I was quite amused by
the recent piece I read about the CoM creating a new minister for
finance, digital and competition. I have no problem with the Island
developing a bigger digital sector. I endorse diversity as a
strategy but the conjunction of the item with the timing and other
pieces has to be commented upon.
Conversations with
former colleagues with whom I worked in the previous tech bubble made
me aware a year or so ago we are into bubble territory, rather like
the late 1990's. Stories of people pitching non existent projects and
others of companies being bought without any technological due
diligence abound. Valuations based on irrational projection of almost
meaningless metrics. I've seen it all before and it is here again. So it
is no surprise some in political circles want to jump on the band
wagon. Of course a few will make it and some fortunes will be made,
but many others will fail.
Locally the drive has
focused very much on FinTech. This is understandable and is likely
very sensible for individual companies, but it is probably a big
mistake for the Island. I want to differentiate here between the
more disruptive startup and the established support business role.
There's a need and perfectly good business to be done installing
networks, managing hardware and patching servers for local financial
organisations. That's not really what we are looking at here.
FinTech really is looking at the small disruptive start up software
company.
Whenever I have been
involved in such companies there has been a common theme to the
successful ones. They have had ample access to and understanding of
the domain knowledge and problem to be solved. Clearly locally there
is specialised domain knowledge in financial services and it makes
sense for a startup to utilise that. So what is the problem?
Risk is the answer to
that, and specifically that it doesn't really represent an effective
diversification of an already over balanced economic base. It does
not matter that the skills are different and the business model is
different the odds are that a problem in the financial service sector
locally would also be a problem for the associated digital companies.
It would be better strategically to concentrate the digital sector
on the much smaller local industries like tourism and agriculture.
There's plenty of opportunity, and some requisite local domain knowledge in both
those areas. Just look at airBNB or this list
http://modernfarmer.com/2014/02/10-silicon-valley-agriculture-start-ups/
to see just how big the opportunities might be.
I am also a little
bemused at the decision to include competition in the
responsibilities of the new minister. I can see how you might need
to do something about its lack for the finance sector when we have
seen so many scandals involving the fixing of Libor, Fx and gold
prices. However software development is a highly collaborative,
cooperative undertaking. That's one reason why people in the last
tech bubble started creating incubators and hubs. We even have on
here in Jersey see http://www.digital.je/hub.
It is a little surprising therefore to see Digital Jersey and some
others locally are promoting the Barclays accelerator. Good for
a company that gets selected, but again not so good for the Island:
“The 10 companies will be guided through the process of growing and
developing their businesses with the help of funding of up to
$100,000 from Techstars. They will have world-class mentorship from
industry experts and will be based at the London Escalator, near
London’s Tech City, giving them the optimum environment to thrive
“.
Why on earth would we
be encouraging the most promising local startups to upsticks to
London if we are trying to build a local digital economy? It makes
no sense to me. It is the sort of irrational thinking that happens
in a bubble – anything that mentions the buzzword is talked up
positively even if it is a pile of ordure.
Some relevant links
http://en.wikipedia.org/wiki/No_Silver_Bullet
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