Government is just another sector waiting to be eaten by software | Sifted


There were many reasons why French officials were puzzled by the now-fading yellow vests movement. But the most prominent was the seemingly contradictory nature of the protestors’ claims, as the “Gilets Jaunes” demanded both lower taxes and more public services in desolate suburban areas.

Sitting on a panel with Jean-Marc Borello, an NGO (non-governmental organisation) executive and early Macron supporter, in December 2018 in Paris (which was peak “Gilets Jaunes”), I heard him saying something along the lines of: These people should start with clarifying their demands. Do they want more public services, or do they want lower taxes? We can’t have both! I replied by voicing my strong disagreement. Indeed, we can have both! But we need to get more entrepreneurial if we want the whole thing to work.

The beauty of working with entrepreneurs is that you get used to this idea that we can make more with less. Successful tech startups prove that you can ship better products faster and at a lower price than incumbents in many industries. As once written by Babak Nivi, cofounder of AngelList, the whole point of entrepreneurship is to serve a customer at the highest level of quality and scale, simultaneously. And leveraging technology makes it possible to do this in unprecedented ways.

The reason why some entrepreneurs succeed is because they refuse to be blinded by business as usual. In the past everyone in a given industry had to carefully balance quality and scale. You could sell a high-quality product to the happy few, or you could scale up your business in exchange for lower quality. But you couldn’t do truly high quality at scale.

Today’s technology makes that trade-off disappear for one main reason: it facilitates powerful network effects through machine learning, peer-to-peer interactions and sophisticated platform strategies. If properly orchestrated, these network effects generate an economic surplus, which can then be allocated to continuously refining the consumer experience, thus attracting even more customers while continuing to please those that are already there. In the language of Amazon’s Jeff Bezos, this self-reinforcing mechanism that broadens choice and boosts quality at an ever higher scale is known as the flywheel.

The thing with high quality at scale is that we’re all getting used to it. We enjoy the seamlessness of well-designed online applications every day. We find it normal that Amazon can deliver any good to our home within 24 hours. We’re confident in the fact that there will always be a startup that comes up with a cheaper value proposition, forcing all competitors to bring their own prices down while maintaining quality. And this is what generates precious trust and engagement from users in the digital world.

In this context isn’t it normal for protestors wearing yellow vests to ask for lower taxes and better public services simultaneously? If Amazon, Airbnb, Revolut and Dropbox can do it, why not the government? And if the government fails at tackling that challenge isn’t it proof that it is ruled by officials that are incompetent at best, corrupt at worst? Clearly the degrading quality of public services in the context of ever higher taxes on the middle class is one thing, among others, that explains the worldwide phenomenon that former CIA analyst Martin Gurri has dubbed The Revolt of The Public.

But there might be a solution. To further quote Nivi, in today’s economy entrepreneurship is to be the basis for an organisation’s differentiation and victory. This means any organisation, either public or private, established or new, can harness the power of entrepreneurs to deliver a higher quality at scale. And when it comes to the government, a new breed of ‘GovTech’ startup is rising to do just that: set a higher bar to meet what every taxpayer and citizen expects in today’s Entrepreneurial Age.

Alas, there are obstacles for any government that’s willing to enrol these entrepreneurs in efforts to deliver more with less. The old way of doing public procurement sees governments outsourcing public services to large organisations with financial firepower and political access — an approach that has led to disasters such as with Carillion in the UK and even lower quality in public services. Today we need the government to provide a platform so that entrepreneurs can experiment with new ways of delivering public value, thus discovering the hidden keys to delivering quality at scale. Ideally, these entrepreneurs shouldn’t have to wait too long or spend too much before they’re permitted to begin doing so.

Prejudice is another, even higher obstacle. And it works both ways. On one side, those who know government, such as Jean-Marc Borello, have no clue about what is going on in the world of startups. Thus they don’t realise that entrepreneurship can unlock the potential to deliver more with less.

But on the other side, entrepreneurs are clueless as well. They don’t see that they have a contribution to make and that public services are just another industry waiting to be eaten by software. Many incumbents made a lot of money entering public-private partnerships in the past. It’s time entrepreneurs ready themselves to experiment with public-startup partnerships in the near future.

Such defiance vis-à-vis public services is especially strong in Silicon Valley, where mistrust toward government runs deep in the minds of libertarian entrepreneurs. And this is why Europe has a card to play. Because the role of government in the economy and the importance of public services are more consensual here, we have the opportunity to take early positions on a very promising field.

Many are already hard at work, as we’ll see at the forthcoming GovTech Summit in Paris on November 14 (where I’ll participate in a panel). But we need to accelerate if we want to turn this opportunity into real value for money, earning better public services and more trust among our fellow citizens.

Nicolas Colin works for The Family, an investment firm supporting entrepreneurs in Europe from Paris, London, Berlin, and Brussels. His 2018 book “Hedge” discusses the need to invent a new safety net for a more entrepreneurial economy. He is writing a regular column for Sifted.