I was talking to a founder friend of mine this past week, whose company is based in London, and he told me that since the days of Margaret Thatcher, the U.K. had been in the mindset of thinking they are really an extension of the U.S., as opposed to its progenitor. This certainly wasn't helped by former PM Tony Blair who had been affectionately known as former President Bush's lapdog in all events leading up to the Iraq War. I remember this time in the U.K. quite vividly, because I was doing my M.A. degree in London and wondering how in the world could Mr. Blair support an unsubstantiated war? I asked my founder friend if he thought it would be possible if the U.K. can reclaim its identity post-Blair? Why does the U.K. not have its own search engine, social network and eCommerce site? Where is the UK's Google, Facebook and Amazon?
19 million people aged 16 and over are not in the labour force.
10.12 million people in the UK are either working part-time or unemployed.
Currently, Britain has a population around 64 million. This means that currently 35.9% of Britain's population is working full-time (23 million people).
This is interesting for many reasons because I think one of the longer-term goals of any startup should be to create jobs for people in its community. Although one of former PM David Cameron's legacy had been to reduce overall employment, there is still a large segment of the population that remains unemployed, underemployed or simply not in the workforce- whether or not that is by choice.
Fifteen years ago, in 2001, Prince Charles set up a non-profit that acts as a kind of accelerator for people in their 50s+ to start businesses via the Prince's Initiative for Mature Enterprise (PRIME Cymru) in order to battle employment challenges for people aged 50+. I wrote in a previous post that although in the media there is the cult of the young entrepreneur, that it is actually people in their 50s who start the most amount of businesses in both the United States and in the U.K.
There could be a myriad of socioeconomic and psychological reasons for why this happens. For instance, in other nations, such as South Korea, many people save up money from their jobs or careers then decide to open up a business after they have gained enough funds to do so and a great percentage of this population tends to be female. Many women in South Korea aged 60+ use their lifetime savings to open up a coffee shop franchise which is one of the reasons why Caffe Bene became more popular and ubiquitous than Starbucks (which is owned by the Shinsegae group in South Korea) in the region. I also know a few people who had high profile jobs on Wall Street who decided to open restaurants in San Francisco, New York City and Seoul. In fact, I surmise that for many people who had extensive experience in the financial districts, this is the number one thing on their to-do list after they "serve time" on Wall Street.
Starbucks is owned by the Shinsegae Group in South Korea, which is one of the many reasons for Starbuck's decline in the nation as opposed to other cafés such as Caffe Bene, which is franchised by individual owners. The Shinsegae Group is one of the few elite Korean chaebols- corporations that have a Godfather-like presence in their population that can have the power to suppress foreign companies from entering the country or crushing budding small businesses and startups.
In a parallel trajectory, many women and men aged 50+ are starting businesses in the U.S. and the U.K. Having been the child of working class parents who were workaholics, I have personally witnessed the trials and tribulations my parents had faced starting multiple businesses; their successes and failures, and they had never received help from any group nor organisation. I can safely say that in the U.S., small business owners are often the most overlooked segment of the population, who are taxed the most, and collectively contribute to their communities more than any single corporation.
California is the state with the highest percentage of supplemental poverty in the United States.
In the top 500 corporations in the United States, the way to traditionally avoid their civic duties has been through the legal methodology of tax avoidance. Google (now Alphabet), Facebook, AT&T et al have all been incorporated in Delaware, despite having nothing to do with the Delaware community, and then become comfortably headquartered in California, where the income imbalance has created a landscape in which an annual $75K salary in San Francisco is now considered in the poverty range, pushing many residents towards homelessness and poverty. In fact, out of all 51 states, California has the highest percentage of supplemental poverty at an astounding 23.8%, followed closely by the District of Columbia (Washington D.C.) at 22.7%. Not ironically, these are also the states with cities with the most amount of gang violence. In fact, despite the happy-go-lucky facade of Hollywood; Los Angeles, CA is only second to Washington, D.C, as the murder capital of the United States. San Francisco doesn't make this list, simply because of its small size of 121.4 km² compared to Los Angeles 1,302 km², but in this SF region of approximately 46.9 square miles, there probably is more economic disparity there than in parts of South Africa.
However, there are a handful of companies that are actually incorporated in the state in which they have their headquarters, such as Apple and Cisco, which are both incorporated in California, and Microsoft, which had been incorporated in Washington State (note: Microsoft was incorporated in Washington State in 1981, reincorporated in Delaware in 1986, and then finally reincorporated back to Washington State in 1993) that have a sense of duty to their communities and I think that is something to take in consideration when a startup goes through the process of incorporation; just because everyone else is doing it, and incorporating in Delaware, or moving from U.K. headquarters to the U.S., doesn't mean you have to.
British actress Emma Watson was implicated in the Panama Papers, for legally looping through tax havens to avoid paying more tax in the U.K.
Although Apple has been criticised by Europe for sheltering money in the British Virgin Islands, as many other multi-national corporations, including prominent U.K. individuals as well, such as the actress Emma Watson, who were exposed in the Panama Papers, I think former Chancellor George Osborne's proposed tax law of making Britain competitive in corporate tax by lowering to 15% would be able to address a lot of the tax-avoidance behaviours of many corporations. Certainly his proposed tax regime has raised a lot of angry voices in the E.U. where there has been a dialogue of "who can make a bargain towards the lowest"; I think that corporations that choose to be incorporated in London, as their European headquarters (although not paying 0% tax as in the British Virgin Islands) would be more motivated towards social reform, if the U.K. makes it attractive for companies to be headquartered in London as opposed to elsewhere. Currently, as of 2015, London already has in place a 230% tax refund for startups and small medium businesses (ie, SME: less than 500 staff, less than €100 million turnover & less than €86 million gross balance sheet assets) and a 150% tax credit for R&D expenditure, but lowering overall corporate taxes will certainly be more attractive for large, multi-national corporations.
What does this mean? It means that if you are a startup or business with less than 500 people with less than €100 million turnover & less than €86 million gross balance sheet assets, that the U.K government will pay you to incorporate and start your business anywhere in Great Britain.
Although there have been some corporations, such as Google, who has been taking advantage of this scheme by legally setting up small subsidiaries in London as separate entities within all their departments, creating the illusion that they are a cluster of small and medium sized businesses instead of a large corporation. These kinds of actions by corporations damage the ecosystem of small businesses by taking away funds from which they were intended. However, I think overall, the government under David Cameron and George Osborne has provided enormous support to small and medium sized businesses in the UK so that the majority of UK startups do not feel a need to incorporate in the British Virgin Islands or Delaware, United States as tax havens.
But what about job creation? One of the arguments of the Brexit camp was to limit the amount of migration so that U.K. businesses will have the best choice in talent acquisition. This is certainly a plus for people outside the E.U. who were previously behind the queue after E.U. residents for job visas. However, as I mentioned before, I think it's important in the overall education of the entrepreneur that wherever he or she will be headquartered that it is in their prime directive to create jobs within their own community.
Whereas London has created a wealth of jobs in the past 6 years, I think it is important to keep in mind that the people in the U.K. should not be dismissed as not being talented enough to be part of a startup or new business venture. Once a kind of technocratic elitism takes over, the result has been blinding social and economic inequalities that often lead to violent crimes, as witnessed in California, where Silicon Valley and Hollywood are headquartered as the tech and entertainment capital of the U.S. It isn't about a few people receiving pay into the millions whilst the rest suffer in poverty- and the excuse is, well, the few people receiving pay into the millions "earned" it. As a startup entrepreneur, I think it is necessary that we must also think about how we can also symbiotically create wealth in the community and eradicating poverty, and most often the most effective results are seen through R&D spending and talent training. Bottom line: we need to invest in people.
It is true, immigrants work hard, work longer hours than anyone else in order to become financially successful and often bring an unique mindset to solving problems in which the rest of the population have simply accepted as fate. Immigrants start the most amount of businesses in the U.S., and they often start the leading corporations that will become iconic into the next generation. However, I also think that it is in the long-term interests of any company to take time to train their employees and to create stable jobs for people in their own region as opposed to the practices by some U.S. on-demand companies to exploit their own population for cheap labour (eg, Uber et al).
For startups headquartered in London, I think it is important to ask, "how can we create 100K or even 1 million+ jobs for people in the U.K.?" This will require capital and investment in people, training people, allowing the 50%+ of U.K. citizens who wish to have a full-time job, but find they are "outsourced" to positions abroad or face a lifetime of prejudice and ageism. This sort of thinking, this "siliconism" or "siliconization" of the privileged technocracy has lead to great economic disparity in the United States, but it doesn't have to be this way in the U.K. Simply put, we need to invest in people, and not constantly date around for the next best thing and going on a Donald Trump's-The-Apprentice-style firing spree.
Queen Victoria was the ultimate Philosopher Queen and in her 63 year reign lead many social and political reforms including the Education Act (1870) which allowed all children to be educated to The Public Health Act (1875) to the Trade Union Acts (1871, 1876), and the Reform Acts (1867, 1884) which broadened suffrage for women. She also launched a national museum, created alliances with many nations and broadened Britain's political influence.
It is in every startup Founder's interest to become a Philosopher King or Queen in the tradition of Plato whilst keeping a Confucius eye of events. Are we going to leave people in a better position than we found them, or will be become like Silicon Valley, and create an unsustainable wealth divide that leads to massive statewide poverty?
This is not a question for only the Founders in Britain and the E.U. to consider, but for Founders in every state and nation.
(Note: a family of 4 with an income of $75K (£57K) in San Francisco is considered in the poverty range)
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