The Landscape Of Opportunity
There are substantially two motors of opportunity that Glasgow should seek to benefit from:
- the end of innocence
- Covid
Political Opportunities
For the last 30 years the tech industry has been regarded uncritically as a good thing. That is simply no longer the case. The baleful experience of the Trump presidency and the role that big tech played in it has burnt that goodwill to the ground.
Add to this the horrors of the Chinese surveillance state and its atrocities against the Uigyurs and it is clear that big tech, and big governments are a clear and present danger.
Tech had been given a long lead to experiment and innovate, but the entire tech industry is no longer so new and so unprecedented that it must remain unregulated: its companies cannot be freed of social and political obligations.
There has been a tension between an Anglo-Saxon model of the state under the market, and a classic liberalism of a market under a liberal state. Trump and now the fatuous protectionism of Brexit have trashed the reputation of the Anglo-Saxon model. ***The American’s are doing it, it must be right*** no longer has the power to paralyze European politics.
The political environment, the end of innocence, will change tech policy across Europe and the world. Regulation is coming, tech is just a normal industry.
The understanding that we now have of new company creation suggests a framework that internet regulation will fit into.
Companies that are post-product market fit should expect to be regulated and subject to anti-monopoly measures. Those that are pre-product market fit should be exempted from strictures de minimis.
The big question is how these measures will be enforced. The old 19th century model of within-state regulation and physical controls wont work on a globalised internet — the new world will require international organisations and agreements.
The only reliable locus of liberal internationalism is the European Union. The UK will be a third country and we need to plan to have a Europe aligned tech sector even if we are outside the EU. Scotland may, but may not be, back in soon.
Will the surveillance state of China and the surveillance private sector of the United States be acceptable in a liberal Europe?
Is the current digital battleground secure enough against foreign intervention? The status quo is untenable. Technology is a core infrastructure built on very shaky foundations. There are huge under-funded and poorly resourced open source systems underpinning everyday life.
Is the current pattern of national regulation sustainable? Given the persistent flight of services from regulation it is hard to argue that it is. However the European Union remains the only international body with the will, power and reach to impose even modest regulation like the GDPR on the global internet scene.
The US would remain a formidable but no longer invincible presence in the global tech scene.
In these circumstances the pressure for product substitution, for lift-and-copy of large near-monopoly American providers will grow.
The US is in remission from Trump, and recovery will be long and protracted. Trump is not a Lukashenko with a small clique of appartatchiki against the overwhelming majority of the population. He has deep organic roots in America society and the institutions of the state, particularly the coercive ones.
The extraordinary circumstances that lead Oracle, led by Trump fundraiser Larry Ellison, to emerge as the unlikely victor of the TikTok acquisition race is a harbinger. Complete capture by a Putinesque klepto-nepto-capitalism would have stripped the US of its economic locus very quickly. First in talent flight and then in capital flight, and then simple capital destruction. Trumpism is baked into the Senate, and the state governments. The US faces a painful internal battle with him and his.
Contra to the first mover fantasies of certain political actors south of Scotland, the task we face is not first-mover innovation, but second-mover. Scotland is not to be the New Britain of the 4th Industrial Revolution but the New Japan, the New Germany.
Germany did not overtake the UK in the first industrial revolution by accident, but by mustering the resources of the state to create an institutional framework of training and research that enabled German industry to learn, flourish and succeed, on a continuing global basis. The Logan Report is firmly Bismarkian in its recommendations. A dynamic free market under a nurturing, hands off state, that seeks not to guide but to enable the private sector. Not slashing regulation and workers rights to drive down wage costs, but helping to create value, high-wage jobs and deep and persisting economic networks and infrastructure.
One of the great and under appreciated successes of the internet age has been the twin growth of open source software, and the explosion of the Commercial Open Source Sector — a source of many global scale unicorns.
Any radical restructuring of the global internet in the wake of the collapse of trust in the US will be made with the instruments to hand, and the instruments to hand are largely open source assets.
It is important to understand the open source company funnel. Interestingly it is collapsed:
The quantity of open source projects is mind-bendingly large. And built on that is a mass of primitive commercialisation. There is not a web development shop, or design agency that would go out of business in a week without access to one open source stack or another. On top of that there is weak scale-up sector. The funnel is mis-balanced with disproportionate large scale up and unicorn COSS companies.
To understand this it is necessary to examine the haphazard institutional support for the funnel. The structure of the COSS market replicates organic networks established 35 years ago that have become self-sustaining.
Some of these are shown below:
There is a research-to-commercial pipeline built around Stanford Computer Science Research institutes that have intestinal connections to the large Silicon Valley firms — the so-called FAANG (Facebook, Amazon, Apple, Netflicks and Google, etc).
The Big Data sector is a case in point. These drop incubated software products (with a thick shell of VC cash) as they pass down the Stanford oviduct straight into the Apache Incubator.
The original open source webserver, Apache, established itself rapidly in the 1990s as the leading open source product. And critically it build a licensing model, a governance model and defined and repeatable processes around itself. As Apache-the-product faded from prominence and was superseded by better technologies, the Apache Foundation, the institutional carapace, has continued to grow in importance and influence.
It remains intimately linked with educational and research institutions in California. Some researchers at an institution associated with Stanford find a promising approach. They get a little money and with a small team build out a strong working Minimum Viable Product. This is injected into the governance model formally as an Apache Incubated Project.
As a piece of software with a formal blessing from Apache, large tech companies try it out in prototypes, allocate engineers to work on the open source, submit bugs and feature requests. If and when there is clear evidence of product uptake the original team create a formal startup around the product, raise money and embark on the long march.
A Glasgow metaphor would be a slipway. First the keel, then the hull, the superstructure, a launch and onto fit out. Then the ship sails on the hazardous sea routes to unicorn/IPO.
There are similar effects visible around MIT to a lesser extent.
O’Reilly, the US tech publishing giant in another source of social proof, in the form of tech books, seminars and training.
Given the collapsed nature of the pipeline at the lower end there exists an opportunity for a tech scene that has paid meticulous attention to its own pipeline development to exploit.
This report makes recommendations on how we can build an institutional support funnel for Glasgow-based COSS firms taking Stanford/Apache Foundation as the model.
Covid Opportunities
Covid has also accelerated a change that was already in the works. Companies have been forced to work in a much more distributed way. There have been enough fully remote tech firms for long enough for us to understand how they work, their dynamic and their shape.
The fully-remote version of a tech company displays a similar, but more diffuse structure for a fully-office based firm.
There remain skeletal offices, and the basic distribution of function remains. Clustered around at HQ region are HQ-adjacent jobs, Marketing, Legal, Corporate with their C-Suite salaries. Manufacturing the production of products and services by brain remains dispersed.
The importance of network creation is even greater in a diffuse world. In the physical world large firms create deep and abiding networks of alumni by bringing people into close contact with each other in the office. For many companies this is an unconscious and indeed, invisible, process.
In the remote world that network has to be consciously built.
More remote working gives us opportunities not only to have young talent stay in Glasgow and build our tax base, but also for Glasgow Tech Companies to grow their hinterland. If we can create a tech scene where C-Suite jobs are based in Glasgow and ***software manufacturing*** is distributed across a network of European university cities pumping out and retaining their own high skilled workers then the future is very bright.
To be that place Glasgow needs to become an originator of high-growth firms. And to become that it needs to make itself a locus of network generation, of contacts, of ideas, of capabilities.
This report will make a number of recommendations about developing remote working companies whose executives are based in Glasgow, but whose workforce are spread across the world in general, but within the European Union in particular.
