This episode is hosted by Boundaryless Conversation Podcast host Simone Cicero with co-host Stina Heikkila.

The following is a semi-automatically generated transcript which has not been thoroughly revised by the podcast host or by the guest. Please check with us before using any quotations from this transcript. Thank you.

Simone Cicero:
Hello everyone. So we are here today Simone your usual host and my usual co host, Stina.

Stina Heikkila:
Hi. Really glad to be here today.

Simone Cicero:
And today with us we have Nicolas Colin.

Nicolas Colin:
Hi, this is Nicolas.

Simone Cicero:
So, Nicolas, we are so enthusiastic to have you here today to explore the topic of entrepreneurship in a changing world, in a changing society, and always from our perspective of exploring scalable organisations and large-scale transformations. And I would like to start the conversation with one of your statements that recently really hit my attention. I was listening to your amazing podcasts a week ago with our friends from Aperture and I was speaking about the impacts of the Coronavirus epidemic on money in general, about the changes and the risks that we are now living through. You said this crisis is going to accelerate the transition to a more mature entrepreneurial economy. And I’m really, really looking forward to unpack these sentences with you today. So where should we start?

Nicolas Colin:
Well, maybe it came from the surprise that many of us who work in the tech world have felt observing other people reacting to the crisis triggered by the pandemic. For us the fact that you shop online and have your food delivered; the fact that working remotely is part of the normal working life, this is all normal but for many people the pandemic has forced them to switch their habits as workers, as consumers. They’ve left the workplace and the office to work from home. They’re renounced going to shopping malls to order food online and for the majority of people it’s been a radical change from what was previously the way of life. And so the contrast between the feeling of continuity that we in the tech world are feeling at the moment and the impression of a radical change that many other people are feeling is what led me to realise that well, what looks like radical change for many people is only an acceleration of pre existing change for people who were already paying attention.

Simone Cicero:
So I was really thrilled by your reference to entrepreneurship. I totally resonate with you when you talk about the consumers perspective, about the perspective of changing habits. To some extent for us and for many of us, for example I’ve been working from home for many months, for many years, and I didn’t really change but from the perspective of intrapreneurship, you mentioned this idea that we’ve got to move into a more mature entrepreneurial economy. And so what does it mean from the perspective of the other side of the picture? Not from the consumer side. From the perspective of those that are creating value in society? What were you referring to?

Nicolas Colin:
So I use this concept of the entrepreneurial age, which I borrowed from Babak Nivi, who’s an investor based in Silicon Valley and one of the co founders of AngelList. And the entrepreneurial age, I think, is a term or an expression that makes it easy to describe everything that’s going on at the moment. So I wrote this book like two years ago called “Hedge” in which I was building on Carlota Perez’s idea of the fifth technological revolution. And you might be familiar with Carlota framework, but basically she reflects on 250 years of economic history and divides the period from the Industrial Revolution to today into five consecutive technological revolutions, each leading to installing a new age which encompasses a new way of life, a new approach to production and consumption. And she gives a name to each of these ages. So the first is the Industrial Revolution but then comes the Age of Railways. Then comes the Age of Steel and heavy engineering then comes the Age of the Automobile and mass production. That’s the 20th century. And then we’re entering the fifth age in Carlota’s framework, but she doesn’t offer a name for that fifth age. And so I’ve been reflecting on finding two words that best describe what’s going on in the new digital age, in today’s world. And I was using a lot this expression “The Age of Computing and Networks”, because I think computing on one side and networks on the other side are two major technological breaks that explain the radical change that we’re experiencing in the economy at the moment. But when you write a book or articles about that topic, and you end up writing the Age of Computing and Networks several times a page, it starts to be a bit long and a bit boring. So I was on the hunt for shorter expression to describe the new age and I decided to set on this idea of the Entrepreneurial Age, rooted in that article published in 2013 by Babak Navi and the idea behind the Entrepreneurial Age is : because it’s an economy that’s supported by computing and networks there’s this idea that there’s more and more computing power disseminated, spread into the society, more and more individuals are empowered because they own computing devices such as computers, laptops, smartphones, any other device. And those people are connected by networks. So it’s either physical networks like telecommunication networks, or its social networks, like we all use the same applications which make it easy for us to interact. And what’s interesting with this is that it explains the fact that entrepreneurs are taking charge, because if the economy is driven by billions of individuals that are empowered by computing and connected to one another, thanks to networks, it’s an economy in which that multitude of individuals has more power than organisations. That’s one thing. And the other, it’s because it’s all about networks and networks come with radical instability. And so you have to be prepared in an economy driven by networks to go through many ups and downs and to renounce stability forever. Basically, everything becomes radically uncertain. And there’s widespread instability across markets, industries, geographies and so on. And because of the radical uncertainty and because of the widespread instability, that characterises an economy driven by computing and networks, the only way to survive and to thrive in this economy is to become more entrepreneurial. That is, you need to be paying a lot of attention to what individuals need, you need to be ready to experimenting at a very fast pace, you need to be ready to fail many times before you finally succeed. And so entrepreneurs are not only the vanguard during the revolution, they are also the perennial elite in this new world that I think we have to recognise as such. And this is why I find that the the idea of the Entrepreneurial Age fits the reality of what we’re witnessing so well.

Simone Cicero:
Where these instabilities coming from? It seems that you relate instabilities to the properties of complex systems that heavily internet work. So there would be a technological route to the instabilities you’re talking about. But can you explain a little bit better these radical and continuous uncertainty and instability. Why do you see this happening?

Nicolas Colin:
So I think many people are familiar with this idea of network effects which fuels what economists called increasing returns to scale which means that the more growth you generate, the faster the growth and in markets ruled by increasing returns to scale, you usually end up with one or two companies dominating the market because they’ve been racing ahead quite early. And racing ahead has made it possible for them to unlock the potential for accelerated growth while other firms are lagging behind. So, we’ve been familiar with this idea of increasing returns to scale, fueled by network effects for longer than we had the internet. But before the internet those network effects existed only in sectors which were all about network infrastructures. So that was typically telecommunications, but also electricity or railways for instance, and because network effects tended to favour the company that was operating the largest network. Well, it usually ended up with one company dominating the entire market, which in return called for the government to regulate that industry to prevent that dominant company from becoming a predator, predator for customers. But the major difference between then and now is that back then the network effects were related or driven by your physical infrastructure. And the thing with the physical infrastructure that you operate as a company is that you own this infrastructure. It appears on your balance sheet, there’s a price attached to it. And if someone wants to take that infrastructure from you, either it’s another company that has to pay the price, or it’s the government that comes with the power of a regulator. But those are exceptions and the rule of the game is that you own the infrastructure so you reap all the benefits from the network effects driven by the infrastructure. Today, I mentioned the fact that networks have been shifting from the physical layer to the social layer, which means that the largest and the most powerful networks in the economy today, thanks to the internet, are networks formed by individuals using the same application. And so the nodes in the network are the individuals rather than the components, or the infrastructure like it was the case. Well, to make it short, it’s not the train stations anymore, it’s the individuals now. So the difference between train stations or you know, nodes, telecommunication network or nuclear power plants and individuals is that you can own the former as a company. It’s on your balance sheet. And no one can take it from you. Whereas individuals, you can’t own individuals, they’re users. And as users, they’re free to come and go. And if they’re bored by your application, they’ll leave in an instant and will go and use another application that serves them better that does the job better. Because you don’t own those individuals, well, you cannot count on the network effects. Over the long term, you need to make everything you can to retain those individuals to retain your users so that they can keep on shooting those network effects that you can then convert into profits. And how do you serve individuals? Well, a large number of individuals connected through a network is a very sensitive group. One day, one of them can wake up and decide that they don’t like your product anymore. And if they start talking about their feelings about your product to other individuals around them, that can spread through the network quite fast, and you can lose them all in an instant. And so how do you prevent that? You need to innovate, you need to improve the quality of the product, you need to bring the price lower. You need to make your deliveries faster, and so on and so on. In other words, you need to remain as entrepreneurial as possible, even though you’re operating your business at a very large scale.

Stina Heikkila:
Thank you for that. I wanted to come back to one point that you made in your last newsletter also linked to this. Because indeed, you pointed out to the fact that we need to cater for these users and the individuals. But then you also raised the point of this geopolitical scene. So how do you see that in the risk landscape nowadays, while we have global businesses that cater for their users in a sort of virtual space? Why is it important to also take into account the geopolitical climate and the local culture in the countries where you try to operate?

Nicolas Colin:
I think it’s very important for various reasons. One reason is that six years ago, it seems like a very long time ago, but Uber was still operating in China. And at that time, we all had the impression that Uber was going to become to mobility what Google was to search, that is the global giant that dominates the market and evicts every other challenger and makes it impossible to compete because of the quality of the value proposition and the attractiveness of the value proposition and the power of the network effects. Two years after that Uber was kicked out of China, they were bought out by Didi, which is the local champion in mobility in China. Then they were kicked out of Southeast Asia they sold their entire operation to Grab. Then they started to be confronted with very tough competition on markets as diverse as Latin America, Russia, and more in Europe and even at home with the revival of Lift, starting in 2017. And so from 2014, six years ago, to today, we’ve been realising that it’s not because you’re a tech company that you will own the entire market at a global scale. There are more and more sectors in which the need to invest in tangible assets, or the need to comply with local regulations will lead to make it much harder for a company to take most of the market and we’ll force even the strongest companies to make room for competition. For competitors I think now the lesson has been drawn by people building tech companies, they realise that every country is different because well, consumers are different because they belong to a different culture. They speak a different language. The regulatory landscape is different because every country has their own approach to regulating industries such as financial services, health care, mobility, education, and many others. And suddenly, I think we’ve all been realising that there’s no such thing as a global tech company. Except for a few exceptions, like Google in search, maybe Netflix in entertainment and a few others. But even the very large and present in many geographies, those companies are not operating in China anyway. So that’s a big chunk of the global market that eludes them. So I think the lesson here is that we’ve lived with an illusion that digital markets will be global, will always be global. And now we are realising that those markets are regional or even national. And I think we are witnessing the beginning of companies adapting their strategy to this new understanding of what it’s about to compete across several geographies in the digital economy. Sorry, that’s the wrong answer. But I think it will become even more difficult in the future to expand your business across borders for many reasons first because the world is fragmenting, there are less and less trade agreements that are negotiated between countries, which makes it more difficult for companies to expand the business across borders, including for digital businesses. The European Union is fragmenting with the UK soon leaving the European Union so that will come with more fragmentation from a regulatory perspective and more difficulties for business to expand across Europe, especially if they’re headquartered in London. And then another thing is that the pandemic leads to governments becoming stronger. Because confronted with the pandemic, we all turn to our governments to ask for help to command because we expect support from them, we expect them to take charge in fighting the pandemic. And I think after the crisis, when the pandemic is finally over and the economy starts to recover, we’ll end up with governments that have become stronger and more present in the economy. And those governments will have many ideas when it comes to regulating different industries in which tech companies are trying to enter and that will lead to even more fragmentation from a regulatory perspective. And so I think tech leaders need to be prepared to reflect on that. We past the time when it was possible to expect that you initial success on the US market was enough to provide you with the capital credibility, velocity to expand in Western Europe. Now, it’s two very different games. And one scenario is that US companies will focus on the US market, and that will make more room for European companies emerging in Europe to serve the European markets.

Simone Cicero:
So I want to unpack these in a couple of points that I want to share with you as a further step for the conversation. You spoke a lot about tech companies and my understanding is that technology and organizing at the moment cannot be untangled anymore. So, when you talk about technology and when you talk about transition, you are talking about the same thing. So organising is a technique and technologies are techniques, and to some extent developed from the perspective of human development, we are talking about the same thing. That’s the first point I would like to share with you and see what you think. And secondly, the point that you raised about regionalization and nationalisation in general. So the question is that we are seeing these polarisation between what Balaji Srinivasan calls nationalism versus rationalism. And to some extent this regionalization of the economy is probably a consequence of the fact that as risk grows, to reduce the impact of this symmetric risk that we are seeing, we need to regionalize our economies because this in a way deflates these risks. So you reduce the connectivity of the economy. You started by talking about this recession and all the new risk generated by network economies and so this deflates the pressure, the risk pressure that your economy leads. Of course this comes with all sorts of side consequences and for sure one of these is probably if you move away from just in time economies because your supply chains need to be shortened, and then you need to invest some of your money and energy, maybe not in efficiencies, but in redundancies. So maybe your economical experience gets a hit. So this narrative of experiences will need to be recast into a narrative of healthcare, for example. So my question is: to what extent are we witnessing the start of a more mature economy of entrepreneurship? Is it possibly something that starts to be a little bit postmodern or meta modern? Are we overcoming this modernity and progress narrative to enter a new age?

Nicolas Colin:
Well, many people use the term “tech company” because it’s a convenient term to describe every company that’s somehow pulling the lever of using the internet to make things better differently, faster or cheaper, whatever. But tech companies come in different flavours if you’d like. I still like to reason about the economy in terms of industries. For me industries exist to serve certain markets and to do certain jobs for which consumers hire companies. And most of the transition to the entrepreneurial age happens at the level of industries, which means that after the transition is over, after we finally reach the end of this paradigm shift, the same industries will probably exist, but they will be very different in terms of who dominates the industry, what link in the value chain dominates the industry and how the value is distributed along the value chain as a consequence. The thing is that the transition happens rather differently from one industry to another. So there are differences in terms of pace for instance, because there are industries that are easy to digest for software. With this idea of software eating the world well, it’s easier to eat the music industry, for instance than it is to eat to eat real estate industry. Hence, we work like we worked was obviously hard to build, as opposed to making the music industry more digital. So there’s a difference in terms of pace. But then there will be a difference in the end in terms of returns on equity. That is the return that investors and entrepreneurs will be able to expect from building companies in a given industry depend on things such as, what’s the importance of tangible assets and what’s the complexity of the regulation that I have to comply with. Well basically the rule of thumb is that the more tangible assets you need to do the job and the more regulations you have to comply with to do the job, the lesser the returns you can expect. And so that explains, I think, the fact that we can still talk about tech companies, but a tech company in real estate will be actually very different from a tech company in music, or advertising. Because the presence of tangible assets in real estate and the fact that it’s a highly fragmented and regulated market will make it more difficult for those companies to generate returns, so they won’t be able to count on those exponential growth curves, comparable to Google or Facebook. So that’s one difference. It will be all tech companies, but with very different profiles when it comes to returns. And just like in the 20th century, every industry was dominated by companies applying the recipe of mass production. But it worked more or less well, depending on the industry. It worked perfectly for building cars. It works less well for you know, operating restaurants, for instance, because restaurants are hard to manage scientifically. Basically, that’s the thing. So to answer the question on tech companies as for the supply chains, and, you know, making them shorter, because the economy is fragmenting, well, it’s true that if your supply chain is not connected to the rest of the world, then you are less exposed to the ups and downs that can be triggered elsewhere in the world with propagation through the network. An interesting comparable for that is the financial services industry. It’s precisely because finance became the first networked industry that became global that the worst crisis rooted in instability was born in finance, including the 2008 crisis. And that’s typical of an economy that’s global in which players operate at a very large scale, but that’s driven by network dynamics. It’s enough to have, you know, a small problem and the margin for it to propagate throughout the network and to turn into a very big problem that everyone has to deal with, that’s typical of networked economies. So what happened in finance could very well happen now in every other industry if they all become networked and global. And so the fact that in fact they are not that global, that fragmentation is at work, forcing companies to focus on a regional market or a national market, it’s a good thing in terms of instability. It prevents the instability that’s characteristic of global supply chains in a networked economy. On the other hand, it will lead to less competition which will contribute to reinforce the position of dominant players at the expense of the consumers interest. It’s always been the trade of if you want longer supply chains in the consumer goods industry, it prevents shortages and it prevents inflation as well. If you shorten the supply chain, then you will not be as dependent on, you know, some pandemic appearing in China. But you become exposed to the risk of inflation because once consumers for any reason decide to consume more of your product, your supply chain if it’s shorter, might not be able to follow up.

Simone Cicero:
And that’s one of the points that I wanted to raise. In this transition what new constituents do you see becoming the constituents of organising? For example, citizens or governments versus traditional corporations. And what are the impacts instead in the corporations that now are multinational corporations and need to adopt the organisational models that are radically different, that scale differently, they tend to scale across instead of scaling up. So the question would be what are the new constituents that you see emerging? What are the new shapes, new organisational shapes and the role that maybe entrepreneurship plays inside these organisations? So for example, we’re working with this Chinese company called Haier that has a structure based on micro enterprises (in a group of 80,000 people they have thousands of them). Do you see this as a pattern? What is the future shape of the corporation, especially in your point of view of the world? And on the other hand, what new forms of organising and new constituents might emerge in this transition towards a more regionalized and diverse and different world of entrepreneurship?

Nicolas Colin:
Good question. And there are several ideas that came to mind when you were asking it. So the first idea is that, again, if you come back to the nature of today’s economy, an economy that’s driven by computing and networks, the law that you need to keep in mind if you want to understand everything that’s happening around you, is the following. There’s now more power outside than inside organisations. That’s the key to understand everything. It explains the weakening of traditional top down command and control, bureaucratic organisations, it explains the lack of trust that citizens express towards governments. It explains many things. And it’s a radical change as compared to what existed in the 20th century. In the 20th century power was concentrated within organisations and the most powerful players in the world were the largest organisations and chief executives were measuring their strength as compared to their counterparts in terms of how many employees do I have under my authority, and how many assets do I have tied up on my balance sheet. And the more assets and the more employees you have, the more powerful your organisation was, but today, the situation is very different. I think you can build up as many employees and assets as you can, you will still be weaker than the multitude of individuals connected through networks. And so the corporations that will end up winning this game, it doesn’t mean that corporations can become irrelevant. It means that to succeed as a corporation, you need to realise that there’s now more power on the outside and you need to redeploy your organisation so as to be able to harness that power from the outside, which basically means inviting individuals to land that power to you. So that you can try and convert that power into whatever you want to achieve. That might be making profits or it might be operating a public service at scale, or it might be winning an election. And so that’s Google harnessing the power of all the users of its search engine, or whatever government agency has realises that citizens have more power. And so we designed the way they operate public service based as to funnel that power for many of your citizens, or it’s Barack Obama, campaigning by relying on a grassroots organisation that deploys their own power to bring him to the White House. So in other words, you can win as an organisation only if you realise that the power is on the outside and if you restructure your operation so as to harness that power. That doesn’t mean that your organisation becomes empty, you still need things on the inside, if only because it makes you more resilient. I think an organisation that’s brought down to almost nothing and that relies entirely on the power that’s on the outside can scale up very fast, but he’s also very fragile because whenever there’s a problem, the organisation will stumble. All those individuals on the outside supporting the organisation will leave in an instant and the organisation could disappear. And so to prepare for those later episodes where you could stumble as an organisation, you better off, you know, still have a few assets on the inside and a few employees on the inside because if your users leave temporarily because of whatever, you can rely on those on the inside to rebuild something and so to attract users again so that they land you that power again. So take the example of Uber. I talked about Uber before to explain that they are now an entrenched company confronted with harsh competition on every market worldwide and we don’t even know if they will survive the Coronavirus crisis. And the reason is that Uber has bet everything on the idea that they had to harness power from the outside. The customers obviously, the rider on the outside that pay for the service, but the drivers are on the outside as well and the cars as well. Uber doesn’t employ the drivers, it doesn’t own the cars and so there’s not much within the organisation, which means that when there’s a problem, when all those people leave in an instant because they decide they don’t like Uber anymore, well Uber becomes weak to the point of being in danger of dying, not being able to generate the returns that their shareholders expect. Whereas if they had done like Amazon, which is divided, well distributed to resources between harnessing the power from the outside while still building up assets and a workforce on the inside, if you do both, well, you can scale up rather fast when things go well. And you can be quite resilient when things go bad because you have assets and employees to fall back on. And so I think corporations in the future will realise that they need to reach that balance between, you know, having resources on the inside, but still harnessing the power of individuals on the outside.

Stina Heikkila:
I was reflecting while you were talking. So it seems like there needs to be some core in the organisation that is able to work to attract the surrounding ecosystem. What do you think is needed for these employees, for this core insiders to stick around?

Nicolas Colin:
Well, I think employees are simple people. They want stability, predictability. They want two things basically. I have a friend, Roy Bahat, managing partner of a venture fund called Bloomberg Better. And he only invests in startups related to the future of work. And as such, he’s very interested in what work is about and what people expect from their experience as a worker. And so he’s done a lot of focus groups and a lot of surveys and a lot of town hall meetings with many, many different constituencies to understand what do people expect from work. It’s fascinating because, as he says it after having spoken with, I don’t know, truck drivers, nurses, restaurant waiters, factory workers, everyone expects two things from work. They expect some stability. They want to be certain that they’ll have the same amount of money next month and next year, because it makes it possible for them to plan ahead their life to invest in a house, to buy a car, to have children, to grow family. And if they have that basic layer that is stability, they want something else on top of that, which is dignity and dignity is well basically what makes people proud of being a truck driver or nurse or factory worker, and so on. And dignity as you see is not the same as earning a lot of money, but have that feeling of dignity in your work because what you do is rewarded by not only your manager but your colleagues and your friends and your family and the different stakeholders that are around the organisation that employs you and so, and a very important dimension of the crisis that’s currently going on in the world of work is that many people have stability without the dignity and some people have the dignity without the stability. We’ve seen that during the pandemic, with the so called essential workers, with everyone realising that, Oh, those people are very important, but we all know that there’s a dignity attached to being a nurse because you actually save people lives. And we saw that even more during the pandemic, but those people don’t have the stability because the working conditions are terrible and they don’t earn that much money. So you retain people by providing them with those two things : stability, dignity.

Simone Cicero:
My question will be more about the intrapreneurs that are needed inside the organisation. Somebody that essentially could be outside of the organisation, but maybe the organisation of the future wants to keep entrepreneurs inside. How do you craft an organisation that is able to become the space for enterprising and what kind of support you give to the entrepreneurs inside your organisation so that they stay inside and feel like belonging to something bigger than just creating a startup? You’re also pretty much an expert for the startup world. And it seems like that what we are seeing now is this kind of clash between a new world that wants to come up and the old world that doesn’t want to die. So my question is really how does the industrial organisation evolve in this process of changes as it changes to fit with the new world that is emerging?

Nicolas Colin:
That’s a good question, but a tough one. When I speak about the idea of the entrepreneurial age, I always hear a lot of pushback on that idea, because people expect that the entrepreneurial age describes a society in which everyone is an entrepreneur. But in fact, the entrepreneurial age is not a society in which everyone is an entrepreneur. It’s a society in which organisations or businesses compete on the entrepreneurial capability. That is the ability to listen to customers, to make the most of the current state of technology, to improve the quality of the product, to make a lot of trials, to be ready to fail many times to learn from feedback loops and so on. So it’s a mindset that can be widespread within an organisation. The entrepreneur is not only the one at the helm of the organisation, it can be everyone in the organisation sharing that mindset and making the organisation move forward in this entrepreneurial approach, with this entrepreneurial approach. I think a key factor in making people more entrepreneurial within your organisation is to connect them to the outside. And in fact, it’s actually very hard because, well, most organisations in the past have been designed under the principle that only the head speaks to the outside whereas everyone else either doesn’t interact with the outside at all or interacts only following a certain script, which deprives them from any spontaneity and any ability to inspire trust. Like if you interact with the customer support in a large bank, for instance, it’s a human being that you’re talking to over the phone, but what you feel is mistrust because you know that they’re stuck within a script, within a playbook and that they can’t really solve your problem. They’re forbidden to actually and the words they’re using are read from a sheet of paper, not what they really want to tell you at the moment. So, a big challenge for legacy organisations is to provide the freedom for the employees to interact with the outside and to interact with the outside as themselves, with their own words. Usually good words for the company and aligned with the interests of the business but sometimes, like you can have bad things happening because people will use the wrong words or make mistakes or speak ill of someone else or you don’t know that they have been already so many accidents of, you know, employees taking charge of interactions with the outside and making blunders. So, I think that explains why it’s difficult when your legacy organisations stuck with employees that have not been trained with that mindset and rules and processes that have essentially so far prevented people, your employees, from interacting with the outside, that’s very hard to transform and to become more open and more sensitive and more sincere in your interactions with the outside. Whereas if you’re a new company, that’s been built with that mindset from the unset, then you can hire the right people. You can then encourage them to interact with the outside parties from the beginning. And you can learn through feedback loops from those many interactions that happen at every level of your organisation between the inside and the outside. And so you can find many examples of tech startups that have been designed as such and that are stronger as a result. But you can also find examples of organisations that previously were startups that have now become large tech companies listed and bound by being a listed company by so many rules that it becomes impossible for those organisation to interact with the outside. Look at Google who was going through a never ending crisis, triggered by the conflict between the values like the don’t be evil, and the openness that they want to cultivate on the inside and the fact that it has led so many employees to voice their anger toward the company on the outside, which has created a backlash, and so on. So they’ve been forced to clamp down on that and to become more of a traditional organisation one that is so controlling and so closed that, well, they’ll make mistakes as a result because they’ll become more cut off, less sensitive to the outside and that will destroy value.

Simone Cicero:
Is there a synthesis that you can see between this brutality that you mention and more generative idea of organisation? Is there some kind of way to transcend the idea of cooperation through entrepreneurship and make it ready to really become a generative player of the entrepreneurial age?

Nicolas Colin:
Well, I think I’d say that I’m a realist. So I’m 43 years old, and so I am making the joke quite often these days that it’s only very recently after 43 years that I finally understood what capitalism is about. And I understood that by reading a short text a few months ago, by Fernand Braudel who’s a famous French historian, notably for having written a very long and in depth, history of capitalism. And Braudel quite unexpectedly makes the difference between two things that he demonstrates are very different. One is the market economy, and the other is capitalism. And so it’s a bit disconcerting, because we’ve all been used to confuse the two concepts like for us, there’s no capitalism without the market and the market is obviously dominated by capitalist organisations. But in fact, those two worlds are very different. The world of the market economy is the world of merchants, that is I buy something and then I add a markup and then I sell that thing for a slightly higher price, and the difference is mine. And that’s it. And it’s not very scalable because you never generate margins high enough to be able to reinvest and so you are only as good as the quality of the relationship that you can entertain with your suppliers on one side and your customers on the other. And so that makes it very difficult to scale up. On the other side are the capitalists and the capitalists are those that are obsessed if you will by the idea of scaling because what they’re doing so well at a small scale they want to do at a larger scale. And for that you need capital and the capital is either generated by your own profit or or raised from outside investors that makes it possible to invest in your companies so as to escape the brutal competition that is happening in the market economy. And to put the competition at a distance so as to be able to find any generate those increasing returns to scale. And the fact is there’s not a good side and a bad side. Like in the VC world, you have all those discussions about the fact that oh, maybe scaling up is not that important and raising VC money is not that important. You should be content with having a small business that grows steadily without making too much noise and so on. That’s perfectly fine. But if you do that you’re part of the market economy. If you want to build an empire, you switch sides and you become part of the world of capitalism, which is a very different game. And it’s a game that’s about the pursuit of increasing returns to scale because those returns will make it possible for you to race ahead of the competition and to retain a part of the value you create so as to reinvest it or distributed to someone else. And so the two are important because the market economy makes the economy vibrant and innovative because there’s so much competition between people that try to, you know, lower the prices improve the quality of the products. It’s widespread in the economy, but the capitalist part of the economy is also very important because the increasing returns to scale that capitalists generate effectively form an economic surplus that explains economic development. And the history of capitalism is also the history of economic development that is, all of us becoming richer, having a better life, becoming healthier, etc, etc. But again, you would have the impression that is it worth if that surplus is retained by greedy shareholders and you know, financial people and so on? But that’s a different question. The fact that you need that surplus is one thing. That’s why most governments in the world try to support their capitalist enterprises, their local champions that try to play the game of capitalism. So that’s one thing, you need that surplus. The other question is how that surplus is redistributed at the scale of the entire society? Part of it is used to pay wages to employees. Another part is used to improve the quality of the product for the benefit of customers. Another part is used to pay dividends to shareholders. Another part is used to pay taxes to the government that can then invest in roads, schools, hospitals, and so on and so forth. And so those are two very different questions you need a part of your economy to be about capitalism because that generates the surplus that contributes to economic development. But then economic development happens if that surplus is used wisely distributed spread around society, so as to create more jobs in service industries, so as to support people in need, so as to cover the cost of expensive infrastructures and so on.

Simone Cicero:
This resonates a lot with Rita McGrath. She said, you know, we need a new social contract. And to some extent your thesis is really that if we are to continue with this idea of technological development and innovation and entrepreneurship, then we also need a new social contract because otherwise it doesn’t really work anymore. And I tend to agree with this as a closing consideration.

Nicolas Colin:
Yes, and by the way, in the 20th century, during Carlota Perez’s age of the Automobile and Mass production, the ultimate capitalists were the car manufacturers. And this is why the social contract at the time was modelled after how those organised capitalist enterprises were creating value and employing people, factory workers. But now, the game of capitalism is played by tech companies. And so we need to revisit the social contract to adapt it, to upgrade it so as to fit this new way of doing capitalism in a very different age.

Simone Cicero:
Definitely, definitely ! That’s I think, a very good point. Nicolas, is there anything else that you believe is really, really important to share with our audience that we didn’t mention?

Nicolas Colin :
Well, maybe just In conclusion, I think one of the message I try to stress is that the world is fragmenting at an accelerated pace, which means that Europe will soon be on its own, as opposed to forming that Western bloc with the US. And so it’s both a threat because we’re not sure if we’re going to survive that, you know, being cut off from the US and the security they’ve been bringing to us. But it’s also an opportunity to push our local ecosystems and to build our own capitalist empires and to generate that surplus that will make it possible for Europe to remain among the most advanced and developed regions in the world

Simone Cicero:
Very good point. Nicolas, where can our listeners find your work and stay on top of your writings and contributions?

Nicolas Colin:
Sure, so if you want the live version, you can simply follow me on Twitter, which I use a lot. If you want more, you can subscribe to my newsletter called Europeans Straits. In which case, if you sign up, you receive at least one essay a week. And if you subscribe to the paid version, you receive even more and especially my work on corporate strategy, finance, entrepreneurship in Europe and policy.

Simone Cicero:
Thank you Nicolas. I think your work is really the sweet spot on technology entrepreneurship policy, that is going to be the battlefield for the future of organising. So I really recommend all the people that are interested in becoming protagonists in the future to really follow your work closely. It was a great pleasure to have you. We are really, really thankful and I’m sure I’m going to isolate several passages that we’re going to share with our listeners. So thanks very much for being with us. It was a great pleasure.

Nicolas Colin:
Thanks to both of you.

Stina Heikkila:
Thank you