Business Education

The negative relationship between property investment and entrepreneurship is not immediately obvious. However, the recent property booms in Ireland and the U.K. (amongst others) helps to demonstrate this relationship. In recent years, both countries have experienced phenomenal growth in house prices. That is, until everything came grinding to a halt at the end of last year. [1]

The net effect of this boom has been one where the incentive to become truly entrepreneurial was significantly reduced – why try and create a new product or service if there was a guaranteed high return from property development? Similarly, from an investment point of view, why consider any other investment opportunity if there was a perceived guaranteed high return from property development?

In Ireland, the short-term results of the boom were a huge increase in people ‘getting into property’ and in the U.K. every second TV show on Channel 4 seemed to focus on property, e.g. Location Location Location, Property Ladder, A Place in the Sun and Grand Designs. Now all manner of problems are coming home to roost as the market collapses and the scale of consumer debt is becoming obvious. [2]

The Irish Government was happy to continue to fuel the boom, rezoning land for development, and cosying up to property developers [3], given how the huge property related taxes were contributing to their coffers. As David McWilliams, a leading Irish economist points out, a national focus on property is damaging as a ‘country which experiences a property boom turns in on itself. The reason for this is very simple, property cannot be traded. Bricks and mortar are tied to the land and the land is fixed and can’t be exported. Therefore, the discipline of international competition is lost.’

I would go further than this, it also destroys enterprise – there have been countless examples of successful businesses in Ireland shutting down because there is a greater return to be had from selling the property for redevelopment than continuing the business as a going concern. [4]

As someone passionate about entrepreneurship however, I take the view that every cloud has a silver lining, and that the property collapse could prove to be an excellent stimulus for entrepreneurship.

As Michael O’Leary, M.D of low cost European airline Ryanair recently claimed, “I love recessions,” he says. “Recessions are much more fun. Good times are a pain in the bum. Good times, any idiot can make money. In recessions, the good get up off their backsides and start doing the kind of sensible things that they should do all of the time. It’s good for business”. [5]

Now that ‘property development’ is no longer a safe bet, and the Irish and U.K Governments realise that the boom is over, it is likely that entrepreneurship, in its purist form, should take off once again. Those who stretched themselves with high mortgages will face stark options: sell up at a loss, or try to make ends meet. For some, second jobbing will be their only option and this will also help to fuel the passions of entrepreneurship in people. It is also hoped that the respective Governments will play their role, after all their taxation policies and planning policies have helped to fuel the boom in the first place.

Alan Gleeson
Palo Alto Software

[1] http://news.bbc.co.uk/1/hi/business/7445864.stm

[2] http://www.grant-thornton.co.uk/press_room/amount_of_uk_consumer_debt_exc.aspx

[3] http://www.independent.ie/national-news/bertie-makes-his-own-pitch-for-the-banished-galway-races-tent-1393773.html

[4] http://www.rte.ie/news/2008/0523/mcnamarab.html

[5] http://news.bbc.co.uk/1/hi/business/7438315.stm

Tags: business plan, entrepreneurship, Ireland
Posted on June 12th, 2008 | 1 Comment »

The recent launch of the Zilok website in the U.K. (May 2008) reaffirmed to me that the way we have been consuming for many years in Western Society is changing. The raison d’être for Zilok goes something like this:

“Why own a ladder or a drill when you only need to use it once a year and you can rent one from a neighbour for a very low cost?”

I think of my parents’ generation, and a combination of increased disposable income (relative to their parents), significant marketing and the growth of retail parks meant that most of their generation have garages full of items that rarely see the light of day. However, our world is changing. In recent years there has also been an increase in single-person households, as well as a growth in apartments and flats with less square footage for storage than the houses of our parents. It’s not simply a case of why buy a ladder to use once a year but also a case of if I buy it, where do I store it?

The notion of community has also changed and urban dwellers are more likely to access an online community than knock next door to borrow something.

The Internet has also served to reduce transaction costs across the board. It is now easier to search for a wide range of (long tail and /or obscure) products and services from a PC. The days of driving around calling into different stores are well gone. On the supplier side it has removed the need for providers to have a physical presence in the various markets that they serve, or to carry a lot of stock in these stores.

Finally there is a greater environmental awareness amongst consumers and an increasing amount of purchase decisions now include a weighting for the environmental impact of their purchases. Websites such as The Story of Stuff with Annie Leonard seek to promote sustainable production and indeed consumption –again seeking to promote shared ownership, product reuse and seeking to educate people about the impacts of their purchase decisions.

As a result of these changes, there is a raft of emerging offerings that blur the lines between products and services as we have traditionally known them. The message for entrepreneurs is that environmental changes and changes in consumer behaviour create business opportunities. The next ‘big idea’ is more likely to be a simple tweak to an existing product or service rather than a ‘mad professor idea’ concocted in a garden shed! Read More..

Alan Gleeson

Palo Alto Software (U.K.)

Posted on May 30th, 2008 | No Comments »

This is from a Fast Company interview with BJ Fogg, Stanford University professor, who is writing a book on the impact of Facebook:

You recently taught a course at Stanford where you had your students create Facebook apps that turned out to be very popular. How’d you manage that?

Within 10 weeks, they got 16 million people who installed their apps. The week of the final, they had collectively over one million users a day. We talked about psychology, metrics, and this feedback loop between users and creators. We really wanted to tune the students into listening to users. Pay attention to the comments about your apps, watch the numbers, try things, look at other examples and imitate them, think about the psychology, tap into motivation and persuasion, make your best guesses and see what happens.

It’s a very interesting interview. He believes Facebook is enormously important to the way we interact, the biggest thing since radio. Here’s the link again: Why Facebook Is Even Bigger than You Think | Fast Company

- Tim Berry
Palo Alto Software

Posted on May 27th, 2008 | 1 Comment »