Matt Ridley is a science writer and a former member of the House of Lords.
“I don’t think employers are working people.” When Emma Reynolds, Chief Secretary to the Treasury (effectively Britain’s deputy finance minister), uttered those words in a recent television interview, her words were widely shared online. She was given two chances by her interviewer, Camilla Tominey, to back down – but she doubled down instead. “The distinction I am drawing is between employees and employers,” she said, while acknowledging that she employs a cleaner.
It is a fascinating glimpse into old-fashioned, almost Marxist, view of the economy. On this view, it seems, we are back in the nineteenth century when top-hatted plutocrats sit back and enrich themselves off the back of hard-toiling employees. You are either one or the other.
Except it was not true then either. At the weekend I happened to be reading about Sir Amos Nelson, a man who went to work in a cotton mill part time at the age of 8 (full time from 13) and ended up the stupendously wealthy owner of a large country estate in Yorkshire on which he built a brand-new stately home, Gledstone Hall. Was he not a “working person”?
My point here is not political point scoring, however. It is to suggest a more valuable distinction: whether you have skin in the game. Both employers and employees can be great if they really care what happens to their organisation, or really useless if they don’t.
A friend once asked about my experience of leaving employment to work for myself as a freelance writer. A few weeks later he messaged me: “You never warned me that when you work for yourself, your boss is a bastard.” The most driven and motivated people I know are self-employed sole traders, the founders of their own businesses.
That’s why Marc Andreessen, the founder of Netscape and star venture capitalist, prefers to back founders rather than hired MBAs. He refers to the 1940s book The Machiavellians by James Burnham, which saw the world of “bourgeois capitalists” who built their own businesses – Henry Ford and co – being replaced by the world of managerialists trained and hired to run firms.
Andreessen thinks management as a skill set that can be used to run many different kinds of business, in the public as well as the private sector, is the cause of many of our problems. “If there is one dominant theme in the last 30 years in the west it is that managers generally, writ large, are not doing a great job.”
Imagine Elon Musk’s firms run by hired Harvard or Stanford MBAs. They would never have dared try half the outrageous things he has pulled off.
The story of Mike Lynch, founder of the software firm Autonomy, exemplifies the issue in two ways. As recounted in Katie Prescott’s excellent book The Curious Case of Mike Lynch, published in November last year, Autonomy was a brilliantly successful company built by a founder with a devout obsession to work hard and grow the firm, admittedly accompanied by sometimes tyrannical behaviour towards others in the company.
But when Autonomy floated on the stock market, different incentives began to dominate. The pressure to keep growing the company’s share price turned Lynch and his colleagues into managerialists who rushed to acquire other firms and sign up clients at any cost to please market analysts. Soon the company was cutting corners at best, or, according to the US courts that convicted its former finance director, booking revenue improperly at worst.
Whether that amounted to fraud, let alone justified the criminal persecution Lynch received in the United States after Hewlett Packard vastly overpaid to buy Autonomy, is a different question. Lynch was eventually acquitted of criminal charges before dying in a freak yacht accident, but Hewlett Packard has been awarded £920m in damages against his estate to compensate it for the embarrassment of having not done its homework before the deal.
My point is that both firms, Autonomy and Hewlett Packard, were ruined by managerialism losing touch with founderism.
The world needs more founders. They drive change, disrupt monopoly, challenge stagnation and make the future happen. Some, like Elizabeth Holmes of Theranos, poured their entrepreneurial energy into fraud, but most get rich by improving the lives of their customers. From Thomas Newcomen to Andrew Carnegie to Elon Musk, they drive down prices for all.
So here’s my question. Are there enough potential founders out there at any time, or could we do with flooding the market – and stifling the supply of managers? I am not generally a fan of the great man theory of history. I think that if the likes of Gates and Jobs, Bezos and Zuckerberg did not exist, other names would still have come forward.
But Musk gives me pause, I admit. The world of space, of cars, of tunnels, of social media would look very different if he had not existed. And it must be true that an economy which incentivises founders at the expense of managers (in both the private and public sectors) would be one that grew faster, innovated more richly and solved more problems.
So yes, let’s at least give it a try: see what happens if we incentivise more working people to start their own businesses. Just as every common soldier was said by Napoleon to carry a marshal’s baton in his knapsack, so perhaps every pie-shop owner carries a tech mogul’s black T-shirt in his tote bag.
Excellent piece. Old loyalties have shifted. Labour is now the party of the public sector employees and the left-leaning intellectual elite. The previous large Labour-voting factory working class has greatly shrunk. And many have become white-van self-employed. They are drawn to Reform, not labour. Big shifts.
I can't think of a piece I've agreed with more. I've long been of the view that businesses are founded by entrepreneurs, mature under managers, and are finished off by accountants.