weeks ago and it didn’t happen. So wise voices prevailed and it didn’t escalate in that way and they are patient so we’ll see what happens. It’s a tricky situation

BR: but do you think what’s at play is simply democracy in Hong Kong or do you think it’s also about wealth inequality and other issues that maybe aren’t talked about as much?

IS: All politics has all those elements mixed in. There are components that are economic based. I remember writing in my Master’s thesis about the fear that Hong Kong Chinese had during the handover talks that they weren’t gonna be able to make their money and get out before the Chinese came in. That sense of the big force across the border has always been there in Hong Kong. It’s part of what’s driven creativity and development there. Same is true in Singapore with its neighbours. I think all of these things are built into the Hong Kong question. I think it’s very hard to separate these things out, but as in anything which starts as one issue, people jump on board. Sometimes it’s noisy people who like breaking down walls. That’s not helpful and it’s dangerous for Hong Kong.

BR: Where do you stand on the question of economic growth in China? It’s clearly been an economic miracle, but some people argue that it’s a miracle that’s been sustained through a lot of cheap government debt over the last few years. Is China due or about to have a slowdown, and is it already having a slowdown that maybe isn’t being recorded as such?

IS: Suddenly the numbers that the government publishes both on its growth where we believe they understate it by the way, even at its peak and at the current level where maybe they’re overstating it need to be taken with a pinch of salt and usual external analysis and yes, clearly there is a slowdown already taking place and yes, part of the growth that took place and development took place was essentially free money, but not just from the government. It came from overseas. There’s a huge amount of foreign direct investment, which fuelled the growth that took place. There’s also a natural growth. You had hundreds of millions of people moving from farmland into the cities. You had the most Darwinian business environment you can imagine, where people who had not had the freedom to build economic models in their countries suddenly could, and there was this fierce, fierce, constantly fierce battle.

Foreign businessmen, friends of mine talked about in the nineties and later and even today about how fierce the competition is there. They were talking about how the Chinese companies treated them. But actually it’s how the Chinese companies treat each other. So it is a really quite Darwinian business environment, and I think that remains even with the slow down. Now a number of people have for some time been predicting a crash, and I, for one, am surprised that we haven’t had a bigger correction since. I’m sometimes surprised and sometimes not. They have very, very good bureaucrats, very, very good technocrats both trained in China and abroad, and they’re very, very good at managing complexity, and so maybe this, there is clearly a larger proportion of nonperforming loans within the local banks than is being declared, and the assumption has always been that the growth would eventually build within those areas to the point where the empty buildings would get filled and the empty highways would get filled and that, you know, if you’re patient enough, the holes would get filled by people moving in and growing and that the economy in general would grow and the developed population would grow, and the middle class would grow as it has done dramatically over the last 20 years. So in general, I’m not worried about Chinese growth. Yes, there’s probably going to be a correction. Will it be hard or soft? Hard to tell. Just super hard to tell.

BR: And you’re not worried that the trade war with United States is heaping an extra level of sort of exogenous pressure that will be difficult for these technocrats to manage?

IS: In a word, no. It’s a more nuanced answer than that. First of all, let’s say that I think that the complaints that the Americans and others have had about Chinese rules for engagement in China are warranted. IP control, which industries you had to have a local partner in and what they were able to do and the imposition of JV rules and so on, all of these things created a bias in favour of both China and Chinese companies, but that’s kind of what you’d expect since everybody wanted the market. So I’m not sure it’s unreasonable that they did this.

By the same token, it’s not unreasonable that people want to now reset the boundaries. China is no longer a developing country. A lot of things have happened and so to want to reset the rules I think is not unreasonable at all. The manner in which you do it as another question, and there are obviously issues about diplomacy or the lack of it, which might cause some concern, but the timing of it from the American point of view was the right thing. It’s only now with China in some sense of where growth is a little bit shaky and we are wondering about hard landing, soft landing. The US are taking advantage of that to try and get this change happening. So from the US government point of view, we’re leaving aside the manner in which it’s being done. It’s not an unreasonable approach and it’s not unreasonable timing.

From the Chinese side, I think it’s problematic only if it spreads to being a global issue. The US is one portion of its exports and exports are only one portion of the GDP of the market. I think if China decided that it didn’t care, it could probably play this long game for a long, long time and just refuse to sign anything and they’d be fine. So I don’t think at the margin the American pressure is enough to create a much bigger problem than they already have because the problem they have is significant. There’s the second question, which is the issue of the acceptance of the Chinese government amongst the Chinese population and many people have written about how people are willing to accept a lot of the things that government decides because the country is in a position where everybody can now make money. Everybody can do well. There’s an opportunity for everybody.

BR: So a tacit agreement…

IS: Yeah, so as long as opportunities remain then everybody says fine. It’s just the government. It’s the way they are. If that opportunity decreases, if people feel that they’re unhappy with governance and they can’t get out of whatever situation they’re in, they can’t do better and have their children lead better lives. Everybody in China lives for their children. Well actually they used to. That’s changing. I think that might cause issues which are as much political as they are economic.

BR: And is that the one thing that would cause China to change direction and change its relationship with the rest of the world? What do you think it might happen now with the existing pressure in the trade war?

IS: I’m not sure that any of this makes China change. The Communist party has a long history and a clear structure. Chinese governments through history have always had long memories and patience. I don’t think external factors are going to make China change. I think if China changes, it’ll be internal factors.

BR: If the future of the global economy is built on new digital network businesses and those businesses are coming out of China and the US and notably not out of Europe at least for the time being, what is the future of Europe?

IS: So it’s true. There was a chart that went around the internet had those big red balls on the left hand side, which represented all the Chinese tech companies and then the medium sized blue balls on the right hand side which represented all the American companies, second Chinese tech companies, so at 10 sentences and all the rest of it, and there’s this tiny collection of little yellow balls in the middle of which was European tech companies.

And so looking at it that way, it doesn’t look great for Europe, but that’s innovation and that’s the companies that are driving new models in the world. There’s a whole bunch of other stuff that goes on in incumbents and it’s not just development of technology that’s important, but how you use it. So since a lot of what I foresee about the application of tech in the future is thinking of it as a utility that permeates different components of your business, I think that Europe’s position isn’t necessarily disastrous because it’s not developing all the pioneering companies in this space. It will be disastrous if it’s not able to adjust its existing businesses, and so I would look closely at management, senior management in big incumbent companies to see what digital awareness there is. I do this already when I’m making investment decisions.

So public market investment decisions, I review the C-Suite in every company that I look at and I’m trying to find out if there’s anybody at that top level, that top layer so Chief Executive immediately below and then below that who is strongly digital aware for whatever reason. I look at their background, I look at their CVs, I look where they have been, I look where they studied, trying to assess whether or not, I think they have people who can make the decisions necessary when they’re made propositions either by third parties or their own staff. I think that’s one critical factor. It’s not the only factor of course, but it’s one critical factor for deciding whether I think a company is likely to succeed or not.

So it’s hard to answer your question. I don’t think it’s possible to answer your question just on the basis of where the pioneering has been done. There’s no question there’s more pioneering being done in both China and the US than in Europe, and that’s unfortunate, but it’s a function of smaller markets, lots of different languages, our approach to funding, the availability of previous entrepreneurs to feed back into the new entrepreneur community. There are lots of reasons why Europe is not leading in the space, but that doesn’t mean it can’t do well with the technology. It still has a lot of smart graduates. It still has a lot of smart business leaders. If they’re able to adjust, if business models are able to adjust, it could do fine. I do think that adjustment is easier in smaller countries than in the bigger countries, but we’ll see.

BR: I think we’re going to have to get you back for part two if you would be kind enough to come back, because there’s a whole section that we didn’t cover off around entrepreneurship in the social sector and all the great work you’ve done amongst others, WheelsPlusWings, but I’m going to ask you to finish with your assessment of the extent to which the social sector can take advantage of some of these same trends in digitalization and so on, and also the extent to which it’s realistic to think you can mesh entrepreneurship with the social sector.

IS: I’ve been a great fan of something called the Global Social Venture Capital competition and the implications of the competition for a number of years. I was a judge at London Business School in London and what it did, what the competition did, I think it’s based in the US and Wharton and North-western are the universities involved. Although I am out of touch now so I don’t know where it is at the moment, but it was the notion… It was a competition for business schools particularly to encourage MBA teams to solve social problems with the business model. I call them non-self-funding charities because the notion of social venture has so many fuzzy definitions, you have to define it every time you use it. So I think of it as self-funding charities, an organization which is totally organized around doing good, not just tangentially that happens to pay for itself.

I think that the guiding parameters of having to make sure that the thing makes money or doesn’t lose money and ennobles everybody involved in the process, which is a terribly important part. I’m a big believer in this, in the old notion of teaching a man to fish rather than giving them a fish because you teach them something which they can use to generate wealth for themselves or at least generate a living for themselves. That’s much nobler than having people rely on charity. I’m not a big fan of charity.

All the social projects that I’ve involved with over the last 15 years, I’ve been trying to make them self-funding rather than relying on the founder having to spend all their time with their hand out, begging for money to give to the right cause. I absolutely see a role. In fact, I think it’s the future of do good for people who want to try and change the world, coming from entrepreneurship background to understand how to build organizations from scratch, to understand how to lead people in a direction, to understand how to generate both funding and revenue in a marketplace that solves problem. I think it’s just a question of focus and I think we’re at a time when people are more aware. I know that the younger generation, Gen Z and the millennials are already attuned to that notion. At least a lot of them are. I have two daughters, now 28 and 25. The older one has her own sustainable food venture in London. She’s just going through her A Round.

BR: What is the company called? We’ve got to give it a shout out.

IS: Nibs etc. Nibs etc. is what it’s called. She takes fruit pulp from high quality fruit producers in and around London who would normally throw that away and turns that into really scrumptious snacks and granola and crackers and other things, so it’s a great approach to food waste, but the products themselves are actually yummy, so that’s nice. She was always a chef right from a very young age. Her problem at the moment is an interesting problem. She can sell more than she can produce. Everybody loves the product and the story is one that works well and she is someone who can sell well. The issue is production. She doesn’t have enough hours in the day with the staff she has to produce enough to sell what she can sell. She has orders coming in from companies for distribution within company buildings that she can’t fulfill. So she’s trying to find a sub-contractor at the moment, and of course the sub-contractors… she’s too small for them. So she’s at that space where she’s too big to manage with her staff so she’s hiring people, but too small for the subcontractors to produce for her, but you know, it’s a classic consumer product problem and it’s a good problem she has to face.

BR: It’s a problem that other entrepreneurs can solve for. It’s a Shopify for the consumer goods sector…

IS: Yes, and then the issue here is she needs a certain quality. Yeah. They also have to produce it a certain way. She’s very much… she’s consistent about ethics and values throughout the value chain of her business, which is the approach that I take to businesses and how I try to corrupt MBA students today is to have them think about all the components of the value chain, not just the end product nor the sourcing of funding.

So that’s Chloe and she’s doing amazingly well with this, and the second daughter is in private equity, and in a space which is a worthy space, which I won’t go into, so I think the younger generation already understands that you can apply business understanding and entrepreneurial methods to solving social problems, and I think that’s a big plus for all of us. The issue is the rest of us.

BR: I don’t even know where to begin to try to summarize this and maybe I won’t even try to summarize it other than to say, this has been brilliant. I knew it would be wide ranging. I knew it would be fascinating, but I didn’t realize I was going to be left feeling this upbeat about technology, future of the world and how younger generations are going to save us. So thank you very much, Ian. Thank you very much for your time and hopefully we can have you back on again.

IS: My pleasure. Happy to be here and yes, if you’d like more than that, I’m happy to come back.

BR: Thank you very much.

Nurturing brands, families and funds (#6)

Structural Shifts with Adrienne Perramond, President of Business Angels Switzerland (BAS)

Together with Adrienne Perramond, President of Business Angels Switzerland (BAS), we discuss the landscape of angel investing in Switzerland, lessons for entrepreneurs, the changing nature of branding and marketing in the D2C age and more.



Ben Robinson: Welcome to Episode Six. We are with Adrienne Perramond, who is an angel investor, startup advisor and an independent mediator. Adrienne works as the president of the Business Angels Switzerland, a Not-For-Profit Angel Investing Association. It’s the oldest one in Switzerland and before that, Adrienne did many things including a career in marketing in the consumer goods and luxury goods set and she went on to found a company called Transfer Solutions which was a relocation service based in Neuchâtel, which she sold in 2001.

the basics of marketing have not changed. I see the startups. I mean, they still have to identify their target group, but how they’re going to go to market, evaluate the barriers to entry, the pricing strategy. So in that sense, the basics of marketing haven’t changed. The tools have changed, clearly.

Ben: Okay, may we slightly change track now because I want to talk a bit about consumer goods. This is an industry that we’re fascinated by what or at least the transition that this industry is going through has been fascinated because clearly a lot of people talk about how the internet has always changing many industries. Not that many people talk about how it’s changing consumer goods. But to us it’s having a radical impact, I suppose what we’d like to do is ask you to compare your experience today working with startups with the time when you worked at TAG Heuer and Kraft and tell us what you think has changed about marketing in those years, what’s, you know, what’s been a constant and what has radically changed about marketing?

the consumer has a lot more bargaining power

Ben: You know, I think we’ve observed this happening which is you don’t need to have billion dollar marketing budget today to have brands that people would recognize, but I suppose it’s almost the converse of that is theoretically any direct to consumer company stands a chance. But I suppose the converse argument is that people’s attention span has got shorter and shorter, and are bombarded with messaging and marketing every day. So for me, it feels a bit like a double edged sword, which is, in theory, anybody can go direct to the consumer, because the cost of distribution content is practically zero. Having said that, it’s quite difficult for whatever you distribute actually land with the consumer, because the consumer is time-poor, attention-poor. how do you how have you seen that play up?

with DTC, the consumer has changed from physical interaction to much more of a digital hiding… behind the comfort of the digital world, and in that sense there is an opportunity to reach the consumer in a more emotional way and that is being met in the DTC with the influencers.

Adrienne Perramond: Well, I would say if you take DTC, as in direct consumer that automatically is more of a local market because you know, to succeed, you’re going to concentrate on more of a local area. So in that sense, that’s changing. But if I look at mass consumer… the industry like General Electric, for example, or even Procter and Gamble, what they’re doing is I mean, General Electric, their most profitable line of business is, for example, the health sector where they are working on medical diagnostics equipment as in MRI and health data management. And they are spending over 5 billion in R&D compared to for example, Nestle, which has I think about one in 1.7 billion in R&D. So take General Electric, they’re not just selling appliances or they are working on innovation through the R&D and hopefully will buy the startups that are innovating, which will help them keep up with the market the way it is today. And if you take Procter and Gamble, yes, what will happen is you can take, for example, a product of theirs like Clear Blue, which is pregnancy tests where you have Eva, which you may have heard of, which is a startup, which has developed a wristwatch and the mobile app which women can wear and which will give them the nine vital signs of fertility and help them see when they are most fertile. Well, now they want to move on to and use their product as a contraceptive method. So I mean, you have ClearBlue, you have contraceptive methods, which will be replaced by more new, innovative and disruptive products.

So, there is less physical interaction, people need to be entertained, they need to be somehow emotionally touched in another way, then maybe in the past where you would have more physical interaction. And so in that sense, you need to identify yourself with others maybe more so because you’re alone in your digital world. And I would add that brands should actually lead the example of helping consumers move away from this digital filter bubble that we’re in.

Ben: In terms of reaching the consumers. So I guess theoretically, you know, if you think about marketing theory, it shouldn’t be theoretically possible there to be such a multiplicity of small brands in the marketplace. Because the consumer being rational and have limited time and attention, would seek to use a supermarket theoretically or Amazon. But it’s just quite interesting that we now see such proliferation of brands and products. Are platforms like Shopify making this possible. And is it a long term trend? i.e. are we living in this new world of the long tail of very small suppliers? Or is this just a moment in time phenomena? And ultimately, people will buy everything through Amazon and they don’t really care or they can’t manage with quite such a fragmented supplier base.

Actually, our biggest problem was that sometimes they had too bigger budgets, and we couldn’t find expensive enough housing. Twenty years ago, it was totally different.

Ben: Great. Okay, so we’re going to change track again, would ask you about Transfer Solutions. For the benefit of our listeners, what is a relocation agency?

today, parents still need to make choices, they still need to make choices. […] I like to take the example of Helena Morrissey, she’s a very famous CEO of an investment bank in the UK… she had nine children. Well, her husband stayed at home and took care of the children. Great. It’s a decision they made together. But you need to make choices!

Adrienne Perramond: The tough part was working from home, actually. Because it’s very difficult to then separate family and professional. On the other hand, it gives you the flexibility to juggle with both, of course I had an Au Pair girl to help with the children.

I was a little naive, because I had seen how other politicians work around me and I thought “it cannot be that difficult. I’m going to go in there. It’s like a business and I’m going to look at it and we’re going to set it straight and then no problem.” And the fact is, it’s not that easy. And that was a good lesson that took me 13 years. And it was a good lesson because politics is not a business.

Ben: So, you’ve also been involved in local politics for a long time. What, Why did you get so involved in local politics? Was it some of these questions around supporting working parents? You know, what was the motivation for getting into politics?

Business Angels Switzerland, we call ourselves BAS. We are a nonprofit association with about 90 members. We all have one thing in common… we’ve been lucky and we want to give back to young entrepreneurs, share our expertise, invest some of our money, and share our networking.

We are really a club where we… I can say we’re friends. We meet we have a meal together, we listen to startups pitch, we do the due diligence together, we share, we compare, we call, we ask for advice, and the members know each other. And although we then invest individually… we do all of the screening, due diligence, investment process together. And afterwards, we follow the company together. So it’s a close knit community.

Ben: We should talk about Business Angels Switzerland, which is what you’re currently working on. So tell us a bit more about Business Angels Switzerland, what what does the organization do? How did you get involved? What’s the difference between Business Angel Switzerland and some of the other angel investment groups in Switzerland?

one of our criteria for investing in a startup is that they have an exit strategy, exit strategy does not mean that they have to sell their company within so many years, it could be that they will be profitable and buy back our shares. And that is maybe a way to shorten the time to exit.

Ben: Can you point to any great success stories, companies that you’ve invested in that have big exits or pretty large organizations today?

I won’t look at the other angel investing groups as competition at all. Personally, I like to work with them, because let’s say a startup is looking to raise a million, they won’t get a million from BAS. Our investment rounds vary between 150k and 400k. And if you can have another angel investing club who will also invest, then it’s positive for everyone. So I like the idea of working together and there’s enough to go around.

Ben: What’s the value proposition of BAS versus other Angel clubs if there’s competition for angel investing, arethere’s some things that you offer that other clubs don’t?

Switzerland is I would say, compared to other countries, it’s a startup country. The startups are everywhere in Switzerland.

Adrienne Perramond: Okay, so at BAS, what we do is we have a jury and the jury will pre screen the startups before presenting them to the members, our criteria is that they have to be based in Switzerland, they have to have a disruptive technology. So that is, there has to be an innovation. Services all that, less so. I mean, unless they have software, something which is innovative, if possible with an IP… and then they have to have a low valuation and have an exit strategy and offer a place on the board either as a member or an observer. And if they meet this criteria, then usually there’s a pretty big chance that they will be invited to come and present which does not mean that the members will be interested.

Entrepreneurs… keep your valuations low.

Adrienne Perramond: The Swiss startup ecosystem is very dynamic. It’s very dynamic, partly because we have our two engineering schools. We have EPFL in Lausanne, and we have the ETH in Zurich, which has doubled its researchers in the last 20 years. It attracts a lot of foreign brains. So we have excellent schools and parallel to that, we have all the parallel engineering schools and what we call the Haute ecole, the Lausanne Hotel School. Saint Gallen. And then we have the government support, which is very important is industries that enables startups to have grants link to R&D, training mentors, and sometimes not enough matching between the startups and investors, but they have a budget of CHF200 million, which may seem like a lot. In Israel, it’s 1.6 billion. So that’s the big problem in Switzerland, there’s no money in government support. I mean, there’s no money in this was an example of government support.

Strategy is dead. Long live strategy! (#5)

Structural Shifts with Markus Menz, Professor of Strategic Management at the Geneva School of Economics and Management

Together with Markus Menz, Professor of Strategic Management at the Geneva School of Economics and Management —part of University of Geneva — we explore the role of corporate strategy in the networked age.

  1. February 2019:  — co-authored by Markus Menz, along with Sven Kunisch and Julian Birkinshaw
  2. 2017: , Markus Menz and Fabian Barnbeck
  3. 1937: — Ronald Coase

You can follow Markus on LinkedIn.

Ben Robinson: For this episode we are talking strategy… Our guest for this episode is Markus Menz, who is professor of Strategic Management and Vice Dean for Development at the School of Economics and Management at the University of Geneva. Markus, welcome, Thank you very much for joining us.

Markus Menz: Thanks for having me.

Ben Robinson: How long have you been teaching in the area of strategy?

Markus Menz: I’ve been teaching strategy for more than 10 years now. I actually joined the University of Geneva in 2015, so now about four years there. Before that I was teaching on the faculty of the University of St. Gallen. I was teaching strategy there for six years and before that I spent a year at the Harvard Business School, I did research there… and prior to that I did a PhD at the University of St. Gallen.

Ben Robinson: Ok. I guess, I guess since you’d been in the profession for 10 plus years, you… like us, have seen lots and lots of change in how strategy works. Maybe you can kick us off by just giving us some kind of definition of how you see strategy, how you would define it.

Markus Menz: I mean, strategy in general, I would still say is very much the same than, than 10 years ago, at least when it comes to the, that’s a more general definition. I can give you an idea of what I understand a strategy and what I usually, explain as being a strategy. Strategy is to me still, and there are referred back to let’s say as the old days of strategy to Michael Porter and others, who said, strategy is about making clear cut choices.

I think that’s still true for today. Strategy is about making choices and it is about deciding, what to do as, as an organization, as a firm, and what not to do. And that’s the harder part of that question actually. And to me that’s still relevant, even though nowadays it may have changed how strategy is being done, what the topics of strategy are about. And of course, also who is involved in strategy these days. But the core question to me is still the same of question of strategy. It is about making choices and deciding where to compete and deciding how to compete and making choices where not to be active. And this leads to what I would refer to as a fundamental trade off between being strategic on the one hand and being opportunistic on the other end. And we’re gonna discuss this probably a bit further later on, but to me that’s very complicated.

Ben Robinson: Do you think that line, is that where the line has changed in strategy? Cause I think the way you, the way my Michael Porter defined strategy, the way you are defining strategy, where it’s about choices and in particular the bit that people forget… choosing what not to do. These were, these are almost timeless concepts, right? Strategy defined like that we’ll look, we’ll always be relevant. But, so I guess the question is more in this self dichotomy between what is operational and what is really strategic. Is that where the line is changing? You know, I guess another way to express it would be, is his strategy becoming more about how to compete and less about where to compete?

Markus Menz: That’s a fascinating question to me and what is relating for me is the challenge to define what kind of time horizon strategy concerns. And well traditionally strategy is being defined as being concerned with the long term and Alfred Chandler said it’s about, the development of the company’s long-term goals… and to subsequent allocation of resources to reach those goals.

[min 5]

And, I mean this was done based on a study of industrial enterprises back in the 1960’s. So, it is something that was true back then. That strategy is concerned with the long term and what the long term means. I would say to me strategy is still about making choices that matter for a certain time horizon. But the question is what kind of time horizon do you consider. And that depends very much on the context you are in and the context has changed and therefore also the time horizon of strategy has changed to me.

Ben Robinson: But do you subscribe to the view of that just simply planning horizons have shortened? Or do you also believe that the companies can operate with more than one time horizon? I mean, the reason we ask that is because, you know, we we’re a big fan of this sort of zoom in zoom out theory. If, you know, you can plan on a horizon of say, five years or 10 years when you’re making very big decisions about product strategy for example. But, on a more operational basis, you’re maybe trying to optimize on a sort of nine to 12 month window? So I guess the question is, have time horizon shortened or have they bifurcated or multiplied?

Markus Menz: I mean, referring to the first point, we do have evidence for that. The time horizons have generally shortened strategy. So, we did, for example a regular studies. Where we surveyed chief strategy officers over the leading 500 companies in Europe. And those senior strategists indicated to us, over the past couple of years, that the strategy horizons have shortened from close to five years to a bit more than three years. This was something that we could figure out in our surveys. But of course, and I can come back to your second part in a minute. But of course this very much depends on the context again and I see as a deciding factor still what kind of industry sector you are in. So what is your investment horizon, for example? Are you in a software, environment? Are you in a industrial environment, for example, or in a service business? So it’s very much dependent on that.

Ben Robinson: Does the data that you’re referring to, do you see noticeable differences depending on the sector? Like it does TMT companies have a shorter horizon than manufacturing companies?

Markus Menz: Yes, they do… there’s a variance across industry sectors. Definitely so, it depends on the industry sector. And then the question is, that’s the second part of your question. Well are there different time horizons to consider, from what I can see, I would say yes and I would say, that a greater alignment or unification between operational tests and short term strategic or tactical decisions, has become visible on the other hand. And it refers to the longer time horizon, I still see that there is a need for companies to have a long term vision. Or I mean you could use vision as an analogy here for, for strategy. But I think that’s still very decisive to decide where the company should, should be heading at. Not just over the next six to 12 months, but in the long term.

I mean you, when you use this dichotomy, I’m of course, I’m asking myself what is it with the time in between and how to operate between those time windows. That’s a challenge that I see is to align the two.

Ben Robinson: But yeah, I think, and I don’t know if you have evidence to this effect, but it seems to us that the, as you say, but keeping a very long term time horizon, strategy is a constant. The idea that the business model shouldn’t change every 12 months… but the execution part becomes a rolling consideration that, you know. And then the time horizons can be whatever you want them to be, but that’s just a rolling consideration versus the constant that sits above it. Because you wouldn’t want things like brand strategy, business model changing every day, you know?

Markus Menz: No. But the challenging part here is to ensure that the rolling part, that the operational part doesn’t run across, your long-term vision. And what I see, for example, very often in organizations is that they — in larger organizations — is that they have two different ways of doing strategy. The one is a classic strategic planning process or where they have, I don’t know, a three to five year planning horizon window or even longer than that depending on the industry. And then they have more, this… well, which I would, I shouldn’t say opportunistic, but which I would call maybe the more spontaneous strategy process. Which builds on very specific strategic initiatives that they launch depending on the opportunities that are arising. And, and they adept those initiatives relatively fast and those two processes are usually aligned. But of course you need to ensure that they stay aligned over the course of the development of the organization.

[min 10]

Ben Robinson: Those longer term strategic planning exercises… I think we could argue whether they’re becoming obsolete. But I mean, it seems very much the case that they still happening at least according to your research.

Markus Menz: Yeas, at least when it comes to larger organizations and also when I talk to startups for example, or fast growing businesses. What I see is that they typically, they have still a vision. I mean it’s not as explicitly formulated or articulated and yet they don’t have necessarily a dedicated strategic planning process, but the team has a clear idea of where to go and what to focus on. And on the other hand, they usually are very good because of the scarce resources, probably they’re very good in prioritizing short term activities. So in coming up with dedicated actions plans where they prioritize for example, as the top three priorities over the next couple of months or so. And that’s a different from very large corporations where you don’t have typically those very specific priorities defined at the top level.

Ben Robinson: But I guess that leads onto the, to the questions that I wanted to ask you, which is to what extent have those strategic planning exercises evolved? Because, clearly, you know, I guess if we go back 10 or 20 years that there would have been exercises that were carried out by a small number of executives. Independently the rest of the organization and they would, and the strategic objectives would have been passed top-down, right? Very much as a directive, this is what we’re going to, this is what the plan is for the next five years, three years, whatever the number, the horizon was… go and execute. Have you seen a shift towards a model that’s closer to the startup world that you’re talking about, there. Where more people are empowered to develop strategy more people are involved in the… Or, there’s a better connection between the people who execute the strategy and the people to formulate the strategy?

Markus Menz: There have been significant changes, I would say also in the mindset of top management, how to do strategy. And you can consider a number of dimensions, for example, you can consider, first of all, why do you do strategy? This has changed. I mean it was, very often in the past, it was considered something necessary. I mean, I still remember when I consulted 10 years ago a company, a medium sized company in Switzerland, that was asking me to develop a strategy with them. But basically it was a CEO, he just wanted to have a written document as kind of a justification of what they were doing. And so this mindset I think has changed. Meanwhile top management, I don’t know any company that doesn’t consider strategic choices as, as strategic priorities and formulating them as something unnecessary.

So it’s the opposite, they consider it quite important. And so as the question is, who is doing it and why? And the who, I mean, strategy has become much more inclusive. That’s what I see in, I mean, on average and in organizations. But particularly in, also in organizations where in the past you wouldn’t expect it from. So, large industrials for example, who do surveys of their employees who involve employees and strategy development exercises. So, it seems to me it has taken maybe two or three decades of ideas that originated from IBM. For example, how to involve people in idea generation… has finally spread across companies. And this is certainly supported by the startup movement we are seeing globally, that somehow infuses new ideas of who should be involved. And this doesn’t only include employees. It also includes customers, suppliers, all kinds of stakeholders that were previously not necessarily considered in strategy exercises. I mean, strategy was something done in the board room previously, but not involving everyone in the organization. And then the final aspect is the how to… the tools. So, was a tool set you would use and and there, I mean you would assume that there should be some more change there.

[min 15]

But from what I see the tools to do strategy, of course some tools do facilitate those interactions of stakeholders meanwhile. But there are not necessarily modern or novel strategy tools out there. So I see that very often companies are still relying on let’s say traditional, could also say old fashioned, strategy tools that were fine for a certain era of strategy. But that are not necessarily useful for today’s environment.

Ben Robinson: So, you’ve raised at least two points there that we want to drill down more into. The first one is really about the purpose of the strategy team. Has the purpose of the strategy team changed from one that was charged with coming up with the strategy and overseeing the execution of that strategy. To being one that coordinates the activities of a much larger group of stakeholders within the organization? And in answering that it would be helpful is if you could share some of your, some of the insights from the report that you published about the consequences and determinants of strategy function sites. So like are you seeing that basically in terms of how well staffed the strategy team is, for example.

Markus Menz: Yeah, I mean just start with, you refer to the central strategy function in organizations. And I would say that not necessarily the tasks or general activities of those strategy functions have changed a lot. Of course they include some of the more recent developments these days. For example, coordinating strategic initiatives across the organization, overseeing sometimes new business development, sometimes you’ll see that internal venture capital arms of, companies are under the umbrella of the strategy function. So those kinds of activities have changed, but the core of their activity is still relatively similar, which includes, well aspects referring to strategy development. And aspects referring to strategy execution. So on the development side, the basic activity has changed, I would say from organizing a formal strategic planning process every year to a more coordinative task. As you mentioned, to coordinate between top management and middle management or even further down in the organization, line employees, coordinating horizontally.

This is something which is very frequently overlooked, horizontally between functions in the organization. So for example, coordinating between marketing, procurement, supply chain management functions and coordinating internally versus externally. So, internal stakeholders for example, in product management and external stakeholders, customers that are relevant or key accounts of the organization. So, this has changed more on the, on the strategic planning side. It’s oftentimes, it’s still referred to as strategic planning, but it has become quite different, how it is being done. On the other hand, the execution side yeah, is these days more concerned with strategic initiatives. It still concerns a lot of, the activities regarding how to execute the decision, where to compete. For example, it includes decisions regarding mergers and acquisitions, divestitures, alliances that are under that umbrella. So those activities are still the same. But it has become a much more, I would say, much more coordinative function than it was before.

Ben Robinson: On the subjects of where to compete, do you still think that’s as relevant a question as it used to be? Because, if you subscribe to the basic notion of the world is moving much faster and also that with technology change in particular, the clear boundaries between one industry and other industry are getting blurred. So is it really the job of the strategy team to continue to make those kinds of bets about where to play? Or is it much more about making sure that the company is fit to play? So it has, by that we mean has an excellent product, has an excellent or optimized business model, and then has real organizational agility. Are they not the sort of competencies that are much more important than deciding making big bets on where to play?

[min 20]

Markus Menz: That’s a tough question. What I see is that at least when I look at the larger corporations, they still rely very much on questions of where to compete, of course those concern the overall firm’s business model. So if you, for example, take recent examples of large industrial conglomerates in Europe, take Siemens, headquartered in Munich and what they want to become as a digital company. They’re trying to reconsider the boundaries of their business divisions in order to develop this corporate, you could say this corporate business model. But I still think that the central strategy function is concerned and should be concerned with questions of the overall firm and not necessarily of the specific, let’s say product specific business models. But rather as a corporate business model so, why does it make sense to have the different products under one umbrella? Why does it make sense to be in certain geographic markets active? And of course, if the market boundaries are blurring, if the product boundaries are blurring because this has consequences for the decisions that they make. But there should still be concerned with those choices because otherwise no one is in the organization. I think they’re the only ones really asking those questions besides the top management, the central or group top management.

Ben Robinson: Another question on the strategic function within organization may or may not be changing… cause clearly as well as the speed of change accelerating… We’re also living in a world where we have an abundance of information. I mean it’s, I think the amount of data that a strategy team works with today versus 10 or 20 years ago, it’s exponentially larger. Is that helpful? Does that lead to more precise decision making or is it at a,in some ways a distraction do you think?

Markus Menz: Well, I think it should be helpful. It should to lead to better decisions, but does it do so…. that’s, that’s a question that I would, where I would be a bit worried….

The amount of data is there, the question is how to deal with that data. And what I also observe, and this is something that also colleagues frequently note and I sees the same when it comes to to data and information technology and organizations. Very often, I mean, it’s considered, as something that must be done, that must be considered. But the question in the beginning should be, why do we need a certain data? Why do we need certain technology? And this is something that is not necessarily being asked. So that’s one aspect, one facet here you could say. The other facet this, when I look at large organizations, multinationals, sometimes there are very smart strategists working in those organizations who see a need for, developing new technology that supports eventually how to do strategy.

But the need is not shared by everyone in top management. But this is about to change. What I see now is that the top management has started pushing those topics as well.

Ben Robinson: Is data helping them to make better informed decisions… Because there’s so much risk involved in making these choices. The more that you can couch those choices in terms of data and demonstrate that it’s a really well formulated, informed decision is great. But I guess on the flip side, the more that you rely on data that potentially the slower the decision making comes. So do you, is that where the trade off is? Is it between collecting the data to make an informed decision versus continuing to make very quick decisions that are required and in a fast moving environment?

Markus Menz: I don’t think that this is necessarily a trade off. I mean, it sounds to me like an excuse that executives probably oftentimes articulate. Because what I think is required is a suitable technology. And the same applies actually when I discuss, for example who to involve in a strategy process with company executives. What they typically say is, yeah, of course we would like to involve everyone but we don’t have the necessary resources. But of course you could rely on technology that facilitates this. And I think you should start thinking about what kind of technology is suitable to deal or manages this amount of data. I don’t think that there can be too much data.

Ben Robinson: Okay, cause I guess it was another way of formulating the question which is… surely there’s an optimal point of which, you know, with, once you’ve reached 80% level of conviction based on all the data you have. Then making a decision there is preferable to waiting for 100% of the data because otherwise you’re not first mover…

[min 25]

Markus Menz: I mean the challenge for me would be not so much about the data here, but about just about making the decision. And I have the impression that many organizations rely on these days, at least, on very good data. Of course we can always improve. I mean, but maybe they’re close to the 80% already. But when it comes to the decision, the data’s not necessarily considered and…

Ben Robinson: Got it, so you’re saying it just becomes an excuse for people who are indecisive in the first place?

Markus Menz: Yes. It could be. I mean, I’m a bit worried about taking a very rational view on strategy and I experienced and therefore I also shifted to, part of my research focus towards the individuals who actually do strategy. I experienced that… this is a very much, I mean, strategy is as much depending on the behavior of the individuals involved as it is on rational choices. And therefore, yeah, we should be careful to, only rely on data. But that’s my experience and view that I developed over the past couple of years.

Ben Robinson: When it comes to decision-making, with or without lots of data, organizations, strategy teams see as are still relying on a lot of, of these tools and models. Are these same models and matrices still relevant because clearly one of the things that we’ve seen is in this new era of kind of networks and ubiquitous computing…. That the nature of strategic advantage or competitive advantage is shifting from way more from being about supply side economies of scale to being about demand side economies of scale. But most of these tools still assume, right, that a company is optimizing its strategy and optimizing its chances of success, based on internal resources and the resources that it could acquire or hire, right? So, do you think the strategy profession has adequately adapted its tooling for this kind of new modern world of networks effects?

Markus Menz: Well, let me start with a relatively mean saying, a fool with a tool is still a fool. And I think it’s not so much about the tools. The tools may facilitate a certain discussions. They may visualize certain analysis, but they’re not certainly not as the most important aspect. So, that’s just to start with. I do believe however, that those tools may be valuable if applied correctly and correctly. I mean, first of all, that you need to consider whether the underlying assumptions of those tools are still applicable or still relevant. And for example, if you take Porter’s Five Forces framework, where you try to understand the competitive forces in an industry, and potential and the threat of of potential new entrants and what you could do about it, the underlying assumption here is that you can clearly define an industry, right?

But the industry boundaries have become much more blurred these days. So there you would see an example where it’s probably difficult to apply the same tool and in the same forms these days. Another example is BCG portfolio metrics, um, where you try to map your businesses or you could say products. You could also do it with geographic markets, along two dimensions. One is market growth and the other one is a relative competitive position. And what you try to do is to get an overview of the activities of the organization. And I think this can be still relevant if you find the right criteria to define your markets, to define your products. And for example, Google is still working of that metrics. So, even a company that is considered for being at the forefront of the technology firms, one of the leading firms there is applying one of those more traditional, tools.

On the other hand you are referring to the more demand-side oriented tools. I strongly believe that there need to be more novel tools. But of course to come up with those tools requires also, at least from an academic perspective, it requires some data about the underlying assumptions about the firms or organizations that you consider. I mean, take for example, Porter’s Five forces, this was developed an industrial enterprise in the 1970s, 80s. So, we don’t necessarily have the data yet to develop those solutions. We have started doing it, but…

[min 30]

Ben Robinson: I think for me the Porter’s framework works very well for an established business. You know, like you’re relatively well established. What are the levers you could use to make this business perform better? What are the potential threats coming? I still think all of those things are relevant as long as they’re applied to an arena of activity rather than a very narrowly defined market. But I think the question is more if, you know if we believe that network effects are of much greater importance than they were historically. What strategic theory is there for example, that tells a company you should maximize the number of users because that will trigger, make way more value for the ecosystem and will enable you to become much more to deliver much more, much more value over the long term. Most models or matrices would probably want you to become as profitable as you could as quickly as possible, which would be in conflict probably with that aim of maximizing the number of users, for example?

Markus Menz: It could be in a way, I mean, you’re referring more to the tension between.

Ben Robinson: Tensions was what I was looking for, yeah.

Markus Menz: The tension between exploratory activities and maybe exploitative activity. So efficiency versus a growth for example. And efficiency, I mean, yeah, many of those tools are definitely targeted towards improving efficiency of organizations. Whereas relatively few are referring more to the growth ideas. I mean the Ansoff matrix you mentioned refers to it, the Portfolio Matrix does partly.

Ben Robinson: The problem with the Ansoff matrix is that for me there’s, this sort of implicitly assumes mass markets, you know. This idea that you could just take a product and introduce it to another mass market or, that’s what’s problematic about that. But, okay, I think you’re right. I think, you’ve kind of redrawn the question or you reframed it… About exploitation versus innovation and that’s cause I think that kind of takes this to the second section they want to talk about, which was organizational design. Because there are many ways in which to frame this question of organizational design. One might be, how do you ensure consistency and control versus autonomy and agility. But I agree with you, another one might be how do you ensure that you get maximum exploitation? Maximum efficiency at the same time as you would allow the organization to continue to innovate and you don’t become subject to threats from much more innovative players in your market. So with those two kind of, those two trade offs in mind, how do you, what what are your biggest learnings in terms of organizational design?

Markus Menz: Let me reply to your first trade off autonomy versus control, which is, let’s say one of the very classic trade-offs. Similar to this is also the classic distinction between differentiation and integration. So, you would associate autonomy with increasing differentiation whereas control with more coherent integration of the activities in an organization. Autonomy versus control is, as you mentioned alone, a huge topic and of course you can, you can think about all kinds of structural or procedural solutions that aim at resolving it. I mean, for example, you could argue that there, that you have a core business where you need to infuse more control. Whereas you have more let’s say more innovative businesses where you would like to have more autonomy and lead them separately.

If I really reflect on this and I don’t think that companies should necessarily strive for control. They should, based on what I see these days. They should strive for keeping people in the organization, teams in the organization as much autonomous as possible. And infuse control only were absolutely necessary. I think that’s true in a very general way.

And how do you achieve this? Well, of course, if you think about an organization with hundreds of thousands of employees. A huge enterprise, it’s very difficult to achieve this, solely by infusing a certain formal, organizational structure. What you need, at least to me are three things based, I mean, again, very general things. But as a starting point to think about it. The first one is culture.

You need to have a culture that allows this autonomy. That allows employees making their choices, that allows teams or units, think about a remote subsidiary… that allows a subsidiary to take choices. And without asking or getting back to headquarters.

Ben Robinson: And I guess the culture also allows for mistakes, right? Because if it’s a much more experimental world, we live in.

Markus Menz: Exactly that would be another aspect of culture. I mean you need to be open to those mistakes.

[min 35]

The second aspect that it requires, and this is closely related is the leadership. And with leadership, I mean that you have a certain leadership style in the organizations that you have a certain development of leaders in the organizations. That you have a certain characteristics towards leaders when you recruit people. And we know to look at highly successful organizations, what they care most about, I mean it is about how people are led. Again, I can only refer to Google here who became quite famous for developing, based on a huge amount of data, guidelines how people should be managed and, let an the firm. And it’s just one example of leadership

And the third aspect, it is about the people in the organization. And here, I mean not only who you have in the organization. But it is about how do you empower the people. I mean, you cannot provide autonomy to everyone without maybe educating or empowering the people to use this autonomy in a meaningful way. And, therefore I strongly believe in order to have an organization that functions well, that wants to benefit from autonomy, you need to invest in the people who are working with this autonomy.

I experienced myself in organizations when I talk to executives, when I advise to organizations or educated executives in organizations. That sometimes the people in those organizations didn’t want to have more autonomy because they had some fears. They had some reluctance that this would be something valuable for them. So you need to make sure that they have the skills and the ideas, how to use this autonomy.

Ben Robinson: A slightly more provocative question. Does this all need to still be organized within the structure of a firm? If we get back to a text you probably teach undergraduates, you know, Ronald Coase’s nature of the firm. And he argues that firm is necessary because of very high transaction costs. Therefore, it makes sense to coordinate the activities of people within a firm. Because otherwise, you know, they cost so much time and so much money each time to try to coordinate this if these people weren’t under some sort of common control and common management. Is that still the case or is that an antiquated notion?

Markus Menz: You already provided part of the answer, right? So, there are certain conditions these days in the environment that have changed compared to the times when Coase came up with his seminal ideas. And I mean, the question is, yes it is about transaction costs. It is about should we organize activities within a hierarchy? Is the market more efficient to do so? And I think what happened in the second half of the 20th century, there was a relatively strong movement towards hierarchies. Meaning, firms, corporations …whereas these days you see somehow a different development. You see that markets are becoming more and more important again. Take for example, labor markets outside of companies. Take for example companies that offer a workforce for certain projects, that, for example, allow you to recruit temporary management capabilities.

So, those are all examples that show you that there has been a shift more towards markets these days. And one of the reasons why it’s possible to, in economic terms at least, to have this shift is that the transaction costs have shifted. And it has become a much easier to communicate. It has become much cheaper also to travel maybe than it used to be. And all those kind of things have changed and the result is, and that’s what we see also in our research is.

[min 40]

The boundaries of organizations have blurred and have become less clear. So, and there are a number of trends associated with it. I mean think about open innovation. I mean this is something where you involve customers for example, in your innovation processes. I mean, this requires that there is some communication at it. It involves a blurring of the boundary of the firm, think about a temporary staff that you hire for, for certain priorities, peaks for example. I mean this is something that requires, a relatively weak boundary between the organization and the market. So, so definitely I think organizations have changed. Do we still see a firm? I think yes, firms will still be relevant, but they will changeMaybe the core of such a legal entity would be relatively small in the future and there will be a subset and network of, other legal entities surroundings this one. And supporting this one in an ecosystem, how it’s referred to today.

Ben Robinson: Do you see examples of companies that break themselves up into much more cellular structure… maybe to make themselves more agile, maybe also, to make them easier to work with a network that dissolve the groups themselves into smaller units.

Markus Menz: It’s actually a quite fascinating question, on the one hand, I mean, what you can observe these days is firms, organizations that have a size that never existed before. I mean, when you look at the largest companies these days, how huge those companies are on the one hand. So you see those giant firms on the one hand. On the other hand you see ways of new ways of organizing internally to make it possible to manage those giant firms. And one of the aspects is actually is this modularization you could say, or is it that dispersion of activities in order to benefit from unique aspects at different locations and different areas?

Yeah, and what we did, we studied specifically the dispersion of headquarters internationally and we were concerned what was the question of why do companies actually split up their headquarters and decide to have a dual headquarters? So two locations for the headquarter activities on more than two locations. So, we refer to it as dispersed headquarters. You could also say virtual headquarters. What we were not concerned with was a question of where’s they set up regional headquarters or not. Because our definition of dispersed headquarters is differently. We are not saying that they need to be necessarily regional headquarters. But we say that their central functions that benefit from unique aspects in certain locations, for example, that you have your legal entity, as a corporation, as a multinational based in Geneva.

Then you have your, maybe your finance function based in London split it also too to New York because you want to be close to your external stakeholders to capital markets.

And you have maybe your central it function you have spread around the world with a very large center of excellence maybe in Bangalore. So that’s one way of thinking about it and what we explored is why our companies are doing it. And we observed, for example, that already, and we relied on historical data here from colleagues and we observed that already in the late 1990s, 50% of the companies in our sample, it was a sample that covered Germany’s and Netherlands the UK and US. That 50% of those companies had dispersed headquarters so, more than just one location for their headquarters, even though it was referred to as a corporate headquarter.

And we explored why they are doing it and found that the strategy is decisive of that they have and besides that also the way how they interact with their businesses and functions in the organization is decisive. So whether they have a more, a central or a more decentralized approach towards managing the functions in the organization. At the same time we heard that, we asked ourselves is this a good thing or not? And we discovered it’s not necessarily a positive thing for companies to disperse those activities. I mean, it may pay off in the long run, but we also saw that it decreases the cost effectiveness of the headquarters.

[min 45]

So it increases the costs that you have because I mean, it’s again, a trade off. Should you co-locate activities at one location or should you disperse activities.

Ben Robinson: Because you might get some cluster effects and, yeah.

Markus Menz: Yeah. And do you have communication costs between the various units, think about the finance functions that you split between New York and London. And that has to coordinate with a legal entity in Geneva, then it involves quite some coordination costs here.

Ben Robinson: Just so, I want to move cause we don’t have long left. So, I want to move on to the topic of how education itself is changing. But just one last question. What’s the aspect of strategy that you’d like most like to debunk, or the, or a certain dogma that you think should be debunked.

Markus Menz: That’s a very tough question. Again, what I consider really annoying is the questioning of strategy itself.

Ben Robinson: Yep. Which always comes up, yes, “is strategy dead?”

Markus Menz: Yes, exactly and that’s, that’s something that I really don’t understand and don’t see because the essence of strategy is, as I said in the beginning of the podcast where it is about making choices for a certain time horizon in order to be able to develop an organization, a company in a certain direction. And I think this is necessary for all organizations that you cannot deny the importance of a good strategy. Of course, what a good strategy is then can be debated. But the existence or the need for strategy shouldn’t be debated at all.

Ben Robinson: Would you argue that strategy has become more or less important with everything that we’ve talked about?

Markus Menz: Well, certainly not less important. So, to me, strategy is something that is more relevant than ever. And if you think about, I mean, if you assume, and I’m saying assume because we don’t have much evidence yet. If you assume that there is a high of volatility in the market, if you assume that there’s more unpredictable development going on, if you assume that the workforce has changed, people are becoming more mobile of different preferences. If you assume this, I think strategy has become much more important these days…

Ben Robinson: I am inclined to agree. And then what’s the best way to teach strategy? So, I ask that I guess with two concepts in mind, the first one is, does it make sense to teach strategy in the abstract? Is it more important to teach strategy in a more practical sense than it was potentially in the past? And then the second part is, does it make sense for people to go to university for three years to learn strategy? Or is there a way in which we can educate people faster in a way that’s more liquid, more fluid and doesn’t involve them coming to a physical location every day for lectures?

Markus Menz: That’s a risky question for me because there’s clearly still a disconnect between how we are currently teaching strategy and how it should be taught ideally. In my ideal understanding at least, referring to the first aspect of your question, I don’t think, that strategy should be taught in an abstract way. And I also think that this is not the case anymore at most businesses… Of course you need to understand the theoretical foundations of the core concepts. And it’s still important to know what economies of scale are. It’s still important to, as it is, for example, to know what network effects are and how a networked economies work. But it is still relevant to understand those theoretical underpinnings. It’s still relevant to know the various concepts and frameworks and tools, but it is as important to be able to apply those tools…

Markus Menz: And just to give you an example of what we are doing is, we let students in the first year of their undergrads and not just learn those management tools, or strategy tools. But they also have to come up with business plans, with ideas for concrete businesses where they use those tools for and develop something based on the analysis building on those tools. That’s just one example. Or another example. I’ve worked with companies where we designed executive education management development programs. And there we usually have a mix. A blend of some input from myself on the various tools, recent developments as well as we have, a lot of group work on concrete projects that they will be pursuing later on in their organizations. So that’s something that, where we incorporate the actual doing of strategy, in how we teach strategy.

[min 50]

Markus Menz: The second aspect refers to the classroom setting. I mean, it’s still think it’s necessary to have it … when you consider a program on management and business administration that it’s three years that are necessary. For strategy alone, I wouldn’t see such a huge amount of time. What we do see at the same time, more on an executive education level is that there’s increasing demand for shorter executive education rather than the classic executive MBA or full time MBA programs. So we do see that, executives, aspiring executives, that they are looking more towards topic oriented, short term programs, like a three to four day programs or a regular online interventions where they can learn on specific topics.

For example, think about a program that develops aspiring board members in the area of digital topics. So, that will be a more specific education rather than a fully-fledged executive MBA program.

Ben Robinson: So, and it was unfair of me to position that as “either…or” because I knew, okay, there’s a lot of blended classroom and online learning and so on. Online learning does, is that as effective as classroom teaching in your experience?

Markus Menz: I mean, there are pros and cons when it comes to those two formats, I experienced myself that online learning can be quite effective particularly as it allows participants to or students to reflect more. To digest of the information and material in greater depth as it is the case with, or sometimes the case at least with in-class formats.

What I also experienced is, and I did this myself a couple of times, direct interaction can be very valuable when applied in an online format, which is not as feasible in an in-class format. So there are advantages of online learning, of course, there are also disadvantages. Students frequently mentioned the difficulty of having an engaging class discussion online. Of course, it is possible with today’s technology. But on the other hand, it’s very difficult to convey a certain spirit or atmosphere through online communication tools.

Ben Robinson: And do you believe that the institutions like yours are adapting quick enough? Or do you believe you are also at risk of some sort of Clayton Christensen type disruption?

Markus Menz: Hopefully we are, I’m confident because I see some relevance of an institution like ours. If you take the University of Geneva as a whole or the business school, the Geneva School of Economics and Management specifically… I think, there are certain facets of an institution like ours that make us unique, compared for example to a standardized online offering or even compared to another private business school. And this is of course, first of all it is a stimulating environment in which we are in. I mean, it’s not only about faculty educating, or teaching students. It is about interactions between students. It is about interactions between students and alumni for example, and the university serves as, as a facilitator of those interactions. And those are live interactions in person. And I think those are still the interactions that matter more than, than just as the online,or virtual interactions.

And secondly, I think we have a dedicated faculty that is very well known globally for their rigorous research. And so we not just teach or convene knowledge, but we also create knowledge. So we try to come up with insights that are unique and at the forefront of our fields. And we try to use this knowledge also to lead our teaching. And I think this is also something that prevents us from becoming irrelevant, as, as some colleagues claims these days.

[min 55]

Ben Robinson: So I’m going to ask you the same question again, but just about academia, is there an aspect of academia that you find really frustrating? That you would like to jettison or some aspect of academia that you find overly formalized that you’d like to do away with? For example, the nature of academic texts. What you said is very interesting, the way you said it’s very inaccessible to the lay person…

Markus Menz: That’s again, a very tough, but also to me, very interesting question. I mean, you could also rephrase the question and ask what will be the one thing you would like to change about about your profession? And I think personally if I think about academia and management specifically, not, I’m not speaking about other disciplines that I’m not that familiar with. But at about management as an academic discipline, you could also sometimes include economics here. But, but management in general, I would say there has been an increasing divide between between the academic world, and the world that some refer to as the real world. The world of practice and of those two to whom academics should actually contribute to. And the difficulty here is that some of my colleagues, I’m not saying all of my colleagues. But some of my colleagues clearly focus on their research on their fundamental research without considering its relevance.

And that’s to me relatively risky because I think we are serving one purpose and does this is improving how organizations work. How organizations are being led, being managed as these days, and if we are not concerned at all with the relevance of the questions, which can be very specific tiny questions. That are not necessarily important for the executive running those organizations. This is a huge risk because there is a risk of a further disconnect between academia and the questions that are being studied and the questions that matter for executives, and managers in the real world.

Ben Robinson: Should it be easier for business people to become academics? In this field, in particular, it’s one where if expertise comes from being a practitioner, then it would be good to blur the lines between practitioner and educator…

Markus Menz: Yes, exactly, it would be, it would be great if there would be a greater collaboration for example, or greater interaction. Just to give you an example, I mean I usually get my research questions that I study from conversations with practitioners or from newspapers, articles in and the Wall Street jJurnal, the Financial Times or wherever. So I see certain phenomenon going on and I then think myself, okay, how can I understand those phenomena better? But I also have many, many colleagues who look into the academic body of literature and ask themselves,  and that’s a starting point. How can I contribute to this academic conversation without necessarily considering that this conversation is, is actually something that is currently relevant for organizations.

And but of course, coming back to your question, I mean, is it needs to be closely collaboration for sure. There needs to be more interaction and maybe also more diverse backgrounds of academics working on, or studying those topics, the most fascinating studies that I oftentimes see from colleagues are those of colleagues who had a different career before they actually entered the academic profession. Yet it is quite difficult to make this career change, but this is something that is clearly enriching this conversation.

Ben Robinson: Okay. Just before we leave, so we’re gonna tweet out the links to some of the research, some of your research that we’ve alluded to during the conversation. Anything in particularly like you’d like to highlight to our audience, anything any blogs or journals or anything that you think for those people who’s super interested in strategy they might want to look into?

Markus Menz: Yeah, I still think that some of the more classic practitioner oriented outlets like Harvard Business Review, Sloan Management Review or even the McKinsey Quarterly are, are still very valuable sources for getting an overview on a specific topic or a specific aspect. I would also recommend your audience to get directly in touch with academics if they’re interested in certain topic areas.

[min 60]

I mean, they see oftentimes, for example what kind of areas of expertise in academic have on their web pages. And, and simply reaching out to them it doesn’t cost anything and it oftentimes provides them with some valuable input. And academics are usually, very open to share their insights and learnings on a specific topic. So, that would be an advice that I would, like to share here.

Ben Robinson: And if, if anybody wants to contact you, how do they do so?

Markus Menz: Well, the topics that I’m focusing on are these days primarily corporate strategy, still topics referring to corporate headquarters, centralization, decentralization and the organization of top management teams, and boards of directors. So, corporate governance questions as well and one question that I would like to particularly highlight that I’m currently concerned with is understanding how to do strategy in a way that keeps up with the modern development, both in terms of changes in the environment, but also keeping in mind technology, that builds on and copes with this complexity, but on the other side simplifies doing strategy. And if you have examples regarding that, I would be very happy to learn about them and to discuss with you, how to maybe generalize and further improve those strategy processes.

Ben Robinson: And if they, if they do, they should reach out to you through LinkedIn or your email.

Markus Menz: Yes, I’m fairly active on LinkedIn and I do have an email address…

Ben Robinson: Great, Markus, thank you very much indeed. I think if I were to conclude, it would be that the nature of strategy, both in the way that it’s taught and the way it’s executed are changing. But strategy is more relevant than ever. So Markus, thank you very much for your time.

Markus Menz: Thank you very much for having me. Ben.

Startup Success Recipes (#4)

Structural Shifts with James MINERS, serial-entrepreneur and now Senior Advisor at Fongit

Together with James Miners, serial-entrepreneur and now Senior Advisor at Fongit — Switzerland’s premier startup incubator — we explore what it takes to make the journey from scientist to startup founder, transforming ideas into successful mass-market products and what is the key to startup success.


  1. Fongit startup support, news & events —
  2. Follow Fongit news —
  3. Overview of the Swiss startup scene —
  4. Swiss startup workshops, coaching, and grants —
  5. Startup Genome Report — Metrics for startup success —
  6. Swiss startup investments —
  7. Swiss startup investments —
  8. Noam Wasserman — The Founder’s Dilemma

You can follow James on Twitter @JamesHMiners

Ben Robinson (BR): For episode four, we’re in conversation with James Miners. James is an international innovator who has made the journey from science to startup, and now supports fellow innovators, helping them to achieve success. If you’ve wondered what it takes to turn an idea into an successful product, or the keys to startup success, this podcast is for you!

James has founded and grown several companies, transforming scientific inventions into mass produced products. For the last five years, he has focused on building the Swiss startup scene and has supported hundreds of innovators and entrepreneurs. He has also used his innovation techniques to support large companies in generating innovative ideas.

James works at Fongit, which is Switzerland’s premier startup incubator where he manages the coaching and incubation process. He is also an expert for Innosuise — Switzerland’s innovation agency.

James, welcome to a p e r t u r e! Let’s start at the beginning. Your career has gone from science, to technology, to product, to people. Please can you tell us about it.

James Miners (JM): Yes. So as a kid I was always excited about discovering new things and making good new things happen. And so strangely enough, I really wanted to push the boundary of what was known in science. So I ended up doing a PhD with someone who went on to win the Nobel Prize for chemistry. And that was fascinating. The problem that we had at the Max Planck Institute, was people saying, well, what’s the application? It was so far out and you have a lot of ideas, but then the question is which of those are useful in the real world?

So that pushed me to industry and to startups and working with taxis that were powered by hydrogen and stuff like that. And in that role, I was ultimately chief scientist. So working on the technology, going from prototype to mass production, multi-generational roadmaps, and then ultimately in the last one, more on the people side and the COO role.

Ben Robinson: So what was the first startup you did after your PhD?

James Miners: So that was in fuel cells for cars and boats. And my job was to set up the research center for new materials. And with that we were able to go from an idea all the way to scaling it up and seeing it in a fully integrated system. And it was a joy because I was working with people on the Russian space program, the European space program and some of the Americans. So…

Ben Robinson: What happened to that technology?

James Miners: So it’s funny, technology has hype phases and for a while the best investment you can make in the world was in hydrogen fuel cells. And then all of a sudden it’s out of fashion. Luckily… batteries became really hip and it’s very similar technology. So I was able to move from doing these fuel cells for those applications and to small fuel cells for the military in Israel and then ultimately to nano technologies for large batteries that you can see in hybrid and electric vehicles.

Ben Robinson: Okay. And so that was that. So the first startup was where? It was in..?

James Miners: So that was in France. And then we ended up having I think, nine sites and we were on our way to raising a hundred million pounds and 93 million signed up and 9-11 happened. So you can just imagine bankruptcies just rolling across. And there I am… in France, 26 years old… first job in the industry, first job in France, and with a team of brilliant people that come from all over the world to join me and we’re in bankruptcy. And that was my first big crisis of leadership. Everyone can sail a ship when it’s happy days. But I was very proud that I could keep my team together in France and teaming up with the Belgian team. We could actually get refinancing and bring that into the second startup.

Ben Robinson: So there is — I suppose as long as these things turn out at the end, these are good lessons learned, right? If they don’t.

James Miners: I learnt a lot. And the second startup really was great because we could take those ideas that we had in the first one and really ramp them up to mass production and I learned a lot in that process as well.

Ben Robinson: So you went from fuel cells to batteries. You went from France to Israel and what came after that?

James Miners: So I went to visit my parents one day, live in new Lusanne and I’m talking to the neighbor and they said, . So I did. And that’s how the fourth startup got going.

Ben Robinson: So what — I missing one. I think. So you did a startup in France, a startup in Israel. [We had two in France]. Two in France. Okay, Both in fuel cells? [Yes] Okay.

James Miners: So the first one got bought by the second and then…

Ben Robinson: Got it. Okay. Okay. And so that brought you back to Switzerland or the first time you moved to Switzerland?

James Miners: No, that brought me back to Switzerland.

Ben Robinson: Because you grew up here or you grew up in the UK.

James Miners: I was born in France, raised in Holland, educated in the UK and Berlin. And then had two startups in France, one in Israel, the last one back here.

Ben Robinson: Okay. That was again in batteries was it? [Yes] Okay. And what happened to that company?

James Miners: We were bought by Dow Chemical and that was at the time where Obama was giving — was stimulating the car industry and also the renewables. So once I joined Dow I could help launch their energy material business. And that’s amazing when you’re helping a large company innovate and bring new technologies to the market as well.

Ben Robinson: A couple of questions I wanted to ask you. One was why not do another startup… because it seems like you had very much had the bug to keep starting new things and… why not do a fifth?

James Miners: Well, if the right opportunity comes along, but at the moment — there’s always this question, if my why is to help make good new things happen, I can either go deep in one or I can work on a lot of different facets of different startups. And because I was really helped by a lot of mentors throughout my journey, it’s incredibly rewarding to do what I do now and I think I can actually have four times the impact just [Interesting] doing that…

…than just working on one and it’s also suits my personality as well. I think. Yes my grandfather always talking about cricket. I wanted to be a good all-rounder and… on one front you’ve got to show to yourself that you can do the depth. And I think I did that with my PhD and my postdocs and being a COO. But on the whole I’m happier in a more creative role.

I think a lot of people idealize how it is to work in a startup.

Ben Robinson: Yes So when you did startups, you found it got very operational very quickly and less about ideation and…

James Miners: You’ve got to manage that process. I really did go from invention to technology to product and then…

Ben Robinson: Which I guess makes you a much, much better mentor. But what you’re saying is what you like about your existing job is you can — you can have an outsize impact by mentoring people, but also you get to concentrate on these of early stage of startups. Is that right?

James Miners: So I like the early bit, but actually what I enjoy is the diversity of questions you get asked. So today it was the employee share purchase plan for a company. It was managing the coaches at Fongit talking about the dangers of making a video of your product because it can really damage your ability to patent them. You imagine that in my morning today, so your brain is being exercised at all of these different dimensions. I think the real questions get more interesting later.

Ben Robinson: And you don’t miss some of the rush, the adrenaline of running your own company or, and I guess also a lot of reason why people get into doing startups is because of the out sized potential rewards that can come later. You don’t miss that aspect. The adrenaline, the potential to become rich or really rich or…

James Miners: What most people don’t know about my job is Fongit is a business and it’s a fascinating one. We’ve got 60 startups that we’re helping who’ve got 350 are employees. And over the last five years we’ve transformed, this incubator being world-class in the way it operates and the way we coach in our process for going from IDF to a fully funded business plan. We’re seeing more Swiss startups going a lot further.

So there’s this whole business side and I’m part of a pretty amazing team at Fongit which has also grown up a lot in the last five years. So I get the whole running a business side or working within a business at Fongit and then the ability to affect the startups without the huge portfolio focusing of running a startup. I think a lot of people idealize how it is to work in a startup. I got married at the age of 45 or 46 for the first time. I think there’s a reason why it took so long.

Ben Robinson: We’re going to come back to that. So there’s loads of things I want to come back to because I think one of the — one of the things we should discuss is there is a false narrative sometimes around what it takes to be successful and run a startup? [Absolutely] I want to come back to that. I want to talk about Switzerland because through Fongit, I think we can start to see some of the impacts of Fongit and other incubators manifesting themselves in way better scores for Switzerland; way more way more vibrant ecosystem.

So I want to come back to that. I want to talk about Switzerland in Europe. I want to talk about Fongit, but I just want to ask one more question about you before we move on to Fongit, which is… all the companies that you did were focused on energy, batteries, fuel cells. I guess you were motivated by stopping climate change or the circular economy or whatever we might call it. Do you not — is that not a burning sort of passion or mission and do you not miss that aspect of what you were doing?

Fongit was set up by innovators for innovators and that was 28 years ago and that’s what we’re doing today. It’s trying to find the best way to transform ideas and research into products and services that deliver social and economic value.

James Miners: So, yes I do think that if you get a gift, you should use it for good. And I have to say when Copenhagen summit collapsed, that was a really big blow to me personally. So now I genuinely believe that new technology tends to improve the quality of life and particularly if it’s in life science, but in a replacement economy, better products tend to also be cleaner. And so I find what I’m doing now is contributing and as if we now look at the movement from clean-tech to SDGs, there are a lot more different ways that you can contribute.

Ben Robinson: What are SDGs?

James Miners: Sustainable development goals. [Okay, thank you] All 17 of them.

Ben Robinson: And so, well, I think what you’re saying is you, you are very motivated by helping the planet. What you’re saying is you’re still having a contribution. It’s just a bit more indirect than it was.

James Miners: Developing technologies for industry is probably a space that is best played by industry itself. Clean Tech is not an obvious place for startups. If you’ve got to prove that you’ve got a lifetime of 15 years and then you’ve got to finance all of that… that’s a tough path of the market as well.

Ben Robinson: We’re going to move on now. So tell us how you started working at Fongit and what Fongit is?

James Miners: So Fongit is Geneva Foundation for Technology Innovation and the story of startups in Switzerland really started 50 years ago with a tech innovator who tried to set up as a company and it failed. And then two years later tried again with his brother… failed. And the third time it was a charm. It became LEM which is now quoted on the Stock Exchange. It’s in multiple companies. A Real Swiss success story.

Mr. Eta when the company IPO, he decided when to take some of that money and use it to help other tech innovators so that they could avoid some of the silly mistakes that he made at the beginning and they could boost their success. So Fongit was set up by innovators for innovators and that was 28 years ago and that’s what we’re doing today. It’s trying to find the best way to transform ideas and research into products and services that deliver social and economic value.

For us, success is having a company of 15 to 30 employees doing something interesting for 20 years, that’s a contribution. It’s not necessarily interesting if you’re a venture capitalist however. In fact, you might end up pulling the plug on this company that could really be viable.

Ben Robinson: And how long has it been going?

James Miners: 28 and half years. [Wow. Okay] Yes, so it was the first one in Switzerland and the guy was really visionary to set this up.

Ben Robinson: Yes I mean it was way ahead of its time, right? [Yes] Because it seems, at least to me that incubators are really, while they thought they were relatively recent phenomenon. [Yes] And in those 28 years, 28 and a half years, I guess you can point to quite a lot of successful graduates from the program.

James Miners: Yes. So we’ve had sort of 11 exits in the last 10 years or so and they tend to be acquisitions by larger companies. Normally the distributor of the product. That long time frame has allowed us to develop Swiss model of startup success and also enables us to play to our strengths rather than trying to imitate other behaviors. So one of the first things I did when I joined Fongit, was try and look at the Swiss strengths and develop this model for the Swiss startup success as opposed to pretending that you’re in Silicon Valley in America.

So Switzerland tends to do high deep tech innovation that can be patent-protected, B2B, in a niche. And very often you are going to have a much higher success rate, more successes, but fewer unicorns. And a lot of the narrative around the startups is driven by creating products for venture capitalists. But on the whole VCs aren’t actually tremendously present in the Swiss scene.

Ben Robinson: It’s interesting because a lot of people focus on that. A lot of people sort of say that Switzerland, relative to Israel, or the UK or US, whatever per capita doesn’t have that much VC money. And I suppose one way to interpret that is it’s an underdeveloped ecosystem. But the other way might be that it just doesn’t need it because if most of these companies can kind of bootstrap themselves and they had become SMEs and they’re not pursuing moon shots, then maybe it’s just an economy in an ecosystem that doesn’t require as much VC money.

James Miners: Well I think there’s that. And I think there’s also a question in maturity of the ecosystem. So what you feed a teenager is not what you’re going to feel as a school kid. And so the Swiss ecosystem now is in growth phase. And what’s funny is we’re seeing higher average quality and more of them and they’re going further. So now we are starting to see Swiss unicorns popping up. But our approach is to say we want rabbits. So real actual businesses developing interesting technologies. So the idea is you have lots of these baby rabbits, you feed them rabbit food and at some point in puberty they start growing a horn. At which point you can start giving them Unicorn feed and you’re seeing those metrics going.

However, if you treat every startup like a unicorn, you’re going to kill most of them. [Yes] That’s kind of toxic. And our job at Fongit is to help develop successful startups. Now what does success mean? In fact, that’s the first question I want to ask an entrepreneur. Do you want to get rich or are you wanting to remain in control? and you even believe you’re the best person to grow this? Success will be different in both cases. And for us, success is having a company of 15 to 30 employees doing something interesting for 20 years, that’s a contribution is not necessarily interesting if you’re a venture capitalist however. In fact, you might end up pulling the plug on this company that could really be viable.

Ben Robinson: And you have some quite good statistics on this. I think in terms of the average age of a Swiss founder that the rates of growth and — because its — like I think when you look at those statistics, it’s obvious that trying to turn Switzerland in Silicon Valley or even trying to compare Switzerland with Silicon Valley is just the wrong lens through which to look at this ecosystem.

James Miners: Yes! Just play to your strengths, I think. And it may be it took a few foreigners to come to Fongit and say, look, this is what you do. Well, let’s come up with this Swiss culture of startup success and let’s work on that. So, yes…

Ben Robinson: But do you think — coming back to this story of this narrative around startups, right? So the first one — I’m not saying these are necessarily false narratives, right? But one of the first things that people say is if you want to change the world, you need to work for startup. Do you subscribe to that view? Yes or no. Secondly, the way to get rich is to join a startup. Do you subscribe to that view? Yes or no? And then the third thing is, you’ve got a blitz scale run as fast as you can. Do you sort of subscribe to that view. Yes or no? And I think you would — you probably, I guess you can even turn this on its head and say like they start with the objectives of the founder, But if you can even remember what those three questions were, how do you[Crosstalk]

James Miners: So the third one was, it turns out that premature scaling is the biggest harm to start ups. And there’s a lovely report called the Startup Genome Report and they reviewed 20,000 startups a few years ago and they came up with the term  is the most common reason for startups to perform worse. And I understand the dynamics. At some point, you’re on generation three, your investors are all “launch it” — — but all your costs come into marketing there and production there.

So you need to be damn sure before you’re going there. On getting rich. There’s a great book called The Founder’s Dilemma and the fundamental question is; do you want to get rich , bigger pie, smaller slice or do you want to keep control? I asked people that if they don’t want to say I really want to get rich and that’s why it’s clear they want to maintain control.

If you’re in your 20s or 30s, you probably get more money working for a large company or in banking than working in the startups statistically. The average age of a founder in the US is 38 years old; in Switzerland it’s 38 years old. VCs tend to prefer funding younger startups and we love the idea of people just finishing university. But the fact is that, every Swiss startup entrepreneur has finished their university. They don’t drop out.

And a really great way to go about doing a startup is working a large company, really understand the industry and then at some point, whether or not autonomy becomes a bigger driver for you, you’ve got the seed capital, you’ve got enough with a few co-founders to go for one and a half years, then your valuation is much higher. Now you’re going to be less manipulatable by VCs and extra money. And there…

People say startups are taking a leap into the void. No, it isn’t. You go, you get a good coach. It’s an airplane… they ask you where you want to fly, they give you some tips, you take off and you work out all the risks and you manage the hell out of them. And you get a great team and a good advisory board. And yes, sometimes you’re lucky.

Ben Robinson: It feels very much the Swiss way, right, to work in industry for a long time, become a master of the profession and then use that knowledge to kind of make the profession better for a different narrative than, ,you know you leave college and he wants to massively disrupt existing industries.

James Miners: It turns out that in the US the 0.1% fastest growing companies, the average age of their CEOs is 40 and the 0.01% of them, the average age is 45. So it depends which story you want. And when we talk about this question of do you want to get rich or keep control, people say, well… let’s look at Apple, right? He was kicked out and there were three founders and you know two of them. Microsoft, also three founders, you know two of them. So even the examples where someone had it all, they’re not particularly helpful. [Yes] So one of the tough things about my job is you have these outliers, which are very, very interesting, but they don’t necessarily help you dealing with the majority of the people you are coaching.

Ben Robinson: True. And the story of successful companies is told by the people who’ve enjoyed their success and they never place or they never attribute any of the success to luck, right?

James Miners: Yes. Or they say it’s timing, which is luck. So one of the worst moments I had and I promised myself when I was going to be successful, I would not do this, is… you’re there… and there’s a successful entrepreneur. And if it’s a guy, he’s going to say… . And he said, . Well there were three co-founders, but I killed two and  and I’d be sitting there in the audience thinking you have to be a super hero to succeed.

This was tremendously demotivating. Now I understand why I’d say that, but no, most of your life as a startup, you’re not a butterfly. You’re actually a caterpillar. And I think the helpful start up and that narrative is, hey look, these are the stupid things I did but didn’t kill me. And nonetheless, I’ve had a really great time. I’ve learned a lot.

Ben Robinson: What proportion do you think of the stories and how companies were founded and how they initially felt success are either fabricated or kind of retrofitted because it sounds great?

James Miners: So I work with the professor of innovation at IMD called Stewart Reed. And he said, the problem with his area of research is if you’re a good entrepreneur, you’re good at telling stories then you will tell the best stories. So it’s a story. And when I’m coaching people that is finding the most compelling narrative. There are many stories, but which is the best one? And the question is, which is the most helpful to the goal of building a thriving Innovation Nation?

People working together and also more women entrepreneurs. Because also this mantra narrative, it isn’t the truth and it’s not helpful. And so much of this is people say startup is taking a leap into the void. No, it isn’t. You go, you get a good coach. It’s an airplane… they ask you where you want to fly, they give you some tips, you take off and you work out all the risks and you manage the hell of them, out of them. And you get a great team and a good advisory board. And yet, and sometimes you’re lucky. So your third question, I forget what — oh your second…

The best way a large company can get the most value out of a startup and also help that startup is to be their customer. Because the value of a dollar from a customer is 10 times that of an investor.

Ben Robinson: I think we covered everything. Do you need to do a startup to change the world?

James Miners: Yes, in terms of innovation types, you’ve got incremental innovation. 70% of innovation is incremental. That’s fine. Then we’d like to think about the breakthrough, which is an IP, you know… new science. And then of course you’ve got the disruptive, which tends to be not much technical breakthrough, but it’s really market driven. So that might be more entrepreneurial innovation. And of course the ideal is when you get all of those together. So the Swiss model tends to be — it’s existing needs solved better. And then the question is do you want to build that yourself into a sustaining company? Some point you want — why would a large company want to buy that?

Ben Robinson: Good. So I’m pleased you brought us on to the subject of large companies coexisting with small companies because, so you’ve obviously lived this in your experience with your startup and Dow Chemical. And, I guess you also live this through Fongit because I would imagine one of the things you’re doing is trying to find both customers and also innovation partners for the startups that you incubate. How easy is that to do?

James Miners: So that’s the weakest points in Switzerland’s innovation score cards, the collaboration between large companies and small companies and startups. And there’s always this debate, should we invest in a startup? Should we do contract research for a startup? The best way a large company can get the most value out of a startup and also help that startup is to be their customer. Because the value of a dollar from a customer is 10 times that of an investor.

And that means the large company is not only getting something that’s super fresh, they’re really testing it before everyone else and tailoring it to their needs. It’s phenomenal. On the other hand, if they want to invest well, there are people like me that know how to make an awfully good slide deck and the proof is in the pudding. So my recommendation is if you’re a large company and you want to innovate, we know that startups are three times more Capex efficient in developing something than a large company.

Also, startups don’t have any brand risk. If they go test something and it doesn’t work. In fact, it’s remarkable. When I was acquired by Dow Chemical, we had three times the number of people. But if we were sampling in the existing customer, there’d be a debate. What happens if it’s not perfect? Well, it’s still going to be better than what we shipped six months ago. Right? But we’re selling this other stuff and this might hurt our brand. And as a manager, that’s the last thing you want to do. So startups can get customer intimate and iterate so much quicker than a large company.

So it does make a lot of sense for a large company to, particularly if you want to explore different positions in the value chain, can even do it on a different brand powered by this, or acquire a startup at the right stage. And then it’s basically rebranded and you scale.

Ben Robinson: It always seems like it’s a very healthy coexistence because as you said, one has — one company has a brand, a lot of customers, a route to market and the other one has innovation. And so does it always seems like it’s a very, very good symbiotic match when you can match a big company with a small company. But what you’re saying is just become their customer and you steer people away from some of the other things that they do. Like investing in startups like innovation centers and all these things that are less effective, you would argue.

James Miners: So the investing it’s very complex. [It’s not really in the DNA of the company, I mean they’re not specialists…] so the point with the investing is it works well if it’s completely separate. But if it isn’t, then you set it up to do those risks that you wouldn’t normally look at. But then you’re getting analyzed using the normal part of your brain, which says it can never work. So you’re not really de-risking it in that case. And then we haven’t really seen the success that was anticipated from these corporate centers where they would integrate startups.

Ben Robinson: Yes well there’s a big movement isn’t there? To try to learn from startups and where do you stand on sort of intrepreneurs and that movement, maybe I’m putting words in your mouth, but it seems to me that you’re saying one company is good at exploitation, one company’s good at exploration and they should work symbiotically, not try to copy each other or…

It’s one of the funny things that if you’re a consultant or you’re an external person, people listen to you. The moment you’re inside the organization, you’re one of 50,000.

James Miners: Well I do think if a large company is going to know how to value an innovation and not shoot down every new idea… they do need to nurture it internally. And you just asked an interesting question. What can large companies learn from startups? And there was a very smart guy from Nissan who approached us two and a half years ago and he said,  

So we worked with them to get an elevator pitch and an executive summary slide where they could pitch the idea to the committee of VPs in three minutes. We train them in Question and Answer. And then it was do we kill it? Do we adopt it immediately or do we ask for a full slide deck, full slide deck, 12 slides. Also trained them to pitch Q and A, took them three months to do. Again, half of them were adopted; one third maybe killed and another 20% just wanting some extra detail. But it turned out the tools that we’re using in startups are highly effective to help those large companies innovate.

And because, you know, you got to be aware, if you see all of your ideas that you’ve gone in house in the next few days and you kick all of them down, well you’re not going to be around in the next five, 10 years. And what was fascinating from the vision of the CEO… said people are managing really well to a certain level, but if they want to become a VP, they need to know how to invent the future. So they need to run an innovation group or on a project or two for 18 months before getting that promotion because someone in the organization has to build the future.

Ben Robinson: I don’t know — you probably have statistics on this too, but it seems that most innovation that takes place within a corporate comes when that corporate is prepared to do things outside of the body corporate. So set up a new entity or give the power to a group of people to go off and think differently and take risks. And so in the same way it works more when they worked with startups because that’s inherent to the culture of a startup. It seems that you’ve got to try to create that culture and maybe you use a separate vehicle if you want to get that kind of innovation in a corporate. Like does applying the business model canvas or whatever work if you just tried to apply it to the body, like divisions within a large corporate.

James Miners: Yes. You always going to have the innovation wars between building the future and the value delivery engine and all credit to the value delivery engine, they’re paying the bills and incremental innovation works fabulously. Now, if you want to do something very different, particularly changing your position in the value chain, so imagine all of a sudden, let’s say you’re Nissan and you want to explore selling cars to Uber drivers. Just want to have a think about it. Now, you upset all of your fleet vehicle manufacturer, you attack all of your existing… so with this idea, just changing a little bit in the value chain, you can damage 90% of your existing business. So that would be silly.

And on the other hand, if you could spin it off or if there was another startup that was doing it and you could help them a bit where you can explore that without that huge risk. So the other problem is if you make this external innovation center within the large company where these people end up being freaks and when they go and talk to the silver back gorilla is that we’re not in running the production and the core thing, they’re like, you’re a freak. So they lose the ability to convince people inside. And it’s one of the funny things is if you’re a consultant or you’re an external person, people listen to you. The moment you’re inside the organization, you’re one of 50,000.

Ben Robinson: So how many years have you worked for Fongit?

James Miners: It is been five and a half now.

Ben Robinson: Five and a half of the 28 and a half. And in that time I would imagine you’ve had exposure to hundreds, probably thousands of Swiss fintech companies because you probably looked through their applications, you were involved in the selection process, then you’re incubating. So you said there’s 60 startups. Is there an annual intake?

James Miners: Yes. So each year we had about 300 people applying and then we’ll screen those down. We’ll pre incubate about 15 so, they spend three months with us and a coach just seeing… what do they really need? Is there a fit? are we the best people to help them? And then we can move on to the incubation, which — typically you’d say, well we want it to be three years. But sometimes, the really great companies you want to keep sticking around because they’re inspiring the other ones. And particularly for me, coaching becomes scalable where you can say,  and now she becomes an expert because she’s explaining it. So…

Ben Robinson: and those successful companies are also happy to stick around in the program or at least in the building or…?

James Miners: Yes. So some of them get too big and at some point when there were about 30 people, they’ve got enough internal dynamics and unfortunately for us, and we’ve got a rent revenue, but we do feel it’s the moment for them to graduate. But some of them ask us, at pivotal moments, for example, during an M&A can we come back on the board of directors to help them for that? so we’re there and our mission is to help startups maximize their value really.

if it takes a village to bring up a single child, it takes a country to bring up a successful start up

Ben Robinson: Is there a Swiss part to your mission or not?

James Miners: Yes, so we have a few guiding principles. One of them is proximity. And what we noticed is if there’s someone in our building on the way to the photocopy machine that asked me a question, I say, And that’s basically saved them a week. And it’s as good as coaching as you could go and meet for half an hour. So we found that the value of proximity of entrepreneurs talking to entrepreneurs and their teams as well. When you are in R&D and you realize that the head of sales is really annoying. You think it’s your head of sales that’s particularly annoying.

When you see other startups, you’ll realize that jogging with another guy from R&D, it’s just the natural tension that you’re going to have. Those are the kinds of things that are useful from proximity. And then we have two other guiding principles. One is excellence. We’re trying to improve the whole time. And the other one is exceptions because anyone that’s going to be successful has to have a sustainable differentiated value proposition. And we can have our rules… but on the whole, if the evidence is some of our best successful companies will be different and will not be in the natural sweet spot.

Ben Robinson: Are there any downsides of incubating starts? I mean it’s difficult to see them. But one thing sometimes people say is that if you put, if you put sometimes introverted people in an open plan office, then they maybe become less inclined to share ideas and collaborate as kind of the only downside that I’ve heard. But are there any thought of others or if you’re mindful of these things then you take them into account?

James Miners: Yes. So… I’m smiling because when I joined Fongit every year we’d have an event with wine and these little nibbles and ties and the politicians will come and entrepreneurs hate that. So the first thing is…what kind of environment do introverted science geeks like myself like? And what kind of events do they like and how do we create an environment where they can thrive and be celebrated? So it turns out you need a kicker table, turns out that they do like coffee and croissant… that’s sort of our town hall meeting. And you can get the information across and getting the right kind of event and the right mix. That’s a lot of how you get the magic to happen.

But you’re going to need to have some noise canceling headphones. You need to ideally have some quiet zones. You need a variety of different spaces. And so we actually had to change our staffing. So all of a sudden you realize, well if we want to build a community where people interact, well, I’m a physicist, I’m not great at building parties. So we started working with people that had been trained in hotel schools, or business schools. And the moment the person that’s running our space has a background in events and facility management and brings a whole range of different competencies to the ones that we have. But again, not tailoring it to extroverted sales people, but trying to create that environment for Swiss entrepreneurs.

Ben Robinson: Is it competitive? So you said you’re getting 300 applications. It sounds like you’re oversubscribed, but does that — is it becoming harder to attract the best companies and what is the competition? Is it other incubators? Is it WeWork — do you think in those terms or is that…?

James Miners: Someone once said, in Geneva, the problem is not the 100 startups that are supported by the incubators. It’s actually the 20,000 companies that we can’t support. And literally if a company applies to Fongit and they’re based in or around our region or in Switzerland, I will try and find a way in my reply to help them. And most of them won’t come to Fongit. People apply, there may be in social entrepreneurship, well there are other good places for them. There’s the Swiss training. There are other colleagues in different fields.

If they’re in Zurich and they want to do something that is where they can equally well do that. And in Zurich as Geneva. Why move? Why not go to F-10? So it’s strange. We’re a foundation… not for profits. So our job is to try and help these people. And sometimes the best thing to say is, well, go and do this InooSuisse workshop and come back to us.

Ben Robinson: I should have asked this at the very top, but it’s only Swiss companies you incubate, is it?

James Miners: Yes, so you asked that was what I was saying about proximity. You’ve got to be here and be in Geneva.

Ben Robinson: What I was saying in effect is; would ask you to move here at least for the duration of their program. But the, the applicants don’t have to be Swiss. And what — you filtering only for Swiss applicants?

James Miners: No, no, no. So most of our our founders are international and but they have to be based here and live here. That’s the idea because simply we have so much more impact if they are here and you’ve got limited resources and time and you want to have the maximum impact, really.

Ben Robinson: Got It. So they might not be Swiss, it might not be a Swiss company initially, but in order to really take part, you ask them to become Swiss and settle here and base the company here?

James Miners: Yeah, So 90% of Swiss startups or startups in Switzerland are set up within 20 kilometers of where the people live. And in fact, that’s your great advantage as a founder is that — where do I want to live? And giving, you’re taking a big risk on your job. It’s kind of important to be there where you have your friends and families so that when that evening is available and you can go for beers… you can. And I think that was one of the mistakes I made with my first startup going from Berlin where I had my life and all the way to the middle of rural France where I got really good tax break. I wouldn’t recommend that.

Ben Robinson: This question occurred to me based on what you said, which is there is there a problem with a) Swiss geographical mobility. Like is it difficult to get Swiss people to move around? If you’ve got successful startup, how easy is it to attract Swiss people to move from, say, Zurich to Lausanne? And then the other thing is b) how difficult is it to get people from abroad to move to Switzerland because of costs, visas? what one of the reasons might be?

James Miners: So the main aim of an incubator is actually to, to grow what you have and help it to thrive. That turns out that, there are some people that are coming from abroad and have very good reasons for wanting to set up their start up here. But we’ve got an agreement with for example, Vaud, the canton next door, which is before the company set up. It’s fair game. Wherever if we can give them an offer that they really want, or they should come and set up the company here.

Once it’s established, you’re going to pay money to relocate someone, they’re going to lose their network because proximity is important. I know when I moved from having my center, the EPFL where my last startup was and Dow was… to Geneva, I had to rebuild half of my startup network. So I don’t see it there’s much… There’s going to be extremely good reason for moving an existing company.

Ben Robinson: But it’s more question about attracting talent?

James Miners: Switzerland and Geneva is one of the most desirable places to live in the world. And compared to San Francisco, it’s pretty good value for money. But the Swiss, actually the European German model of company growth tends to be… it’s a country of small to mid-sized enterprises, you can have little centers. And then you’ll grow, you might find some talent and grow another center of 30 people there and other talents of 30 people there. But on the whole you’re always keep your headquarters in Switzerland because it makes tax sense and it’s good for IP.

Ben Robinson: Okay, I’m going to get back to the question I was going to ask you earlier, which is, so you were working at Fongit for five and a half years, you see at least 300 startups a year because that’s roughly how many applications you get. So you, more than perhaps anybody else in this country, has a finger on the pulse. And so the question I want to ask you is what’s hot in the Swiss startup scene? What are the early indicators that you see of success? What are the — you think of the best characteristics of successful startups of founders, maybe? Just just share with us some of your insights based on all the startups that you see?

James Miners: Okay. So the first thing is…

Ben Robinson: And do they mainly come out of universities?

James Miners: Yes, so that’s an easy question, right? the first thing is, Yes. Solo founders versus teams. Solo founders take three and a half times longer time — more time to reach scale and two and a half times less likely to pivot. So we know the narrative of the lonely leader on their own. It ain’t true. So the next one is [debunking part of the established narrative right?] Yes. And then it’s always about diverse teams because you want people with (a) if they can get along and work together, but you’ve got different mental models going on as well. So that’s very valent. So balance team tends to have about three times or more user growth.

Ben Robinson: Is there an optimal number?

James Miners: Actually we got a really great start up and I think they had seven co-founders that was — average age was around 40 when they founded … called OB Wise. And they were a spin out of — it was ST Microelectronics and Ericsson, really good team. So we tend to find also early on if it comes to pitching competitions. So teams with a female member will tend to win that… just on the whole we’re seeing women are better in Q and A which is a big part of — [What do you think that is?] On the whole, guys can see questions as a challenge and women on the whole just — thanks for the question and going for it!

And also it’s aspect of differentiation. When you’ve seen five pitches of just one guy and talking about the team and how diverse they are, and then you actually see two people and they’re sharing the, the voice and the Q and A and one of them represents 50% of the purchasing public.It’s kind of more credible.

In terms of trends, our idea at Fongit is very much bottom up. We believe it’s the entrepreneur, the market and the investor that decide. And we enable. So when I heard the word Fintech via London five years ago, I looked around and we had five Fintech, seven fintech companies already at Fongit and no one in Geneva knew that word yet.

So if you know the word, it’s probably too late. So you’ve got to do it bottom up in that approach. But the biggest advantage I have is I get to see teams every day. Do they have lunch together? How are they when they’re not on show? What progress do they make? Because sometimes, and we’ve had to standardize this at Fongit. If you coach a company, put in a hundred hours and another one you got 10 what you’re going to expect? you know 10x improvement in the first case might not be the case.

So that’s my unfair advantage if I’m angel investing… because I get to see it and I do believe or choose to believe that those companies where you have someone that has the positive energy but also the endurance and is part of a team, that’s a really powerful mix.

Ben Robinson: So you think it’s less — so I do want to suggest that it was about technologies. There’s obviously no direct causation between a great technology and a great success. So I wasn’t — the question wasn’t what’s hot and leading to success because I think you’re right. I think it’s many other factors that explain much better than causation. But the question was more what’s hot in Switzerland right now? Is it in the Medtech space? Is there anything in particular that you would highlight as being world beating and quite specific to Switzerland?

James Miners: So in a word it’s Deep tech. So patent protected technologies, that’s our sweet spot. And then of course, yes, Switzerland has a huge life science heritage. A lot of the financing money is going towards that. Of course you combine that with watch making, with med tech and then ICT is growing a lot in terms of the amount invested there and a lot can be said for the fact that now the ecosystem has matured and you’re seeing B2B software or even B2C. And another bit is that now you have some serial entrepreneurs who are working inside angel groups, like SICTIC, to support the next generation. And that’s really powerful when you’ve got people that have done it giving back, investing, and giving appropriate and actionable advice.

Ben Robinson: How does these groups, because there’s this — I agree with you, those groups has seem anecdotally at least to be having a much bigger impact on the ecosystem. So these, the angel investing groups and there are at least three that I can think of right now that have quite big membership and deployed quite a lot of capital. How do you coexist with these types of organizations?

James Miners: So actually we collaborate a lot. And what I love about Switzerland is you’ve got just enough competition to stay world-class. But on the other hand, you’re exchanging best practices. With us, we want to make sure that anyone that we’re allowing to work with our startups is doing this in a benign and positive way. And then how can we collaborate with them? Because we were the first, at the beginning there was nothing. So if someone can do something even as good as us or better, hey, let them do it. And then we could — we can focus in on the other gaps. So we’ve hosted events with the Business Angels Switzerland who we were the first Swiss angel group, then with SICTIC, then with Investiere. And these would be good.

What we normally do is they bring some of their startups, we bring some of our startups, they bring some of their angels, we bring some of the angels in our ecosystem together. And you’ll find that each of these have their own culture. And maybe that will be the place where an angel would think, okay, here’s a group of like-minded people that I can work with. And on the other hand, these are my angels that prefer to do their own thing.

Ben Robinson: So one of the questions I want to ask you again, from the time you’ve been working at Fongit and other companies you’ve seen, which is — are you able to see demonstrable impact of the work you doing?

James Miners: So what we’ve noticed is, if it takes a village to bring up a single child, it takes a country to bring up a successful start up. So really our best startups, you’ll find that they were — the idea was initiated at a pre incubator called Genius. Then they got the venture kick. Then they may have hopped out to Mass Challenge for three months. They’re founded at Fongit. They’re winning the prize, you’ve got the Business Angels Switzerland and SICTIC coming in as angels. They’re InnoSuisse coached and that’s classic.

You’re getting the best of all of these components and whether you wanted or not as an incubator, your job as a coach is not being the one source of objective truth, but it’s actually connecting them with the best. The funny thing for me is I think I’m a better coach in fields where I’m not an expert. So I’ve been a better coach in med tech because I connect with more experts in those fields and I’m doing the just plugging the entrepreneur.

And the other important thing is to remember… it’s called entrepreneur. It means she does it, and never try and become a consultant, never make them dependent on you. The three rules of coaching for me is number one, do no harm. And that’s very difficult if you’re coming from a large company because it’s so much of your, what you’re going to advise is actually toxic to start up strategy.

And the second one is do just, just enough so that they still own it, they’re independent. You want to do an upgrade in one specific area, the most vital one that creates the most value in a very short time and then they can carry on running.

And the third rule of coaching, I’m trying to find out…

Ben Robinson: Okay, there’s so much I wanted to follow up on that because, so first of all, do you coach the coaches and do you have professional coaches or are they volunteers? The second question I wanted to ask you was, it’s interesting you said that you think you’re a better coach in fields where you’re not an expert because I’ll give you a short anecdote, which is, I was briefly a mentor at an incubator.

I remember going to a session where startup asked for help on pricing. And it was a B2B Enterprise Support Company asking for help in pricing. And 14 mentors turned up to this meeting, giving — dispensing advice on B2B software pricing. And it was absurd. And at one point I asked, ? None of them had. So what other sort of minimum — like if you could be a better mentor and feels you don’t know much about, what are the minimum criteria you have to meet to be a decent coach. So do you coach the coaches, are they professional and what are the minimums sort of characteristics you think of a coach?

James Miners: Okay. So we have developed a process going from from an idea all the way to a funded business plan. So idea — you have to be able to express that idea, getting the value proposition, minimum viable pitch, written elevator pitch, then the testing it, getting to your 12 slides. We’ve got examples of all of those 12 slides financial templates that are accepted by the market, executive summary and so on.

So we’ve got that process and all of our coaches at Fongit follow that process. They’re all InnoSuisse or Platinum certified coaches. So tech startup coaches and but they get each, everyone gets to use their own tools as long as they deliver this in a certain amount of calendar time and a certain number of billable hours. And because as a coach, if you want to stay fresh and inspired, you’ve got to use new stuff constantly, but within that framework.

My director is Antonio, so he come, did quite a lot in classical music and I’m always thinking about this balance between structure and freedom. And I think that’s important with managing coaches. They’re good musicians. You’ve got to give them… there’s got to be enough structure so that we can all work together in driving that startup forward to success, but enough freedom for each person to add their own flavor and also adapt it to the startup.

And then there’s this other aspect between — difference between a mentor and a coach. So a coach is paid to deliver something in a given time. So, ideally 10 weeks. A mentor on the whole, it’s pro bono. You are lucky because mentoring really should be done with at least two or three mentors in the room so that they keep themselves honest. [Probably not 14]

But the danger is if you have a single mentor who is; and off they hop and you’ve got your whole slide deck in pieces and you can’t get it back together again. So in Switzerland, because we have this history of the coaches from CTI and Swiss and Platinum, there is less appetite for coaching for mentoring from our high tech startups.

Ben Robinson: So maybe it was a question on mentoring then, which is what do you think? So if you — maybe express it in a different way, which is if you’re a startup and your eager to get a mentor, what would you advise a startup to look for in a mentor?

James Miners: The first thing would be real startup competence. I would ask or same with any new board member, investor, ask them for reference and then phone those people up. And startups are not smaller versions of large companies.

The other thing is understanding what kind of time they can commit. If it’s a little, everyone wants to give you advice, but what you ultimately want is connections to business and then coaching where you can really go deep.

You know how it is with brainstorming anything. There’ll be a few quick wins but, in an hour and a half meeting, how deep can you go? You can’t really start sculpting and changing a bit of your business out of that meeting, particularly a start up that’s been going for more than six months, which is most of our startups and that depth of work and appropriate actionable advice you can — you need to invest the hours there. And that’s when coaching really can pay off because that is their job.

Ben Robinson: Yes. So in short you’re saying go for coaches over mentors and if you go for a mentor, make sure that person, knows something about startups, not necessarily deep domain expertise and they can actually commit time consistently.

James Miners: Yes. So I will always have one lead coach and then get some mentors and try and use them for connections.

Ben Robinson: Yes, okay. And where do you stand on the whole debate about Europe? Because there’s a viewpoint that Europe’s massively lagging United States and China in terms of building next generation tech companies. Where do you sit on that, do you think — I know your viewpoint is very much Swiss centric, but do you have a view since you’ve worked all over Europe on whether Europe’s doing enough to create next generation digital age businesses?

James Miners: So I’m kind of a bottom up guy, so I’m always thinking what can I do to improve things and what are the gaps and can we do something to change them? Because a while back that was the narrative in Switzerland; we are not good enough and — okay, maybe that belief keeps you surging forward, but it doesn’t necessarily tell you what you need to be doing and more of and how to be doing it.

So I do think if there’s a miss message for Europe, then play to your strengths. Stop complaining that you’re not the United States or something like that because you’re not and you’d only be a pale imitation. So Europe and digital, well as David Galbraith said, we have a strength in design and then we also have a strength in privacy. So how can we bring those round to a more modern view of what the Internet is going to be?

And is there space for an internet that is not funded purely on advertising and your data, but rather maybe having privacy at the core and payments and then you see Swiss becoming a good place for privacy and also crypto, potentially micro-payments. So I don’t have the answer. But what I’ve seen in Switzerland where we’ve really gone from, my exit was the only exit in two years at the EPFL in 2009.

Now it’s every three months. Why? Because people kept on doing good stuff and we stopped trying to do B2C platforms that required huge networks to win and focused on deep tech, niched, B2B, export orientated stuff and then all of a sudden we start winning. And by the way, every now and then a unicorn starts popping up. So I think we’re moving in the right direction.

Ben Robinson: Are you excited that Facebook has started Libra here in Geneva?

James Miners: Well, it was funny because, we were having our team meeting a while ago and I say, look, they’re having privacy problems. So what’s the gold standard in privacy? Well, it’s crypto. So if you want to prove that you’re repositioning yourself. Well, that’s a good one. And if you want to do privacy and Crypto, then Switzerland is a good answer and Geneva. So I think that’s a result.

But the other interesting thing is it’s a Geneva entrepreneur coming back and this was one of the strategies of — [explain that? So is that not an angle that I picked up on]. So it turns out David Marcus comes from Geneva. [I didn’t know that]. Yes. So he co-founded Paypal, Facebook Messenger, and then the question is where do you want to live? And actually EPFL, that’s their strategy, to find Swiss émigrés in the US, and say, . And I think that’s a very smart approach it is…

Ben Robinson: Not many people have picked up on the angle, I don’t think. Just wanted to finish up by asking you — So first of all, I wanted to say that the Fongit events are excellent and we’ll be tweeting out a link to the Fongit event page. We will tweet out links to all of the publications that you’ve mentioned, all of the reports that contain all the great statistics you’ve been mentioning. I wanted to finish by asking you what your proudest achievement is in the time that you’ve been at Fongit. And it doesn’t have to be a single company that you’ve coached, although if you want to mention any great companies, that’s cool.

James Miners: So can I give you two? So first one was five years ago, I was speaking to our neighbours at the incubator, and we were talking about their strategy for the next five years. And together we had this dream we like, could our region be one of the top 30 startup ecosystems in the world? If we’ve done that… that would be amazing. And maybe one day, they will do it.

And literally six weeks ago, the global startup ecosystem report came out and there we are… number 22 in the world. And interestingly, it’s Geneva-Lausanne-Bern as a region. And in Life Scienses we are seventh. Yes, there was a startup genome report, which I mentioned that had studied 20,000 startups and came up with the first success criteria and some real metrics on startup success.

So they’ve always been a reference. So then coming in that was pretty, pretty powerful. And it shows that, it’s not about one start up. It’s about a whole region and other things I like is one great entrepreneur who was working for one company left that worked in another company that bankrupted, started out his own venture, which is doing quite well because our ecosystem is big enough and there’s a need for talent. It’s actually de-risked… your venture or if you’re working a startup that may not work, but we will want you for another one. And I think that’s a sign of the dynamic.

But privately, and this sounds really geeky, but one of the things I’m most proud about is when we developed a new incubation process and new incubation agreements, which were above and beyond what we’ve seen from the US National Business Incubator Association, or theEuropean one; say it’s just taking this profession of supporting startups to the next level and seeing Fongit go from 20 companies to 60 and this great dynamic atmosphere around that. And that’s really rewarding.

Ben Robinson: Fantastic. Well, I would like to thank you very much for your time, and I hope that our listeners feel the way I do, which is I think you’re having a profound impact on the ecosystem and if there was a medal that we could give you for contribution to the startup ecosystem, that would be great. So thank you both for being on the podcast and for everything you’re doing for fostering the ecosystem here.

James Miners: Thanks a lot.

In Pursuit of Happiness (#3)

Structural Shifts with Mike NOLET, CEO at LiveBetter

Together with Mike Nolet, CEO of LiveBetter and former CTO of AppNexus, we’re discussing the limits of what society can achieve through startups, the health risks of being a founder and the importance of wellbeing


Switzerland, wake up! (#2)

Structural Shifts with Martin NAVILLE, CEO of Swiss American Chamber of Commerce

Ben Robinson discusses with Martin Naville, CEO of Swiss American Chamber of Commerce, whether Switzerland is losing its competitiveness in attracting multinational corporations


  1. Switzerland, Wake Up! Reinforcing Switzerland’s Attractiveness to Multinationals


Ben Robinson: For episode #2 of a p e r t u r e, we’re on tour and we’re in Zurich. We’re in the office of the Swiss-American Chamber of Commerce, and we’re discussing multi-national corporations (MNCs) in Switzerland. Specifically, we’re discussing their importance as an engine of economic growth and prosperity and the key role they play as a bedrock of innovation and productivity. The question will be discussing is whether Switzerland is losing competitiveness in both attracting and retaining these MNCs. And to discuss this topic we are with Martin Naville, who is CEO of the Swiss-American Chamber of Commerce. Martin, please could we start by you telling us about your background, the mission of your organisation, and also why are you so interested in this topic of MNCs?

the new-economy companies who have built European headquarters, you know; the Netflix’s, Amazons, Google’s, Uber’s, Airbnb’s of this world. None of them has chosen Switzerland as European headquarters. And that should really make us worried that this is not the place that it was ten, fifteen years ago.

MN: Well, we can be mediocre and then we don’t have those companies and we are Belgium or Portugal when we’d like to be better. And then we need to work very hard. And as long as you do the things right, there is no reason to leave. If we don’t do the things right then clearly, we have a risk of losing them. But I’d rather have them and risk losing them than not have them here in Switzerland. It’s like in tennis, Federer can easily play and be, say, number 100, that’s fine and I don’t need to train so hard, but if you want to become number one, you have to go on court every day. And that’s, I think what Switzerland needs to do is to go on court and train every day.

I think the common factor is basically the people out there selling the business location Switzerland to other companies outside. They do a marketing job. They have a great product, but they have to explain it. […] And so we need people out there to sell it. And especially to the new tech companies who are not used to this European environment and also to Chinese companies. And we do a poor job selling this. […] this is a competition and we have to up our game.

MN: So let’s quickly go back. Switzerland was never one of the really low, low, low tax countries. And also, in Paradise Papers and the Luxembourg Papers and all those things Switzerland didn’t really appear. We were always slightly higher than others, but we were competitive and tax is only just the cost of the product – the product being political stability and the talents and everything. And so we were always, we had a great product and we weren’t the cheapest, but we were competitive. The way to be competitive was ringfencing the foreign revenue and giving them a priority over domestic revenue. And this is where the EU and then the OECD said, we’re not accepting this.

airports are very important, but just not for multinationals. But also for art and science and education and sports and everything. You need a very efficient airport system. And the title of this report is Flying Blind after 2030 because at least in Switzerland, but in many places around the world, you plan roads and railroads 40, 50 years out. Here, we all know that the system is already creaking.

MN: There are not many multinational leaving, but many multinational downgrade their presence. They take certain departments and send them to somewhere else because it’s cheaper or just — they do just a good job in Frankfurt and Munich or Paris or somewhere else. I think Geneva and Vaud have had mostly a flat development – since we haven’t looked at the numbers in depth. All those numbers are strong numbers, the latest report is with McKinsey Company and the report you mentioned is a Boston Consulting Group.

Playing Devil’s Advocate (#1)

Structural Shifts with David GALBRAITH, Partner at Anthemis

Ben Robinson sits with David Galbraith, Partner at Anthemis, and they talk about big topics — fintech, internet business models, economics, politics, the climate — but through the prism of what people are missing or what are they not asking themselves.


David Galbraith: So, at Anthemis my role is to play the devil’s advocate and… what that means is, I don’t come from a traditional investment background, but I come from the other side of the table as an entrepreneur. And what that means at Anthemis is playing the role that often taken by analysts looking for insights and opportunities but taking it one step further and saying… well, what are the kind of businesses that we could build, or people could build in these gaps, and then saying if those example businesses match the deal flow we’re seeing and if doesn’t, could we build something in the Foundry that matches that deal flow. So, what I do is come up with insights, look up market opportunities on those insights, and then where appropriate actually say, well… here is an example business that could be created in this market opportunity.

BR: And how do you stop yourself from entering into group-think. I mean, how do you know if you’re really spotting gaps, like what information sources do you use, for example?

DG: Well, I’d almost go back further and say “What’s wrong with group-think”? The reason that group-think is bad is you get stuck in something that’s immutable. An opinion that if it was right at the time, isn’t right now because environment is changing and what we’re seeing is we’re in a very disruptive period in human history and therefore organisations need to be complex adaptive systems. Like biological ones… they need to react to the changing environment. So, the reason you don’t want group-think is you don’t want to get stuck in way of doing something when the environment is changing.

BR: And how to you test yourself that you’re not entering… how do you not slip into group-think?

DG: So, my background obviously was always as a designer, as an architect before as an entrepreneur. And, when you’re doing something creative… like, if you go to the heart surgeon and say —  — it’s not a good idea, but that what’s you want from an architect, to do something in an interesting and unusual way, to do something different. So, creativity is doing things that are different, and if you’re doing things that are different it means, by definition, you’re not in group-think mode, you’re thinking about things differently, you’re playing devil’s advocate. And, we know, if we look at the statistical evidence that backs up this idea of thinking differently about things, which is, Geoffrey West from Santa Fe Institute in that book  that was released last year, he realised that cities outperform companies. Because cities have weirdos in them, they have people that question the group-think.

So you need a bit of noise, you need a bit of contrariness and one of the things I do at work is to provide a bit of that contrariness and noise. Sometimes it’s a bad thing, it’s not good to have too much of that, but sometimes it is a great thing.

BR: Yes, because you are an agitator and not everybody likes that. So, Anthemis is chiefly looking at fintech. What are the sorts of gaps that you see in fintech, what are people missing, what are people not investigating in fintech? What are the opportunities that aren’t so well documented?

DG: In some ways ‘fintech’ was an irritating term for Anthemis, because Anthemis was predicated on the fact that capital flows are a bit like information flows. They are foundational, they are things that… the internet in the U.S. certainly was built on new ways of communicating, new information flows. And then, you had fintech that was really just the digital-era version of existing finance. So the more important thing is what is the internet of capital look like? What do the capital flows look like when they’re inter-networked? And that’s really at what we’re looking at, we think of a much bigger opportunity.

BR: And… can you expand on that? What do you think it looks like? Put it another way, do we already have some examples of the internet of finance?

DG: So, a lot of people thought the internet of finance would be blockchain. I don’t think so actually, I think this period mirrors exactly what happened with communication and information which is around year 2000 there were a lot of decentralized systems around communication… there was Napster and things like Gnutella, and the whole of Web 2.0 came when that collapsed into… not being a decentralized version of the internet, but looking at the applications that have happened around things like file-sharing and they you got YouTube, Spotify and all the social networks.

So I think what’s happened, and maybe happening again with blockchain, is that it’s not the decentralization that is important, but the idea of internet of money. And I think the internet of money actually has appeared, and it’s the Chinese internet model. I think that the Chinese platforms are not predicated on advertising, they are predicated on payments. And therefore we’re seeing something that is — because advertising is something you do to drive money eventually to people buying things — a payments version of the internet is more foundational and I think we’ll see that the Chinese internet is more resilient and a better model going forward.

BR: Yes. Because it seems to me, when you think about it, having a model that is built on advertising has a number of flaws, right? Because first of all you’re serving the advertising, you’re not serving the consumer, so it creates a conflict of interest. Secondly, it’s a race for attention and we’ve seen what that can do for things like the quality of news and sensationalism and so on. And also it seems to me that you’re putting an unnecessarily small limb on the side of any business, because really… how big is the advertising revenues as a percentage of GDP? So I agree with you that it’s much better to have the internet built on payments — micro-payments — but I suppose the group-think now is that the U.S. internet is moving away from advertising to subscriptions and… I suppose my question is why does it move to subscriptions and why does it not move to micro-payments? Is it a function of the underlying architecture, the legacy and the cost of that architecture, which the Chinese were able to leapfrog and get ahead? Is that the difference?

DG: Yeah. I mean, at the lowest level, the transaction cost is much higher in the U.S. When you link your… if you use PayPal or Venmo, your money is going through an intermediary which is the credit card company, and the deal they made with the credit card companies meant that that they were no longer allowed to promote linking directly to your bank account. So the transaction cost is much higher — and so the only way of then selling media, rather than paying people to watch it through advertising, is to bundle it into subscription packages. But you don’t need to do that in China, because the transaction costs are so much lower, and because the friction is taken out of the system where offline transactions happen so much more easily through people’s smartphones as well. All transaction in China happen in this fundamentally more fluid fashion — which is a bit like when… Eastern Europe went straight to mobile telephones instead of landlines and had a more sophisticated system than parts of Western Europe. I think we’re seeing the same thing happen with the internet, which is the Chinese internet went straight to a more efficient model.

BR: And it will be difficult for, let’s call it the West, particularly the U.S., to catch up, right? Without replacing all of the infrastructure which is so embedded. Just think of all the terminals, everything that’s been built around it. It’s a very different thing to unpick. But that’s why I’m going to bring you back to the crypto question, because if you listen to crypto advocates, they will say that — sure, the U.S. internet, again to use that term, was built on the wrong foundations but the way to get around it is crypto because the advocates will argue that it’s near free, it’s almost completely divisible so you can really manage the most micro of payments. But you wouldn’t buy that argument, you don’t think crypto is the answer to the problem of re-building the right foundations for the internet?

DG: Well… crypto, in its purest form as Bitcoin as digital gold — it’s great, that’s a great use case. Digital gold, it works, crosses borders, it’s purely electronic, amazing thing. But the latency in those transactions is thousands of times slower than the payment system that WeChat has and the volume is thousands of times smaller as well… and the theoretical volume is thousands of times smaller, so it doesn’t… I would argue that we already have an efficient centralized system that’s purely electronic and works.

BR: True. That’s always been my, I suppose misgiving about blockchain, which is — to apply blockchain to payments just seems the wrong use case. For the reasons you said — maybe blockchain will become much more scalable over time but right now it’s just simply not scalable enough to handle payments. And why would you want a distributed ledger anyway for payments? A much better use case seems to me to be settlement versus payments, for example.

Just quickly — because I want to come back to the questions on WeChat and AliPay and so on — just on blockchain, what use cases do you see as interesting for this technology?

DG: Well, there’s the same kind of use cases if we think of what are the use cases for BitTorrent or things like that — that’s decentralized peer-to-peer networks that appeared. And they were actually lastly obscure areas of security or… they weren’t the use cases that people thought they initially were. They had some kind of network advantages, but if you look at things that were originally decentralized, like Skype, they ended up centralizing it. So I think the uses cases… if I was to pick up one use case beyond digital gold for blockchain, it would be things that create resilience by being decentralized, so it might be things like firmware updates for IoT devices where you make it very difficult to hack… like a camera that someone’s bought of Amazon that has had a trojan put in it because you’d have to hack every camera in the world. Those kind of use cases where there’s safety in numbers… they seem to be quite interesting.

BR: Yes. And it feels like we’ve gone through the hype cycle with blockchain, where everybody was going crazy about blockchain a few years ago… and now it feels like we’re almost in the sort of trough of disillusionment, so it’s almost contrarian to now be bullish about blockchain. Have you become more bullish over time or do you still see it a technology largely looking for a use case?

DG: Well, as I said, it just feels very, very similar to the previous wave of decentralization that I think, most people are not as old as me that work in technology, and therefore don’t have the muscle memory of knowing what happened post-Napster, post-BitTorrent. That era was wonderful, that era actually paved the way for Facebook and all these things. So, that’s why I’m so excited to see what is happening in China because it seems to me that this is history rhyming.

The second chess move for GDPR and Article 13 is catastrophic. Basically they’ve just killed the ability for Europe to create its own platform to challenge the U.S., for example.

BR: Just to go back to China, then. How can Europe and the U.S. catch up with the big Chinese players like WeChat, like Ant Financial?

DG: So Europe is caught in the middle between having no platform-scale company and by that I mean — there seems to be something when you have a USD +50bn company that it creates its own ecosystem around it and there’s a phase change there that becomes self-fulfilling. That happened with Google and Facebook. Amazon is a bit different, because it’s obviously transactional. But if we look at Google and Facebook which, in the Western world dominate, it might be that the we’ll see that the transactional stuff that China starts to encroach in Europe — so it might be that Europe has Google for search and we might actually end up having a Chinese platform for payments, unless let’s say Facebook has payments built into Whatsapp.

BR: And it’s the future of the internet then… for, you know, for the thousands and thousands of fintech companies out there — finding a route to market through Amazon in the U.S. and Ant Financial everywhere else, then?

DG: So I think you need to own a name space to become dominant in transactions. That’s why I personally have a bias towards consumer-side of things rather than technology. And so PayPal originally used the name space of email addresses as a proxy for bank account, and then phone numbers became that proxy for bank accounts instead. And the interesting thing is that the control of the phone number ended up not being held by the telcos, i.e. Whatsapp has shown that you can own that. So Facebook owns identity, Facebook now enters into this space. I don’t understand why it hasn’t earlier. I don’t think Apple is the natural winner here, I think Facebook is.

BR: I guess Facebook didn’t because — well, interesting how things played out but I supposed they didn’t want to take on big regulatory burdens. It was a very asset-light platform, very scalable and…

DG: Yeah — and they didn’t own the phone number name space originally, that’s basically what they got with the Whatsapp acquisition. And Whatsapp does have payments in India, but only in India. So whether that will become more predominantly everywhere, I don’t know. But, again, the reason this hasn’t taken off in the way it has in China is that the incumbents are there already so it’s far, far harder to suddenly make people buy things with their smartphones and QR codes in Europe and the U.S., than it is in China.

BR: Just on Europe, to go back to that for a second. This isn’t the first time that I’ve heard you say that Europe lacks internet age platforms — and it’s a big problem and I think it’s quite like going into the industrial era without having any Fiat or Citroën or Renault. Are you more or less bullish than you were before, because it seems that we’re moving away a bit from the consumer internet to something that’s a bit more industrial internet, and that seems like somewhere where Europe might fare better?

DG: So I think the fact that China has different internet from the U.S. means that possibly South America and Europe can now decolonize from being colonized by U.S. platforms. I think it’s actually optimistic in that sense. We’ve created a duopoly instead of a monopoly and because of that — it either means that Europe is either corner of ice and basically we’re caught in that horrible space between China owning one half and the U.S. owning the other — or that playoff means that there are now opportunities for Europe to do platform-scale companies. They may not be social media companies, I think they’re more likely to be financial.

retirement is the biggest shift anyone can possibly image. To put a number on it — the committed pension liability shortfalls in developing nations are $450 trillion. That’s half a quadrillion dollars. So when people talk about billion dollar market opportunities — this is a half a quadrillion dollar shift in money

BR: When we look at the financial companies that might come out of Europe, what kind of spaces are we looking at? Because I suppose there are certain things that Europe does very well that maybe the U.S. and China doesn’t do so well. I mean, for example they’re both single-currency territories, while Europe is a multi-currency territory — which I think lends itself to maybe start-ups that do things around currencies…

DG: No, I think Europe is actually more homogeneous than that. In Europe people actually do have the same currency across many countries but they don’t speak the same language. And so, what America did was — it was a single-language culture which created the modern idea of what popular culture and popular entertainment was, in terms of media. So, when you had media and communication — that works very well in the U.S. And certainly, even in Anglo-Saxon countries, like Britain exporting pop music to America, it worked very well. In Europe, people don’t speak the same language, but there are common standards for insurance across the whole of Europe — while in the U.S. there are different insurance licenses required state by state. So you have a much bigger single market for things that are the language of money. I actually think that the opportunity there — the regulatory opportunity — means that single financial platforms for insurance, for banking are much more viable in Europe.

BR: So the regulators, I guess, have been more proactive in Europe than in the U.S. particularly, in trying to encourage new types of competition, I guess generally but also in banking with PSD2. Where do you stand on some of these regulations? Are they helping or making matters worse?

DG: There are well meaning initial ideas for things like PSD2, but I feel like Article 13, that recent copyright regulation, it’s absolutely crazy. Because the secondary effects are… it means that you create such a bureaucratic burden that no small company can afford that. So it favours only large companies so it plays into the hands of the existing platforms.

BR: Same thing with GDPR as well, I think, no?

DG: Certainly true, but to a lesser extend. You could in theory comply with GDPR. As a small start-up is really hard, but it’s practically impossible to comply with Article 13. So yeah, I think these regulations have been created by people who, in the game of chess, when they look at how the effects of regulations play out… there’s often an initial effect and then a secondary effect and then so on. The second chess move for GDPR and Article 13 is catastrophic. Basically they’ve just killed the ability for Europe to create its own platform to challenge the U.S., for example…

BR: Changing gears slightly. One of the more interesting companies in the Anthemis portfolio is Kindur. I read a blog article that you wrote about Kindur and one of the things that you spoke about in that blog is the enormous size of the pension/retirement market — and it’s not one where many fintech seem to be focusing right now. Why aren’t more fintech companies focusing on the pension market and trying to reform it? Is it just because it is complex and… ?

DG: There’s two reasons, one I think a profound reason, the other one quite trivial. If we take the more profound reason first is that most people think technology companies, because of the word  — and what we’ve seen with the internet is not the kind of research and development that was coming out of Bell Labs and Xerox Park. What we’ve seen is commoditized technology being used to create new applications. And those applications have existed in big markets of change. My devil’s advocate role is to be not so interested in blockchain or A.I. — I’m interested in markets. In shifts in markets in places like mobility, or education, or retirement. And retirement is the biggest shift anyone can possibly image. To put a number on it — the committed pension liability shortfalls in developing nations are 450 trillion dollars. That’s half a quadrillion dollars. So when people talk about billion dollar market opportunities — this is a half a quadrillion dollar shift in money. And because of that, there will be massive opportunities.

And one of the more banal changes there is that the existing model of pensions which started when Bismark introduced them and the idea was that you got a pension if you’d outlived your normal lifestyle and then it morphed into this idea of along holiday after you stop working. That’s not possible now because the support ratio, i.e. the number of people working for the number of people retired is a lot less. So you can’t have people having a bigger holiday unless there are people paying for that holiday. And that’s why there is this shortfall. The only way to do that is to shift from a pension that pays out a defined amount to basically contributing… defined-contribution pensions where you contribute a certain amount and you get whatever you put in, back out. That’s what’s happening and because of that people will have to manage their own retirement — it won’t be management by someone else. And that’s where someone like Kindur comes in. It takes something that… people are not going to be able to do this because it’s going to be difficult — but they’re going be forced to do it, therefore you need a product like Kindur to do it for people.

And just so I close that out… the reason why that hasn’t been been done by other people is because most people that do start-ups are young, they’re not pensioners, and they’re not thinking about their pensions, so this has been overlooked…

BR: But there are a lot of people that are working on this, but sort of on the earlier stage of that, which is “now I`m making more contributions, I should be putting them into ETFs and vehicles that have lower fees”. So there’s a lot that’s happening in the early stage of saving for retirement, but much less that’s happening in the Kindur space…

DG: Absolutely, that was exactly the opportunity that Rhian from Kindur identified, on the asset management side, on the way up — on the accumulation of assets — there’s tones of stuff. On the  of assets, and making sure you don’t run out of many, on making sure — as she says — , there was nothing.

BR: Do you think that we have a massive pension crisis — I mean $450 trillion I think you said is the shortfall. So presumably, at some point, this is going to come to bite.

DG: Yeah.

…on the other side, is this idea that you can have a purely capitalist environment and not look after people who are unlucky, that’s just mad. And it does create inequality. You want people to create wealth, and create opportunities, but you also need a safety net.

BR: So when is that… so does that happen without massive social unrest?

DG: Probably not… but there are all sorts of things that can cause social unrest, like climate change… and pensions is just one of them. Human beings have been very good at getting out of trouble historically, I hope they do at this one. But yeah, it’s definitely up there in terms of things that could cause unrest. When people realise they’re not going to be able to have the same lifestyle as their parents and that they’re going to have to work a lot longer, and things like that, yes it could cause civil unrest.

BR: Will come back to some of these topics, but at the root of some of this is inequality, right? Because plenty of people will have large pensions — and almost magnifies the inequality. Because it’s a contributions based system and… the more you earn, the more you’re able to contribute and the better your pension. And so it will prolong and magnify the inequality.

DG: And the inequality is not really where people currently think of it — right or left. In the sense that, you know, Jeremy Corbyn in the UK — the Labour Party leader — his pension is worth about £2 million. If he was to buy an annuity, that would pay the same, and I`m sure that he wouldn’t maybe think of himself as being that wealthy. But a lot of people that have these defined-benefit pensions they’re worth an enormous amount of money.

BR: It’s almost like the lens through which we’re looking at inequality is wrong because we look at inequality in pay, whereas inequality in assets is much bigger if we include pensions.

DG: Precisely, and I think that basically what we’ve seen is this big shift to assets. Many people would look at assets like houses and think that these people are very wealthy because they’re in the 1% and they’ve got all these assets, but they’re not including pensions as being an asset — if you’ve got a defined-benefit pension.

BR: Just to get into the topic of inequality. It seems to me that there might be a significant gap in the thinking, because pretty much if we want to be crude — you’ve got The Left that wants to, if we talk about pensions, they want to tax people more to fill the pensions gap, tax people more to redistribute more money — and then if we take The Right, they want to do the complete opposite, they want to accelerate growth through lowering taxes, and cutting red tape and so on. Because these opinions have become more and more extreme, and there seems there’s so much white space between them… is there a middle ground? What is the middle ground that sits between those two increasingly polarized views of how you reduce inequality?

DG: Well the middle-ground is to communicate to both sides the benefit of the other. If you were to talk about capitalism to people vs. Marxism — well actually an investment bank is a good example of a Marxist organisation because it pays its employees at the expense of the people who own it. And technically being in a rock band is a very capitalist enterprise. If you sort of phrase it that way you sort of capture people who wouldn’t think of themselves on neither side of that. The second thing, on the one side we know that free enterprise and free choice about what you want to do as a job, creates wealth and all sorts of benefits — and we want to live in a world where you can choose what you want to do.

That being said… it requires luck. And so, on the other side, is this idea that you can have a purely capitalist environment and not look after people who are unlucky, that’s just mad. And it does create inequality. You want people to create wealth, and create opportunities, but you also need a safety net. So we need both of those things. That’s why I describe myself as a moderate, because I see things as . Like most things in life, it’s not capitalism vs. socialism, but rather what it the play-off between encouraging people to create things and rewarding people who do things but not punishing people who are unlucky.

BR: Yeah, and that’s seems to me to be the overlooked middle-ground. Which is, unless we grow the pie there’s less to redistribute in the first place. So we have to grow the pie. We have to encourage risk-taking, we have to encourage wealth accumulation. But I agree with you, I think the bit that everybody neglects is the safety net — universal healthcare provision and so on. That will encourage that risk taking in the first place and not penalize people those who are unlucky. But very few people are talking about that.

DG: I think in France, I don’t think many people in France have a problem with a good baker’s shop producing great bread and caring about it. And actually that’s a very French thing to think about — that kind of small retail being very good and very honest. The problem most people have is with things that aren’t really capitalism — where you have big organisations that create monopolies or game things.

BR: Just on the topic of growth. Clearly, if we’re to tackle inequality, I mean there’s been no better system for reducing inequality than globalization and capitalism, right? I just want to read a statistic here, in the last ten years, according to the U.N., 750 million people have been lifted out of extreme poverty. So growth is really an engine for reducing inequality. My question to you is — there are a lot of people, a lot of thinkers who position growth as the antithesis of protecting the climate. Almost like those things cannot be done simultaneously, like they’re mutually exclusive. Again, are we wrongly positioning the trade-offs? If there isn’t a scientific way to remove that trade-off, than we need to find one?

DG: Two things — one is can you get growth without consumption of resources that if you consume them, you mess things up. Because if we look at the standard , psychologically what does that looks like to a lot people is ” Which, of course, causes issues because we haven’t figured out a way for human beings to exist with the benefits that have happened through growth without consumption.

BR: And also, it amplifies that inter-generational argument — the sense that this generation won’t have the same benefits particularly as the previous generation, the baby boomers. They had big retirement pension, as you said, also they were able to consume as much carbon as they wanted. It aggravates that sense that this generation might feel aggrieved.

DG: I’ll come back to the argument about growth and why I think there is a model that works with growth. But to your point about what’s happening with people feeling aggrieved — this is developing countries that people are feeling aggrieved. More people have been lifted out of poverty, globally, than any period in history — and yet you’ve got people saying .

Well, that’s in developing countries, and I think the way to look at this — the thought experiment that I have is imagine two glasses of water. One glass has got a little bit of water in it, and the other glass is almost full. And the water in the glasses is inequality. The glass with a little bit of water, with a little bit of inequality, is what most developed countries look like. The glass with a lot of water in it is what most developing countries look like. And then you globalize… you mix those two glasses together. Of course, what it looks like…. even if you pour some of that water away, the glass with the little bit of water now has a lot more in. Looks more unequal.

BR: But isn’t that just another way for making the argument for a safety net, because I think the problem with that analogy is that it assumes that is a zero-sum game, right? You’ve just put water from one glass to the other.

DG: No, no, I’ve assumed that you’ve put some of the water out. I’m saying that even if it’s not a zero-sum game, you still get the perception as you globalize that some people in the developing countries, which were insulated by being part of these nation states that were very wealthy, and suddenly they loose out. And I think that’s part of what’s happening in politics…

BR: But clearly the overall level of economic activity has gone up. And so, the challenge is — that’s why I mentioned the safety net — because the challenge is how do you use globalization to create living standards that make sure you don’t have much inequality?

DG: Well you probably, as you globalize, you need to remove the existing pockets where people game the system— offshore, taxation — things like that. We’ve seen a period of globalization, global trade. If you believe that increasing the flows of things creates wealth then you have to assume it’s a good thing — globalization — but you also have to accept that it has downsides for people who were benefiting from the pockets of wealth in the past.

And the only thing we can do is create technological progress. And the only way we can create technological progress is through growth. So we have to consume more, ironically…

BR: I made us digress. To come back… this potentially false trade-off between growth on the one hand and the environmental protection on the other. You were saying that — you were posing the question of whether you can protect the environment and continue to consume.

DG: When I said that our psychological model is that we live on the planet and it is this single thing — i.e. it’s a finite, closed system. And we’re digging stuff out of the ground — fossil fuels — and expanding them and damaging the environment. Mentally, what that model looks like is that it’s a closed system with finite resources.

That’s not actually the way it works… we’re an open system. We have a bunch of high energy photons raying down from the Sun — and actually, several times more photons are re-radiated out in the infrared, out in the space. So the Earth is an open system, sitting between the Sun and the heat sink of space. And in that open system, we have an unlimited amount of energy. The second thing is that we’re sitting in an energy gradient, between cold space and hot Sun. In terms of the physics of this, what it means is that we don’t actually consume any energy.

Zero energy is consumed by all of the people on Earth. We don’t consume any of it. We just benefit from being in this gradient. So this mental model of consumption is actually just a colloquial, not a scientific term. We don’t consume energy — by definition energy is conserved. This is not a new idea, this is a Newtonian idea. What we have done though, is we have destabilized this open system such that it might create a runaway heating effect. We could consume an unlimited amount of solar energy, and consumption is not a bad thing in itself. What’s wrong is the wrong type of consumption — that pollutes or creates global warming. We need to create a form of consumption, the right form. It’s not amount the amount, it’s about the type of consumption.

BR: And do you feel — I mean there has been massive progress in solar, right? McKinsey said that by 2030 it will be cheaper to use solar to generate energy than using coal. But in general, people have become more skeptical of the role of technology can play in solving climate change — or that’s the way it feels.

DG: I take the opposite view — we could take the negative view and say . Let’s assume that killing everyone is not what we want to do because that’s not a nice idea. Some people may want that, but that’s a lot of suffering so let’s just assume that is off the table and we have to keep everyone alive, alive. The only way that we have got through problems in the past was through technological progress. And so if we assume that the only way we can get outside of this problem which is pressing is through technological progress, then if we have a model which is about conserving and efficiency — we’re going to reduce technological progress, and that would have been a viable modelif climate change wasn’t inevitable. But if we assume that climate change — that we’ve hit a point of no return and it’s going to happen if we do nothing. Then we can’t do nothing, we have to do something. And the only thing we can do is create technological progress. And the only way we can create technological progress is through growth. So we have to consume more, ironically…

But the only way we can consume more and create that technological progress without making the problem worse is if we consume in the right way — through things like solar. So we have to create the environment that exacerbates consumption, ironically, but make sure we don’t do things like burn coal.

BR: If we’re challenging existing thinking — then very few people are talking about increasing consumption. But it seems again that we’ve got polarization between on one side people who just deny climate change and on the other side people who, I suppose, engage in false science— trying to argue for much lower consumption, arguing against nuclear. For me, it’s very difficult to make the argument — for me the best argument against nuclear is that the waste needs to be stored for hundreds and hundreds of years…

DG: If we didn’t have climate change, if climate change wasn’t inevitable, we should be decommissioning nuclear power stations, clearly, because they have non-guaranteed but potentially catastrophic pollution risk. But the problem is… we know that they solve here and now the climate change risk. So it’s completely coupled. If we didn’t have the climate change risk, we shouldn’t be building nuclear power stations and we should make sure that everything is focused on pollution and a sustainable environment in that way. But we have this very pressing thing — where we might need to geo-engineer the environment, i.e. we might need to make some unpleasant choices to make sure we don’t all die and then fix the mess afterwards. That might unfortunately be what we have to do.

…if we switch to organic tomorrow two things would happen: half the population will die and the second thing is that the environmental impact would increase, i.e. we would produce more global warming.

BR: It seems such an irony that Germany, for example, which has been such a pioneer in solar has now turned against nuclear and burning more, ironically, coal, right? On another point, where do you stand on the whole GM vs. organic? Because I suppose we’d all like to consume fewer pesticides in our food and so we can make the case for organic — but it’s producing lower yield and therefore is not really compatible with a growing population and the need to feed everybody etc. So where do you stand on that?

DG: Like most people, I do actually buy quite a lot of organic food — for the reasons that you don’t want your children to be eating pesticides and all that. So, parking that aside and not being completely hypocritical about what I’m about to say is — I think it’s complicated, like all these things. If I take the devil’s advocate argument — I don’t want my kids to eat nasty pesticides, but I’ve got no problem with ammonia-based fertilizers being used versus… dung. For me what I don’t agree with is this extreme view of organic — where everything is bundled into this notional idea that everything natural is good and everything mineral is bad. By natural we mean organic vs. mineral. Organic food says , i.e. all chemicals are bad. It’s just not that straightforward. And we know that if we take that extreme view, we reduce yield, and — so if we switch to organic tomorrow two things would happen: half the population will die and the second thing is that the environmental impact would increase, i.e. we would produce more global warming (there are certain aspects of pollution that would reduce, certainly).

So we need to find a model that deals with the complexity here. And one of the ways of dealing with that complexity is maybe create a less extreme version of organic that isn’t based upon this tribal idea of chemical vs organic, but is to do with what are the real things that reduce pollution, and what are the real things that reduce climate change effects and actually can feed everyone on Earth. So one of those example — to get back to like investing and things we might invest in — is, if you bundle… let’s say you put a bunch of IoT sensors in a field that look at how every single individual plant in that field should be dosed for pesticides, then you create a bigger yield with less pesticides going in the ground. Now, if the person selling those pesticides isn’t selling pesticides but they’re selling crop yield, and they bundle say financial product for crop insurance with digital product for measuring the data for the plant, with the pesticide, as a service, on-demand, then you can actually create a win-win scenario where less stuff goes in the ground that’s toxic, and there’s more yield, and also more money is being made.

BR: And what other areas are there where, I suppose a populist/tribal view of science is holding us back from making major breakthroughs — also related to where we need to rethink business models?

DG: Everywhere. I mean… you look at vaccinations. And the reason they’re tribal is…. Homeopathy has the same narrative as vaccination. It’s just part of a different tribe — the non-science, back to nature tribe’s view, of vaccination. So if we could somehow reconcile these things, the narrative is the same. Homeopathy is just a vaccination that doesn’t work… or has no evidence that it works, I should say.

BR: Why did people turn their backs on science?

DG: For real reasons, a lot of scientific things like putting pesticides in the ground. There were a lot of good things, but there were a lot of bad things. And so some people got nostalgic and said that maybe what’s wrong with our lives is that we’re stuck on our smartphones and eating food that makes us ill and things like that.

My vision for a smart city is something that would look like a medieval hilltop town in Italy, and not something like Fritz Lang’s Metropolis.

BR: Changing topics again — you wrote a really great piece on Medium about designing smart cities. What are we missing, or again how should we think differently about urban planning?

DG: I mean, I could go on forever about this, having been an architect. So, if I summarize the tl;dr of that article is that most people have a tendency to fetishize technology so when most people think of smart cities, they think of things being full of futuristic technology. I would argue that’s a very primitive and old-fashioned way of looking at smart cities that came from  or something like that, like a hundred years ago. I suspect that one of the big trends and the things that can happen because of the modern type of technology that we use is very miniaturized and small… is that we reduce the amount of infrastructure. My vision for a smart city is something that would look like a medieval hilltop town in Italy, and not something like Fritz Lang’s Metropolis. We’ve been fetishizing technology and assuming that smart cities look like some of the neo-cities in China, and I would argue that a truly smart city looks much more like something… natural.

BR: What a lot of people say about the future is that the automobile completely changed the layout of cities and so autonomous vehicles would do so again. And you didn’t mention autonomous vehicles, and if you follow the logic of autonomous vehicles is that cities will become more dispersed because we’re not worried so much about distances because we can sleep in our cars, we can chat in our cars. But your vision of an Italian hilltop village or city suggests we will be living in closer proximity.

DG: Well, multiple things. The autonomous vehicles, we have a secondary thesis about autonomous vehicles and it has nothing to do with urban use of these vehicles, but it has to do with being used between towns and cities.

BR: So in place of trains…

DG: Yeah, so, specific… again, when I talk about tech insights and then doing opportunities and then come out with example companies. The example company or idea we looked at there was a dedicated self-drive lane on a freeway between San Jose and L.A. And if you look at that as a serious proposal — it does a few things: one is, you could do it now as self-drive, without waiting for Level 5 autonomy, so at Level 4.

BR: As if you’ve got lanes for trucks that work perfectly well, right?

the grid layout of cities was largely about people in cars not getting lost. We don’t need that anymore because of GPS systems. The concept of getting lost has gone… forever.

DG: Precisely. You can do it now. You can do a self-drive lane providing you make sure that the non-self driving cars can’t go in that lane. So it’s basically a bus lane, but with a curb so you can stop things going in it. The cost of producing that is a tenth of the cost of high-speed rail, because you don’t need to do any gradient leveling or the kinds of things that needed to be done for European high-speed rail networks. So it’s a lot cheaper and it can be done now. You can do self-drive now. And you can also create a system that’s a bit like the… service-design like the channel tunnel, where you park on the side and then you switch to autonomous, and then you park on the side again and wake up and you drive to the end destination. So you can do point to point. As soon as you do point to point, with the one vehicle, self-drive, and you have this middle-zone where you’re on a self-drive dedicated lane on a freeway, you can double the speed. And doubling the speed means that you suddenly can get from a place in San Francisco to a place in L.A. quicker that you can by flying. And that’s the biggest short-haul route in the U.S. You can suddenly take a million people that use the plane out of the sky and put them in an environment which would have let’s say, no carbon emissions, because you would make it electric self-drive. And you’ve created a wonderful thing.

The second thing is that, bizarrely, the model for financing this comes from France. So when we think of Europe, high-speed trains and things like that. But most of France’s motorways or freeways are privatized, or semi-privatized I should say. The way they’re financed let’s say by a sovereign wealth fund is that the sovereign wealth fund comes in and they’re allowed a capped return over a certain period of time, and once that return has been achieved for financing a toll road, it goes back to the state. In the U.S., less than 10% of freeways are privatized or have toll-roads. So, the idea of taking this model to the U.S. in terms of financing and creating dedicated self-drive lanes might happen. This sounds futuristic, sounds like something, yeah great in theory, well actually it’s happening now.

BR: Sounds like much less futuristic and much more feasible than boring into the ground to dig tunnels.

DG: Exactly. So it’s a much lighter touch of doing futuristic transportation than a hyperloop, and it is happening. The Chinese are doing it. There’s a 60 miles route between Beijing and one of its satellite towns which is going to have a dedicated self-drive lane on a freeway.

BR: Just one more question on smart cities, then. You still see us living in close proximity — because, I guess, there’s so many spill over effects from high-urban density and also, probably, way lower carbon footprint.

DG: Well, if you look at specific examples of less infrastructure in a city. So, a lot of the city was designed around cars, like we say. I think in-between designed could be designed around cars and bits of cities will be, let’s face it. But the layout, the grid layout of cities, was largely about people in cars not getting lost. We don’t need that anymore because of GPS systems. The concept of getting lost has gone… forever.

BR: And I suppose the grid system came at massive expense in terms of parks and…

DG: It’s not organic, yeah. We don’t need grid cities anymore. They can look much more organic. We don’t need to worry about people getting lost in this labyrinthine sort of medieval style of town. We can build those again and they can be practical. That’s a specific example. And we don’t even need any traffic lights, or signs, all these things can go away… we don’t need all this physical infrastructure anymore because of some of the smarts that are being put in smart cities.

BR: Can you… because it seems that those labyrinthine, old medieval cities… they are like that because they grew gradually without design. So can you design those features into future cities?

DG: So I’d refer the essay I wrote. Which is a very subtle topic about how things are designed. When I was an architect, things were planned, they were designed as blueprints. But actually if you look at organic, the nature of organic things, they’re designed as recipes. And recipes are sets of instructions where everything looks a little different, and plays out… so that’s not something I can talk about in 5 minutes but I think there’s a fundamental difference between recipe-based designs, which are very natural looking, and blueprints. And for example, when people say colloquially “DNA is a blueprint for life”, no DNA is a recipe for life. And that’s why organic things are have similar recipe or the same recipe but they look slightly different, because the way that recipe is executed over time in an environment means that it has very natural characteristics. Whereas a blueprint means that things look identical every time it is executed.

Basically, the experts weren’t experts because the world had changed and so we had experts in old things that were no longer relevant. We didn’t have enough people that understood the modern world. And so when the experts where not experts, it went to the people who were also not experts so the whole thing was a mess.

BR: Great! So last question. We couldn’t have a podcast with you and not talk about Brexit. Nobody knows quite how it’s going to land — whether we’re going to have a long extension, whether it’s going to happen at all. I think, like me, you were a big opponent of Brexit, not because we didn’t sympathize with people’s sense of disenfranchisement. But because, a lot of the people who voted for Brexit — this won’t be the solution to the problems they face — in fact it’s going to deepen the problems for many of the constituencies that voted for Brexit. So I guess my question to you, a little bit controversial, is should we give people direct decision making power? The UK is a representative democracy, but it seems there’s more and more of a push to give people, in general across the world, or in the Western world, more say on significant matters of political economy. Is that a mistake?

DG: You’ve hit the nail on its head. There’s a very big difference between a representative democracy and true democracy. True democracy is things like referendums. We’ve seen what happens when you have referendums, they can become mob rule. Most people like the idea of democracy, but mob rule I think people would agree it’s not great. We’re sitting in Switzerland, the place where people always said that referendums work. Well actually if you look at Switzerland last week, they’ve agreed to re-run a referendum because the information was wrong to start with. The information was definitely wrong with the Brexit referendum to start with, but they’re not doing what the Swiss do, they say there’s an absolute, no second-guessing.

In this period of change where we’re going through things where we see that Brexit is just a symptom of political change that manifests itself in different ways in Hungary, in Holland, in Sweden, the U.S.

Brexit was a symptom, but it was a symptom where putting it to a true democracy and non-representative democracy was clearly a big mistake unless people could have been told the facts. And that’s why you’ve have experts, that’s why you have representative democracies and part of the narrative and the language you get form the Brexiteers is that .

BR: yeah, the famous Michael Gove’s 

DG: There’s a reason why you have doctors training to be doctors and not everyone can just show up and say I’m a doctor. That’s a form of representative democracy, if you’d like. We need to do the same that we do with doctors — where you need to be a qualified doctor to do something — that we do with politics particularly now.

BR: Exactly. Which is almost we’re moving in a direction towards direct democracy at a time when experts matter more than ever precisely because society is changing so fast.

DG: And at the other extreme end you’ve got the technocracies which are too much the other way. You could argue that China, as a country, is run like a corporation, where maybe it’s too much the other way. So it’s mob rule versus dictatorship, at the end of the day. You need something in between, you need some way to make sure that the technocrats are acting on behalf of people and making informed decisions.

BR: And this push towards direct democracy why did it come about? I mean, there’s an argument that people that used to represent us were better educated, much older and those distinctions have disappeared. Because the population in general has gotten older, more educated. So one of the pressures is that people don’t necessarily see a big distinctions between the political class and themselves. Is that one of the causes or are you much more of the view that it’s done to the changes in the information flows and…

DG: Basically, the experts weren’t experts because the world had changed and so we had experts in old things that were no longer relevant. We didn’t have enough people that understood the modern world. And so when the experts where not experts, it went to the people who were also not experts so the whole thing was a mess. We need new experts, people who understand the modern world and understand the political decisions that need to be taken.

BR: And how are we doing on that?

DG: Terribly. Well, apart from China… despite people saying, it’s making a lot of decisions that look intelligent. But I would argue that we need balance. We need to have the right experts but with a lot of democracy to elect the experts.

BR: Yeah, because if you follow that — I guess you could recast the copyright regulations and GDPR exactly as anachronistic regulations because they were put together by people who think in the old paradigm.

DG: We have industrial age politicians in the digital era. That’s part of the issue.

BR: There seems to be some digital-era politicians coming to the fore in the U.S., but less so in the UK and Europe, right? Do you disagree or see potential that I don’t?

DG: They will definitely happen, people that understand the modern world. Because what we’re seeing now is all the dystopian advantages of politicians that understand the internet through manipulating people through Cambridge Analytica etc., they’re definitely not naïve in how to leverage the modern world, but that needs to happen in a benign way.

BR: I think that’s probably a good place to leave it — which is if anybody listened to this who does understand the digital world and wants to enter the world of politics, now is your time to use these tools for the good.

David, thank you very much for your time!

DG: Thank you.