The Business of Creativity

Trust the creativity of people - because that doesn't just build new businesses, it builds stronger communities, and will foster yet more of the creativity that is one of the hallmarks of our country.
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What links Christopher Columbus, Punk Rock, and the banking industry?Creative Enterprise: something that should be at the heart of economic thinking, and has the potential to not only deliver growth and prosperity, but make us feel better about ourselves too.

Columbus came from Northern Italy - the birthplace of modern banking. He appealed to the banks to fund his exploratory voyages, but never convinced them to back him. Why would they? The guy had no idea where he was going. But as JM Keynes wrote about the necessity for "exuberant inexperience", disruptions (and not knowing your endpoint) advance change.

When I speak to many people setting up their own creative enterprises, it seems that little has changed since the Renaissance. The bank is often their first port of call, but frequently turns them away. Instead, they're forced to resort to family, friends and wealthy individuals who know them, believe in them and want them to succeed.

How we back innovation and value creativity has not altered much in the last 500 years and we need to address this pretty quickly - because, whilst we may be experiencing growth, most people in the UK are certainly not experiencing prosperity.

Many parts of the creative industries are characterised as being notoriously risky. There is an understandable lack of appetite to put money into something which one can't see, feel or touch yet; but this is quite astounding, given the bizarre financial products that have turned out to be basically "betting and hedging" rather than anything one can ascribe real value to.

We have a very odd idea of what constitutes risk. We label Wall Street Traders as creative risk-takers, but the poet in the corner a waste of public money and the gamer on their laptop a beer-swilling, pizza chomping, violent cyber-thug.

The creative industries generate £71.4bn annually - and are growing at a rate of more than 9% - but my sense is that policy makers don't really believe that these businesses are the new drivers of growth. And if you tell them that ideas, passions, emotions and self-expression are where future investment needs to go, they'd nod politely and never return your calls.

Which is a shame, because Demos' study into creative businesses in 2011 demonstrated that creative enterprises had, on average, lower failure rates than businesses generally across the economy as a whole. Yet they still face significantly more difficulty raising investment.

In many ways, the start of a creative business is text-book: they buy low - ie ideas which cost nothing - and then seek to create value and sell high. However, because ideas are intangible and unique they feel much riskier than, say an investment in a shop or a central heating widget, even if the evidence in front of us shows that these investments might be just as "risky".

So there's the dilemma - how can you raise investment for something that doesn't exist yet?

When it comes to investment we need to get rid of this old fashioned notion of public bad, private good; intervention bad, free markets good and we should be bolder about the role of public investment as essential for future economic health. Behind many "private sector" success stories is years of investment from the public purse into frontline research. The 12 different technologies integral to the creation of the iPhone, iPad, and iPod, for example, were ALL developed through public research and development efforts.

At the heart of the Creative Economy is trust, experimentation, cooperation, imagination and crucially creativity and collaboration; because of digital disruption these characteristics are now central to all types of business growth.

Just as Punk re-invented the notion of what it meant to be a musician, to question established thinking, to dispute hierarchy and privilege and reject the mainstream - so is digital disruption and our internet-enabled world questioning our norms for how growth is generated.

Government, institutions and big business still have a job to do, but they need to be bold and submit themselves to the rigours of punk-scrutiny and address barriers to growth. This means giving more financial fire power to citizens to try things out; backing ideas, the success of which they have no way of measuring in advance.

This is what the organisation I lead is seeking to do. We make small amounts of capital available for people to take risks and we connect entrepreneurs, creators and producers to networks that will help them succeed.

So here's my short and sweet manifesto. Firstly, embrace your inner Punk, shout louder and be bold. Whilst we need to continue to lobby or change within our public and private institutions, the best thing we can do is take our custom somewhere else or do it ourselves.

Secondly, we must find ways of encouraging IP to remain in the UK. It's absolutely right that the government really focus on supporting SMEs and seeks to improve the availability of finance, as Osborne has promised in this week's autumn statement, but it doesn't address the real problem: a lack of willingness to invest in IP-related businesses. I would advocate a tax regime that incentivises investment in intangible assets - perhaps by rewarding creative IP that is retained in the country for a minimum period of five years.

Finally, we must take risks, follow our gut instincts and encourage those holding the purse strings to follow suit.But, the UK has been massively disadvantaged by a system in which Whitehall has failed to trust local or regional government outside London and many of our institutions have failed to reach out to talented people and companies all over the UK. Everyone is now recognising that this urgently needs to be addressed.

It may be hard to visualise George Osborne as a punk, but let's hope that, in his determination to redress the imbalance between south and north, between London and the rest of the country, he can allow a dash of punk philosophy to drive his policies.

So trust the creativity of people - because that doesn't just build new businesses, it builds stronger communities, and will foster yet more of the creativity that is one of the hallmarks of our country.