Julie Meyer of Ariadne Capital has laid a strong case why entrepreneurial capitalism is enabling economics to trump politics. Jyoti Banerjee listened to find out more.
At yesterday's Future of Work roundtable at IBM South Bank, keynote speaker Julie Meyer of Ariadne Capital (and co-founder of early Web start-up First Tuesday) pointed to the billion or so people in Asia and Africa that have come out of poverty, thanks to individuals turning to entrepreneurship, and benefiting from globalisation's spread. And she spoke of how aid (a non-entrepreneurial government configuration) has ruined Africa.
But its not the magic of economics that is dazzling Julie. What she really likes is a specific application of entrepreneurship to economics, which she calls ecosystem economics. Now there happens to be a sustainability consultancy in Oregon with just that name, but that's not what Julie is referring to.
By ecosystem economics, Julie is referencing the approach where a digital economy start-up comes alongside a traditional company with a large userbase and ecosystem, and provides products and services in concert with the large enterprise.
In my view, such an approach enables three things:
- The slow-moving gorilla learns from the youngster how to play in the New World and adds digital value to its customers
- The customers are exposed to new opportunities and value-added services, without which they may be inclined to look elsewhere
- The entrepreneurial start-up is able to ramp up its own expansion by coming alongside a proven market leader and benefits from the gorilla's resources, customer base and market presence.
A great example of such ecosystem economics is the deal recently struck between British Gas and AlertMe, a venture-funded home energy management company.
I really like the whole principle of ecosystem economics, particularly because everybody benefits and can see what their win will be in such a marriage. And it fits into an idea that was birthed in a conversation with my friend and erstwhile colleague, entrepreneur Hugh Keeble: we analysed the leverage that one (small) organisation can get from working another (larger) organisation in its ambit. We called the result "brand ecology," not a million miles from ecosystem economics.
However, I do wonder if ecosystem economics runs out of runway in the one area where economics itself fails us: externalities. This is where markets fail to price resources appropriately, such being the case with carbon - since the use of carbon is not priced in our marketplaces, those who use carbon in any way are subsidised by all of us who pay the price for carbon being used in our little blue planet.
So the question in my head is this: if we have a situation where a failure of the market mechanism creates an inappropriate resource allocation, can we expect ecosystem economics to work anyway? I asked Julie Meyer that question, and her response was that it will take some smart innovation for somebody to come up with a lo-carbon offering where the economic incentive for everyone to participate is made absolutely clear.
I agree with that view but with two provisos: a) in a world where carbon remains free, no one has really come up with a good argument to bring all the players to the table so that we can progress to a lo-carbon world, and b) would it not be a whole lot easier if we could strip out the externality and price carbon appropriately? If we could do that, we would level the playing field, and ecosystem economics would shine even more brightly.
And economics could continue to trump politics...
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