In California, I saw the virtues – and vices – of the new economy | Will Hutton

As a country we don't get the importance of computer code or the scale of the revolution unleashed by the digital world

It might sound absurd, but Palo Alto, where I spent a part of last week, reminds me of Pompeii or the remains of those other Roman cities I've explored over the years under a sweltering sun. For this vibrant centre of California's Silicon Valley is planned on Roman grid principles, is low storey, presumes sunshine and is surprisingly ordered. Perhaps for a city built on computer code nobody should be surprised.

This is a place where invention, new ways to assuage human need and the hunger to make cool fortunes interact. A third of the students at Stanford University, across the railway line from Palo Alto, opt to take computer science for all or part of their degree. It's the precondition for anyone who wants to make Californian-style riches, even for joining in certain key conversations.

That's one point about Twitter and its ambition announced last week to sell its shares on the New York Stock Exchange valuing the company at up to $15 billion. Its founders – Jack Dorsey, Biz Stone and Evan Williams – will join a roll-call of other San Francisco/Palo Alto-based internet entrepreneurs who turned super-rich. There's Mark Zuckerberg (Facebook), Larry Ellison (Oracle), Larry Page and Sergey Brin (Google).

What unites these names is the ability to write code. If you want to be very wealthy, be listed as one of the most influential Americans and do good in the world by promoting connectivity or enabling something momentous to happen with greater ease or reduced cost, you can't begin unless you write code.

Without a sophisticated structure that can turn the idea into companies that can grow explosively, it might all be worthless. Palo Alto boasts an extraordinary world-class research university on its doorstep in Stanford, an institution that is hard-wired to connect research, code-writing and start-ups .

Almost everyone you meet is either involved in a start-up or contemplating getting involved. At best, only one in 10 ventures will succeed. But all over the valley, countless entrepreneurs regularly pitch their ideas to a room full of angel investors and venture capitalists. The idea has to be original and solve a human problem, but, crucially, it has to be scalable: unless there is faith the fledgling company can reach a billion dollars turnover fast, it won't raise a single dollar. Having a single market of 315 million at their feet ready to experiment with the novel – and allow the prospect of scale – is yet another building block.

The angel investors and venture capitalists are very un-British. Many are former entrepreneurs or senior executives in hi-tech companies, recycling the fortunes either they or their own investors have made . Many write code too – and while keen to make money, many speak of changing the world for the better, building an insurgent business. This is not a state-driven ecosystem, in European terms, but is governed by a sense of "publicness". There is also an understanding that one person alone, given all the technical complexity and potential to make colossal mistakes, is unlikely to crack whatever problem presents itself. You have to collaborate, open up, build fluid teams and work together. Our story today of Airbnb in Tech Monthly is typical: its success is about three people – not one.

In this respect, what is happening in California is a bit like Britain's industrial revolution. James Watt, Richard Arkwright, Samuel Crompton and Josiah Wedgewood wanted to embrace the new and to change the world. They collaborated and shared. There was a nobility of intent that united them, even while they made fortunes. Nobility of intent is not usually associated with successful capitalism. For the ideologues of the right, cargo cult worshippers at the shrine of Mrs Thatcher, successful capitalism is about less state, more market and no Europe. To be value-driven or care about purpose is for hippies and socialists. But successful entrepreneurship is about using frontier technologies to address human need and ambition. It understands it is part of society and owes a debt to the culture and public infrastructure that create it. Unless an entrepreneur is rooted in society, his or her chance of spotting needs and wants for which there is a market is very much reduced.

Change is afoot in Britain. Last week, the CBI and government held a conference at Warwick University celebrating their new joint belief in industrial strategy, opened by a video clip of David Cameron giving his wholehearted backing. But while a repudiation of simple Thatcherism, this is not industrial strategy 1960s style. It is more an attempt to create an investment and innovation structure across eight technologies and 11 key sectors: the Palo Alto effect in British terms. It is hesitant and intellectually hazy, but there is no doubting the direction of travel. Public institutions and public money have to catalyse innovation together. It is the beginning of something potentially important.

There are also early signs of a startup culture. The UK Crowdfunding Association now boasts 12 members: websites such as Crowdcube and Seedrs allow wannabe entrepreneurs to pitch their ideas online to potential investors and are growing fast. The National Institute of Economic and Social Research reports that there are 270,000 firms in the digital economy – half as high again as the official estimates.

But essential ingredients are missing. As a country, we don't get the importance of computer code or the scale of the revolution unleashed by digitisation. There is no process or institution that will not be transformed. One important reason why there is no British Twitter or Facebook is because too much British business culture – operating in one of the least supportive environments in the world – has little nobility of intent or purpose, and thus ducks engaging with such immense challenges. Intellectual effort is instead expended on avoiding tax, stripping workers of rights or selling out. Instead of obsessing about leaving the EU, Britain should be exercising every sinew to enlarge the EU single market.

There are dark sides to California. Google today is as obsessed by tax avoidance as innovation. Parts of the common ecosystem in California – public transport, for instance – are woeful. The startup culture means that everybody is on the move; nothing sticks for long. Yet in the round it inspires. A growing number of our under-30s want to make common cause, but without what disfigures California. It is the challenge of our times, but who at the top of British politics, business and finance really gets it?


Will Hutton

The GuardianTramp

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