We seem to live in the age of the entrepreneur. The startup has become objectified to such a degree (think the wonderful Silicon Valley TV comedy series) that it almost feels almost like an Ayn Rand novel, with striving, thrusting young things looking to change the world. The triumph of the ego and the id.
Bizarrely a thirst for entrepreneurial ambition is one of the few things that unites Red Labour, the Liberals (especially under Vince) and the Conservative’s. Britain must become more entrepreneurial they all say, with tax subsidies thrown at the startup sector – Labour’s riff is that the government can be more entrepreneurial in backing new businesses that have a social value.
Overall, I applaud this ambition for the UK and this enthusiasm for new businesses. I have my own doubts about the efficacy of some tax reliefs, especially the Business Property Relief extension to AIM businesses but the overall policy objective is laudable. But we also need a strong dose of reality and cynicism. There’s already a vast catalogue of academic evidence that productivity rates amongst small businesses and especially startups are very low – dampening down national growth rates. Many economists are also openly sceptical about the impact on national labour markets of startups. Maybe, in a rather Heseltine like fashion, if we spent more time focused on helping the really big businesses here in the UK and stopped denigrating them at every opportunity, we might create a stronger economy. But that’s another debate.
My concern here is to expose what I think is the downside of the cult of the entrepreneur, namely that it is increasingly powered by the existing class system in the UK. Put simply, if you are a bit posh, and upper middle class, its much easier to become an entrepreneur in the UK, and especially London. Crucially I am not arguing that all or even most entrepreneurs are posh or that most successful entrepreneurs are posh. But the brutal truth is that being public school educated, preferably Oxbridge trained, and moderately well endowed with cash from the family helps enormously. I’ve given up counting the number of rich trustafarians I know who strut around London as entrepreneurs. Over the years I’ve been to dozens of entrepreneurial events and my impression – which might be skewed – is that they are overwhelmingly dominated by bright young upper-middle-class things, of which a disproportionate number are men.
My own advice to the younger Stevenson’s is increasingly a) get a good finance degree b) do a bit of time in the city c) then go to business school d) and take all the tech-related courses at business school, finishing off with a move e) into business via a start-up. Friends from the US are also full of similar stories of “Go West Young Man/Woman and get into a startup”.
So, why does a more privileged class background help with being an entrepreneur? I’d identify three key advantages. The first is that good schools – mostly private – provide their clients with the right social networks which will help with fundraising and business development. Crucially good private schools, in particular, imbue their kids with a strong sense of confidence and an ability to present in public – vital skills for the entrepreneur forced to endure endless pitch events. Next up privilege also helps to steer students to the right universities and the right business school courses – all of which help the budding entrepreneur, not least in the networking game again. Lastly a more privileged background also frankly allows more financial breathing space – a bit of money to help the budding startup genius through the first few months is enormously helpful. Many people from poorer backgrounds simply can’t afford to take the necessary time out of work to build a business, especially when so many private investors demand that the entrepreneur stumps up sweat capital in the form of unearned work to build the business. It’s a demand I completely understand, but we need to be aware of the unconscious bias which results.
Crucially these feedback loops favouring the more privileged are then reinforced down the line. Most successful angels I know chant the following mantra – backing a new business is all about the management, their experience and the team. Always back a business person with an existing track record. But if there is an unconscious but institutionalised bias favouring one group of people over another, guess what happens with this fetish for an existing track record – you back the same sub set of people with existing talent/good luck/ambition.
I’m very far from being the classic business phobic type who daydreams about a Corbyn victory – an absolute nightmare scenario in my view – but as a relatively free market liberal, I think we are missing out a huge wealth of opportunity. We absolutely should NOT be encouraging more entrepreneurialism via government policy in places like Shoreditch and the M3 corridor. These places will thrive based on their own ecosystems. We desperately need to focus on reinforcing the entrepreneurial culture of the regions and especially those areas with a disproportionate share of less privileged citizens. This doesn’t necessarily mean backing increasingly questionable local economic development policies – which end up throwing good money after bad. What it does mean is thinking long and hard about how we tap the vast entrepreneurial potential of less privileged members of society. The productivity bonus will be huge and benefit us all.