Blockchain wins, bureaucracy loses?

Like many of us in the world of business and enterprise (and local government), I am curious about how blockchain could change my world.

Wikipedia’s definition is:

Blockchain is a distributed database that maintains a continuously growing list of records, called blocks, secured from tampering and revision

One of the earliest moments when my interest was really piqued was reading about “smart contracts”.

Wikipedia’s definition is:

Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary.

Wikipedia does make it clear that there are different ways of defining smart contracts but one of the early examples of a practical implementation is that of Ethereum, a blockchain platform featuring smart contract functionality.

Smart Contracts could transform the way the world does business by giving certainty of performance and settlement. The international freight industry is likely to be one of the early adopters of this technology. Potentially it can significantly reduce the paperwork and simplify global shipping transactions.

The financial services industry, including banking and insurance sectors, is at the forefront of developing applications for blockchain and smart contracts. They see efficiency gains which could transform their cost bases.

Blockchain takes automation out of the world of manufacturing into the service sector, especially the professions. Imagine how much greater efficiency could be achieved in the UK if it was applied to the buying and selling of houses. The role of lawyers in conveyancing would be dramatically reduced, especially if blockchain technology is applied to the Land Registry.

The role of the professional adviser will become simplified and focused on the establishment of trust between the parties to a contract. Many contractual relationships already become quickly standardised and the role of lawyers and accountants substantially reduced. Hopefully, the number of disputes will reduce as well.

Accountants may find the purpose and definition of Auditing is transformed as accounting systems adopt blockchain technology, which by definition makes records and transactions immutable and beyond doubt.

Finally, bureaucrats and civil servants may find their raison d’etre being removed. The rubber stamp manufacturers of the world will suffer a dramatic reduction in demand.

So while blockchain technology is still some way from solving some of its key technical challenges, it poses a clear threat to certain sectors, including the public sector and professions. Consequently, the most predictable form of resistance will be a deluge of regulation and legislation to re-insert complexity into a concept which has the potential to simplify the world.

Despite this risk, the world of commerce may make the acceptance of blockchain irresistible. Early adopters will be driven by the competitive advantage they hope to achieve. As history tells us, eventually horse-based transport was replaced by the automobile. Blockchain technology brings us to a similar fork in the road and I, for one, hope the change will mean less bureaucracy and greater efficiency and productivity.

Why we don’t need to leave the EU

OLYMPUS DIGITAL CAMERA

A few years ago I was part of a UKTI delegation to a major Environmental exhibition in Lyon, France. On the day we arrived we were given a briefing by the UK Commercial Attaché who had travelled down from the embassy in Paris. The lasting memory of that briefing was his analysis of how the EU game is played by France and Germany and how the UK took a different approach that put it at a permanent disadvantage.

He had many facts at his disposal and I regret not making detailed notes at the time but the core message stuck in my mind.

More recently, I was part of a group visiting MEPs in Strasbourg and again we received briefings from them as to how legislation for EU Directives is developed. The key message was that the draft laws were very long and detailed and required reading in depth. In a 500-page document you might have to get to page 463 before you picked up the fact that, for instance, certain specific industries/organisations in specific countries (usually France or Germany) were exempted from having to comply.

We should be grateful for the diligence and perseverance of some UK MEPs who try hard not to let the EU game be tilted too far from the UK. However, you can’t blame EU member states for trying. Lobbying for special concessions was invented in the UK parliament, after all.

Nevertheless, with all this gaming of the system going on, nor can you blame the British public for getting a bit fed up. If the game is rigged against you, why continue playing?

So why don’t we need to leave the EU?

You will soon see it all comes down to timing.

At university, I studied GATT, the General Agreement on Tariffs and Trade, and Most Favoured Nation Status (MFN). These are now part of history having been established in 1948 as part of the post-war arrangements that also set up the United Nations and superseded in 1995 by the creation of the WTO, the World Trade Organisaion. However, MFN is a wonderful concept. It meant that, if a country granted it to another country, the latter would be able to trade on terms equal to the most beneficial rules and regulations of any of the other countries. It essentially demolished bilateral trade agreements. Some readers may remember the long campaign for China to achieve MFN status with the US.

So, the relevance to a trading area like the EU is obvious. All members are automatically benefitting from MFN status for trade within the EU. I see the UK’s current approach to EU directives as MFN in reverse. It seems to be policy for the UK to be the first to issue regulations implementing directives, possibly because of the mistaken belief that doing so sets the gold standard for all other EU members to follow. The result is UK businesses start incurring the costs before their European competitors. Other nations look at what the UK has done and implement a lesser version, thereby costing their businesses less. They take their time about doing this.

Then there is the issue of enforcement. British culture is that, in the main, we like to follow the rules and we have very good enforcement agencies to ensure we do. Other countries do not.

My answer to this is to stop. Make a new policy that the UK government will not be the first to implement new directives. Indeed, the UK should be the last and it should cherry pick from the least burdensome approaches taken by other EU members. This is Positive MFN.

We would have less red tape, fewer bureaucrats and more competitive businesses. Such a policy would also have a reciprocal effect on legislators and other EU members which would change the nature of the EU at its core.

Best of all, we don’t need to renegotiate or change treaties, let alone leave the EU,  to do this. We have total control of implementation in our own hands. In Parliament and on Whitehall.

Business Growth

The UK Business Growth Service is closing. No bad thing. The approximate replacement, Regional Growth Hubs, will not set the world alight.

Subsidised provision of services supposed to support small, growing businesses has not done much more than spawn an industry of providers who know how to tap into the subsidies. A direct link between the subsidy and actual growth has been difficult, if not impossible, to prove.

The reality is most small businesses do not grow. Their ambition is to survive well. A few have both the potential and the ambition (P&A) to become large. Finding this group has been difficult.

It’s easy to find start up businesses with huge ambitions but without a proven, solid foundation on which to build. They create a lot of noise but the hard truth is that most (80%?) will fail within 18 months.

The Growth Hubs will not solve the problem of connecting with established businesses which have P&A. As should be expected, the management of these companies tend to just get on with it. Their usual experience, should they identify a need for some support, is one of frustration. They tend to prefer selecting their own support providers whereas any government-funded scheme will prescribe defined support from a limited “approved” list of providers.

To be continued……