Four problems we have with the Flat White Economy

Professor Douglas McWilliams’ new book The Flat White Economy – about how digital enterprise is transforming London – is in the public eye for substances rather harder than coffee. Footage recently emerged of the author allegedly smoking crack at a North London drugs den; now he has stepped down from his job as chairman of the City think tank CEBR. All of which has seemingly drowned out all scrutiny of the book’s contents. It’s an enlightening read – but here are four arguments with which we take issue.

1) The headline point: by 2025, the Flat White Economy will contribute 15.8% of GDP, which will make it the single largest business sector in the UK

Granted, current trends suggest this will be the case. But the Flat White Economy – named after the preferred coffee-shop order of the East London tech whizzes that comprise it – is all about disruption. It involves companies that transform, re-think and create as a matter of professional urgency, which means its course can change in rapid, radical ways. Forecasting digital trends in five years’, let alone ten years’ time is extremely difficult.

That’s further compounded by the fact that technology tends to evolve in line with Moore’s law. This states that computer processing power doubles year on year. In other words the rate of change is geometric (1, 2, 4, 8) rather than linear (1, 2, 3, 4): it is much faster than our brains tend to think. That’s why technologies seem to come out of the blue. Smartphones, 3D printing and personal genome sequencing are all products of the last few years, yet we imagine that they have been around for far longer.

So who’s to say that there won’t be an innovation within the next ten years that fundamentally disrupts the tech sector and how its organised, rendering the basis of McWilliams’ prediction irrelevant? Also, three words: Dot Com crash.

2) To reverse the Flat White brain drain to London, the regions should encourage entrepreneurs who have moved to London to eventually return

All well and good. But McWilliams’ chief proposal for how to actually engineer this is a “social” one. “Each region should compete,” he writes, “to make its migrants feel that they will be given significant social status when they return.” But he doesn’t say what this would look like in practical terms. A local government simply stating that’s somebody is important – presumably by inviting them to events or involving them in local projects ¬- is far from affording them true celebrity status and the respect of the community. Plus, what kind of egoist would choose manufactured small-town recognition over the financial, commercial and social benefits that come with being in London?

3) Create regional tax havens in the UK

To make the Flat White Economy work for the wider country, McWilliams would scrap the current model whereby London taxes finance high levels of public spending outside the capital. Instead, he wants to use those taxes to pay for income and corporation tax breaks for economic activity in the regions. Effectively, he wants to create regional tax havens. Having pondered whether EU law would even permit this, he concludes that “it should not be beyond human abilities” to find a way of doing so within the rules. Presumably in the same way that it should not be beyond human abilities to take advantage of such a tax haven without having to give much back in return.

4) But here’s the fatal oversight

McWilliams notes that the Flat White Economy’s dress code is “jeans, trainers, hoodies, bomber jackets – anything but suits!” Now, if there were ever an argument against it…