An interview with Nicolas Colin
Unbundling the Safety Net; Entrepreneurship in uncertain times; Differences between Europe, China, and the USA;
We are kicking off our newsletter with a series of interviews with people who, we believe, can help us understand the current context and explore where we might be heading next.
For our first one, we invited Nicolas Colin, a co-founder of The Family, author of Hedge: A Greater Safety Net for the Entrepreneurial Age, and creator of the newsletter European Straits. You can follow him daily on Twitter. On our side, we brought Thomas Walker, Miguel Coutinho and Rui Quinta.
It’s a bit of a long one, so grab a cup of tea.
Enjoy the read.
Thomas: Thank you so much for joining us, Nicolas. It'll be really interesting to hear some of your answers today. To begin with, could you explain the concept of a Safety Net, and talk to why you believe it needs to be rethought or reconstructed?
Nicolas: Sure. So the Safety Net is a bundle of various policies and institutions that, once brought together, provide economic security for everyone; and because it protects against critical risks, it translates into more prosperity for the entire society. So it's based on the assumption, widely proven by history, that more security for individuals translates into prosperity for all of us as a society or as an economy, if you will.
So the Safety Net always has the same goal, which is security & prosperity, but obviously, it depends on where we are in time, in space, in terms of culture, the state of technology. And so we what we have to do during this transition that we're going through — the shift from the old Fordist age of the 20th century to the new digital or entrepreneurial age of today — we have to realise that the goal remains the same.
We need to provide security to individuals so that it translates into widespread prosperity. But the instruments, the tools, the techniques, the institutions, the policies must be different because the world is very different from what it was in the 20th century. And technology, especially, has evolved quite a lot and has brought about new risks, but also new solutions to cover those risks.
Thomas: It feels like the circumstances that were in — this pandemic — are acting as an accelerant for a lot of trends that we've seen coming for some time. Using, I guess, remote work as a basic example. Do you think this is also true for the concept of the new Safety Net? How do you see this playing out?
Nicolas: Yes, I think it's true for many, many things, actually. So a lot of people, considering the situation these days — with the crisis we're going through — have the impression that everything's changed and the world is radically transformed. For most of us who have been interested in innovation and entrepreneurship for a long time, we don't see much change. What we see is an acceleration of trends that were already here to be seen, to be observed, before the crisis.
And so I think it's true for many, many trends, many things that are happening these days or that have been made visible by the pandemic and the magnitude of the crisis; and I think it's especially the case for the Safety Net. If you follow the coverage of the economy, policies, what governments are putting in place to try to alleviate the problems that people and companies are going through. There have been quite a lot of discussions around the fact that, well, we provided a lot of money to companies 12 years ago through the financial crisis. But this time maybe shouldn't be so much about providing money to companies, but providing money for people, for individuals, because less and less people are depending on large organisations; more and more people are self-employed, working in proximity services or have a more entrepreneurial lifestyle. So those people are not covered if you focus only on the traditional employers and large organisations.
So I've found it very interesting to see that all the ideas that I've been bringing forward with my work on the Safety Net have suddenly become kind of mainstream. It's usually different worlds; everyone has their own concept or their own ways of describing the problem and the solution. But mostly what everyone's realising these days is that providing security to individuals in a time of crisis should be radically different because the economy doesn't work like it used to work in the 20th century.
Thomas: Are there any examples, any countries or places, that you think are doing this particularly well at the moment?
Nicolas: Well, no, I don't. Maybe I don't know enough, but I don't see any country that stands out in terms of, you know, handling the pandemic while also salvaging the economy and while also providing support to individuals. Certainly not France, certainly not the U.K.
There have been a few discussions about the situation in Denmark, which seems to be interesting. Asian countries have their approach. But there are two things I find especially interesting and, in my view, are revealing the fact that this shift is happening in terms of thinking about social policy. The first is that most countries, starting with the US, the U.K. more recently and France have put in place policies to support self-employed workers, which is new. Self-employment used to be a fringe population; people who had made such radical choices that you wouldn't have helped them in a time of crisis, like, you want to be self-employed? You're on your own and we won't help you. We will, however, help those who have an employment contract. Stable wages and so on.
For the first time, because these people are both more numerous and also more visible and they can voice their problems over the internet, which makes it easier for them to be heard. The chancellor in the U.K. has been kind of forced to put in place a dedicated program to support them. The same has happened in France and also in the US. So that's one thing.
The other thing that I find interesting is that while most of us are confined within our home and have to work from home, there are still many, many workers that have to go out and go to work. It starts with nurses and doctors, but also people working in retail (because everyone still has to buy groceries), logistics, delivery and so on. So we're suddenly realising, oh, but those people are important. And we need to support them and we need to help the companies that employ them so as to maintain continuity of service in those industries.
And I think it's a very important shift because when the crisis is over, we'll have a different perspective on those people. And we'll realise that they might be the new frontier in terms of deploying new policies and mechanisms to provide security to people. And because they will get used to being under the spotlight, they'll be, I think, more vocal and more eager to organise to demand support and recognition from all of us.
Miguel: I would like to focus on a specific word you used when answering Thomas' first question about the Safety Net, which is the word bundle. We sometimes look at innovation as this movement of bundling and unbundling and so forth. And that this movement actually propels innovation forward or allows for these leaps. Do we need an unbundling, somehow, of some of the pieces that are part of this Safety Net bundle? And if so, is that something private companies should do? Or should our public institutions still be the ones trying to focus on specific parts of this bundle?
Nicolas: Well, actually, that's a very good point. I think public institutions are very good at operating a bundle, once we know what the various components of the bundle should be. The thing that's happening with the shift these days is that we have to unbundle the old Safety Net before we can rebuild it and make sure that it's in line with the risks to which people are exposed these days.
And the public sector, because it's about very large organisations, very top-down, very rigid, is rather bad both at discovering new things and at unbundling old things to provide more flexibility to the entire system. Which is why historically — if you're interested in the history of social policy — you realise that new ideas in social policy are never invented or discovered by public institutions. They're always invented or discovered by businesses, unions, mutual organisations like mutual banks or co-ops or whatever.
At first, they exist at the margin and they're at a very small scale. It's like people working in the same factory will decide to pull a bit of money together just in case something bad happens to one of them. That's how you invent social insurance, basically. And then the state later can realise that, oh, that works. That seems to be working quite well at a small scale, let's pick that and let's deploy all that at a much larger scale so that every company supports its workers, pooling resources so as to cover each other against critical risks, whatever the risk may be.
And so I think we're still in the unbundling time. Many people are attached to the idea of the employment contract, for example, because it's more than a contract and it's more than a salary. It's the salary plus security: the guarantee that you won't be fired without cause. Plus, if you show your payslip to your bank or a landlord, it makes it possible for you to borrow money or to find a house. Plus, it gives you access to social benefits, to healthcare coverage, to a pension if you're too old to work. And so that's the bundle. All of this comes together.
So when people say, we hate these entrepreneurial forms of work and self-employment because we prefer an employment contract. It's because they are thinking about the bundle. We have to make those people realise that maybe we can recreate each component of the bundle but for these new forms of work and for a more entrepreneurial workforce, which is absolutely true, and you already have many examples that help make this case.
So the only problem is that, well, because the public sector is unable to unbundle in then re-bundle itself, you have to wait until businesses, start-ups, unions, co-ops, non-profit organisations experiment with those new things and then make the case. Then at some point, a minister or a politician will have campaigned on deploying those benefits; those new mechanisms at a large scale, they win the election and that triggers the re-bundling of the Safety Net.
But while history makes you pessimistic about it because you realise that usually the re-bundling only happens after wars or terrible catastrophes; you can be more optimistic if you realise that, these days, the internet makes it so much easier to share ideas and to come together, and to organise, and to experiment with new things.
Maybe we don’t have to wait for a war that will kill millions of people before we unbundle and re-bundle the Safety Net. Maybe this crisis we’re going through at the moment, which is a terrible, but not as terrible as World War Two or World War One. Maybe it will be enough to trigger the re-bundling. So to this extent, I think that all the experiments that are going on in every country are interesting. Again, there’s not one country that stands out, but there are a lot of experiments both in the private sector and in the public sector that are worth our attention.
Thomas: Building on that a little bit, in the past years, we have been trending away from these less traditional, as you explained it, less Fordist jobs. Obviously at the moment, due to this crisis, people are quite scared about their future and, in some cases, their income each month. How do you think these circumstances will impact our mindset in the mid to long term and change what we demand from our employers or society in general?
Nicolas: Well, I think the crisis will make people realise that our income can go up and down at a very fast pace. It's rather new because, so we all went through the financial crisis twelve years ago. But first, it hit the US very hard but Europe less so. Second, governments and central banks were extremely swift in their response and managed to contain the crisis and to make sure that not too many jobs were destroyed. So, again, depending on the country, but most countries did OK because the government was strong enough and large enough to respond at the appropriate scale.
And so we haven't gone, as a society, through something as big and critical as the crisis we're going through today. I think the crisis will contribute to making people realise that you cannot take anything for granted. You might have a job, but you can lose it. You might have a stable income and suddenly it disappears. And above all, what people will realise is that those people who until then were at the fringe, living a more entrepreneurial life; I use entrepreneurial in a more general sense, it's not necessarily that you have your Start-Up, it's that you hop from job to job or you have a contract and then a gig on the side or you're a nomad or whatever. And so I think, ultimately, those people will come out of the crisis reinforced in their choice. Because if you renounce the security that a work contract comes with, you also regain the agility that makes it possible to adapt, reposition and rebound throughout and after the crisis.
And so I think, in the end, you'll have different streams. So one stream will be, again, the policy experiments and business experiments that we are going through. The other stream will be people who have the capacity to be agile will be comforted in their life choices and in their embracing of a more entrepreneurial life. And then, most people who thought that they had the security of traditional work contracts will realise that the security wasn't there this time, and maybe they should make the switch and consider the new options brought about by the entrepreneurial age. And so that will accelerate the migration from the old world to the new world; because the new world is, by definition, more resilient to the ups and downs of the entrepreneurial age.
Thomas: You mentioned World War One and World War Two earlier, we can always look at these kinds of global crises as a kind of big catalyst for change. And earlier this week, Marc Andreessen released an essay, It's Time to Build, which can be seen as a call to arms for entrepreneurs, for Silicon Valley. Something that stuck out to me in this essay was this feeling of complacency or inertia with consumers, or the market, not valuing certain types of innovation as much as the new iPhone, for example. And with more shortcomings of our current systems appearing, I guess daily at the moment, I'd be interested to hear your opinion on this. How can we as innovators, as entrepreneurs, use this time to drive us to more desirable futures?
Nicolas: I think all of us who work in innovation, entrepreneurship, the Start-Up world in general, are comforted in our choice. I think it's the best place to be at the moment because it's a place where you can find a lot of optimism, where there's a lot of experiments going on on the ground. And also it's a place where, again, information circulates quite easily because so many people that are building new things are also writing or talking about the things they built and their writing is easily accessible because it can be found on Medium, YouTube, Substack, whatever.
So it makes it possible for everyone to realise that there is something going on and for those things to scale up much more quickly than in the past, when you had to wait for a journalist to get interested in your business before it was finally made visible to the rest of the world. So we don't have those frictions anymore, and so I think those working in the world of innovators and entrepreneurs simply should keep on building things, keep on experimenting. Double-down on pushing radical ideas and following weird intuitions because it's now or never. It's the best context these days to try new things. However radical they sound.
But then you need to do something else on top of building those things, you need to make it known that you're building those things. And so I think it's a period when it's even more important to voice your ideas, to share them widely, to document your day-to-day business and to collect the data that you're gathering in building new things; to make the case to other entrepreneurs, to investors when they start investing again, to policymakers, when they'll be desperate for new ideas and for a broader audience with everyone not really knowing where we're headed. Again, I was saying at the beginning that, everyone is lost except for innovators because innovators have been following those trends for much longer. And so we only see an acceleration, but the direction is clear for all of us. But it's not clear for the rest of the world. Most people don't really understand what the direction is. Because we know — as entrepreneurs — we need to share that wisdom, if you will, with the rest of the world.
Miguel: In order to make this big bet that I think Marc is talking about when he says that we need to start building or keep building, isn't it the case that the state sometimes needs to intervene and almost give these missions? I'm thinking a little bit about here of the work of Mariana Mazzucato and mission-oriented innovation policy. And if the state, when we are talking about social structures that are so complex and big, if the state doesn't have to almost trigger these kinds of innovation?
Nicolas: Well, I think, it's highly dependent on the country you are in. I've been very interested in this idea that the US is a country that's so safe and so secure, and so wealthy in terms of natural resources and land that it doesn't really need a strong central government to make things happen. And this is why, historically, the US government has been extremely weak when it comes to forcing decisions upon American society. What changed in the 20th century is that for the first time, the US was confronted with an external threat, first Japan and Germany, then the Soviet Union.
When it was the Soviet Union, it was even more threatening because they had the atomic bomb. So they could bomb the US from thousands of kilometres away, which was new. Normally, nobody could attack the US. It's too far away. It's isolated, it's bordered by oceans. And so it was something new that prompted the government to become much stronger than it had ever been before and to deploy those resources. That has translated into the mightiest military in the world and that still exists today. But also, a bit by accident, Silicon Valley; which was a by-product of that. It was not planned, the government was not interested in fostering new innovative companies. They were just interested in having weapons to contain the Soviet Union. So I think the US has learned to do that when it comes to tackling an external threat that again, Japan, the Soviet Union, then global terrorism. But they're still extremely weak when it comes to tackling a threat on their own soil, which we're witnessing at the moment.
This threat doesn't come from outside, it's a virus that spreads within the country. They don't have a government that can intervene and decide that we'll do this instead of that and we'll force you to close your company and we'll force the governor to do that, and so on. It doesn't work, and that's because they have a weak government, because they've been so safe and secure until now.
So we, in Europe, have a different tradition. And in China, they have a different tradition because we are less safe. We are used to being attacked all the time by our neighbours, being invaded, being ravaged by plagues and other problems and so we have strong governments to tackle that kind of thing. It's not a coincidence that the weakest government in Europe — and the most liberal culture of the government not intervening too much — is in the U.K. Because the U.K. is a bit like the US, it's an island. So they're safer than us on the continent. That's the long answer to your question but, I think that the government has the legitimacy to intervene when it's about waging a war against something, it can be, again, the Soviet Union, pandemics, or something else. Now we have a war to be waged.
A lot of people don't like thinking in terms of war, but I find it the clearest analogy: there's an enemy, we need to fight it, it's compelling and the threat is obvious enough for the entire society to come together and to rally behind the state and to do what the government orders us to do. And so it's an opportunity, again, out of which we can build (by accident) something like Silicon Valley. We can foster a lot of innovation that will ultimately go in very different directions well beyond ‘winning the war’. It's correlated to how threatening the situation is, how legitimate the government becomes when it comes to intervening, taking charge. Then if the government is legitimate and if it's able to raise enough money, then that money can be put to work and give birth to amazing businesses, amazing innovations, new institutions and so on.
Thomas: It's interesting that you talked about the US and Europe so separately there because that's kind of where we were wanting to move next in this conversation. In your book, Hedge, you talked to these different scenarios for the deployment of the new Safety Net, and I'm curious as to if you have seen anything that's happened in the past six months that has forced you to re-evaluate these scenarios?
Nicolas: So what I have been seeing over the past year, let's say that it's the past year, is that the rift between the US and Europe is growing even larger. It's sad for many people, including me, but the US is really drifting apart from us and we should, at some point, stop considering that we're part of the same world. There used to be this idea of the West, it was the US and Western Europe — extended to Eastern Europe after the fall of the Soviet Union — but I don't think it's the case anymore. I think we're discovering, to our great surprise, that the Americans are very different from us Europeans when it comes to their culture, their views on society. And also, we have divergent strategic interests because we don't have that common enemy, that was the Soviet Union, anymore. In the discussion of the scenarios for building the new Safety Net, one thread was the idea that maybe we'll have a model for the Safety Net that's the 'Western model' that will be implemented with slight differences, but it will be ultimately the same in the US and in Western Europe; like was the case in the 20th century: the Safety Net in Western Europe was modelled after the New Deal that was implemented in the US in the 1930s.
I don't think it will be the case anymore. I don't think we have the ability to come together as the West anymore, which means that there won't be a Western model for designing and implementing the Safety Net. And we shouldn't wait for the Americans to lead the way toward discovering this Safety Net.
With the Chinese, on the other hand, the scenario in my book remains true. I think they're going faster than ever in discovering their own version of the Safety Net. But it's a version that is of no interest to us because it will be Chinese and it will be shaped by their very different values and their very different culture. It will be ultimately incompatible with our way of life in the West. And so that they have their own version of the Safety Net. It will probably work quite well, but it won't be possible for us to draw any inspiration from that when it comes to designing our own version of the Safety Net.
So if the US is not leading the way, and the Chinese cannot be a model for us, that means that we Europeans or maybe we French people and English people or British people, maybe each country will invent their own version of the Safety Net. Maybe Scotland will have a different Safety Net than England, which will be different from those on the continent.
The thing with the Safety Net is that it's so deeply ingrained in the daily life of people that it's really shaped by the local culture, the mechanisms might be the same, like it's about insuring people against risks and providing them with capital and helping them organise. But it takes a very different form depending on the local culture, and this is why even when there was a Western model of the Safety Net it was, in fact, quite different in the UK, in Germany, in France and in the US.
So we had that model and so now these days we won't even have that model. So we really have to retreat into ourselves and to rediscover what really matters to us as a continent or as a country or as a region or as a community and build a Safety Net based on that.
Thomas: It's really interesting that you broke it down into these different parts because this is something that we've been talking about; we actually had a long conversation about it yesterday. This kind of fragmentation of the European identity and I guess what you're saying is if it doesn't make so much sense for us, as Europe, to unite and to create this new Safety Net, it's down to the individual governments or individual public institutions inside each of the countries inside Europe, for example, to create this. So what role does the European Union play?
Nicolas: Well, I'm not really sure. I have always been quite pessimistic and quite sceptical when it comes to the European Union. Not that I'm a nationalist or whatever, but I find, having spent most of my life in France and in policy, what I see is policymakers in France have never really believed in the European Union. They've just used it to force reforms that they didn't have the political capital to implement. So France is a much more business-friendly country, thanks to the European Union. Everyone's happy that it happened because, had we been on our own as a country, we wouldn't have been able to implement the pro-market, pro-business policies that have unlocked so much value and so much wealth creation.
So I've always been sceptical, I still think that the European Union is mostly a creature of the unified West. It's a mechanism that Europeans and Americans designed together so as to provide more autonomy to Europeans and to provide the illusion of self-sufficiency and sovereignty in Europe. The idea that we don't depend that much on the US because we have our own thing, our own organisation. But in fact, now that the US is retreating, we realise that the European Union is not that powerful; it doesn't have the power to impose too many things on its member states.
One reason for that is that the Europeans are so different from one another. They don't speak the same language. They don't have the same culture. They don't know each other very well. And so if the institution that brings them together, the European Union, doesn't deliver a better life, well, what's the point? So I'm optimistic for Europe as a continent, but I think that Europe will be integrated not by some top-down institutions located in Brussels, but more through the connections that we as individuals can build across Europe, across the borders of Europe.
It's more like what happened in the 19th century. So in the 19th century, Europe was, in a way, much more integrated than today, because people were moving around more freely. Everyone in the elite spoke two or three languages and thus were able to interact with almost everyone on the continent. There was a lot of business done across borders and there was a financial system operated by private bankers that were effectively lending money to every government and orchestrating the financial and trade integration of the European economy. So I think that we are entering a period in which Europe has to become that if we want it to exist. We shouldn't wait for Brussels to build things and to bring us together. We should get together without asking permission.
What I find interesting is that it's actually happening in the world of entrepreneurs and start-ups. I mean, you’re in Lisbon, I'm in France. I was in the U.K. one month ago. We all know people in the local ecosystems in Berlin, Munich, Bucharest, Prague, Copenhagen. So you have this community of entrepreneurs, investors, financiers, innovators. We feel at home in any of these large cities where part of the community is located. So I think that — European Union or not — this community will endure, these networks will get larger and stronger, and Europe will be rebuilt from the bottom up by the people who really want to do business across borders, are really interested in what's happening in other cities, other countries in Europe. And that will be the glue for the continent. That's the optimistic view.
Thomas: That's great, that's all of my more formal questions. Rui or Miguel do you have anything you want to add on top of that?
Rui: I have this more, I wouldn't say 'fun' question, but connected to our overall study. I would ask you like to try to imagine yourself in January 2021 and describe to us, how are you feeling from there?
Nicolas: Well, in 2021, I think we'll have everything we need to know in terms of the impact of the crisis, what businesses have been transformed forever or have disappeared, what are the opportunities that we should pursue?
And because my job is as a director at The Family, which is essentially in the investment business. That means that we can look in many directions and seize many opportunities, we don't have to focus on one thing only; that's the luxury of being an investor as opposed to an entrepreneur. Entrepreneurs have to focus on one thing otherwise they'll fail. Whereas an investor, if they want to do their job properly, has to be on the hunt for opportunities. And so what I find interesting, it's a bit paradoxical because so many people are suffering, some are sick and some are in hospitals, some have lost their income. But for us, we're in that small bubble where the current period is full of opportunities. I expect next year to be a year when we realise the magnitude of the change and we can start moving forward and planning ahead as to what the next steps are, which is always quite rewarding, so I expect to be more optimistic one year from now.
We will be back on Monday with an interview with Philippe Kern, the founder of KEA. In the meantime, take part in our study about these uncertain times.
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