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Entrepreneurs as the source of wealth-diffusion

Here's a good video about entrepreneurship made by the Kauffman Foundation:

Video also in YouTube here:
http://www.youtube.com/watch?v=M7VZIbeUrSU

This same topic; innovators, entrepreneurs etc as wealth creators, job creators in society is also a hot topic here in Finland at the moment. The country would desperately need precisely those things.

The global crisis of oversized governments, with reckless overspending and debt taking has already all but ruined the economy and will continue to haunt us for the near future. The governments will not be able to solve a problem they themselves have created.

Finland also has a massive oversized and bloated behemoth of a Government. Currently the 2010 figure for GDP % of the public sector in Finland is 55.3%, according to Eurostat, that means that the public sector in its entirety is larger than the private sector. How long can this madness go on? Not for long. I have been told that no nation in the history of the world has survived for long with a larger public sector than it's private sector.

The Finnish Statistical Bureau, Tilastokeskus, Also has some 2009 data available: they state that the public sector is 56.3% of GDP in 2009. Source here.

As the public sector expenditure is so massive % from GDP this forms a particular problem: it makes the economy increasingly dependent on the public sector and its cash flow. If simultaneously the public sector purchases from the private sector are conservative in attitude and always favor the big corporations then we have another particular problem as the spending never flows to the new. Public sector spending is massive and to large extent its just maintaining the status quo. A cynical person might comment that perhaps this is by design, working as intended?

Needless to say this is totally batshit insane and cannot be sustained for long. The public sector needs to diminish to half it's size, or possibly more, immediately. And the longer we wait, the more massive the cut will have to be later on. The only alternative to this is to rapidly grow the private sector in such a massive way that the GDP% balance shifts and the private sector quickly becomes much larger than the public sector. What do we need for this?: you guessed it; successful innovators and entrepreneurs. By the thousands.

This brings us back to entrepreneurs and innovators. They are the solution to turn this around and get the country, the EU and the economy back on a healthy track.

Every time a brilliant innovator and entrepreneur successfully takes a magnificent product/service/whatever to the markets we all benefit from it in a massive way;

Imagine someone inventing a free, easy to produce, endless energy source and taking that to market. Something like a quantum zero point energy source possibly. We would all benefit and be enriched by it in a massive way. Such an innovation would bring disproportionate amounts of wealth, extra free time in our lives, etc.

Imagine someone inventing a cell-phone (and network) that operates with gravitons and gravity-micro-ripples in the gravity field instead of the usual electromagnetic radiation and distortions in the electromagnetic field of earth as our current cell phones operate in. This tech, taken successfully to market, would mean massive benefits and cool stuff for us all. Making the cell phones work underground (or undersea) amongst other cool things.

The examples could go on forever. Every time an innovator or an entrepreneur creates something new, something valuable and successfully takes that to the markets - we all benefit as a result. We all receive a gift of more free time, the gift of increased performance, etc.

Imagine having to cook a chicken for dinner without any technology; taking a knife (or a sharp stone), butchering the chicken at first, then skinning it, processing it, taking a few hours to light a fire without any tech (or is fire tech also?, yes it is, in fact..), and perhaps after a full day of work you could have it cooked. Imagine having to visit Oulu without any tech: walking there from Helsinki would take more than 5 days according to Google Maps directions. Tech and successfully commercialized innovations make our life fabulous, rich and give us free time to do other things with our lives besides live in caves and hunt for food every day (as we would be without innovations and technology.)

The wealth created by such success would be diffused throughout the society in every level; making the poor richer, and also the rich richer. This diffusion happens through mutually voluntary exchange of value-for-value and ends up effectively diffusing wealth to every level and corner of society. Today, however this doesn't happen optimally: as the public sector is so freaking massive, larger than the private sector, we have a parasite in the system: instead of healthy natural diffusion we get suction. We have a massive freeraiding vermin in the system that sucks away the wealth created, and intercepts the diffusion - by means in intervention, excessive taxation, regulation, the non-producing public sector sucks a lot of it away, and doesn't allow for the diffusion to happen. Instead of voluntary value-for-value exchange we get involuntary value-for-nonvalue exchange. That isn't an exchange at all; it's more like a violation of individual rights and legalized robbery.

The Finns often think that "society" is the same as "government" or "the state". We must be pretty much the only nation thinking this way. Finns are government-worshippers, statists. In just about every other part of the world people tend to think that society = the people, and the that the people pay for the government, the people allow the government to exist by their mandate, and that the government works for the people. Lately I have seen interviews in the media here in Finland from the Green Party politicians saying that "we must increase taxes because the government needs to be pay for the society".. it's amazing how fucked up this issue can be in people's brains; it's the society that pays for the government, certainly not the other way around.

Innovators, entrepreneurs and growth companies cannot flourish in an environment of massive taxes, larger public sector than private, over-regulation and over-intervention at every level. Governments simply can't regulate and tax innovations and growth companies into existence and success. Cannot be done.

Today we have a crisis. This would be our way out. Currently however I am worried that the public debate on the issue is going to the other direction: more restrictions, more taxes, more tackling down this process of innovation and the new that could benefit us all. It's almost like the government would not want people to be better, would not want everyone to benefit from cool new things that enrich our lives and massively benefit us all. Is this the case for real? I'm starting to suspect that it is. I'm beginning to suspect that because one massively successful entrepreneur might capture 0.5% of the value for herself (and the 99.5% goes to the rest of us) the Finns are so jealous that they won't allow or accept this to happen. This is pure evil. Unethical behavior that leads to maximizing human misery and making the poor more poorer, along with making the rich more poorer too.

Think about it for a while, and consider how you can affect this attitude. We are in crisis, the clock is ticking, every day our oversized government is spending and going deeper into dept. Courageous urgent action is required and this topic needs to enter and stay in the public eye.

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Channels of communication

Started thinking about the different communications channels we all use, and how well they really reach people? And not only that; how well they really achieve the end goal of facilitating good communication and actually getting a meaningful exchange going between people?

I have most of my communication channels listed here in the contact section:

http://tane.li/contact

Today I was away from email for most of the day, just a normal 8 hour work day. Meanwhile: 100 unread emails keep piling up. I also use about 11 different email accounts that all come to the same reader.

The point being: email is pretty much destroyed as a communication tool by overuse and spam. People email each other carelessly. They email too long texts that are not summarized. They abuse all sorts of mailing lists. They also email half-finished thoughts and raw mindflow that's painful to read through waiting for the actual point or call to action to appear somewhere in there. They don't consider who really needs to receive that message in the first place. They don't consider is it going to be a meaningful exchange between the sender and receiver - they just fire away something half-baked. Also one common challenge is emailing people something that asks too much of them. Too much attention, too much time, too much consideration. Like emailing them an entire book as an attachment and asking the receiver to read it and summarize it.

People also abuse the expectations and time frames of email communication: emailing each other something and expecting an immediate reaction as the reply - almost as if they had just talked with the person over the phone. Cannot do that with email. It's asymmetric communication and you should treat and expect it as such. It helps significantly if the email is short, summarized, very clear and has an indication of when a reply is expected. Without this clarity and focus emails are a massive negative time sink that just end up frustrating you and wasting everybody's time.

How are the other channels working then?

The phone: often busy with actual work and no time to answer it. I don't have a voice mail service, because I hate using one and it would just be unfair to other people who would try leaving messages there. So; doesn't work too well at all.

SMS then: works a lot better. The receiver is in control of when to read it. And the messages are never too long.

Skype: never online. When I am, it sort of works OK.

Google chat: same thing as Skype

Facebook chat: I have disabled this. Way too much spam and chatter of the interrupting kind.

Facebook messages: don't quite work, slow to reply. Reason: too much spam. (Same as email)

LinkedIN messages: don't quite work, slow to reply. Reason: too much spam again.

Private message in Twitter: works extremely well! Can only be 140 characters; so it's laser sharp and never too long. Don't get that many of them, so it's easy and fast to reply. There's very little spam in Twitter, which is great.

==

Perhaps somebody should create an email service that can only send and receive emails of up to 200 characters. That could make it bearable and usable. Or would it?

How do you relate to your communication channels? Which one functions the best? Which ones don't work?

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Recent TV stuff, fail day and 2012 with sir Richard Branson

It has been an active start of the autumn with several interviews and things going on; more on video than usual.

On 13th of October 2011 Finland is celebrating our second annual national fail day - a bold attempt to influence culture and attitudes. Trying to suggest that Finns could recheck the negative attitude towards risk and failure - and view the whole topic with a more intelligent angle.

"Success is inspirational - failure is educational." (quote from Prof. Mike Shaner).

You can find more about fail day in finnish from here:

www.epaonnistumisenpaiva.fi

And here's my fail day video in Finnish:

The Finnish Broadcasting Company (YLE) also showed the video on their morningTV segment and interviewed mr. Petri Vilén on the phone. That's here (in finnish again, sorry folks):

The very next day I was also on MTV3 channel "Good Morning Finland" program again, this time talking about the upcoming changes with Facebook. In finnish again, video here:

Next year I will also be one of the people on stage in the Nordic Business Forum 2012 with sir Richard Branson and big names from Finland and abroad. They released the "teaser trailer" for the event yesterday on Youtube, it's here (in english):

Plenty more interesting things to come this autumn I hope! I have been mostly busy with developing Soprano Brain Alliance forward (we are still hiring, big time, btw). And working with a few startups on the side, as a kind of a hobby. Keeping it busy with mostly very positive things!

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Social media cases

I have been using a few social media examples in my talks semi-frequently during the past year or so. Many blogs have written such lists of good showcases, so I decided to copycat the fad and share a list of stuff I am using from time to time.

Here it is then;

1) a book that explains the longer term strategic meaning of social media nicely, by Prof. C.K. Prahalad and Prof Venkat Ramaswamy

http://www.amazon.com/Future-Competition-Co-Creating-Unique-Customers/dp...

http://www.dancewithshadows.com/books/future-of-competition.asp

2) data about how brand engage their audiences:

http://www.engagementdb.com

http://www.slideshare.net/PingElizabeth/engagementdb-social-media-engage...

3) BestBuy, and especially their Twelp Force:

http://twitter.com/twelpforce

http://techcrunch.com/2009/07/21/best-buy-goes-all-twitter-crazy-with-tw...

4) Swedish state owned broadcasting company's campaign for paying your broadcasting fee:

http://www.tackfilm.se/version/

5) Prototype the experience; a cool video advert for a game that sucks your Facebook info right into it:

http://www.prototype-experience.com/

6) Journalists immersed into Discovery Channel's Shark Week -campaign, in a rather macabre manner:

http://www.movieline.com/2009/07/scores-of-journalists-killed-in-shark-w...

7) The Old Spice commercials and their rock star brand spokesperson on Twitter, Yahoo and others:

http://www.youtube.com/user/OldSpice

http://www.oldspice.com/videos/

8) SSI Shredding Systems, and their videos of sweet destruction:

http://www.ssiworld.com/watch/

9) Greg the Architect. Or how to turn a deadly-boring topic (SOA) into something interesting:

http://www.gregthearchitect.com/

10) "Why so serious?" an epic campaign for the Dark Knight movie (Wonder what they'll do for the upcoming film "the Dark Knight Rises" ? something pretty glorious, I'm sure)

http://www.youtube.com/watch?v=VpuC7HhCPWA

11) IRC-Galleria and the finnish airforce in 2006! This is one of the weirdest combinations of the time and amounted for quite bit of media attention:

http://www.digitoday.fi/tyo-ja-ura/2006/12/18/ilmavoimat-varvaa-lentajia... galleriassa/200623767/66

12) The tough competition: Youtube and funny kitten videos. This one has so much viewers it dwarfs the population of Scandinavia already:

http://www.youtube.com/watch?v=0Bmhjf0rKe8

and it's long tail:

http://www.youtube.com/watch?v=_RJ5KJyUVwc

13) Lord of the rings creation through the 3 movies; by involving their fans in the creative process (also check out: wreckamovie, naturally)

http://www.imediaconnection.com/content/1179.imc

14) masters of social media attention; Varusteleka and their net store. One of the best examples of Social Media usage in an enterprise in all of Finland. Brilliantly done!:

http://www.varusteleka.fi

15) The social media 2011 video:

http://www.youtube.com/watch?v=3SuNx0UrnEo

..Naturally I have plenty more cases I typically go through, but these are some of the informative and juicy ones.

Know better ones? Feel free to share!

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Professional board member work is now illegal in Finland

Finland has seen the rise of very positive new breed of business accelerators in recent years. They are called professional board members. Many of them are also angel investors and experts in various topics like law, business, internationalization, finance, technology etc. Professionalism towards Board of Directors work has been a much welcomed change into the old culture where only founders/owners of the company used to occupy board seats, entirely despite of their competence in actual board work. Finland has benefited tremendously from this new level of professionalism; networks, specific expertise in advising growth, finding funding, providing valuable insight, advice, mentorship, sparring and acting as a credible list of known names that back the company up by being members of its board (which is legally liable if the company behaves badly, mind you). Countless growing companies have benefited from these board professional experts who make it their professional competence to really excel in responsibility carrying, decision making and strategic level board work.

The basic business of a professional board member has up until now gone as follows:

A professional board member, or a group of them, establishes a company, often a limited liability company. Then the company offers its employees (the board pros) to startups and other firms as professional board members. The people sit on the board of directors, carry on the legal responsibilities associated with board work, and help the company in a multitude of ways; often relating to their own specific field of expertise. Many companies have had more than one professional board member contributing throughout the years. They also often do assignments for the company outside the scope of normal board work: like for example work extensively on the company's sales, technology, financing plans or other such major engagements that might often result in weeks of work. I have even seen board professionals who work on jointly creating marketing materials for the company, or participate in trade shows and conferences for the company in other countries etc. Often also this is done together with business angel activities: investing into the very same companies that then become clients to professional board member services.

Naturally this is also something that the Vigo accelerators often do: they invest into their portfolio company, and a manager from the accelerator team often takes up a board seat.

For all of this activity it has been the standard business model that the professional board member company sends an invoice (often a monthly invoice, or per project invoice) to the company it is helping, and this relationship has been quite similar to normal management consultant work - with the exception that the person is a member of the board of directors of the client company, and that the work is typically much more longer term and larger/wider (more strategic) in scope.

Naturally many VC funds and VC firms do this as well: they have venture managers, investment directors and partners who frequently sit at the boards of their portfolio companies - and just as frequently do more extensive projects for the companies and often mutually agree upon sending an invoice as compensation for their work to the company.

Well all of this is now illegal in Finland. Here's why:

Finland's Supreme Administrative Court in alliance and ruling based on advice from the Finnish tax authorities has made a very interesting recent ruling. It can be found here:

http://www.kho.fi/paatokset/54322.htm

From the case you can read between the lines that the "company X" they are talking about is in fact Capman, Plc. a VC firm listed in the NASDAQ OMX stock market.

This decision stacks on top of previous decisions made by the tax authorities, and now as combined to the previous decisions forms the final link in declaring all of professional board member work to be illegal.

Here's what the ruling means together with the old rulings and rules from recent years:

1) anything paid to the board member is considered as income, and under the income tax. This is despite the form of payment: even if you pay in stocks, in options, or in anything the result is the same; they are all considered income.

2) while the person is a board member he or she cannot do any consultancy work at all for the company: any such work cannot be invoiced from the company, it has to be paid as income instead (and taxed as direct income) - and this situation forms a temporary relationship of employment between the parties.

3) while the person is a board member the company cannot pay for or compensate in any way for any travel, flight tickets or such costs: these are also always considered income and in some cases this also can form a relationship of employment between the parties. The logic here however has been that since a board member is not a "normal" employee of the company; the company cannot pay him for travel costs. The tax authorities expect the board member to pay for all travel himself, or then pay income tax for all the travel cost the company pays for him. This changes if the board member is doing a consultancy assignment that is paid to him as regular income (thus forming an employment relationship) if this is the case then travel costs can be paid. But if there is no consultancy agreement, no income salary, just regular board work: then travel cannot be paid without avoiding this.

With that ruling they effective just ended professional board of directors work in Finland. A situation where a person is a member in, let's say, 8 different boards; all this becomes quite impossible. He would pay income tax from 8 different sources and would be frequently temporarily employed by all of those companies when ever there is a more time demanding task or any travel associated.

So now, all professional board members will either have to:

I) Resign their board assignments and become consultants. (my own tax advisor recommended to me that I should do this)

or

II) Become employees of the company they help and pay income tax from everything they do and get compensated for.

You cannot act as a professional, offering board member services and advice, and invoice for your services anymore. Not even if you are a partner in a VC firm and you sit on the board of your portolio company: even then you aren't allowed to do this.

For Vigo Accelerators this means that either;

a) their managers can't have board seats in portfolio companies at all.

b) or they will have to have separate roles; one
manager is a board member and is banned from doing any consultancy at all, while another manager does all the consultancy (the acceleration) without being a board member.

Or they can also, do c) act as up until now and pay huge amounts of income tax personally for accelerating all those startups.

That's how Finland encourages growth, entrepreneurship and economic success. What a wonderful climate to be in!

This is very very sad for Finnish growth companies.

This also pretty much kills the new breed of professional business accelerators from growing and rising any further: now that the whole practice is declared illegal and made totally idiotic in terms of taxation, now there won't be any more professional board members then... great.

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