Flat Whites and Finance – Disruption on the Doorstep of London’s City

April 15th, 2015

Why Financial Services in London are over-ripe for disruption.

We say: The financial services sector – from huge exchange providers to personal lending – is overdue for disruption because there are inefficiencies from legacy practices, no unique asset or resource at the heart of the business and massive latent demand for cheaper access to the services on the part of the public. Regulatory and compliance issues will not prevent this taking place.

Step out of the London Underground at Old Street and two distinct and separate worlds meet your eye. 

Look southwards down City Road and you’ll see the gleaming towers of the City of London, the traditional centre of financial services for the UK. Cast your gaze a little further East to Shoreditch and you’re looking at a very different world, one populated by a tight network of digital startups, design companies and grass-roots entrepreneurs.

IMG 5922It’s taken for granted that the City and its legions of suited traders, financiers and insurers are a major driver of the UK economy. However according to one of the UK’s leading economists, it’s the bearded, exotic coffee and craft beer drinkers who run the country’s startups who are now massively transforming the economy right now.

And the two worlds which previously rubbed up against each other but remained separate ,are about to collide and unleash a wave of disruption on the economy, argues Anthony Hilton, journalist and commentator. 

In a recent business briefing, Hilton argues that the existing growth figures on which we base our  preconceptions are hopeless for understanding the size and scale of the transformation going on before our eyes. Hilton draws on the ideas put forward in The Flat White Economy, a recently published book by controversial economist Douglas McWilliams (1),currently on sabbatical from his job as chairman of the Centre for Economic and Business Research.

“The Growth figures are wrong.” says Hilton, pointing instead to the yearly double-digit surge in travellers using Old Street station and the 32,000 companies registered in the EC1 postcode since the 2012 Olympics.  

“In and around Old Street you have the most colossal dynamic digital economy right now, says Hilton.”More jobs have been created in EC1V than in the whole of Leeds.”  Digital is already the 5th largest sector in UK, larger in revenue terms than the oil and gas or motor industries and will represent more than 15% of GDP by 2025.

“The UK has embraced internet in a way no other country has,” noting 14% of retail sales now come from digital channels.  Hilton used a convenient shorthand to conflate digital activity with Old Street – the economic growth is driven by digital activity in regions across the country. But it’s not for nothing that the area around Old Street is called Silicon Roundabout, and Google Campus and Tech City have offices on or within a stone’s throw of the unlovely traffic island. 

Only in London

The digital economy has taken root in London for a number of reasons, argues Hilton, citing McWilliams. Eurozone stagnation and lack of opportunity in Southern and Eastern Europe has led to an Influx of digital  talent from the continent.  More than half of those employed in the digital economy are are non-British. 

It happened around Old St, Shoreditch and Hackney, due to the cheap accommodation close to centre of town, where young unattached talent can live the outdoor life in exotic coffee shops and workspaces. Thus is borne the flat white economy, where techies fuse work and play. 

In a smaller tighter and more networked version of the Bay Area in California, demand and skills come together, and the network effect of physical proximity creates a critical mass of digital activity.  

What does this mean for the rest of the UK economy? 

Firstly, it means that the exponential speed at which the entrepreneurial digital sector can grow is leaving larger, linear companies behind. Established players take a long time to innovate – they have a vested interest in status quo, argues Hilton – and within their structures, innovators and innovation get squashed. 

And for FS?

Zooming further in, the implications are most acute for the financial services industry. According to Tomas Philippon, professor at at Stern Business School in New York, this sector has seen no improvement in efficiency for the last 100 years.  Philippon argues that despite domain specialisation and the expected gains from massive IT investments, the FS sector has continued to take around 2% of all net flows into and out of the business over the last century.  Low rent accommodation for startups butts up against the City's glass skyscrapers

“When flows double financial services fees go up pro rata. All increases are captured internally.” says Hilton, arguing that the increasing burden of regulation and the $10bn annual cost of compliance has taken a significant proportion of this. 

Financial Services – You’re Next

Given that digital has disrupted media, personal banking, personal fitness, retail and just about any other sector you can name, and Financial services have remained relatively untouched by the digital revolution “it’s only a matter of time until financial services get disrupted, says Hilton. “We can expect that  flows will shrink.  Banking is a essential a high cost way of getting money from a to b.  There’s no reason that the entire stock exchange can’t be on something like eBay.” 

In fact the disruption has already begun. Tech accelerator Seedcamp is seeing an upsurge in applications from startups looking to disrupt an area of FS, from solving the challenges of Bitcoin liquidity to enabling customers to manage their own Exchange Traded Funds (ETFs). In Canary Wharf, where many FS giants now house their operation, accelerator Level 39 is an accepted part of the FS innovation landscape.

And this clash is likely to be the focus of Disrupt Finance, taking place on the borderline between Shoreditch and the City on April 15.

In every industry which has been disrupted, incumbents have consoled themselves with the fact that they have a unique asset which protects their market position. Music producers took refuge in their copyright laws in the fight against Napster; travel operators consoled themselves with superior advice and knowledge in the face of internet search, now taxi drivers are feeling smug about their “knowledge” while Uber erodes their business. Regulation and customer trust are now the twin factors which the FS business believes can save it.

Given the history of digital for destroying traditional structures, it’s a given that the impact of the flat white economy will be felt in the towers and streets of the neighbouring City. Those existing players which recognise embrace and co-operate with the inevitable disruption will stand to gain most. But for all involved it’s going to be the next chapter in how software ate the world.

(1) At the time of launch of his book, McWilliams was due to face trial over allegations of assault and stood down from his role at the CEBR.

Orientate First, Then Navigate

April 11th, 2015

It has to be one of the most frustrating moments of the digital age.

Orientate firstImagine you need to get somewhere, fast. You fire up your GPS-enabled smartphone and open your favourite mapping app.  Yet while you wait for the details of your immediate surroundings to load, all that appears is a tiny blue dot on an empty screen. Right now all you know is you’re….somewhere. You might as well be nowhere.

Frustrating isn’t it? There are strong parallels with the sense of bewilderment felt by organisations who are about to launch into transformative change.  It doesn’t matter whether they’re spurred into action by competitive threats, regulation, disruption from digital upstarts or a spontaneous and genuine desire to innovate. Suddenly, there’s a desire to get somewhere fast. 

But without the immediate context of where you currently are, how can you tell if you’re taking the right or wrong path?

I recently had the privilege of working with a behavioural psychologist who used the phrase “orientate to navigate ” in the context of helping service users to achieve specific goals. It stuck me as a great guidance for the first steps around that desire to launch into transformation.Navigate to your goal

Whether we’re talking metaphorically about moving towards a distant personal goal, finding your way though the innovation maze, or literally about the real world challenge of getting to your next meeting, the idea is are the same. Setting a goal is only as useful as knowing the starting point of your journey. 

So what how can you load your own map of where you are? 

You might want to achieve a transformational goal, but how do you navigate the realities of you corporate culture? What is the degree of risk aversion in your organisation ?  What are the skill sets you have in house and how will you use them to your advantage ? Do you have the time, budget and support you need from top down and bottom up?  By framing these questions at the start of this journey you can begin to build up a picture of your surroundings.

By learning to orientate before you navigate, you can set realistic and achievable timescales for reaching your goal.

Why I’ve Pre-Ordered Tiles

August 6th, 2013

OK. I’ve put down money on a product which isn’t even made yet.

Brave, rash, maybe even foolish.

But when I get my Tiles I know they’ll be good. If you don’t know, they’re little tags which use Bluetooth Low Energy and can report their location remotely. You can also locate them on a map via an app, in much the same way that iOS finds lost devices.

Here are just five reasons why I’m excited about these little slivers of plastic.

Tile hero shot black

1. I lose things. Whether it’s the fact that I’m male, approaching the age where I have “senior moments” or having a permanent cognitive deficit, I’m never sure where things are. Tiles fulfil a need - the universal and everyday need to find things. For that reason I’m admitting them into my personal space.

2. Tiles fit in with my digital life. The app will enable me to access information about their location in a way I’m used to accessing info.

3. Tiles will crowdsource the location info. The Tiles network helps find other lost tiles without compromising your personal info. That has to be a great model for collaborative services in the future.

4. The founders Mike Farley and Nick Evans are also self-starting the funding. Going direct to potential backers and buyers they’re selling the first batch direct and raising the money direct. Not a VC or hedge fund in sight. Just Amazon payments and a direct route to the customers. There’s nothing to stop anyone doing this. These guys did it.

5. Tiles bridge the physical /digital divide. So far most of the great ideas and disruptive plays have been in the digital space, notwithstanding a few funky players such as Evrything which connects products to the web and social. This is the start of the internet of everyday things for everyone.

Bottom line – Tiles will change my life, but I’m betting on the launch of Tiles to be a moment which will change the way we view the connection between real world objects and digital.

In the meantime the nice people at Tile are going to update me on the progress and I should get my batch by Christmas. Until then I’ll be leaving my keys in a place where I can find them, or as usual, “crowdsourcing” location info the traditional way by calling “anyone seen my keys?”

Shelfari – Reading as social capital

July 30th, 2013

Must have been on another planet or doing something really useful earlier this year as I missed the removal of Amazon Reading list from LinkedIn in one of the revamps early this year.


This little LinkedIn app let you share on your profile what you were reading, have read and would like to have read. While I’m not pleased that Amazon and LinkedIn quietly withdrew this (and left a broken user journey on the way), a bit of judicious googling produced a link from Jonik on StackExchange leading me to Amazon’s Shelfari which the online giant bought in 2008.

Screen Shot 2013 07 30 at 14 47 53

One quick and painless import later and I now have my reading history visible and shareable on blog, web and social networks.

What we’re reading and what we’ve read gives us huge social capital in meatworld (that’s real life to you and me). Shelfari takes a huge step towards enabling us to demonstrate this publicly – and nowhere is this more valuable than in the career-oriented LinkedIn. If the product team there has any sense, they’ll enable a Shelfari widget in the same way that Slideshare can be seamlessly embedded.

Meanwhile, now all I have to do is actually pick up and *read* the books I’ve bought and publicly committed to reading…

Enforced Intimacy and Reading Room

April 18th, 2013

This #midiblog was originally posted on my Tumblr back in February.

There are few situations like the London Underground where an individual shares the same personal space with others.

In a nightclub or a mosh pit, we come together and share an enclosed space because we wish to. We choose to come together, unified by a common affinity for the artist or a shared desire to groove.

On public transport the only unifying force is a loose desire to get to a series of common destinations on the line. Apart fom that, we have little in common with those with whom we crush and jam up against in a compartment.

As humans we instinctively spread out, seeking our own space but never too far from each other. Enforced intimacy is stressful at the best of times. Think of those awkward elevator silences and you’ll understand.

Some cope by trying to dominate and defend their own personal space while others cope through denial and ‘cocooning’ with noise cancelling headphones.

Add now to this the almost universal usage of mobile devices, phablets and tablets and we add on another need for defensible space – the desire to be far enough away to read our books and newspapers, see our sudoko puzzle or watch a movie.

So with wifi now rolling out in London’s underground, enabling a host of new behaviours, the battle for personal space is about to reach a new intensity. Where we used to have the basic need for breathing room, we now – thanks to devices, connectivity and our addiction to services – have the new need for reading room in our crowded transit systems.