Paul Wallbank – Brilliant Communications

Tag: government

  • Dangerous liaisons – the risks in government support

    Dangerous liaisons – the risks in government support

    “I coulda bin a contender” is the first thing that comes to mind when reading The Register’s story on how the iPhone could have been a British invention.

    However the tale of British engineer Andrew Fentem and his struggles with the UK investment bureaucracy is a warning to all of those who think that government support programs are an easily solution for getting ideas to market.

    Fentem’s story is a common one around the world – an inventor approaches a government agency which agrees to support the project and then bogs the entire venture down in paperwork and bureaucracy.

    In some respects this is understandable as bureaucrats and politicians are deeply risk averse, which is fair when taxpayers money is involved, with the result that justifying an investment is going to be more about ticking boxes and meeting criteria rather than genuinely helping projects succeed.

    During my short stint in working for a government agency every week would see at least three people contacting me about taxpayer support for their businesses.

    Most of the time there was no godly reason for the government to give these folk a penny and it took the few diplomatic skills I have to politely break the news they had little prospect of getting a grant or subsidy.

    Some approaches though were very good projects but usually I’d warn the inventor or entrepreneur that any support the state government would give them would come at the cost of spending hours completing irritating paper work.

    My advice was that driving a cab and living on noodles for six months to raise the capital would be a better investment of their time than dealing with grey suited bureaucrats like me.

    This advice didn’t always go down well, but it was better for both the taxpayer and the entrepreneur in the long run.

    Well thought out government programs can do a lot of good for businesses or inventions that might not otherwise come to fruition, although many of the success stories probably have as much to do with the calibre of the public servants running the scheme as they do with the programs themselves.

    In the case of Andrew Fentem and his touchscreen technology it’s almost certain that the folk at NESTA were out of their depth and far more comfortable with subsidising trips to Las Vegas for circus clowns, which in itself is a valuable lesson for governments on defining programs and supervising agencies.

    Raising funds for any business or invention is a tough game anywhere in the world and assuming governments are an easy way to find money is as flawed as any other misconception about building a startup.

    The moral is government money in neither free nor easy if you’re an inventor or an entrepreneur.

    Similar posts:

  • Regional pains – what happens to communities when industries close?

    Regional pains – what happens to communities when industries close?

    Yesterday’s post on Chobani Yoghurt rescuing a town in Upper New York state raises some questions about what happens when a major industry leaves.

    For South Edemston, the question went unanswered as Hamdi Ulukaya and Chobani saved the day, but other towns haven’t been so lucky.

    Australia’s Goulburn Valley, about a hundred miles north east of Melbourne, may be about to find out as the main local fruit cannery will close down unless the state and Federal governments each contribute $25 million to an investment plan.

    Closing the region’s major cannery will have dire consequences for the local economy as the industry has been a major customer for the local fruit industry. Without the cannery, many of those peach, pear and apple growers have nowhere to sell their produce.

    Already farmers are bulldozing their trees and grubbing up the roots as the market works against them.

    So what happens to the Goulburn Valley if the canning industry leaves? Do the orchards get turned over to goats?

    There is a precedent in Australia for this, in Tasmania the ‘Apple Isle’ has seen its orchard industry steadily decline from the days of peak production in 1964.

    A touching story in The Griffith Review by Moya Fyfe, the daughter a former Tasmanian apple farmer, describes when her father’s orchards were ripped up.

    So in the winter of 1974, his life’s work, and that of his father, was bulldozed into windrows of gnarled stumps and roots. Acre after acre of once productive apple trees, captured in a photograph hanging on my parents’ dining room wall as picture-book hills awash with blossoms above North West Bay, were twisted and torn from the ground and left in undignified heaps to rot.

    Moya’s father was given an exit package – a cash payment to find something else to do – by the state government. Something that many agricultural communities around the world have become familiar with.

    The problem for Tasmanians was that there wasn’t really much else to do. At the time Moya’s farm was ripped up there was a belief the state would become an industrial powerhouse on the back of cheap hydroelectricity, but that never happened.

    Tasmania’s economy continues to struggle and Moya’s article was part of a Griffith Review edition focusing on the state’s struggles.

    The most pubilicised essay was a scathing analysis of the state’s culture by Professor Johnathan West, who identified the real problem for Tasmania as being a dependency mindset.

    These numbers suggest that as little as a quarter to a third of Tasmanian households derive their livelihood from the genuine private sector. Of them perhaps a third gain their income from wholesale and retail trade and associated logistics, another third from residential and commercial construction and maintenance. The clients of both these groups depend largely on public-sector incomes, leaving only about 10 per cent of all households making a living from the traded private sector.

    Interestingly both Johnathan West and Moya Fyfe are employed by the University of Tasmania, which probably proves the Professor’s point.

    Overall Tasmania relies upon Federal government funds to survive, receiving over $1.50 in payments for ever dollar remitted in taxes; in that it joins half of Australia’s states and territories in being economically dependent on the Federal taxpayer.

    That’s not a good sign for the Goulburn Valley or for the state of Victoria which increasingly is appearing to be to Australia what Spain was to the European Union circa 2007 or Miami to the US in 1927. When the Melbourne property market pops, the region could be in deep trouble.

    For much of regional Australia – like disadvantaged parts of the European Union or the United States – communities have become dependent on transfers from the central government, the sustainability of that is being tested now.

    It may well be that South Edmenson’s experience with Chobani illustrates the most sustainable way governments can support these regions, attracting entrepreneurs and new industries into communities that are being left behind is far better than leaving them on welfare.

    Image courtesy of elcapitain through Flickr

    Similar posts:

  • A tale of three cities and three different government programs

    A tale of three cities and three different government programs

    Three different business; Chobani yoghurt, ESPN and Phizer are an interesting contrast on how government support can help business and get a real return for taxpayers.

    When Kraft Foods decided to shut down its South Edmeston yoghurt plant losing the 55 remaining jobs was a blow to the hamlet of 2,000 in upstate New York.

    Eight years later the plant is in new hands, employs 600 people and is the centre of  the United States’ thriving Greek yoghurt industry.

    In 2006, Hamdi Ulukaya bought the dilapidated factory from Kraft to produce yoghurt similar to what he was used to in his native Turkey and today Chobani is one of the fastest growing food brands in the United States.

    Ulukaya tells the story of Chobani in the Harvard Business Review and how the company has grown without any external investment, instead relying on bank finance and government supported guarantees.

    Key to Chobani’s founding were the US Small Business Administration loan guarantee program that enable the entrepreneur to buy the mothballed Kraft plant.

    While Chobani is a success of the Federal government’s program, just over a hundred miles away the Connecticut state government is pouring money into the maw of ESPN to keep the company’s head office in the town of Bristol, the New York Times reports the company has received nearly quarter of a billion dollars in subsidies in just over a decade.

    ESPN has received about $260 million in state tax breaks and credits over the past 12 years, according to a New York Times analysis of public records. That includes $84.7 million in development tax credits because of a film and digital media program, as well as savings of about $15 million a year since the network successfully lobbied the state for a tax code change in 2000.

    Notable amongst ESPN’s benefits are the credits under the state’s film and digital media program. As we’ve discussed on this blog in the past, the movie industry plays a cynical game or playing off governments and its no surprise that cable networks would do the same thing.

    Connecticut has a bad track record in industry incentives, the destruction of much of the town of New London is a poster child of what governments shouldn’t do when trying to build new industries or attract large corporation.

    New London’s demolition of an entire suburban district for the never built head office of pharmaceutical Pfizer is testament to what can go wrong when government officials are dazzled by big promises from large corporations.

    Unless support is appliedstrategically and sensibly, competing against other communities to attract big corporations, sporting events or major projects is a zero-sum game that ultimately sees the taxpayer a lose.

    While Chobani created 600 jobs in South Edmeston at no net cost to the taxpayer it’s likely Kraft would have demanded tens of millions of dollars in NY State taxpayer support for retain fraction of the jobs that the new business created.

    Invariably modest small business programs prove to be a better bet for taxpayers than dumb corporate welfare, unfortunately governments around the world prefer to throw money at big business as they are the ones that write the campaign cheques and employ retired politicians.

    Sadly in an era where corporate welfare is the norm rather than the exception, we can expect to see more ESPN type deals and fewer Chobanis with the taxpayer being the poorer for it.

    When a politician proudly announces the number of jobs being created through their subsidies to a large corporation, it’s worthwhile for local taxpayers to take the spending of their money with a large grain of salt as history is not on their side.

    Image courtesy of jprole through sxc.hu

    Similar posts:

  • 2014 – the year privacy and security will be defined

    2014 – the year privacy and security will be defined

    Happy New Year – 2013 might have been a disappointing year for tech, but for many it was a weird, wild roller coaster ride. Hopefully that ride is going to result in some very interesting destinations in 2014.

    It’s tempting to make predictions about 2014 and wise heads prefer not to – what I’d refer to is a failed prediction from 2011, that that year would be remembered as the year of the security breach.

    That was wrong. 2012 was worse and 2013 continued the trend of ever increasing corporate glitches and finished the year with two massive security breaches at Target and Snapchat. 2014 promises to be a year when the stakes become higher.

    And then there were Edward Snowden’s revelations. Everyone who’s worked in or reported on the tech sector knew security agencies had the ability to snoop on the data of anyone they thought might be of interest, but few of us thought they would have engaged on such massive sweeps of the planet’s personal and business data.

    Snowden’s leaks and the fallout from them have a long way to play out and the big story is going to be how the US justice system reacts to the creation of a surveillance state.

    In countries like Australia that lack the US’ constitutional protections, fighting the constant spying of government agencies is probably a lost cause unless an economic collapse sees the authorities running out of money to operate their comprehensive monitoring programs.

    What we can be certain of in light of ongoing privacy breaches by governments and businesses that the technology world is going to obsessed about security. That’s probably going to be the big, ongoing story for 2014, even if the mainstream media outlets focus on big TVs and the latest smartphone.

    So Happy New Year and play nice on the internet. The Feds are watching.

    Similar posts:

  • How important is public transport to smart cities?

    How important is public transport to smart cities?

    One of things that stands out when discussing economic development with city governments is the importance of public transit for towns aspiring to be smart cities.

    This was particularly notable in interviewing Gordon Innes, CEO of London and Partners, about British capital’s building upon the legacy of the 2012 Olympics and its quest become the digital capital of Europe.

    At the centre of these developments is public transit, something mentioned by both Innes and Laurel Barsotti of the City of San Francisco.

    Innes sees public transport as essential to London’s growth, “it’s absolutely critical to the physical growth of the economy.”

    “In the run up to the Olympics nine billion was spend in upgrading the tube and Dockland Light Railway and that opened up all of East London’s economy in way because it wasn’t accessible or attractive for businesses.”

    “Stratford now is the best connected train station in Europe,” declares Innes. “That part of the city and around the Docklands is much more accessible and that’s bringing in investors. It wouldn’t have happened if the transport infrastructure wasn’t there.”

    In San Francisco, Laurel Barsotti sees a much more subtle advantage for the city in having, by US standards, a comprehensive public transit system in its bus, light rail and subway system.

    “A lot of the entrepreneurs creating those companies are concerned their employees see people using their products,” says Barsott. “They want them riding the bus to and from work and see people interacting with their products.”

    While in Barcelona, the public transport system is forming part of the local Smart City program where bus stops are Wi-Fi base stations and a fundamental part of the town’s communications network.

    For cities, it may well be that having decent public transit systems is going to be the competitive difference in being a key part of the 21st Century economy.

    Those parts of the world not investing in transport networks may find they are being left behind in the new economy.

    Similar posts: