‘An AI investment that destroys its own consumer base, and the middle class with it, is not intelligent. Machines do not consume. They do not take holidays, upgrade kitchens or pay school fees.’
Izabella Kaminska
Hardly a day goes by without yet more evidence of the challenges facing human civilisation, and particularly young people. I'm not referring to the outbreak of conflict in the Middle East initiated by the Chairman of the Board of Peace, but to the remorseless rise in the number of young adults who cannot find employment. The Office for National Statistics reported that nearly one million 16-24 year-olds are in this situation, and that's just in the United Kingdom.
There was a very good article in the Telegraph business pages last Thursday written by Izabella Kaminska. Our quotation is drawn directly from her opening paragraphs, and her article ends with the reflection that an innovation that destroys its own consumer base is not progress — it is self-sabotage.
On the same day, and as if to prove the point, The Times’ business pages reported substantial staff reductions at HSBC, as their profit reached $29.9 billion; then on Saturday one of The Times' investment experts wrote, ‘I’m preparing my teenagers for unemployment’.
Young people do need to take more action themselves in the face of the collapse in employment opportunities: so, this week we put forward the proposal that a new focus on entrepreneurial resolve could be the answer.
Entrepreneurial activity works. Indeed, I think it is true to say that, in general terms, it is the only thing that really works long-term. If I offer to do your gardening, I am being entrepreneurial, and I’m employing myself. If I set up a corner shop selling newspapers, I am being entrepreneurial and perhaps employing three or four others. If I set up a small manufacturing business or a small services business, I am also being entrepreneurial — and employing perhaps 50-100 people. The majority of jobs in the United Kingdom are now created by small businesses and by entrepreneurs.
We use computers to make the work possible. Indeed, many of today’s businesses would not exist if we could not reduce the costs in this way, and many new jobs in the service industry witness to the power of new technology in bringing work to communities which were dead. Anyone who sits in front of a personal computer has the power to be an entrepreneur, as it if were a gardening fork.
My first job was as an unskilled fitter at British Aircraft Corporation. Having benefited myself from inherited wealth, I found myself confronted by the real world of those who have no financial reserves and therefore no economic freedom, being dependent on this week's pay packet to pay next week's out-goings. I resolved there, fifty-eight years ago, to commit my working life to bringing about a more egalitarian form of capitalism.
In 1984, my old family stock-jobbing firm was taken over by Barclay's Bank. I took the opportunity to set up a new retail share service in Barclays called Barclayshare, which is now called Barclays Investment. That was entrepreneurial activity within a large conglomerate; this also works at creating jobs, most of the time. In 1990, I left Barclays and started again on the ground floor, by establishing The Share Centre. There were no customers, no staff, no premises, no systems — only plans.
By the time it was merged into Interactive Investor and sold to abrdn in 2022, it had a customer base of over 300,000 people and well over 250 staff; and indirectly we created and maintained employment in printers, the Post Office, stationers, computer firms, telephone businesses, etcetera, etcetera. On top of this many thousands of people built their financial reserves and enjoyed the experience of managing their own share portfolio. After the first six years of struggle, which left me personally heavily in debt, we became profitable; but its real value took a couple of decades to establish.
So, what are the key ingredients for being an entrepreneur? Firstly, it helps to have a vision for making things better in the future. In my case, it was that vision for a more egalitarian form of capitalism — but there are so many different things that people might see as their driving passion.
The route to achieving your vision has to make financial sense, and it's a good idea to do some business planning first: but that doesn't need to be gargantuan.
You have to be prepared to dig in for as long as it takes, and commit as much of your time as it calls for — but it still takes a very difficult first few years to achieve financial stability. Early-stage investment has got to be watched very carefully, as external funds at low early-stage valuations can easily dilute your control of the business.
This is why I recommend — on the basis of my own personal experience — identifying a source of what I call ‘surrogate capital’, even if it doesn't fit in with your wider vision. In my case, that was handling huge volumes of share certificate sales resulting from the 1980s privatisations. It wasn't in line with my passion for building wider share ownership over the long term, but it made possible a huge expansion of steady-state shareowners later, while I remained in control of the business over its full thirty-year journey.
Scalability is also a key attribute for successful entrepreneurial businesses. It can be achieved by a variety of ways: in the past, franchising your brand was a really effective channel, but now we have the immense power of technology in order to deliver services or products in scale right across society. Doing everything yourself might appear to be a good way to maintain the quality of your offering, but it needs serious leverage to be successful.
However, as your business builds there are also some serious caveats to watch out for. The first is to understand the balance that must be struck between leadership and management, as the senior team builds around you. You may be clearly focused on what you want to achieve, but your priorities are not necessarily their priorities.
I particularly recommend a book by Richard Higginson called, ‘Transforming Leadership’, which tackles this issue really well. It is written from a Christian perspective, but it helps greatly in understanding how to cope with a growing team of managers.
Then there's the tricky subject of how and when to plan your exit — and whether you wish to endow your own family with your business legacy. Moving away from control of your brainchild is never easy, but life doesn't go on forever and it's important to find not only the optimum valuation but also the optimal outcome in the circumstances.
That's just a quick synopsis of some of the issues that entrepreneurs have to address.
It used to be said that the best thing was to build experience in employment for ten or twenty years before striking out on your own, and that's what I did. But these days young people have the technological skills and tools to launch out much earlier and, as noted at the start of this commentary, employment is not an easy option for so many young people today. On top of this, a person’s capacity to deal with risk tends to be much stronger when they’re young as opposed to when family formation and responsibilities are underway.
So — entrepreneurial resolve could be the answer; you can't spend your life as a couch-potato.
Gavin Oldham OBE
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