America’s recovery is slow, but there are signs of improvement, at least in some states and some sectors, for those prepared to look for them.

The problem for US politicians is that most voters are not inclined to look. They judge economic progress by the crude measure of “jobs”, and economic growth does not necessarily mean an increase in employment. On the contrary, it might mean that companies are finding more efficient ways of operating.

Some say the policies of the Federal government actually discourage growing businesses from taking on new people.

Since this blog is strictly non-partisan, and since the government’s record on employment will probably be the decisive issue in November’s mid-term elections, it is not for us to take sides.

However, it would be interesting if we could construct an experiment which enabled us to compare different approaches to the economy. For that experiment to be fair, the different approaches would have to be applied to identical situations.

That is impossible in the real world, but it is possible to compare different approaches in places where there are several common factors.

California and Texas are both big states with ethnically diverse populations. Both border Mexico and rely on immigrant labour. Both have significant agricultural and technology sectors. Both have known the extremes of prosperity and poverty in the past. Both have Governors of the same political party.

Yet it is generally accepted that Texas is coming out of recession far more strongly than California.

Perhaps one should not read too much into this. After all, the economic strength of a state varies according to how one defines “wealth”, and most definitions produce patterns that defy neat explanation. For example, several states with “left wing” reputations have a higher percentage of millionaires than most.

So it is unwise to generalise – except to say that it is clear that local variations do matter, and that different policies do produce different results. If this is true within countries, it is true between countries. US politicians should not assume that a return to economic growth will mean a return to high employment. Job generation requires effort – or at least a friendlier attitude from government towards those who might be willing to make that effort.

British pubs are more than just bars. They are a focus of local community life.

Increasingly they are the only focus of local community life. The same politicians who bemoan the decline of community life are partly responsible for the closure of all the others – village schools, libraries, sub-post offices, and, indirectly, churches. It is true that changing social patterns are the primary cause of many closures – ten years ago, your contributor would go almost daily to the local post office with an armful of letters and packages of papers, nearly all of which are now sent by e-mail – but in most cases it was a political decision that provided the straw that broke the camel’s back.

The same is true of the traditional village pub. Alcohol sales have remained strong despite – or perhaps due to – the recession, but many prefer to drink at home or in soul-less urban nightclubs.

Yet there is still great demand for old fashioned pubs. The real problem is on the supply side, and this is where the politicians do their usual damage. High property taxes and the difficulty in finding casual bar staff, not helped by minimum wage legislation and other anti-employment measures, have made prosperous pubs marginal and marginal pubs unviable.

No wonder pubs are closing at an alarming rate.

Running a pub has never been an easy job. Most Britons, certainly most male Britons, have dreamt of doing it at some point in their lives – but it was always a dream that was unlikely to survive a half hour conversation with someone who had actually done it. Now even experienced licensees are leaving the business and not looking back. Their work ethic and knowledge are irreplaceable.

For those of us who believe that business is about more than profit and loss – it is also about meeting collective and individual needs – the damage to what is left of British community life is a double tragedy, but even the most ruthless economic Darwinist must disapprove when thousands of otherwise viable businesses are closed in defiance of the laws of the free market.

Once again, businesses are lost not because of supply and demand but because of state interference with them.         

According to the UK’s Chartered Management Institute, 44% of managers polled consider that they “excel at people management”.

Yet of those who took a diagnostic test only 14% excelled.

Neither of these figures is surprising. Few managers are actually good with people, and poor management in general has been a particular problem in some British companies for decades. At the same time, British managers can be among the most arrogant in the world – a psychological hangover from the days when middle class Britons effectively ran the world.

Indeed, some British managers are particularly bad because they are particularly arrogant.

The best leaders are humble.

This goes against the traditional image of “The Leader” as the self-confident alpha-male, striding around masterfully and shouting out orders without a moment’s hesitation or, apparently, a moment’s weakness or doubt.

Yet those loudmouths are usually the worst leaders in practice. Convinced of their infallibility, they see listening to others as indecision and they refuse to admit it when they are wrong – which, as a result, they frequently are. Since they lack all self-perception, they do not realise that their subordinates can see all this very clearly and hold them in contempt for it.

The good manager, by contrast, is always learning. He is always listening to others – both because others are more likely to co-operate with him if they feel he has listened to them and because he knows they might just be right. He is always open to the possibility that he might be wrong. He is engaged in a permanent quest to improve how things are done.

Above all, he is dissatisfied with himself. This is the key to all self-improvement. Where someone is perfectly content with himself and his situation, he has no incentive to change anything. Positive change can come only from unhappiness with the status quo – and the greater that unhappiness, the greater the openness to change and the motivation to improve.

The meek will indeed inherit the Earth – not least because they are more willing to adapt than the arrogant.

This blog entry is posted in conjunction with our Podcast # 122 – Business Partnerships.

It is often said that whether a partnership works or not depends on whether there is the right chemistry between the partners.

Yet partnership has more in common with physics than chemistry.

In human relationships, as in physics, opposites tend to attract. There are, of course, situations in both where this does not happen, but it is easy to demonstrate how a positive charge will repel a positive charge and a negative a negative – just as people who are too much alike will each want the same thing and will fall out over which of them gets it.

The most successful partnerships succeed because the partners have different characters and different objectives, so that each has his own role in the partnership and is content with it.

There is simply no point in going into partnership with a clone of yourself. The clone brings nothing new to the partnership. He has all of your weaknesses and his only strengths are those you have already. Instead of covering your weaknesses, he will reinforce them. He may extend your work capacity, but at the price of desiring the same rewards as you. This might boost the efficiency of the partnership in the short term, but must ultimately tear it apart.

Dr Evil and Mini-Me were always destined to betray and destroy each other: such was their nature and the nature of their relationship.

We are forced to rely on the Austin Powers reference, rather than something more serious and business-related, because it is often hard for outsiders to see how real partnerships operate in practice. It is wisely said that no one knows what goes on behind closed doors in a marriage, and the same is true of a business partnership.

In any case, the most celebrated, as well as some of the most successful, partnerships are known throughout the world because they were up there on the big screen: Laurel and Hardy, Crosby and Hope, Tom and Jerry...

Of these, the first is the most famous and the best example of how different characters filling different roles compliment each other to produce the elusive “synergy” – where the whole is greater than the sum of its parts, and two plus two equals five.

On screen, the Ollie character is convinced of his own cleverness. The Stan character, while not altogether convinced by his friend, accepts that he is even less intelligent and so he goes along with Ollie. The characters need each other: Ollie needs someone even stupider than himself to impress and Stan needs someone slightly less unintelligent than himself to tell him what to do. So the partnership serves the needs of both and both serve the partnership. There would be no comedy, and so partnership, if both were trying to be clever or both were passive.

Off-screen, the roles were reversed. Stan Laurel was a very intelligent man and a consummate professional, always thinking up new ideas for scripts and routines. Oliver Hardy, while by no means as foolish as his screen persona, was an amiable, easy-going sort, who would rather play golf than think about work.

It is pleasant to be able to record that the two men were great friends in real life, not least because Hardy never meddled with Laurel’s script ideas and Laurel ever interfered with Hardy’s golf.

Zurich, Monday 16 August 2010

When most informed commentators are issuing dire warnings about the economic future of “Europe”, they usually mean the European Union, or at least the Eurozone.

So the warnings do not apply to Switzerland, which is neither a member of the EU nor in a particularly dangerous financial position. This is not to say that everything is perfect in Helvetia, or that the Twenty Six Cantons have some form of exemption from the problems of the global markets – but it does seem that Switzerland is in a far better condition to weather the storms than most other European countries.

Although Switzerland’s independence from the EU is currently working in its favour, it would be facile to attribute the relative prosperity of the Swiss to that one factor alone. It is rather a symptom of a number of deeper strengths that have allowed the Confederation to enjoy hundreds of years of wealth disproportionate to its natural resources.

1   In spite – indeed, because – of its small size, Switzerland has always understood its economy depends on being open to foreign trade.

2   The high sense of civic responsibility of the Swiss, combined with the small size of both the Confederation and its constituent Cantons, have always imposed a tight fiscal discipline on government. It is harder to hide public debt when it must be shared among a small population.

3   Swiss banking and tax laws have always been hospitable to outsiders with money.

4   Switzerland is proof that economic liberalism is compatible with a strong sense of social cohesion, based on shared traditional values. Switzerland is a clean and safe place in which to live and do business – a nation armed to the teeth in which there is little gun crime.

5   The Swiss retain a formidable work ethic, an obsession with the quality and precision of their products, and a passion for punctuality. Although Switzerland has been mocked as the nation which gave the world the cuckoo-clock, the clever little timepiece is actually a good symbol of the virtues that make a strong economy.

The combined impact of these strengths is a healthy economy, which means a strong currency. Perhaps that is why your contributor, trying to stretch out is his devalued pounds sterling, feels so impoverished travelling through this great nation.

An entrepreneur’s most valuable asset is his time.

It is the only commodity subject to an absolute limit. It cannot be bought, sold, transferred, assigned, or delegated. You only get a certain amount, no more. Most of us feel we do not have enough of it – certainly not in the working day.

Yet the world treats our time with contempt – as if we had an infinite amount of the stuff to waste.

Since the proportion most of us spend on administrative tasks is fairly constant, anything unexpected cuts into the time we set aside for earning. This is particularly annoying when the unexpected takes the form of avoidable disputes or vexatious litigation.

In British courts, it is theoretically possible to recover all reasonable legal costs if you win in court. In practice, most winners still end up out of pocket. Even if you do get your full legal costs, you are most unlikely to cover your personal costs. It also adds insult to injury when your lawyer gets paid lavishly for his time and you get nothing for yours.

So, even if you are in the right, a strict cost-benefit analysis of pursuing a case all the way to eventual victory usually concludes that it is cheaper not to bother – and, of course, your opponents are counting on you coming to that conclusion and not bothering.

All credit then to our latest hero, the aptly named Barry Payling. Like most British people at some time or other, the self-employed photographer found himself being pursued by an incompetent but intransigent arm of the Establishment – in his case, the utility British Gas – for money he did not owe. Unlike most, he had the brains to keep a detailed record of how much time he wasted on this unnecessary dispute, and the courage to sue them for it.

British Gas settled before going to court and paid Mr Payling £2,000 – about $3,000 – for his time. This is a victory in which we should all rejoice. It would be churlish to suggest that it would be an even greater victory, worthy of even more rejoicing, if the case had gone to court and Mr Payling had won there. Then a judge would have approved a precedent that would have been of benefit to others in similar situations.

The irony is that it would benefit not only the wronged entrepreneurs but the bureaucrats, bankers, and big businesses who wrong them. If they knew they would have to pay the full financial costs of their inefficiency, perhaps they would try to be a little less inefficient.

What are we to make of the UK’s higher than expected 1.1% growth in the last quarter?

Not too much. It is a one-off combination of a slight rise in confidence as a result of having a new government and the economic effects of the high spending policies of the previous government.

Neither will last. The high spending was always going to end after the General Election, irrespective of who won, and the novelty of having a new government will soon wear out when the spending ends and the cuts begin. There is no doubt that those cuts are necessary – indeed, long overdue – but they are going to hurt, and they are going to hurt business more than most. Many businesses rely on government contracts, and civil servants will cut outside contract before they cut their own numbers or salaries. Even businesses with no government contracts will see their overall markets contract.

Added to this is the weakness of the EU as a whole identified in a recent IMF report. This is the culmination of problems that have been building up for years – over-regulation of business, pension obligations, structural deficits, and all the other “usual suspects”. Some have been warning about these for years, but those in power have laughed at them and simply borrowed more money. Now the bill collectors are at the door.

Although the UK is guilty of some of the same economic crimes, Britain is not as badly exposed as some other EU states – at least not yet. The more immediate danger for British businesses is that their European markets may be contracting at the same time as their domestic markets.

However, we should not be too gloomy. The dreaded “double dip” recession still seems unlikely. Yet the fact that the Bank of England predicts that interest rates will remain low for some time is hardly a sign of confidence.

Things are never as bad as they seem – but they are never as good as they seem either.

If ever a man deserved to hang it is Reichsmarschall Hermann Goering: his pudgy fingerprints are all over the letter that led to the horrifying Wannsee Conference.

As if that were not enough, many on his own side would also cheerfully have strangled him, albeit for very different reasons: his incompetent handling of the Luftwaffe, the mighty German Air Force, in World War Two was a major contributory factor in Germany’s defeat.

Yet the same Hermann Goering also deserves credit, if that is the word, for creating the Luftwaffe in the first place, and for building it from nothing into the most feared fighting service in the world in just six years.

It is an astonishing feat, but even more astonishing is that Goering accomplished it. Physically brave, personally charming, and politically cunning, he was not without natural gifts, but management skills were not among them.

This lazy incompetent achieved great success on his own terms by accepting that he was a lazy incompetent, and by hiring active and able subordinates to cover his weaknesses. More importantly, having hired them, he let them get on with their jobs with the minimum of interference – unlike his master, the paranoid meddler Adolf Hitler.

One of the most talented of Goering’s deputies, Field Marshal Albert Kesselring, made a perceptive comment in his memoirs about his chief’s leadership style:

“Even if he was a past master at getting his subordinates to do his work, occasionally his very frequent hours of leisure were devoted to casual reflection which bore many fruitful suggestions.”

Many executives today would say the same of their own boss. While Goering should never be a role model for anyone, it is foolish to try to write him off as a fool. He was intelligent enough to know his limitations and to build an organisation around him that took them into account. It cannot be denied that his management system has been much imitated, and it can be very effective in turning weaknesses into strengths.

However, Kesselring made another perceptive comment, this one about Goering’s greatest opponent, the man who beat him, which every entrepreneur should memorise as a far more reliable formula for success...

“Every undertaking is a risk, and needs, besides planning, relentless execution and a certain optimism. Churchill fulfilled these conditions in the highest degree.”

We had no sooner posted our last blog entry than we read official confirmation of everything we said about governments not listening to people.

Britain’s new Coalition Government made a great show of asking for public “input” on a range of issues. Almost ten thousand people took the time and trouble to send in their thoughts, but there have been no substantial changes to government policy as a result of them.

The whole thing was a public relations exercise.

We should not pretend to be outraged or even surprised by this. In any organisation, from a government to a small business, power belongs to those who control policy. No one in their right mind is going to give up that control or their own power.

Even ideas can be instruments of power. An idea has no value unless it is owned by someone with authority within the organisation. If he can call it “his” idea, then it increases his own power and he will promote it. If he cannot call it “his”, then it is in his personal interest to block it in favour of some idea of his own. Whether the idea in question is good or bad is of secondary importance.

In the case of the Coalition Government, power lies with those who agreed its programme. It is absurd to imagine that some suggestion off the street would ever be allowed to alter that programme.

In the case of a small business, power lies with the entrepreneur. Requests for customer feedback and suggestion boxes are never going to take the place of the entrepreneur’s own vision for the business.

If the entrepreneur has no such vision, so that he actually depends on customer feedback and suggestion boxes because he has nothing else, he will not be an entrepreneur for long. The same is true of a government.

So the whole point of any consultation process is not to generate ideas, and certainly not to make policy, but to make the consulted feel happy and important because they have been allowed to have their say.    

As the Nobel Laureate novelist John Steinbeck put it, “You do not want advice – only agreement”.

Government bullies business and big business bullies small business. Such is the order of things.

However, although business can exist without government, and often has done, government cannot exist without business to finance it – and small business is in many ways more indispensible to the country than big business.

We have always stressed the importance of small business but the statistics that prove it still come as a bit of a shock.

According to figures from the British government – a source not exactly biased in favour of small business – there are 4,800,000 small businesses in the UK, as opposed to 7,000 big businesses.

Those small businesses contribute more than half of the nation’s turnover – and more than our fair share of the taxes that fund its public services: governments give tax breaks to individual citizens because they can vote, and to big businesses because they can always move offshore, but we are the easy targets.

At a time when politicians profess particular concern about jobs, you would think that they would love small business for employing 58% of the private sector workforce in the UK – and, of most immediate importance, providing the vast majority of new posts. Small business is the most efficient engine of recovery from a recession caused by the follies of governments and big businesses.

Small business is also the country’s best hope for the longer-term future – the provider of 69% of apprenticeships and the source of 64% of commercial innovations.

We should be valued for this. We should be loved. Politicians should be falling over each other to ask us how they can make our work easier, so that they can help us rebuild our country.

Yet we are ignored. The loudest voices when it comes to actual policy are those of the bureaucrats and the politicians themselves, then those of big business and other special interest groups. The polite complaints and requests of the small business lobby, such as it is, carry no weight.

The only protest we can make is with our feet: we retire or we emigrate. Even then, the politicians do not notice our passing. They only complain that the economy is not growing as fast as they want – but they profess to be mystified why this is the case. We could tell them – indeed, we have told them – but they do not want to listen.