Hedge
Nicolas Colin began his career in the French civil service and then brought his clear understanding of regulatory systems across Europe to his work as a tech entrepreneur. In 2013, he became Co-founder and Director of The Family, a pan-European investment firm supporting early-stage entrepreneurs, now with a portfolio of 150+ fast-growing startups.
He sits on the board of Radio France, the French national radio broadcasting corporation, and teaches university courses on corporate strategy and public policy at Sciences Po in Paris. He has previously served as a member of the board of the French personal data protection authority.
Nicolas is a thought-provoking voice in the conversation about new institutions in the digital world. He has co-authored several works on technology, including a 2013 Report on Taxation in the Digital Economy (for which he was voted one of that year’s ten most influential people by the International Tax Review). His articles regularly appear in both English and French publications, including Foreign Affairs, The Financial Times, and Le Monde. Hedge is his third book, and the first published in English.
Nicolas was born in Normandy, France and raised by musician parents, becoming an accomplished bass guitar player. He lives in London with his wife Laetitia Vitaud and their two children.
Advance Praise
“Brilliant, timely and urgent! This digital native takes my theory of technological revolutions and runs with it, applying the lessons of history to the complexities of the present day. An eye-opening primer to the technological present, this book speaks to innovators and entrepreneurs, proposing bold and imaginative solutions towards the creation of a ‘Safety Net 2.0’ and a better future for all.”
— Carlota Perez, author of Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages
“Nicolas Colin is a path-breaking French entrepreneur who emerged from the world’s most elite civil service to become a direct participant in and compelling analyst of the Digital Revolution. In Hedge, he brings together a deep reading of the history of economic development through transformational technology with his own direct experience as co-founder of a unique Paris-, London- and Berlin-based firm, The Family, dedicated to galvanizing a start-up culture first in France and now more broadly across Europe. Colin’s understanding that economic disruption, especially of the labor market, must be balanced and buffered by relevant innovations in social policy makes Hedge must reading for everyone – on both sides of the Atlantic and around the world – wakening to the impact of the Digital Revolution.”
— William H. Janeway, Senior Advisor, Warburg Pincus,
author of Doing Capitalism in the Innovation Economy
“Nicolas has written a sharp and historically grounded analysis of how technology and the political economy of the West have evolved in tandem, and how we might lay groundwork for a society that has both a strong social safety net and supports entrepreneurialism and innovation going forward.”
— Kim-Mai Cutler, Partner, Initialized
“This is an important book which poses profound questions about the social and political effects of technological change. Rather than adding to the growing backlash against tech, Colin puts forward specific and forward looking ideas about how we can strike a new balance between technological change and wider social stability and solidarity. In essence, Colin envisages nothing less than a reinvention of the welfare state to suit the modern entrepreneurial age.”
— Sir Nick Clegg, former UK Deputy Prime Minister
“I have known Nicolas since the inception of his firm The Family, back in 2013. I’ve seen their capacity to transform the European startup ecosystem from the inside. As a former civil servant in the upper levels of the French government, Nicolas knows very well that politicians aren’t willing or able to take the lead when it comes to technology. To save the tech industry from itself, he urges entrepreneurs of the world to build a “Greater Safety Net 2.0" that can provide economic security and prosperity for all. I’ve always praised Silicon Valley’s unique ability to encourage contrarian thinking. Hedge should become part of its playbook, because we urgently need to come together and find ways to uplift humanity in these times of radical change.”
— Vivek Wadhwa, Distinguished Fellow at Harvard Law School and Carnegie Mellon University
“Nicolas Colin has brilliantly interpreted a fundamental shift in the nature of the worker and the political economy, a shift to the Entrepreneurial Age. This must be met, he argues, by delivering a new Great Safety Net. Carefully documented yet contemporary, Hedge makes for compulsive and thought-provoking reading, which will hopefully stir you into action.”
— Azeem Azhar, Founder, Exponential View
Hedge
A Greater Safety Net
for the Entrepreneurial Age
Nicolas Colin
The Family, 9th Floor, 107 Cheapside, London, United Kingdom, EC2V 6DN, www.thefamily.co
Information on this title: hedgethebook.com
© Nicolas Colin 2018
This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of The Family.
First edition published 2018
The Family has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.
To Eckhard Strohschänk, who was my uncle,
and my political awakening.
To Laetitia, Béatrice, and Ferdinand.
Table of Contents
Introduction—From Europe With Love
Part 1—The Ticking Clock
Chapter 1—The Tech Backlash
Do middle class workers dream of tech companies?
Big chances missed in the tech world
The shifting balance of international power
Chapter 2—Technology and Institutional Change
Modern history is a succession of paradigm shifts
Different days, similar problems
How we once built the Great Safety Net 1.0
Chapter 3—Stuck in the Dark Ages
The Western middle class’s never-ending crisis
How the Dark Ages shifted risks onto individuals
Making the West Great Again
Part 2—The Entrepreneurial Age
Chapter 4—Entrepreneurs and the New Corporate World
A brief history of science and entrepreneurship
From personal computing to continuous innovation
Entrepreneurs are here to stay
Chapter 5—Behind Entrepreneurs: The Multitude
How customers rose as the main force in the corporate contract
Production and consumption are increasingly blurred
What’s a tech company, anyway?
Chapter 6—Consumer Power: The Modern-Day Janus
We’re all undergoing the ‘Wal-Mart Effect’
Instability is the new normal
Getting from Great to Greater
Part 3—The Collapse of the Cathedrals
Chapter 7—The Safety Net in an Open World
Software is opening the world
The thalassocracies
A more open world calls for greater economic security
Chapter 8—From the Old to the New Working Class
The old working class has been left behind
The new factory floor
The problem with proximity services
Chapter 9—The Lost Art of State Intervention
The state as the solution to many problems
How bureaucracy reached the point of irrelevance
Reviving the state
Part 4—A Greater Safety Net
Chapter 10—Always Be Rebounding
Education is no longer the magic bullet
Occupational licensing for amateurs
Affordable housing for hunters and settlers
Chapter 11—Institutions for Hunters
A new breed of consumer finance
Dealing a new hand in insurance
We should all be taxed like Donald Trump
Chapter 12—A Hedge for the Networked Individual
The corporate world in retreat
The new frontier in collective bargaining
The equation for creating good jobs
Conclusion—Basic Income Isn’t Enough
Acknowledgments
Introduction
From Europe With Love
“The new line is drawn between those who look back with nostalgia, trying to hold on to past practices, and those who embrace the new paradigm and propose new institutions to fit the new conditions. This blurs the previous connection between certain values and goals and the specific means of attaining them. Though the goals may remain unchanged, the adequate and viable means to pursue them change with each paradigm shift.”
— Carlota Perez[1]
On February 7, 2014, my firm, The Family, received a letter at our office in Paris. The sender was an investigating police officer, inviting me to present myself before an examining magistrate. I was about to be indicted for defamation against Nicolas Rousselet, the CEO of Groupe Rousselet (then known as Groupe G7), a family-owned conglomerate that dominates the taxi industry in the Paris area.
The plaintiff had lodged a civil claim against me as part of a criminal case. Because French law lacks the broad principles of free speech that grew out of the First Amendment in the US, this is enough to trigger an indictment. With no room for prosecutorial discretion, the meeting with the examining magistrate was the first step toward a criminal trial that would take place a few months later.
Now why would the de facto chief of the mighty Parisian taxi industry file such a suit against me, a former civil servant who had just co-founded a small firm assisting startup founders?
It was quite simple, in fact. A few weeks earlier I had published a blog post, later republished by the newspaper La Tribune, that openly questioned the soundness of Rousselet’s understanding of innovation. Initially, the article attracted a few thousand readers, which was somehow enough for me to appear on the man’s radar.
Back then, the war between transportation startups and the local taxi industry was warming up. The French government had decided to enact a new rule: every car without a taxi medallion had to wait 15 minutes after the driver had received a booking before picking up the passenger. Obviously it was targeted at Uber and other ride-hailing startups, and it was a major blow for them. I wasn’t particularly interested in the sector at that time. But the new rule was so stupid, and the discussion around it so heated, that I decided I had to learn more about the topic and form my own opinion.
Among all the available information, one document stood out: a filmed interview of Nicolas Rousselet, a proponent of the 15-minute rule, touting his vision of innovation. It was appalling. There was the bias for the higher end of the market, as Parisian taxis mostly transport business people and rich foreign tourists. There was the idea that innovation was all about improving existing products, not solving bigger problems and redrawing the contours of the market. And there was the arrogance of a man painting himself as a champion of innovation while actively lobbying for that ridiculous rule. What I wrote after watching that video was quite straightforward: “Innovation as seen by Nicolas Rousselet deserves our attention because it is so derisory and so erroneous, virtually from beginning to end”[2].
All in all, Rousselet’s was an outdated vision of mobility in today’s urban world. And it was coming from one of the most powerful persons in the Parisian transport sphere! If this man had such a backward-looking, narrow-minded understanding of innovation, it was no wonder why the local taxi industry was having a hard time competing against Uber and other tech startups.
Now, lawsuits are nothing new in the tech world. Among the many entrepreneurs I know, more than one has had to deal with the police or the magistrates—typically because their innovative value proposition didn’t fit in the old boxes created by existing rules.
What’s more, being sued by the leading figure of a disliked industry known for rent-seeking led to a warm wave of support. Many more people read my article and thanked me for opening a much-needed conversation on innovation and regulation. Pillars of the local tech community offered to serve as witnesses at the trial. Entrepreneurs trying to enter regulated industries approached us to join my firm’s portfolio. In the end, I was eventually cleared by the court and left with just some fees for my (excellent) lawyer—and quite a few new Twitter followers. As for the 15-minute rule, it was never enforced and was later struck down.
Taxis are admittedly an extreme case. They’re quite rough in their approach to business and very close to the government due to the high level of legacy regulations. But the legal dimension of what I call ‘startup busting’ exists in most industries. It is quite representative of what happens in Europe when fast-growing startups shake up the status quo. Politicians and corporate executives love tech entrepreneurs only so long as they look like harmless children frolicking on the playground. But as their businesses grow, entrepreneurs come to be seen as threats and are scolded accordingly, just as when children bring their roughhousing home and annoy the adults at the dinner table.
If you’re in the US, this only reinforces what you think of Europe: just another example of why no dominant tech company has ever grown out of there! Yes, we in Europe can be forced to defend ourselves in a criminal defamation case for publicly discussing questions like “What is innovation?” and “Couldn’t we do better than the existing taxi industry?”.
This is why many of us are tackling the problem of making entrepreneurship easier in Europe. Luckily, a good set of lessons is available to learn from thanks to our fellow entrepreneurs and venture capitalists in the US. And today, the overall European context looks rosier than it did when I went on trial four years ago: a healthier startup ecosystem; promising tech companies growing swiftly; the election of pro-entrepreneurship president Emmanuel Macron in France.
Yet as Europe makes progress, the US tech industry is encountering new problems of its own. Airbnb has been restricted in more than one US city. Uber is now an embattled company with many regulatory and cultural challenges to tackle. The election of Donald Trump has destroyed the support that Silicon Valley could count on in Washington under Barack Obama. Many decisions by the Trump administration, from suppressing net neutrality to booting out skilled immigrants, are direct blows to the US tech industry. Even the mighty Facebook appears to be stumbling badly. What is now known as the “tech backlash” seems to be underpinned by a generalized and widespread fear for economic security and prosperity in the face of technological change.
Again, for Americans, Europe may seem far away—different, and lagging behind. And yet, in the context of this worrying “backlash” I think that Europe provides valuable insight. One example is our attachment to economic security for the many. In the US, the workers’ safety net has been methodically dismantled over the last decades. As for China, its singular political system provides little room to implement the kind of social compromise that once reconciled classical liberals and social democrats in the West. By contrast, most European countries still have best-in-class public services and a broad and strong safety net. These can even serve as platforms for entrepreneurs and give rise to European tech champions in sectors such as healthcare, insurance, housing, elder care, child care, education, and others.
Above all, Europe provides a distinctive institutional context in which caring for the greater goals of economic security and prosperity is critical for entrepreneurs to succeed. T
hat’s because European citizens, most of them still living the good life, have a lot to lose in the current paradigm shift. And dealing with such a widespread mistrust of change is precisely where European entrepreneurs can supply the US tech industry with a few useful lessons.
The truth is that technology will progress against all odds. But not every country will welcome it as an opportunity for further economic development. For a long time, we’ve had good reasons to be worried about Europe. But there are now reasons to question whether the US, too, will make the most of the current transition. Now it’s the entire Western world that seems about to miss the opportunities brought about by the current great surge of development.
Many people in the tech industry think that they can fight back through the polarizing playbook of entrepreneurship. But in doing so, they neglect the institutional needs that underlie our economies and indeed our societies as a whole. Tech companies are only a part of something bigger: a paradigm shift, the kind that once happened with the deployment of railways or the rise of the automobile. And many obstacles are still barring their growth, among which is that nagging feeling that today’s economy brings about neither prosperity nor economic security for the many.
Hedge Page 1