“If you read only one business book this year, read this”

Patrick Nash, author of Creating Social Enterprise
Patrick Nash, author of Creating Social Enterprise[1]
I knew very little about Patrick Nash when he joined me in 2019 as an angel investor and advisor at Tranquiliti, a start-up providing an innovative mobile phone app mental wellbeing tool for school students and their teachers.  I didn’t know much more when we were bought out in August last year by Tes Investments[2], other than what I gleaned from our monthly video call with George and Aaron, Tranquiliti’s founders, which was essentially that Patrick knows a thing or two about social enterprises.  He proved a source of sound advice to them and had a similar appetite for risk and the level of investment as me.

A couple of weeks ago, he invited me to a book launch in November.  I explained that I would be travelling to New York but promised to buy the book and read it on the plane.  Amazon already had “Creating Social Enterprise” in stock and a train journey created the opportunity to get stuck into it right away.  It proved hard to put down and I quickly concluded that it deserves the “If you read only one business book this year, read this” accolade. Scrutiny of the spine shows the publisher to be Patrick’s own company[3], so I doubt whether it will get the push (although it would from any self-respecting business book publisher) in the direction of the shortlisting for FT Book of the Year 2024 that it deserves .

While I was studying for an MBA at the Stanford University Graduate School of Business and serving my apprenticeship at McKinsey, Patrick was doing alternative stuff and getting his first taste of commercial life at Nova[4], a whole food co-operative in Bristol.  He drove the company van, turned the handle on the trail-mix mixer, learnt a range of valuable lessons about people, customers, marketing, margin management, cash-flow, risk, systems implementation – loads that you have still to learn when you graduate from Harvard, Wharton or LBS – and, importantly for his own development, undertook a crash course in double entry book-keeping (something I did learn in the first term at the GSB) from his father when the founder’s ill-health meant he had to step back from the business at short notice.

Scarred by the experience of putting Nova’s stock system onto computer (Patrick’s Learning#8 in the book is “Never Trust  ‘should’” as in “This should work” or “It should be ready by then”) and burnt out by three years without a holiday, he took a spell away from work.   A few months later, he discovered the Findhorn Community.  Most people are drawn to Findhorn in the search for a more spiritual focus to their lives but Patrick was sufficiently intrigued by a conversation with its finance director that he joined it to work in its accounting and finance department.  Rather than finding himself spiritually, he stayed on to lead the project to develop its Ecovillage (the first homes were built from giant whisky barrels), where he “learned much of the complexity of running organisations, raising funds, creating multiple corporate structures and leading teams”.  During his ten years with Findhorn, Patrick learned a lot more about running a successful business, not least about managing external and internal stakeholders.  He describes this time as a “significant phase in my social enterprise journey.  Many of the skills I have deployed as a social entrepreneur were developed there”.  But lessons and consequent skills are not just for the social entrepreneur, most of them translate into any enterprise, public or private, large or small, and independent of industrial sector.

Although Patrick has established twelve social enterprises, charities and values-driven businesses in all, his greatest achievement was establishing Connect Assist, a specialised 24/7, outsourced call centre supporting multiple clients from the public, private and third sectors (including Versus Arthritis where I spent 8 years as a trustee), employing over 450 people in a part of south Wales where employment has still not recovered from the demise of coal mining.  The third part of Creating Social Enterprise tells how Patrick developed a string of businesses that evolved into Connect Assist after first joining the Teachers’ Benevolent Fund, a charity operated for the teaching unions.  In this role he took the lead in some tough decisions, including closing TBF’s legacy residential homes for retired teachers (he is the first to call out the case for closing businesses that are loss making and no longer fulfil their purpose) and pivoting the organisation to become a telephone counselling service, setting him on the path towards establishing Connect Assist.

Patrick has great stories to tell, including how, along the way, he had the Dalai Llama as his boss when, for a few years in between the big projects that are the meat of Creating Social Enterprise, he was CEO of the Tibetan Relief Fund.  He tells tales of scrapes with the law as a twenty-something driving a whole-foods van around the country, when the grass roof of a house in the Ecovillage bursting into flames, and the thrill and relief at securing financing for assorted projects at the eleventh hour.  These come across with a freshness as though they only happened yesterday rather than ten, twenty, thirty or even forty years ago.

He has built the account of his career around no fewer than 44 learnings, drawn out at the end of each chapter and recapped at the end of each of the three major sections of Creating Social Enterprise.  Most, if not all, are relevant to anyone who picks up the book.  As someone who preaches the importance of purpose and values to a business (as part of the Dark Matter that makes organisations more than the sum of their parts) I turned the page corner down at Learning#3: Align values and commercial  interests.  I did the same at Learning#38: Empathy is the new superpower, as I have no doubt that being able “to understand another person’s thoughts and feeling is a situation from their point of view, rather than your own” is essential to effective leadership based on trust.  And his observance of the final sign-off learning, Learning#44: Moving on when it’s time to leave was the one that positioned Patrick for  life after Connect Assist where, from the comfort of home on the Pembrokeshire coast, he could join me in our support to the  young founders of Tranquiliti and find time to write Creating Social Enterprise.



[1] ISBN 978-1-3999-47-6  www.creatingsocialenterprise.o.uk

[2] Tes invests in fast-growing tech to transform pupil wellbeing | Tes

[3] Enterprise Values – Enterprise Values

[4] Still thriving: see Essential Trading Co-operative Ltd | Welcome (essential-trading.coop)





Lessons for leaders from a front-line healthcare team

CIS Team Charter

I couldn’t fail to be impressed by a slide in a recent presentation by the community health director at the NHS Trust that I have chaired for the past eight years.  It described the Team Charter developed in a programme of mutually agreed behaviour workshops in the Hammersmith & Fulham Community Independence Service in which community nurses, occupational therapists, physiotherapists, and care workers support patients to keep them out of hospital.  They are a high performing team delivering a great service, facing challenging demands, working with constrained resources, juggling priorities, and taking difficult decisions.  The Team Charter illustrated above speaks for itself.  It may look like a “motherhood and apple pie” recipe, but it is no worse for that.  And, what’s more, it provides a lesson for teams and their leaders everywhere.

A “Big Read” feature in the Financial Times recently (23rd February 2023) described how the isolation of Vladimir Putin within the Kremlin and narrowness of the circle he consults contributed to his disastrous decision to invade Ukraine and subsequent conduct of the “special military operation”.  Pictures can paint many thousands of words, but if there was anything to illustrate the need for the Kremlin to take a lesson from the healthcare workers of Hammersmith & Fulham, the photograph below, used by the FT to accompany its article, does the job.

Putin with foreign minister Sergei Lavrov - a clue to why we're in the mess we're in?
Putin with foreign minister Sergei Lavrov – would they benefit from a team charter?

The paradox of the anti-woke investor

Fundsmith founder, Terry Smith
Fundsmith founder, Terry Smith – No Nonsense?

The Escondido Framework argues that all the market interfaces of the company (with customers for their goods or services – either B2B or B2C, labour, their own suppliers of goods and services, and providers of capital) are essentially similar.

Customers for goods and services make their decisions to purchases on the basis of a variety of characteristics of the offering: quality, product features, after-sales support, credit terms, price and more, and in relation to all of these, the competing alternatives.  Employees consider not only the raw salary package, but the variety of employment terms, both hard and soft benefits, company culture and values, corporate reputation, risk, opportunities for career development, and that’s just the start of the list.  Suppliers of goods and services also have complex decisions in terms of how they view their customers, whom to serve and how.  It is not just a matter of price.  For example: is this customer big enough to justify the effort to sell to them compared to the other potential customers out there; can we support the service levels and stock requirements to meet their demands; would our brand be damaged in the eyes of our premium customers if we sell to downmarket segments?  And suppliers of funds to companies, whether equity, debt, or hybrid instruments, consider a wide range of trade-offs: risk (reflecting a wide variety of considerations: operational, financial structure, regulatory exposure), term, liquidity, income generation, value growth, portfolio diversification for starters.

So what should we make of the debate raging over ESG informed investment and rise of the vocal “anti-woke” investor?

The Escondido Framework is not a normative model, arguing over rights and wrongs of ESG investment.  The model describes the world as it is, and highlights the shortcomings and incompleteness of other models of the organisation.  Investors, alongside with consumers, suppliers and especially employees include ESG type considerations in the mix when deciding who to do business with and on what terms.  Do I want to be complicit in the destruction of the planet, oppression of minorities, exploitation of disadvantaged populations – whether on a third world plantation or facing an early death through a predisposition to consume addictive toxins (alcohol, tobacco or opiates).  ESG is a fact of life in all markets, the only question is the weight and precise form in which it plays into the consideration of all the parties (aka stakeholders) with whom companies interact.

There are conflicting accounts as to whether ESG focussed companies and investment funds deliver superior returns.  Part of the problem is one of definition and the nature of the measures employed: movements in share price are a poor metric because any starting point in a share price measure has future performance expectations priced in.  However, to the extent that robust taking ESG issues into considerations reflect long term strategic thinking and the combination of transparency to investors and quality in decision-making processes, it is hard to see why and how ESG would not offer great value creation over an “anti-woke” alternative.

The Financial Times has once again (Helen Thomas on 11 January, following an article by Harriet Agnew on 12 January last year) focussed on a spat between “anti-woke” investor Terry Smith of Fundsmith and the leadership of Unilever.  Smith has mocked Unilever’s leadership in his annual letter to investors for highlighting its sustainability credentials and for “virtue-signalling ‘purpose’”.  He takes issue with Unilever for “purposeful” brands. For example, he comments about soap that “when I last checked it was for washing” dismissing Unilever for talking about “inspiring women to rise above everyday sexist judgements and express their beauty and femininity”.  But, as Thomas points out, “the huge success of Dove – one of Unilever’s biggest brands, held up as a marketing case study – suggests a bit of female empowerment and body positivity isn’t a stupid way to sell soap.  Rather like efforts to make mayonnaise appealing to health-conscious millennials [Smith laid into Unilever’s account of the “purpose” of Hellman’s last year], Smith just isn’t the target market”.

He is on stronger ground in his criticism of Unilever, which has been subject to a raid by activist Norman Peltz who now has a seat on the board. He complains that Unilever has failed to engage with his fund which had been a long-term holder of Unilever stock and twelfth largest shareholder.  Marketing to investors, involving both taking strategic marketing decisions about the proposition provided to the investor (ie the profile of the investment including characteristics such as those listed provide above) as well as communicating with the shareholders, is one of the core responsibilities of the chief executive.

Reading the Fundsmith shareholder letter, I take away the impression that Smith’s criticism of “virtue-signalling” reflects a politically informed discomfort with a company that responds to trends in society and to the new consensus about threats to the environment.  However, his language elsewhere and his stated strategy to invest in good companies, hold onto shares for the long term, suggest that he doesn’t recognise that his fund should invest in companies that adopt the underling strategic approach of Unilever (even if not its failure to communicate adequately with large shareholders or its apparently inept approach to large transactions).  Given the stated approach (effectively to emulate Warren Buffett), Smith ought to be able to leave his personal politics and any “anti-woke” tendencies outside in the carpark when he comes to work and to recognise the value of purpose and ESG when investing on behalf of his clients.

First lessons from the war in Ukraine

Russian military convoy

It’s a bold step to claim to draw lessons from a war is that is not yet a month old, where the outcome is very far from clear, and the impact on the world in terms of economic disruption and political destabilisation way beyond the immediate geographic scope of the conflict.

This Russian invasion of Ukraine has so far been consistent with two of the great aphorisms about war.  The failure of the Russian army in its assault on Kiev perfectly demonstrates that “no plan survives contact with the enemy”[1].  And the information coming from all sides, some understandable propaganda and disinformation, some amounting to exceptional self-deception, demonstrating the point originally made by Samuel Johnson in 1758[2] but later attributed in more pithy form to US politician Hiram Johnson in 1917 “the first casualty of war is truth”.

This war also demonstrates as well any other that existence of the three sanctions and the complex web of how they apply and interact. This is a war about the application of force and arms.  It is also a war about the application of politics and persuasion.  It is also a war where economic pressures are at work, where calculations about financial transactions and trade-offs are already having a huge impact.

The question is very reasonably asked how the European customers for Russian gas allow themselves to be propping up a Russian economy that Ukraine’s allies are trying to hobble through a trade embargo.  Correspondingly, the world is being thrown into crisis by the impact of a shortage of Russian gas, whether held back by Russia to apply pressure on European countries or from a curtailing of imports driven by an act of policy.  The impact on large parts of the world of restrictions of exports of grain from the Ukraine is likely to cause prices to rise in the affluent world and threaten famine in the less affluent.

At this stage, it is far too early even to speculate on the outcome.  Will the wave of political sympathy in the West and suspicion of Russia’s motives among the former colonies of both Soviet and Tsarist empires outweigh the economic pressures that may undermine the popular support for the Ukrainians?  Will the costs and potential duration of the “special military operation” undermine the political support for Putin’s irridentist claims?  How does the Chinese claim on Taiwan play into the political and economic debate and super power balance?

Playing into the corporate world that is the home turf of the Escondido Framework, companies have to take into account the changes to the pressures that they work under.  The virtual spaces between market interfaces within which they operate will change.  This will reflect changing patterns of supply and demand for resources and for their outputs.  It will also reflect changing patterns of government interference in the shape of the restrictions on where they source and where they sell.  It will introduce uncertainties where previously there may have seemed a degree of foreseeability.  And all this following on the heels of the pandemic and in the context of a climate crisis.

[1] “One cannot be at all sure that any operational plan will survive the contact with the main body of the enemy”  Herman von Moltke in “On Strategy”

[2] “Among the calamities of war may be jointly numbered the diminution of the love of truth, by the falsehoods which interest dictates and credulity encourages” Samuel Johnson in “The Idler” 1758

This was the house that Jack built

GE Logo

This week’s news that GE is to demerge into separate energy, healthcare and aviation businesses follows the disposal of GE Capital Aviation Services in March that finally completed the dismantling of GE Capital, finalises the implosion of the business led by Jack Welch between 1981 and 2001.

Shares in GE jumped by more that 10% on the news, suggesting that, even at this stage in the disaggregation of the conglomerate’s activities, owners of GE stock took the view that the corporate entity sitting above the various businesses was destroying over $10 billion in value. To this measure of the destruction of value by the corporate parent of the underlying businesses should be added the $7 billion paid in fees to Wall Street investment banks since 2000, of which $2.3 billion related to M&A advice and $3.3 billion to fees related to bonds (not unconnected to the parent company’s top executives about the corporate structure).

The FT staff’s covering story commented that “investors welcomed the move, which will make it easier for them to decide which of the businesses they want to back.”  We have moved a long way from the 1970s and 1980s approach to corporate strategy captured by the BCG 4 box matrix with its Stars, Dogs, Cash Cows and Problem Children and the idea that at a corporation could create value by shifting resources between the business in these quadrants.  Jack Welch’s GE, aided by McKinsey, used a 9 box matrix, but the essence was the same.

The FT’s Brooke Masters has written a first class piece reflecting on the conglomerate cycle.[1]  She cites the LSE’s Alexander Pepper: “It becomes the conventional wisdom conglomerates are no good and need to be broken up.  Then we end up with companies that are so specialised that somebody decides that there is merit in vertical and horizontal integration.  Ten years later you end up with a conglomerate”.  Brooke Masters further observes that “the conglomerate’s resurgent appeal lies in the normal ambition to improve couple with a hubristic assumption that good managers can manage anything.  Entering new business lines seems attractive new business lines seems attractive when competition rules prevent dominance in a single sector.  Cynics note that chief executive pay and influence expands with company size.”[2]

The Escondido Framework approach to the conglomerate is to think of the corporate centre as a business in itself, distinct from the portfolio of businesses that it manages.  Jack Welch’s GE was in the business of managing a portfolio of activities, allocating capital, buying and selling business according to a number of guiding principles (such as only buying or selling businesses that could demonstrate that they were number one or two – generally on the basis of market share – in their sector), and rolling out some common approaches (such as 6 Sigma quality) to management across the businesses it owns.  How businesses in the portfolio created value themselves for their stakeholders and wider society was incidental.  Jack Welch’s GE, the corporate centre of the corporation that bore the GE name, has long since failed to meet the test for an organisation to survive, that it should create value for those with whom it interacts above and beyond what is delivered by markets.

[1] FT 10th November 2021

[2] A number of these features apply equally in public sector organisations, not least in the NHS where I spend much of my professional time.

What We Owe Each Other, by Minouche Shafik

Minouche Shafik, Director of the London School of Economics
Minouche Shafik, Director of the London School of Economics

There is much to celebrate in Minouche Shafik’s argument that we need a new social contract[1], not least a title that uses the language of obligation and duty rather than employing the language of rights.  This is even if she falls back, in her closing remarks, on answering her question of what it is that we owe to each, that it is “to muster the courage and sense of unity” that the Beveridge Report said was necessary for the “winning” of “freedom and want”.  I was looking for more, and shouldn’t be too critical her effort at a rallying cry to round off the book when she has addressed a variety of policy measures, without being unduly prescriptive about their precise form, that would address “our interdependencies, provide minimum protections to all, share some risks collectively and ask everyone to contribute as much as they can for as long as they can….investing in people and building a new system of risk sharing to increase our overall well-being”.

Shafik’s underlying argument is that we need a new social contract to meet the needs and opportunities facing both individual society and global society in the 21st century, including those of an environment threatened by global warming and the degradation from human activity, of an ageing population, of an inequity between generations, and of the alienation of communities left as others have prospered that as consequence poses a threat the liberal democracy.  She is qualified for this task by her  personal history which includes an affluent childhood in Egypt that exposed her to third world poverty around her before her family emigrated to the USA, a career largely “in the trenches of policymaking” spanning international institutions and in the central government and central banking in the UK, and finally her current appointment as Director of the London School of Economics in 2017 where she launched a programme of research, ‘Beveridge 2.00’, to rethink the welfare state.

Having spent many years in healthcare and the application of health economics, I felt initially that her chapter on health was skated over too much.  But this was before I reflected that the chapters outside my own area of knowledge were throwing me snippets of valuable information and new insights that left me with respect for the ambition within her 189 very readable pages (Thomas Piketty could learn a thing or two from Minouche Shafik!).  Plenty of the examples in this book are familiar, such as the marshmallow test, but others cited, such as the evidence of the value of quite modest investment in early years intervention, such as weekly hour-long visits by Jamaican community health workers for 2 years to encourage mothers to interact and play with their children to develop cognitive and personality skills that 20 years later yielded 42% higher earnings than the control group.

Shafik sensibly avoids too many narrowly defined prescriptions, reflecting on data presented in the book that different countries have successful applied different policy solutions (for example in how they fund and organise healthcare) to achieve broadly similar outcomes (even if the one nation in the case of healthcare that doesn’t do this in a coherent way – the United States – ends up spending far more in aggregate, and in terms of public money, than everywhere else only to realise worse outcomes).  However, the general thrust of her argument in each area of policy is clear.

Shafik poses interesting questions around the intergenerational social contract.  On one hand, younger generations are blessed with material well-being that the old generations could not have dreamt off.  On the other hand, as David Willetts documented in the The Pinch[2]the millennials and generation Z have good reason to be aggrieved as they pay for the higher education and the home ownership enjoyed by their parents appears out of reach.  Shafik recognises, in the emphasis that she places on investment in education in new social contract and various mechanisms for achieving this that she suggests.  There is also the issue of the price that they and future generations will pay in terms of the environmental degradation resulting from the previous generations’ approach to achieving their wellbeing and economic growth.  I am surprised at the complexity that she builds in to potential solutions to this when the solution should lie in regulation, a national income calculus that better reflects the value of the natural world that currently calculated GDP or national income, and environmentally based taxes that capture the externalities of industrial and agricultural activity that damages the environment.

The book also gives rise to a set of interesting questions about what this means for businesses.  Where do they sit within this narrative?  There are important lessons for the people who sit at the heart of businesses, the “controlling minds” in terms what they can do, both in relation to their own workforces, customers and suppliers, in terms of contribution to a new social contract.  For the business to thrive, and sustain itself in the long term, the core lesson is that it should be a player, alongside the individual citizen, in such a new social contract.  Otherwise, its profitability and in due course its survival will be undermined by the very same pressures the Shafik describes threatening both individuals and liberal democracy.

I have a fear about one element in the approach Shafik takes to the need for a new social contract.  This relates to what goes into the “increase in our overall well-being”.   Some of the steam that is driving populism is increasing material inequality and the sense that communities are being “left behind”.  Some of this populism is a function of identity politics, which may be whipped up by the perception that communities with other identities (often, but not exclusively, framed by other ethnicities or immigrant groups) are posing an economic threat or gain an advantage.  But the perception may nothing to do with actual material wellbeing.  Indeed, in the case of some of the 52% of the British population voting for Brexit, or the potential majority in Scotland for independence from the UK, this may be a desire to escape from or avoid the “other” despite the prospect that of material disadvantage.  Some may be seduced by arguments that “getting back control” will leave them better off materially, but many others take the view that independence from Europe or the UK is more important than the economic benefit of remaining part of the whole.  There is, at least at an abstract level, a link between the communitarian spirit in Shafik’s argument for a social contract “that addresses our interdependencies” and the desire to be part of a union, whether of states sharing a continent or Kingdoms sharing a small archipelago at the continent’s north western edge.  Those same people who resist the membership of the country they occupy in a union of countries are also likely to be those most resistant to her arguments for a renewed social contract.

[1] Shafik, Minouche (2021). What We Owe Each Other: A New Social Contract. ISBN 978-1847926272.

[2] Willetts, David (2010). The Pinch: How the Baby Boomers Took Their Children’s Future – And Why They Should Give It Back. ISBN 978-1848872318.

Not Useful but True – “the space is never static because the problem keeps changing all the time”

Nick Ormerod and Declan Donnellan
Nick Ormerod and Declan Donnellan

During lockdown, Declan Donnellan and Nick Ormerod, artistic directors of Cheek by Jowl[1] recorded a weekly podcast “Not True but Useful” about their approach to working in the theatre.  They have now released transcripts of the first series of stimulating conversations.  The following is an extract from the second of these podcasts “Space and Shakespeare”, published in April 2020[2].  I reproduce it here because I find the visualisation of the firm and the organisation as something existing in space, bounded by its interfaces (which are themselves dynamic) with outside world very helpful when thinking about the firm, what it is there for, and how people interacting with the firm or setting its strategy from inside.  Listening to Declan and Nick in conversation with interviewer Lucie Dawkins, I was struck by parallels between what happens to actors on stage and to the managers of the firm.

Lucie   So, today we’re going to focus on the way that you think about space when you stage your plays together, both in terms of what it means for the actors, and how it influences your design. And later in the episode, we’re going to use Measure for Measure as a test case, and I suspect we’ll probably talk a bit about Macbeth as we go along. But let’s start at the very beginning. Why is space so important to you?

Declan   It’s very difficult to explain what we mean by space. I can put it in this form, I can say that what happens when we die? When we die, the space gets taken away from us. So the space is an enormous thing.

Lucie   So what has space got to do with acting?

Declan   Everything. It’s got to do with our whole existence.

Nick  Human beings live in space. They’ve spent their lives dealing with the space, they are formed by the space, everything. The character (Macbeth, for example) lives in a space, a changing space from second to second. Each character has their own special space. And it’s very subjective. You look at a chair, perhaps your mother sat in that chair, that chair means something to you in your bedroom. The character deals with the space. And we as human beings spend our lives dealing with a space.

Declan  Yes, sometimes it’s a criticism, a lot of people say, oh, you know, ‘he’s at the centre of the universe. He thinks he’s the centre of the universe.’ And of course, it’s very annoying if somebody’s self-obsessed like that. But unfortunately, we are at the centre of our own universes. We invent the world that we see. There is a reality, I’m sure, but we have no access to that reality other than through our imaginations. Nick and I are looking at a microphone now but we’ll see different microphones. The microphones we see we have to invent somehow in our heads. One can’t explain these things, but we can get used to these ideas. And we can say things about the space, which is different from defining it.

Lucie  How does the space influence the behaviour of a character, for example?

Declan  Well, there would be no character if there were no space. And the thing is that, in a mysterious way, we are not independent of the space, we only exist as part of this big binary. And that’s the very hard thing to get one’s head around.

Lucie   That’s a striking statement, that there’s no character without the space around them. So, let’s unpack that a bit. How, for example, does the space define Macbeth in the scene we talked about last week, Act 1 Scene 7, when he leaves the dinner party in the next room offstage to talk to the audience about why he wants to kill Duncan.

Declan  I think that first we shouldn’t in any way have the idea that space is something that only afflicts Shakespearean characters. You know, Nick and I are sort of hunched over a microphone and we’re looking at your face, and we’ve the laptop open, and I’m trying to not make noise on the table. And I’m pinned in space.

For Macbeth, there’s a million different ways of doing it, but the space will be central to all of them. There is no world, there’s no life beyond the space. The space is what gets taken away from us when we die, and death is what happens when the space gets taken away. Macbeth gets the feeling that he has to leave that table. Yes, we can interpret the stakes: because he feels suffocated; because there’s no air in the room; because he has to get away from the man he is murdering; he needs space to think – and he comes out, and maybe doesn’t want to speak to anybody, and maybe he sees us, and there are all sorts of stories that one might evolve in order for him to do that. But whatever solutions he comes up with, these will all be absolutely dependent on the space, and on him allowing that space to come before he does. That is the important thing. So it’s not me and I spray a space around me – it’s that is a space and I’m in it. I try to control that space. And so I imagine it to be all sorts of things other than it is. But it’s going to be there before me, during me, and after me, and my perception of it will be continually changing.

If we need to break it down into steps, we can say – it’s a bit leaden – but if we run into difficulty, we can say that one of the shapes of life is that I’m in a space, I have an impulse to cross a threshold to go to another space to find something which turns out to be different from what I had expected. And that last one gives us life, the fact that it’s a continual surprise. When we look at any space, we see it’s just one long transition from one space to another. There is no state of a space, the space itself is transitioning, and we are normally trying to keep up with that space that’s changing much faster than is comfortable for us. It’s like, you know, we think that the world is spinning too slowly. Actually it’s spinning uncomfortably fast. And in all of these plays, events run out of control, and that they’re trying to slow things down. It’s rather sad to say to actors, you know, you must drive the play, because actually the space, the thresholds, the predicament, drives the action. And the characters are struggling to keep running with this thing that’s running wild and out of control.

Lucie   So, one way of looking at what’s driving this character through the space is that there’s a problem in one space, it drives them into another space, but the new space only keeps presenting him with more problems – that the character’s journey through the scene is dealing with the problems that the space is serving up to them.

Declan   That’s exactly right. Yes, the space is never what he wants it to be. The space keeps presenting new challenges. And we all think, oh wait, if only the threshold changing would stop, if only the carousel would stop, then I can deal with it – if only it would stop! But it doesn’t. It just keeps going. And there we are. And that’s what we do. And yes, he’s continually dealing with the new things that he sees.

Lucie   So it sounds like the space is never static because the problem keeps changing all the time. I guess the longer he’s out of dinner, the more he realises that he’s going to be missed, and it looks suspicious, and the bigger his problems keep getting, and every face that he speaks to in the audience presents another source of discomfort, as if he’s trying to persuade each one that the murder is a great idea. So the space is always changing, either serving up new problems or letting the existing ones grow worse.


[1] I have been one of Cheek by Jowl’s patrons for many years, having enjoyed their shows for most of my adult life and almost certainly seen performances involving Declan and Nick in my first year at student at Cambridge University in the 1970s.

[2] Full recordings and transcript available at Not True, But Useful Podcast – Cheek by Jowl

Understanding Apple’s implausible explanation

Apple logo






Apple has just announced that it will reduce the commission it charges smaller developers (those who earned less than $1 million last year through the App Store) from 30% to 15%.

As someone with an advisory role and financial interest in just such a business for the past ten years, the explanation provided by Apple’s CEO, Tim Cook, has a hollow ring:

“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. We’re launching this program to help small business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love.  The App Store has been an engine of economic growth like none other, creating millions of new jobs and a pathway to entrepreneurship accessible to anyone with a great idea. Our new program carries that progress forward — helping developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”

The suggestion that this is a natural evolution and being done out of the goodness of Apple’s corporate heart is implausible at best.  The small businesses that rely on the App Store to reach iPhone customer have been “the backbone of the global economy and beating heart of innovation and opportunity” throughout the iPhone’s existence and have put up with being fleeced.  The entrepreneurs have funded their businesses, taken risks on new ideas, expanded their teams and made apps that enrich people’s lives without any help from the black shirts* formerly of Infinity Loop, now Apple Park.

The likely explanation is provided by the threat of action from the European Commission, which opened an investigation into Apple’s anti-competitive behaviour in June, and potentially from the US, with Congressional hearings into the monopolistic conduct of the tech giants later in the summer.  This is an illustration of the strategic solution space available to a company being reduced by the prospect of regulatory intervention.

In parallel with this reduction in the price charged to its small customers for using the App Store, Apple revealed at the Congressional hearings something about the shape of the market interface between the App Store and the “customers” who sell through it when it disclosed that it had agreed a 15% commission with Amazon for in-app charges within the Prime Video app.

The interesting question is what happens next.  Apple has had to cave in to the threat of another web behemoth flexing its market power and potential to lobby against it.  It has accepted, so far in part only with the new deal for smaller developers, the political reality of the forces gathering against its abuse of its power over a large slice of the market for apps on mobile phones.  What of the middle-sized App Store developer customers?  How long will it take Apple to develop an implausible but face-saving formulation to explain why it has reduced their commissions too?  Or will it try to tough it out until competition authorities around the world run out of patience and take Apple, and potentially some of the other tech giants, apart in the way they did to the US rail and oil industry over a century ago?

* for the avoidance of doubt, this is a reference to the sartorial style of the late Steve Jobs and his successors and not a comment on either their conduct or politics.

Rio Tinto’s dynamiting of the Juukan Gorge: Jean-Sebastien Jacques’s solution-space implodes

Juukan Gorge caves after Rio Tinto dynamiting
Juukan Gorge caves after Rio Tinto dynamiting

What better illustration could there be of the Escondido Framework approach to understanding ESG investing described in last week’s blog than the defenestration of Rio Tinto’s chief executive, Jean-Sebastien Jacques, by the company’s shareholders?[1]

In relation to the distinction made in last week’s article between the impact of regulation on the solution space available to executive teams, one of the interesting aspects of the dynamiting of Juukan Gorge and the two rock shelters is that the company had previously negotiated native title agreements with the Puutu Kunti Kurrama and Pinikura people, giving it rights to mine the area and had also secured regulatory approval.  In Escondido Framework terms, as illustrated in last week’s blog post, the company thought that it was operating within the solution space defined by the market transaction with the owners of the land and that the regulatory market interface had not reduced the solution space available to the company.

However, the executives had failed to appreciate the sensitivities of the company’s investors to such an egregious violation of the heritage of not only the indigenous population but humankind as a whole.

Perhaps the board and executive team at Rio Tinto paid too much attention to the likelihood that investors in mining stocks are already a self-selected group that is less sensitive to ESG considerations than the investment market overall.

It matters little whether the response of the investors whose pressure on the board finally persuaded chairman Simon Thompson (who previously had insisted that Rio Tinto would not fire Mr Jacques) was a reflection of the potential for the scandal to increase future regulatory pressure on the industry, or a concern for the response of the upstream investors in their funds, or the consciences of fund management executives themselves being pricked by comparisons between the dynamiting of the caves with the actions of the Taliban blowing up the Bamyam Buddhas in 2001.

Either way, the shape of the investment market interface was sufficiently different to that perceived by Mr Jacques and his colleagues for them to have placed themselves, not temporarily but at a personal level permanently, outside the solution space available to them.

[1] For anyone who missed the story, Rio Tinto blew up two 46,000-year-old Aboriginal rock shelters in Western Australia, offending not only the Australia aboriginal community for whom the sites were sacred but also a wider public sensitive to an ancient archeological heritage. Initially the board decided to withhold bonuses for the executives involved, but has now decided that Mr Jacques should go (albeit not until early next year and without any further financial penalties)

Moody’s says Lloyds’ ethnic diversity plan is ‘credit positive’

The Financial Times reports today that Lloyds Banking Group’s plans for promoting more black employees have been described by Moody’s as “credit positive”, the first time that a credit agency has explicitly linked a company’s stability to ethnic diversity measures.  Moody’s has not gone as far as to upgrade Lloyd’s credit rating at this point, but it clearly indicates that Lloyds’ plans  are “credit positive [implying that they have the potential to reduce the company’s cost of capital, even if not immediately] because they will improve staff diversity at all levels and reduce Lloyds’ exposure to social risk”.

Lloyds has stated that it recognises that some groups are under-represented in its ranks.  Anyone viewing the current TV advertising campaign for its domestic mortgage lending arm, Halifax, showing a diverse mix of staff ready to serve customers despite working under Covid-19 restrictions at home, can see that Lloyds is not talking about front-line staff in this instance.  It has set a target to increase five-fold the number of black staff in senior roles by 2025 and will be publishing data on its ethnicity pay gap.

Investors and rating agencies have been taking increasing account of environmental, social and governance (ESG) risks, reflecting the importance of sustainability, on all measures, to the corporation and to those who invest in it or lend to it.  The note about Lloyds published by Moody’s on Thursday is a welcome acknowledgement of the work Lloyds is undertaking.  Action of this sort should improve internal culture, communication, engagement and ultimately operational performance and profitability.  The motivation behind showing a diverse face to the TV audience is that it contributes to winning customers and increasing revenue.  The response of Moody’s suggests that yields benefits in addressing the capital market interface, ultimately increasing access to capital and reducing its cost.

Let us hope that Moody’s response to Lloyds’ efforts spurs others to recognise that action on equality, diversity and inclusion is good for business.