Month: September 2023

“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)

 

 

 

 

Secret sauce – or obfuscation discount?

19th century copybook example used by Wikipedia to illustrate Kipling's poem
19th century copybook example used by Wikipedia to illustrate Kipling’s poem

A headline in this morning’s FT – Secretive active ETFs[1] lose out to their fully transparent rivals – leapt out at me and put me in mind of Kipling’s October 1919 poem Gods of the Copybook Headings.

FT journalist Steve Johnson notes that “The new portfolio shielding models were expected to encourage actively managed funds to enter the ETF market, something many active managers had been reluctant to do because they feared daily holdings disclosures would reveal their “secret sauce” allowing other investors to front-run their funds and steal their intellectual property.”

The idea of some fund managers that they possess “secret sauce” suggests a dangerous hubris, redolent of aspiring Masters of Universe heading for a fall.  Even if some may develop some special insight or clever algorithm to give them a temporary lead until their competitors catch up or until their perceived advantage turns out to be no more than a couple of rolls of the dice falling their way, the underperformance and lack of appeal of the non-transparent ETFs to investors suggests that any perception of the existence of “secret sauce” is outweighed by the discount that investors apply because they can’t see what is going on.

My instant reaction to the story was “What Dummies?”.  While transparency of the composition and activity within an exchange traded fund may fall short of the “perfect information” ideal, investors in ETFs are a reasonably sophisticated bunch and will want the assurance that goes with transparency and be naturally suspicious of anything short of transparency.

Which brings me to Kipling’s poem.  It was written in the aftermath of the First World War, with Kipling expressing pessimism about the nostrums that he perceived taking hold at the time. The current edit of Wikipedia describes what is going better than I can: In the poem, Kipling’s narrator counterposes the “Gods” of the title, who embody eternal truths, against “the Gods of the Market-Place”, who represent an optimistic self-deception into which it supposes society has fallen in the early 20th century.  For my purpose, the believers in “secret sauce” are the God’s of the Market-Place, and the God’s of the Copybook Headings are the students who stayed awake during Economics 101[2] and acknowledge the existence of the obfuscation discount.

As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: “Stick to the Devil you know.” 

On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: “The Wages of Sin is Death.” 

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.” 

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more. 

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

 And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

[1] Exchange Traded Funds

[2] I could equally have used this poem to illustrate the disastrous budget of Lizz Truss and Kwasi Kwateng and, who assumed office (briefly) as prime minister and chancellor of the exchequer exactly a year ago.