Dropping the digital ball.

It was entirely predictable that the oil price would rise as a new war erupted in the middle east. To this day around 30% of oil comes from this area. So as any economist will tell you, change availability by 30% of anything and the price will change.

Of course, it’s not as if 30% is cut off. Even with Hormuz shut (and I don’t see that lasting long) the actual drop is probably 15%. It will have an effect and traders and oil companies will for sure gouge as much as they can as quickly as they can.

Some friends of mine have been working on a plan to retire depleted oil wells and seal them with a view to being ecologically sound and reduce emissions. Typically, a small depleted well “leaks” gasses for 10-15 years after it is shut down. Unless it is entirely plugged and cemented in, this continues. Their plan is to buy up these wells, plug them properly and effectively sell off the carbon offset. Now, the increase in the price of oil means 99% of the wells they have so far bought are profitable to operate. So their business plan has changed and they are pumping for all they are worth, even though the amount from each well is tiny. Personally, I don’t blame them, but I would be pretty sure the eco-investors who gave them the money to do this in the first place will be somewhat dischuffed. On the other hand, my friends will be able to repay them all in pretty quick time and they can then pivot again. Or not as the case may be.

The announcement by Rachel from Accounts about some hefty looking sums for AI and digitalisation are of course to be applauded. The problem as I see it – as ever in the UK – will be the rules and regulations that are loaded on top of all this. I had a very interesting chat with a main board director of a company that oversees investment funds under FCA approval. The problem we have in the UK is that the environment for start-ups and further funding in the UK is absolutely appalling. Another friend of mine got his fund started basically using friends and family and then started the journey to get real money on board. After about four months of effort he was hardly a step closer. So he got on a flight to New York and pitched his idea to a group of small investing companies, all of whom said they would invest. Job done in under one hour. There was a caveat though. They didn’t want to invest effectively in the UK (who can blame them?).  He had to re-register in the States and he had it all done within a few weeks, had the money and finally decided he would move to Texas. Why Texas? Apart from ZERO income tax you mean? In the end he went to North Carolina and the Tech Triangle around Raleigh Durham and is already making some really good waves. My point is the USA is a delight for people who are trying to be entrepreneurs and make a difference.

It seems to me that the conditions for growth persist in America across not only the political divide but also across the generations. From Bill Clinton’s “ It’s the economy stupid” to Trump’s beautiful stock market (his words) American politicians are entirely aware that their population wants growth to the detriment of most other things. Yes they get het up about lots of things but in general it’s not the majority of the population engaged with them.

Compare that to the UK where our politicians talk about growth, but refuse to change the rules which just might lead to it. At the moment, our tax system penalises growth and expansion and success. The result is that as soon as our entrepreneurs have something sellable, that’s what they do. That’s why so many UK “firsts” and inventions go overseas. It easier to simply take the money and run. I was reminded the other day about the first aircraft that broke the sound barrier. It was Chuck Yeager’s X1 in 1947 – practically in my lifetime - and it just scraped through at Mach 1.06. But the tech to achieve this was largely developed in the UK. As ever, the government of the day stopped funding it and – because of a fairly liberal interpretation of the wartime Lend Lease agreement, handed all the research to the Americans. We have done something similar many times. My point is that it is ONGOING research and development that leads to great businesses and not a stop-go approach. I regret to say that the new cash announced for the Brave New World of digitalisation may well go the same way.

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