Sunday, 29 May 2011

Fun Outings to Crap Headquarters 1: Tesco

An hour or so out of London, in the commuter belt, is a place called Cheshunt. It is home to the world’s crappest corporate headquarters. They belong to Tesco and they're situated in a light industrial zone, next door to Monster Gym, the first American style warehouse gym in the UK (satellite image here and google street view here)

This photo was taken in 2009, and at the time I was trying to sell Tesco esoteric financial derivatives. I sat in a room with someone from the treasury and suggested she should consider entering into a large transaction which, at the time, I thought to be in both our interests. She didn’t dig the idea, but appreciated the attempt. Innovation, she said, was what Tesco was all about.

Looking back, I feel privileged to have walked the crap linoleum floor of the world’s crappest corporate headquarters, to have seen the crap canteen plonked in the entrance lobby, and the crap cramped desks of the employees that run one of the world’s largest retailers. If nothing else, I was impressed to see a company truly living its values.

I had a reason to be there, but why would you want to go there? I think it’s worth a visit because Tesco is a key node in the global trade in consumer goods, and it’s startling that such an enormous task gets done in such a mundane setting.

Retailers, much like banks, act as intermediaries, but where banks act as intermediaries in investment goods, retailers act as intermediaries for consumption goods. As such, they are key gatekeepers between the world’s producers and us. Globalisation of consumer items, as it were, gets mediated through them.

In particular, globalisation gets sorted out in this warehouse, across the road from the headquarters. It’s where producers bring goods that they want Tesco to stock, to see if they make the cut. My mate Charlie has been in there, once upon a time when he was trying to start a business reliant on the consumer market. He tells of the horrors of that experience, watching a team of four inspectors move along the aisles, looking at proposed products. One is a product specialist. One is a floor layout specialist. One is a lawyer. One is a health and safety professional. Charlie has an entertaining tale, but it ends in tears and personal bankruptcy, which is one reason he ended up alongside me, trying to sell derivatives to pay off his debt.

Tesco may not have bankrupted you, but everyone has their connection to it, from fruit farmers in South Africa to London junkies. So go see Tesco and pay your respects to the most utterly shite, yet perhaps most authentic, corporate headquarters in the world. Take a photo, and if you see Elma, tell her Suitpossum says hi.

Sunday, 22 May 2011

How to get involved in disruptive finance: The Finance Innovation Lab

Trading floors and paneled offices in Canary Wharf look profoundly hi-tech, and yet they are built on blueprints inherited from the past, in some cases the very distant past. Modern financial institutions like to use the language of innovation, and yet they endorse only a narrow conception of innovation, focused on product innovation. There’s very little tinkering with the base level assumptions from which they are created.

To challenge the deep-level normative status quo requires one to move out of the mainstream salons, and into the fringe coffee shops and covert speakeasies. Close to Moorgate station is one such safehouse, down a small alley, behind an austere wooden door. Enter the Finance Innovation Lab.

The Finance Lab initially started as a joint project by the WWF and ICAEW, asking the question “What does a financial system that serves people and planet look like?” It’s now a forum for an assortment of financial heretics, some outrightly so, others more subtly so. The community is partially centered on an online platform hosted by the Ning social networking architecture, and partly on monthly meetings where ideas are presented and workshopped.

On Friday, I attended the monthly brainstorm. The setting is old English, in a meeting room with gilded portraits, but the content was anything but traditional. The session focused on work by David Braid, showcasing his graphic design visualisations of the financial sector as a tool for altering the way people perceive the sector. Ben Curtis was also there to discuss the PositiveMoney campaign that seeks radical monetary reform. The atmosphere is part collaborative, for people to throw around wacky ideas, and part critical reflection, to bring attention to shortcomings in proposed innovations. Friday’s session saw both impulses in action. For my part, I wanted to see David’s financial maps interpreted by graffiti artists on the walls of the urban downtown, and I wanted to see a more robust proposal by the PositiveMoney guys.

In the end, the sessions are not designed to be prescriptive. Presentations are used to set up loose themes as a backdrop for open-ended explorations. Key topics that have developed over the months include complementary currencies, social finance innovations, methods for dealing with complexity in finance, building resilience and dealing with risk, grassroots finance and mutual credit systems, social enterprise and community investment, behaviourial economics, environmental economics and the art of dealing with externalities, crowd financing, religion and philosophical aspects of finance, alternative conceptions of value, alternative metrics of economic wellbeing, and alternative goals for economic systems.

In part, the specifics of what is discussed doesn’t necessarily matter. More important is the fact that you’re able to do it, and to meet others who are doing it. Ideas have a way of fertilising other ideas and creating mutations. It’s the Silicon Valley effect. You hang out with people like Bertrand, Eli, Tav, Nick, Mary, Timothy, Max, Deeti, Giles, Rachel, Jen and loads of others who are doing similar things, and your own ideas get sharpened and informed in light of theirs. 

There’s also no single objective. Some have a particular agendas. Some frame their goals in utopian or moral terms, whilst others are more hard-edged or pragmatic. There's a general sense of trying to make the financial system better. For me though, the objective is disruption, change for change’s sake. I think the true value of these forums is to workshop ideas that can cause shit, for better or for worse, and see if the resultant disruptions, outcomes not strictly known, could potentially lead somewhere worthwhile. I like the idea of a creative dialectic to keep the system on its toes.

Over the next few months I’ll profile some of the movements I've encountered at the Finance Lab in this blog, some of the fascinating thinkers and some of the shit-stirrers. Keep tuned, and sign up.

Sunday, 15 May 2011

The Politics and Culture of Social Finance: Big Society Bank

London is the home to a small but growing ‘social finance’ community. It’s an imprecise term, but in general social finance is seen to encompass finance for social causes, finance for public services, finance for social enterprises, and finance for vulnerable communities. That covers a pretty wide scope, ranging from crackpot schemes to move back to a barter economy, all the way to mainstream debates about alternative finance sources for public services.

On Wednesday I attended PopSe!, a ‘popup think-tank’ on social enterprise. The theme of the day was social finance, and in particular, the issues around the UK government’s plans to set up the ‘Big Society Bank’.

That’s a pretty politicised name for a bank, and gives rise to interpretations of it being the thin edge of a wedge the government is promoting to take the slack from its public service pull-back. To be accurate though, the Big Society Bank is not really a bank. It’s more like an investment fund, and it will start with £100 million, to be used for the purpose of providing wholesale finance to other social finance organisations. In other words, it’s supposed to be a financier for social financiers.

In the grand scheme of things, a hundred million pounds is pretty tiny, but a handful of mainstream banks have pledged to put cash in as well. All this raises fears of it becoming a window-dressing operation for banks’ CSR departments, as well as the government. The murky political undertones, and it’s potential to be used as a means to change in the culture of social services, means there’s a fair amount of skepticism about this new ‘social investment bank’.

At Wednesday’s discussion session, participants expressed concern at the lack of specific detail on what the bank’s remit was. It’s supposed to support social financiers, but will that include credit unions and community development finance institutions – CDFIs? Would it really support existing social finance institutions, or would it actually compete with them, as some fear. We wondered who would get employed there – would it be staffed by jaded ex-public sector employees, or ex-investment bankers carrying sad tales of emptiness in the fast-lane, in search of something meaningful?

All these details will be ironed out in due course. What I’m more worried about is the culture of social finance: The problem is that it’s still so bloody un-sexy, bogged down in public sector buzzword speak, phrases like ‘enhanced service delivery’ and ‘outcomes-based commissioning’. There’s little in the way of hard technology and cowboy venture capitalists. Instead, there’s abstract concepts and social metrics designed by people with concerned looks on their faces. It’s self-conscious, and that makes me suspicious to its potential for overhyping itself.

My last question at the meeting remained unanswered: What relevance does the Big Society Bank have to large-scale housing, health and education needs in the country? A one hundred million fund ain’t even going to come close to touching those issues. Social finance needs to be upscaled beyond being an add-on to the small-scale social enterprise sector. It needs to move beyond Bono sunglasses and Apple Macs. It needs serious realism.

Wednesday, 11 May 2011

On the trail of the Living Wage: Suitpossum does Centrica

Last week Boris Johnson announced the Living Wage to be £8.30 for London. The Living Wage campaign, started by Citizens UK, recently celebrated its tenth year of trying to boost the incomes of those on the lowest rungs of enterprise. One way to speed up the campaign is through shareholder activism, buying a share and attending the annual general meeting of a company to raise the issue.

On Monday, I attended the Centrica AGM on behalf of advocacy group FairPensions, to see if the board would be willing to commit to the Living Wage. Centrica are the guys that run British Gas, and they have a large number of employees in lower salary brackets, for example, all the call-centre staff.

You’re playing to a tough crowd when you do shareholder activism. Think about who actually attends a three hour meeting starting at mid-day: Most are loyal supporters of the company and many are former employees, now retired. They have a slightly sycophantic edge, especially considering part of their self-identity is wrapped up in their years of service to the company. It’s easy for the chairman to turn them against anyone raining on the parade.

So my strategy was as follows: 1) Wear a smart suit, 2) drop in Boris Johnson’s name to deflect suspicions of left-wing status, 3) suggest the Living Wage is becoming recognised as an important mark of commitment to Corporate Social Responsibility, and that, as such, it’s an important business decision, and 4) that as a shareholder, I believe it to be an issue which needs to be carefully assessed by the board.

Those should prevent you from being seen as a raving radical quack, and forces a serious response from the board. Unfortunately, it doesn’t guarantee you anything of substance: In his response to my question, Chairman Sir Roger Carr gave a true politician’s answer, asserting that the company paid more than the minimum* wage, whilst avoiding direct mention of commitment to the Living Wage.

There was a tea afterwards, in which the directors mingled with the shareholders. I used it to chat to three of the directors, including the head of the American business. Treat them with respect and they’re forced to do the same back. He assured me the Living Wage issue would be brought up at their next CSR meeting.

Shareholder activism is but one method of getting yourself heard, and it has its limitations, but it can be a surprisingly effective way to get up close and personal with senior management of the world’s largest companies.

*(the minimum wage is considerably lower than the LivingWage)

Wednesday, 4 May 2011

Financing climate innovation: WRI and the bounty system

Last week the World Resources Institute (WRI) posted a challenge on Innocentive, the online innovation reward website, offering cash prizes to individuals for solutions to climate change adaption issues. There is a total of $10 000 up for grabs if you can articulate a clear and actionable vision for climate change communication strategies in vulnerable communities.

WRI’s approach adds to the broader debate on how you finance climate innovation. There’s much discussion concerning how to deploy money into existing technologies and ideas, but how do you best put money into creating new technologies and ideas?

In issues of strategic concern, governments have frequently used grants, for example, to support universities and research institutes to develop new ideas and technologies. That has the advantage of giving innovators space to develop ideas without an immediate need for commercialisation. On the other hand, government grants risk being too prescriptive: What if the government chooses the wrong initiatives to support, and sinks money into non-starting technologies and concepts?

An alternative strategy has been to encourage private sector involvement in research and development through establishing intellectual property rights regimes and legal patents. These do protect innovators that sink time and resources into R&D from the prospect of others freeriding on the products of that labour. On the other hand, they only do so at the cost of creating artificial monopolies, which can have very detrimental side-effects when it comes to crucial issues of welfare, for example, in pharmaceuticals.

Perhaps the most underused method for promoting innovation though, has been the bounty system – offering prizes to induce people to solve something. Back in the 1700s, the bounty system was used to induce the creation of the first accurate maritime clock that revolutionised ocean navigation. Prizes needn’t be purely monetary though: Academic prizes like the Nobel Prizes have done much to inspire much cutting edge research, providing innovators with goals to work towards.

Innocentive is an interesting example of the bounty system. Private companies and institutions post challenges, and offer to pay individuals who can solve the challenges. A lot of the challenges to date have been scientific – how to synthesise a chemical component, or how to make fizzy drinks that don’t go flat. It’s a quick and efficient way to hone in on people who are carrying necessary skills and to harness those skills without having to directly hire them. They can be anywhere in the world, but many come from developing countries, providing a potential source of income for bright PhD students.

The obvious shortcoming of any bounty system is that if a problem seems too complex, individuals might not feel it worthwhile to put in time and effort. Many people simply do not have the luxury to commit large energy to something without any guarantee of being paid, so the bounty system probably works best for relatively less complex puzzles.

The World Resources Institute puzzle seems complex enough, but seeks ideas rather than finished technologies. They want bright ideas for “communication platforms that will connect information about local community needs to public and private sector organizations that can provide solutions and support”, so as to improve community resilience in the face of changes brought on by global warming.

At the time of writing, there were about 200 people working on the challenge, with a deadline in June. That theoretically gives you a roughly 0.5% chance of winning, assuming all were equal in their abilities. If you think you have what it takes to turn the odds in your favour, why not join up? Even if you don’t win, it gives you a chance to develop and professionalise your ideas. And, yeah, I get to take a small commission from anybody who wins after reading this blog post.