Tag Archives: government

Secret History of Silicon Valley: Steve Blank

Below is an amazing lecture from Steve Blank on the history of Silicon Valley.

As military funding was a big part of it, the majority of the talk is around the role of electronic warfare in World War II and the Cold War.

Steve’s Secret History site shares the full slide deck and more.

Some interesting highlights from the talk:

  • World War II was the first electronic war – the German air defence even had radar-guided flak guns!
  • The ground-facing radar on Allied bombers that was designed to help identify targets was used by Germany to track them (and so was the radar warning receiver on their tails)
    • This shows the cat-and-mouse game of measures and counter-measures in electronic warfare
  • Allied bomber formations would throw out a cloud of aluminium foil “chaff” to reflect German radar, which was cut to exactly half the wavelength of the signal.
  • Fred Terman of Stanford moved East during the war to run the Harvard Radio Research Lab
  • He hired 11 colleagues from the Lab to join him at Stanford when he returned. Together they made Stanford the “MIT of the West”
  • Heretically for the time, he encouraged faculty to sit on tech company boards and his graduate students to leave and start companies (for example, Hewlett and Packard)
  • The Cold War became an electronics war as well
  • The USA use the moon to pick up reflected Soviet radar signals and map out the locations of the radar bases
  • CIA and NSA would fund big radio dishes for universities like Stanford as a result
  • Shockley came back to Stanford. He was a great researcher and talent spotter but a terrible manager
  • The “Traitorous Eight” left to start Fairchild Semiconductor and a suite of companies formed in the resulting ecosystem
  • The US military “primed the pump” as the first customer for tech entrepreneurship in the Valley.
  • But in the mid-1970s, the US Government slashed capital gains tax and told pension funds they could invest up to 10% of their assets in VC firms.
    • As a result, inflows to VC firms rose by an order of magnitude and Silicon Valley became a hotbed of for-profit innovation

The UK’s most important 21st century infrastructure project? Cybersecurity

I believe that the most important 21st century infrastructure project for the UK will be the development of world-class cyber-security.

So much of our national infrastructure is being digitalised that it is easy to lose track.

My sector, the energy industry, is in a massive state of change. The emerging “smart grid” scenario comprises connected renewable generation, storage, metering, and demand response. This deep level of decentralised control will yield enormous benefits for cost and sustainability. However, these will come at the price of potential vulnerability to cyber-criminals and attack from state/non-state actors. A hijack of our energy infrastructure would have catastrophic consequences for our economy, security, and general way of life.

This is not just a problem for the energy sector. Digitisation is sweeping through our industries at breakneck pace. The automation of vehicles, the proliferation of digitally connected appliances in the home and industry (the “Internet of Things”), digitisation of medical records, and even the cultivation of food in “vertical farms” means every aspect of life will be affected.

Improving the resilience of these assets must be of paramount importance. However, the rise of high-profile hacks of data and growing incidences of “ransomware” attacks show this is not translating into action.

Increasing cybersecurity literacy for all ages must be a priority for the government. Many people still use easily-hackable passwords and can be fooled by a simple phishing attack. Education must start at school and continue in the workplace, even at board level.

The 2017 ransomware attack on the NHS shows how crippling cybercrime can be for our institutions. The attack exploited a vulnerability which would not have been an issue if the IT infrastructure had been the latest available. Budget cuts at the NHS Trusts meant that they had de-prioritised IT upgrades and exposed themselves to cyber-risk.

The UK Government must make it clear to leadership at all critical organisations that IT security has to be priority #1 for all spending, with ring-fenced budgets. HM Government should set up a unit of “white hat” hackers that is responsible for penetration testing the Police, NHS, and other assets of national importance on a constant basis.

Our economic advantage as a nation arguably rests on our ability to innovate. Therefore it is also critical to help the private sector to protect itself against industrial espionage, which is often sponsored by nations with low respect for Intellectual Property rights.

The physical communications network underpinning the internet also needs to be protected. The vulnerability of our undersea cable connections to other countries to attack by hostile actors needs to be addressed, and the UK needs to have a strong presence in the Space sector to remain at the leading edge of innovations.

Developing the world’s best cybersecurity infrastructure will put the UK in pole position to capitalise on the opportunities of digitalisation while protecting itself against future threats. All other infrastructure will need to build on this platform, which is why I regard it as the most important.

Idea: Social Impact Bonds for mental health

The case for improved mental health services

The consequences of poor mental health on human well-being are becoming more widely understood, as are their impacts on other areas of society such as use of drugs, violence, lack of productivity, obesity, lack of creativity, unemployment, smoking and other addictions. Improvements in mental health can cause a cascade of positive multiplier effects throughout society.

Social Impact Bonds as a concept

As noted in my recent post on tackling homelessness, I am fascinated by the potential of Social Impact Bonds to help drive positive social change.

One idea that really resonates with me is the use of Social Impact Bonds to drive positive change in people’s mental health.

Inspiration for the idea

I was inspired by the potential for improvements years ago after reading Healing Without Freud or Prozac by the late Dr David Servan-Schreiber (which was once lent to me by the late Ismena Clout).

In the book, Dr Servan-Schreiber talks about combatting depression with the following:

  1. Meditation and heart coherence
  2. EMDR (Eye Movement Desensitization and Reprocessing)
  3. Maximising exposure to natural light
  4. Acupuncture
  5. Omega-3 Fatty Acids
  6. Exercise
  7. Social Interaction and Emotional Communication

Most of these activities can be undertaken by a beneficiary without any qualified medical assistance, which made me think that this would be an ideal area for a for-profit company or social enterprise to provide a service that would support sufferers of depression.

Indeed, people like Tony Robbins have companies focussed on this area with many of these areas being employed.

However, with Tony Robbins, the emphasis is on the beneficiary directly paying for services themselves. This means that many people that are not currently in a financial position to access the services can benefit.

Use of Social Impact Bonds to reward positive outcomes

What if a company or social enterprise could provide beneficiaries with all the benefits of this approach at no cost at the point of use but instead could be rewarded by a government or health service for delivering the beneficial outcomes?

I drafted this paper below on the back of the idea that Social Impact Bonds could be used to reward social enterprises for just this:

Concept Paper_ Social Impact Bonds for Improved Mental Health

Originally I designed this business so that it could be implemented by a Tony Robbins company because I am a big fan of the work they do to help people achieve transformational change in their lives. However, it could be undertaken by any organisation with a mission to help people make positive change in their own lives.

Below is a diagram explaining the value flows in the concept (note in this diagram I referred to beneficiaries as “patients”, which is not a terminology that I would use anymore):

Diagram: Social Impact Bonds for Mental Health

Risks and risk management

One major risk of this approach is that it could contribute to “privatisation of the UK’s National Health Service (NHS) by stealth”, with private sector organisations slicing off more and more of the NHS’ workload and sweating the assets for profit in the way that UK train franchises have done.

This could be mitigated by the fact that a lot of these activities are things that can be undertaken by individuals without any form of medical intervention, such as regular exercise, socialising, and improved diet. Therefore these would fall outside of current NHS services and would carry a low risk of this.

Another challenge is whether or not the activities would count as, or have the perception of, being medical treatment and therefore need to be regulated.

For the same reasons above, I think a strong argument could be made that this is not the case. Effective protocols that signpost beneficiaries to NHS services should be in-built so that the NHS and other authorities can have confidence that the social enterprise is not masquerading as a healthcare provider, but a “wellbeing-support provider”.

UK Government support

It’s interesting to see that the UK Government also sees the potential for Social Impact Bonds to stimulate change, as they have launched an Inclusive Economy initiative that includes a funding stream for Social Impact Bonds.

Contact me to discuss

I’d welcome any contact via my contact page from anyone interested in starting a social enterprise in this field. I’d be happy to share my ideas for potential methodologies that exist for the service, as well as potential funding streams to launch a pilot project.

Tackling Homelessness with Social Impact Bonds

One of the methodologies to achieve positive social change that really interests me is the concept of Outcome-Based Payments.

I recently saw a great example launched by The Big Issue, one of my favourite charitable organisations.

Homelessness in the UK: the challenge

Shelter estimates that there are about 300,000 people classified as homeless in the UK, with the National Audit Office estimating that there are about 4,450 people sleeping rough on any given night.

These are shamefully high numbers in such a rich and developed society as the UK.

How do Outcome-Based Payments and Social Impact Bonds work?

Social enterprises and charitable organisations target the social improvements that they want to achieve.

They find the relevant local authorities that would benefit from having these challenges dealt with and then enter into contracts with them. These contracts guarantee that the organisation will receive a certain payment once a measurable improvement has been made, known as an “Outcome-Based Payment“.

The organisation then provides the service in question and measures progress via the agreed methodology. Once this agreed target has been met, the local authority releases the agreed payment.

Of course, there is a delay between the provision of the service and the payment, meaning there is a need for startup capital. This capital can be issued in the form of a bond that is linked to the future income stream of the Outcome-Based Payments. Therefore, these bonds are often referred to as “Social Impact Bonds“.

Why are Outcome-Based Payments important?

This is a great model for local authorities because it means that the payments are made only after successful outcomes are achieved.

This means less taxpayer money is wasted on schemes that don’t work and it also means that funds can be diverted to the most effective strategies, obtaining maximum impact for the local authorities.

Big Issue Invest, the social investment arm of The Big Issue Group, launched the £10m Outcomes Investment Fund to target just these sorts of opportunties.

How could this work for homelessness?

Big Issue Investm via its Outcomes Investment Fund, has backed Changing Lives in its target to get 150 rough sleepers in Newcastle and Gateshead into long-term accommodation.

Source: The Big Issue, November 20-26 2017

I think this is a fantastic model that has potential to stimulate improvements for many other social challenges, such as mental illness.

What other organisations invest in Social Impact Bonds?

A non-exhaustive list of organisations that would make these sorts of investments are listed here.

Upgrading Our Energy System: Smart Systems and Flexibility Plan from BEIS – my thoughts

Early in 2017, the UK Government called for evidence and views on how to move the UK to a smarter and more flexible energy system. They received over 200 responses and I am informed that the vast majority related to energy storage.

The UK Government took the views into account and have produced a plan of 29 actions that BEIS, Ofgem, and industry will take for the future of the UK energy system called: Upgrading Our Energy System: Smart Systems and Flexibility Plan. I’ve sketched out some of my main thoughts on the document below.

Introduction of an energy storage licence to UK grid code

Tantalisingly, the UK Government plans to recognise the overwhelming noise from industry and amend the Electricity Act 1989 to include a definition of storage, but frustratingly only as a subset of the generation asset class. It will be based on the Electricity Storage Network definition and Ofgem will begin consulting on this in the summer of 2017.

The licence changes will allow storage to be exempt from final consumption levies and will de-risk investments that co-locate alongside renewables. Ofgem will improve the connections process and will use financial incentives to make the DNOs do more to help their customers.

In some ways, it is great news that the Government is finally making this move. However, by merely adding it as a sub-set of generation instead of making it a separate asset class, I interpret this solution as a bit of a bodge-job.

Creating a separate asset class would have opened up a much deeper discussion about which organisations can own the asset (i.e. can DNOs? Can National Grid?). By not creating a separate class, it seems that this vital conversation is off the cards entirely. Indeed this is consistent with Ofgem’s view (plainly reiterated in the document) that “network companies should not own or operate storage”, as they think it will “impede the development of a competitive market for storage and flexibility services”.

In my mind, this is the wrong conclusion. For me, DNOs are the perfect customer for energy storage assets. They already own the wires on the network that do the spatial arbitrage of taking energy from places of low price (supply) to places of high price (demand). Surely it follows that DNOs should be trusted to do the same with the temporal arbitrage that storage provides?

If DNOs will be continuing to make decisions about investing in the capital equipment of wires, transformers, and the rest, then surely they should be allowed to own storage at the same time, as it is being lined up as a potential rival for these traditional assets ( one of the major touted benefits of storage being “Transmission and Distribution Upgrade Cost Deferral”)?

Removal of other barriers to energy storage and Demand Side Response (DSR)

Apparently, Ofgem has already consulted on a proposed Targeted Charging Review (TCR). The consultation stated Ofgem’s views that storage should only pay one set of balancing system charges (not two as currently) and that storage should not pay the “demand residual” element of network charges at transmission and distribution level. This is obviously a sensible move as it removes a major source of unfairness and will make the business case for storage projects a lot healthier.

Ofgem are looking at giving aggregators access to the Balancing Mechanism (BM) and clarifying the rules for DSR and energy storage to participate non-exclusively in the Capacity Market (CM). This is really great news for the UK energy market. Firstly, clarification of the CM rules will finally allow the much-talked-about revenue stacking that underpins almost all energy storage projects.

Secondly, allowing aggregators access to the BM will boost DSR and energy storage as it will allow them to compete with traditional generation in the provision of this vital service to the System Operator, National Grid. Professor Goran Strbac of my almer mater Imperial College has frequently spoken about the potentially huge benefits that energy storage assets could provide to the BM, so this development would pave the way for his predictions to become reality.

Removing barriers to smart meters and “time of use” tariffs

The document refers to the UK Government’s commitment to ensuring that every household and small business is offered a smart energy meter by the end of 2020.

To make the most of these hard assets, domestic half hourly settlement of electricity payment has been possible on an elective basis since June 2017 and Ofgem will consult on whether it will be made mandatory. If so, it would be dovetailed to coincide with the smart meter roll-out.

Intriguingly, these two developments would allow me to introduce my PowerCube product idea if I decided to move forward with it, as the smart meter and half hourly metering requirements were the two major limiting factors holding back the product’s successful launch.

The document talks about the need for consumer protection, standards, and cybersecurity protection as part of the smart energy revolution. In an increasingly interconnected and rapidly-changing world, these factors will be extremely important if the benefits are to be safely secured.

Recognition of smart energy entrepreneurship

On a final note, it was great to see the inset case studies of various innovative smart energy startups such as VCharge and Open Utility included in the paper.

It was particularly great to see Upside Energy mentioned, which is a company that formed as part of the Nesta Dynamic Demand Challenge competition that I supported as a mentor back in 2014. Graham and the team were one of the winners, so it’s encouraging to see them still going from strength to strength.

Sale of Green Investment Bank

In my opinion, one of the great Liberal Democrat achievements of the Lib Dem/Conservative Coalition UK Government of 2010-2015 was the establishment of the Green Investment Bank (GIB).

The GIB was set up with UK public money to “back green projects on commercial terms and mobilise other private sector capital into the UK’s green economy”. It invests in a variety of green UK projects such as energy efficiency, waste/bioenergy, and offshore wind. By June 2017 it had invested into 99 projects, committing £3.4bn into the UK’s green economy (much of that from private co-investors).

As a Brit who is dedicated to greening the global economy, I was proud to see this excellent development and excited to think about the huge potential impact that it would have.

I envisaged a British version of KfW, the German Government-owned bank with over €489.1bn of total assets and annual revenues of over €74.1bn (in 2014). KfW has had a transformation impact on the German green economy and wider economy. It is 90% financed by the capital markets, issuing bonds that are guaranteed by the Federal Government (and therefore have an interest rate that is extremely low).

I was therefore shocked to hear that the Conservative government (2015-2017) had agreed on the £2.3bn sale of the GIB to Macquarie, an Australian infrastructure investment bank. Many have criticised the sale, saying it has been sold off on the cheap and that the bank will not stick to the green investment mantra after the obligatory 3 year period.

Apparently, the GIB chair was in favour of the sale as they believed it was important to get new investment to grow the bank’s impact and secure its long-term future. How true that is (or how much it is someone protecting their job/position) I can’t tell, but I can somewhat see the logic.

What I find odd is the fact that the GIB would surely be a key channel that the Government could use to deploy capital to support their flagship Industrial Strategy policy. This Strategy was formulated to stimulate technology and green businesses so that the UK economy is well positioned to grow and be globally competitive for years to come. Selling the GIB removes a crucial funding dispersal mechanism that could have addressed barriers to green economic development and buttressed the Government’s efforts.

Additionally, I would have thought that leaving the GIB in public hands would be ideal for the UK Government’s commitments under the Paris Agreement and the commitment to spend 0.7% of GDP on international aid. Having a bank focused on clean energy projects would have been an ideal channel to deploy capital into projects aligned with these commitments.

This year, there were rumours that the sale could be abandoned in favour of an IPO. That appeared to be the preferred option of the second favourite bidder, Sustainable Development Capital. Whether the recent election miscalculation of Theresa May has interfered with it remains to be seen.