Yet his story is fascinating because it is a definitive study in luck: Not just pure chance. But the type of luck that comes from a combination of unusual personal interests, social circumstance, and the active pursuit of something different.

It’s a reality that few “successful” entrepreneurial people acknowledge, because it’s an uncomfortable reality: It doesn’t fit neatly into a 5-point plan for instant fame and fortune [also see box below]. And it leaves a nagging doubt that the outcome could easily have been unsuccessful. And while I suspect that Alex isn’t comfortable with pure chance, he provides ample examples of how other elements of luck can be biased. How the odds can be improved. The dice loaded more favourably.

Those examples make Alex van Someren worth understanding. This article is based on a talk he gave to the Edinburgh Informatics Forum. In this article:

• Little Acorns
• Acorn Development
• ANT
• nCipher
• Trading Stocks
• Issuing Stocks
• Luck

Little Acorns

Born of an entrepreneurial father, Alex and his younger brother, Nicko, were raised in Cambridge, England. Cambridge is important, because both brothers were interested in electronics, and in the late 1970s (and arguably still today) Cambridge was at the heart of Britain’s “computing” industry. Aged 14, Alex discovered that Acorn Computers (as it was later known) was based in Cambridge, and he wrote to them asking for a job. They told him to visit during the school holidays, and on first day of those holidays, Alex was on their doorstep. A presumably bemused Hermann Hauser sent Alex home with an Atom. An Acorn Atom, one of the first genuinely personal computers.

This was “getting what you want by being prepared to take it,” as much as “right place, right time”.

Alex and his brother (“the smart one”) spent the rest of the day translating a Star Trek game onto the Atom, and duly returned to Acorn the following day, tape [audio magnetic] cassette in hand. (My first computer experience was very similar – aged 7, writing what would now be called a roleplay game onto my father’s kit-built Sinclair ZX81.) Acorn’s staff were impressed – not least, because they had a new game to play – and Alex and his brother continued to “work” for Acorn for the next 3-4 years, variously hacking and testing Acorn computers. They were too young to be formerly employed, so were paid in free computer components and products.

Acorn Development

Aged 17, Alex was offered a job with Acorn. Since he now “had a job”, he lost interest in formal education, and never attended university. His job in customer service and bug-fixing exposed him to the “people side” of computers. But, by his own admission he was more-or-less unemployable, and after 2 years moved to London to become an independent computer consultant.

This was a period when computers were rapidly evolving from the expensive corporate mainframes, to widely available cheap personal devices. Businesses knew they wanted to use computers, but didn’t know how. Or sometimes why. So, Alex both earned an income, and learnt how to develop useful products. He cited the replacement of a manually-operated paper teleprompter (auto-cue used in television) with a computer-based device: Although it was relatively simple to programme words to move up a screen, live television required very high standards of reliability, which meant emphasis on testing and quality.

Alex used his knowledge of Acorn Computers to develop various related products: A card that “made Acorns go faster” became so popular he merged backwards into his father’s business to sell it – “dad already had a credit card machine.” He wrote the earliest book on the ARM processor – the Acorn-based computer architecture now found in many (possibly most) personal electronic devices, including mobile phones. Worked on an Acorn emulator to run Microsoft software (Microsoft was becoming dominant, an dominance that would eventually lead to Acorn Computing’s bankruptcy). And implemented a cheap form of networking for Acorns, called Ethernet.

ANT

Meanwhile, Alex’s brother, Nicko, had continued on into further education. While at Cambridge he had become aware of this thing called the internet. They ported the first popular browser, Mosaic to the Acorn, adding email and FTP (file transfer) features. This created the business called ANT (“Alex’s Networking Team – although everyone else calls it something different”), which continues by providing software for services such as interactive screens in hotel rooms.

Oracle approached Acorn to make a home internet device. And consequently raised the question, would Alex van Someren license his browser technology to Oracle? There was only one catch: No payment. Oracle expected prestige to be enough (Oracle was that big in the early 1990s). Alex’s gut reaction was no – why give the technology away? But his wife changed his mind – you do know who Oracle are, don’t you?

As events transpired, the Oracle project was a commercial failure. But it had led Alex and his brother to start working with the encryption of data sent across the internet. Encrypted communications protocols allow confidential information (like credit card details) to be sent across the internet without risk of the data being intercepted and stolen while in transit. Netscape had already implemented SSL (Secure Socket Layer), but it was technically very slow for the host server (the machines running the website). Slow meant expensive: Many more physical server machines were needed to operate a SSL-based website, than a normal website. A big problem looking for a clever solution.

Box: Team Work
“The press” can create the impression that the leader of a company is the most important person, but isn’t the case. Alex tends to be “the front man”, happily dealing with the more bureaucratic elements of running the business. His brother, Nicko, is described as more capable with the technology itself. This idea of keeping the full skill-set distributed between different people, in different combinations, continues into the wider company. “Team work” doesn’t mean that everyone tries to do the same thing.

nCipher

By chance Nicko had meet a venture capitalist, who had made a vague offer of money, should the pair have any good ideas. Alex read a “business plan in 24 hours” book and sweated blood over the perfect “pitching slide-deck”, before the brothers flew to Canada to meet Terry Matthews, the Welsh technology billionaire. 3 slides in, Matthews interrupted to ask how much money they wanted, before suggesting they “take a million now, and see how you go”. The brothers upgraded to First Class for the flight home.

It transpired that Terry Matthews didn’t just want a third of the business in return for his investment, but a further third was to be owned by an associate company. Which meant that the van Somerens had already lost control of their company in the first round of investment. The process was not exactly “by the book”. But, in spite of Alex’s misgivings (see Oracle, above), the brothers were still in control of their business from day-to-day – and didn’t do so badly in the end.

While they understood the problem, they didn’t yet have a solution. Or rather they did, they just didn’t know it: Back in Cambridge, staff and ideas were “crowd-sourced” from local pubs (bars inhabited by students and tech’ types). The solution itself was described as “a load of ARM chips” – reusing locally produced and understood technology. The solution was about 30 times quicker at de-encrypting secure communications. Ergo, requiring 30 times fewer expensive web servers. A commercially viable solution.

Box: Role of Universities
Alex’s story explains a lot about the role of universities in entrepreneurial innovation: That university towns create a suitable background environment and ecosystem, rather than specifically training the people required to lead any commercialisation. Someone that has spent most of their life in education/research may be able to formulate a solution, but the problem may only be understood by someone with more commercial, “real world” experience. The skill-sets are different, and you need both. It is easy for decision-makers to be fooled into the belief that innovation simply “comes from universities”.

Trading Stocks

In 1996 electronic “ecommerce” was almost exclusively occurring in the United States. So although the company remained based in Britain, its sales operations moved to the United States. To Boston, where Alex’s mother was already living (another small background/geographic advantage).

Alex was too late to hire a stand at the main (RSA) data security conference, so took a suite in the same hotel, and tried to “button-hole” (accost) people in the lobby, as they entered the conference. Alex mixed up 2 similar looking people, and ended up talking to someone he wasn’t planning to talk to. Except that the person he was talking to transpired to be from Fidelity Investments, which operated a large stock-trading websites. It transpired they were conducting 5000 stock trades per second, where each SSL trade took a third of a second to compute. This traffic required $150 million [I think I got that figure correct, even if it seem outrageously high by current standards] of Sun servers. Needless to say, they were very interested in reducing the number of machines by a factor of 30.

Unfortunately Netscape (then the developer of the dominant web browser) hadn’t returned Alex’s calls, so the new technology couldn’t be used. Fidelity Investments didn’t just secure the first $1 million of sales for the new van Someren business, nCipher. They convinced Netscape to change their browser, to accommodate Alex’s product. And the rest, as they say, is history.

Alex also cited $5 million of sales to Microsoft, for Hotmail. Sales which were made by someone who just happened to be working late in the office. Alex’s argument, that while chance is involved, actions had been taken by individuals that allowed that chance to occur: They wouldn’t have succeeded by simply staying in bed.

Box: Intellectual Property
Patents make investors happy, because they are somewhat quantifiable assets in an otherwise intangible business. But sometimes it is better not to protect intellectual property with a patent, because then competitors will never know how something works. The result is that the least important things are often patented, while the most important ideas simply remain closely-guarded trade secrets. Electronic security is an exception, because nobody will trust a “black box”. Instead the business aims to use standards, preferably standards they have invented and championed themselves. Those standards then become the basis for the creation of further intellectual property.

Issuing Stocks

The company was offered (IPO) to the London stock market at the height of the “dot com” boom of the late 1990s: A £350 million valuation (over $600 million) on a business with $4 million of (venture) capital backing, $15 million of annual revenue, and still losing money. The company was obliqued (by the market) to sell a proportion (20%) of the stock, gifting it a huge amount of cash. Alex used the interest on cash to make 4 acquisitions, before eventually returning the cash to the shareholders.

Alex van Someren’s best acquisition was of a company that had failed, after burning through $50 million of venture capital funding: They waited for the business to fail, then manage to secure 2 containers worth of server machines, and a lot of Intellectual Property rights for a mere $120,000. His worst acquisition was of a business with “optimistic” revenue predictions, that was originally intended to be purchased alongside another complementary business (which Microsoft purchased during the negotiations). The result was $10 million wasted on something that wasn’t making money, was to create law suits, and didn’t have a clear strategic reason for being.

After a decade leading nCipher, Alex had become bored, and someone else took over the day-to-day running of the company. Attempts to sell the business to a competitor fell foul of competition regulation: The plan to merge companies with 60% and 25% market share together upset the UK’s Competition Commission. nCipher was eventually sold to the French Thales group.

Box: Capital and Mentoring
Alex’s products tend to be “software in a box”, where the physical hardware is a significant part of the product. Hardware tends to require (venture) capital backing, because of the high startup costs. Software enterprise now dominates: Software is much easier to “bootstrap” (fund yourself and/or from revenue). The ideal situation (for the entrepreneur) is not to have to sell a portion of their companies in exchange for capital: The traditional funding role of venture capital is diminished (something I’ve discussed in the context of Cloud computing). Mentoring is one area where venture capital organisations can still assist, however the importance of mentoring remains questionable: Alex acknowledged that he was never consciously mentored, and much of his life has involved “screwing up as [he] went along” – merely, on balance, getting more right than wrong. Of course, he’s also giving talks like this, so clearly thinks there is benefit to sharing past experiences.

Luck

Several years ago Marc Andreessen – the founder of Netscape and, as such, almost a parallel life to the van Somerens – wrote about James Austin’s 4 kinds of luck. It’s a theory I’ve also discussed in the past: Active curiosity, unusual background, and distinct hobbies, are just as relevant to “luck” as pure chance.

Alex van Someren’s story fits the pattern remarkably well:

• Actively doing something: From “getting what you want by being prepared to take it,” to buttonholing people in hotel lobbies.
• Unusual social and geographic background: Family (parents, brother and wife), location (Cambridge), and time (immediately pre-internet revolution) are all clearly important. Few individuals will have had all these backgrounds.
• Distinct hobbies: If computing is still a bit “geeky” today, it certainly was when assembling a home computer involved a soldering iron.
• Chance: One wonders what would have happened if Fidelity Investments had not learnt about nCipher…

However, there is one further element, which is intriguing: Doing the opposite. Taking what conventional wisdom would deem to be the wrong decision. From giving technology to Oracle for free, to selling 2/3 of the company in the first round of funding.

This might be a logical extension of simply doing something a bit unusual: Unusual methods become just as valid to “luck” as an unusual background or interest. Alternatively, the underlying market might be so prosperous, that one could make a huge number of mistakes and still succeed. Both states are perhaps true, since the aim is generally to pre-empt the crowd – occupy a different position today, that everyone else will adopt tomorrow. An unusual approach may be required to be able to occupy a different position today, while tomorrow’s appreciative market allows unusual approaches to be funded. However, such a chaotic process is still bounded: For example, giving technology to Oracle was ultimately successful because it lead to further work on secure internet communications.

Do you like the sound of £100 million ($150 million)? Can I tempt you with £160 billion? Expressing these figures per person in the population can be useful. The first figure is one bar of luxury chocolate for everyone. Doesn’t sound so big now, does it? The second figure is like everyone having a £2,500 bank overdraft (loan). Strange that, because indirectly, we do.

Unfortunately, applying the economics of household groceries to major items of government expenditure introduces certainty. The idea that one can visit a store where luxury chocolate bars are sold for precisely £1.70. Yet many large elements of government expenditure are akin to ordering a chocolate bar years before it can be eaten, for a price that transpires to be somewhere between £1 and £5.

Larger businesses will be familiar with this concept. It’s called risk. Such businesses are often far more interested in what “it might cost” (£5) than what “it will cost” (£1.70), because what it might cost might lead the business to bankruptcy.

The national economy is chaotic in its complexity, but overall, things should average out. So long as all the assumptions are broadly reasonable: Ultimately some will earn/cost more, some less. Short-term in-balance can be solved by (basically) printing more money, and then down-grading future assumptions until everything is back in balance.

However, this breeds a form of arrogance. A sense that government doesn’t need to consider the possibilities. That we can deliver a radical new policy – that has never been done before – and, in spite of it never having been done before, we know precisely how much it is going to cost. Just like a bar of chocolate.

Unfortunately, assumptions tend towards optimism. On average, projected costs are less than actual costs. This isn’t just a problem for accountants. It means that decisions are taken which do not reflect reality. Potentially leading to a Disneyland scenario, where everything is affordable until after the decision is taken, when suddenly everything has become too expensive. It ultimately challenges the validity of decisions, and in doing so, the moral authority of those that take them.

This article uses the Edinburgh Tram project to demonstrate the inherent uncertainty of large government infrastructure projects. It discusses the role of optimism in planning, and the methods used to reconcile planned optimism with subsequent reality. The article describes how the involvement of the private sector in public projects has evolved over the last 20 years, and the highlights the different time-scales applied to private investment and public choices. It concludes that optimism is not only unavoidable, but necessary. Rather, the true problem lies in tendency of people to demand certainty from the public sector, while accepting uncertainty in the private sector. On this page:

• Digging Holes
• Optimism Bias
• The Downside of Up
• Evolution of Public-Private
• Paradoxes of Uncertainty

Digging Holes

Edinburgh’s Haymarket used to be one the busiest transport junctions in the city. Used to, because for the last 2 years, the highway has played host to a unusual urban art form: Holes.

The exact location of these holes changes from month to month. An elaborate game to confuse pedestrians and drivers, as they fail to navigate the shortest path to their destination. Like the best urban art, the artist is rarely seen – although the presence of various pieces of mechanical digging equipment indicate that the work is somehow still incomplete. Yet the most intriguing part of this sculpture is it’s name, “Edinburgh Trams“. Because in spite of the preponderance of construction activity in the locality, the only track to be seen at Haymarket is the same mainline railway that has run under the road junction for the last 170 years. No new stations, no over-head power cables, and certainly no trams.

“Light rail” requires slightly heavier engineering than road traffic. So laying tram tracks often involves rebuilding almost everything underneath the road surface before the rails can be laid. In a large British city, this means modernising about 200 years worth of poorly (that is, not) planned subterranean infrastructure. A maze of pipes carrying all those important things that normally remain unseen – water, power, communications.

That doesn’t just cause the appearance of a lot of track-free holes. It means that we aren’t entirely sure what’s down there until we start digging. This is one example of what makes the construction planning process especially uncertain for trams: How many holes should we plan to dig, and, hence expect to pay for?

Now that most of the utility work is complete, we know that almost 50 kilometres of utilities were diverted, almost double the 27km originally estimated. Estimation which appears to be fairly typical of the way the rest of the project is progressing:

The Edinburgh tram project was originally conceived as part of a package of transport measures, funded by a new road pricing scheme. The road pricing was abandoned by popular vote, but the tram scheme proceeded anyway.

Before construction had started, a perceived shortage of funds reduced the 3 proposed tram lines (and some extensions), to 2 core routes. Yet by the time the first hole had been dug, the estimated cost of this (smaller) network had already risen above £500 million. That’s a thousand pounds for every city resident – including those that don’t have £1000. By the start of 2010, the (generally accepted) estimated cost had risen to £600 million, with some private estimates closer to £1 billion.

This in a period when (money) inflation has been almost stationary, especially in an otherwise recession-hit construction industry. And all the while, the completion date continues to slip backwards – curiously, always 3 years from now. The Edinburgh Evening News provides a timeline.

This inherent uncertainty doesn’t just make a mockery of announcing something “will cost £375 million”, when the only thing we can be reasonably sure of, is that it won’t cost precisely that much. It creates scope for optimism in planning: To bias all the cost assumptions down. Nobody can convincingly dispute an estimate, because nobody has accurate figures about the cost of building trams through Edinburgh. Estimates are biased down because securing popular (specifically political) approval for a project is easiest when the cost is lowest. Naturally, once a proposal has political support, there is considerable reluctance to abandon it. So everyone keeps digging.

Optimism Bias

The tendency for costs to be under-estimated has been apparent for several decades. Indeed, it has been formalised in the planning process as “optimism bias“. Literally, add n% to the projected cost, because, on average, past infrastructure projects have cost n% more to finish than originally estimated.

For light rail schemes, n is at least 40%. That’s quite a big error for a sector that claims to employ professional people for forecasting and planning.

Of course, adding n% still doesn’t solve the problem: We merely proceed to make even more optimistic assumptions. Claim that that much optimism bias shouldn’t apply to us. Like a gambler, convinced that their luck is somehow above average. Yet (unfortunately) secure in the knowledge that British government doesn’t “go bankrupt”: However bad the bet, those gambling debts will always be funded from somewhere. And you’d be amazed how few people working in government can explain where somewhere actually is.

This isn’t a grand conspiracy. It’s the same kind of optimism that concludes parents to believe their children are somehow “better” than they actually are at school. It’s inbred in planners and politicians alike: They’re fundamentally the kind of people that want to affect change. To get things done. They have a natural disinclination to believe proposals are unachievable.

Extend the planning horizon over (often) decades, and, frankly, almost anything can be made plausible.

Consider an operational, rather than construction example: Optimism fills our new trams with people that were previously causing road traffic congestion (policy objective), and who happily pay a premium over bus fares (operational objective). Yet pessimism would fill our new trams with former bus passengers (minimal policy impact), and who are paying bus fares (unfortunately trams have higher operating costs than buses). Only a couple of inherently uncertain assumptions separate these 2 scenarios. Separate success from failure.

The Downside of Up

There are several methods of managing the financial crisis that (invariably) occurs once reality challenges optimism.

For example, we can always do less. Build 1 tram line now, and another one “later”, maybe. Commission a single aircraft carrier, rather than a pair. It’s a terrible fix:

• 1 tram line clearly delivers less benefit than 2 lines. If the prime objective is perception, not transport (as I contend), then running trams past the Royal Bank of Scotland headquarters and on through the city centre, may be sufficient. But it is not always so easy to scale back. A single aircraft carrier reduces the solution to farce: If one wishes to maintain an active sea-based air capability, then you can’t do it with one ship: Wars rarely adhere to maintenance schedules. Strategically, the choice is between 2 ships or no ships.
• An initial decision to build 2 tram lines triggers an immense amount of preparatory work, the cost of which tends to be lost. Even if no work has been done, contracts have been signed, organisations have been scaled up to deal with the initial (larger) proposal. In defense procurement, the naval architecture associated with a one-ship fleet is rather similar to a 2-ship fleet.

We can also try and pass costs on to commercial contractors. Transfer the risk from government to the private sector. When the price doubles, it is the private contractor that picks up the bill. Sounds great, except:

• Short term, relations between contractor and client can become exceedingly unpleasant. Not least because government is a less aggressive environment than (most) commerce, so public officials often aren’t prepared for unpleasantness. In Edinburgh, work has been stopped completely by disputes with the main contractor, Bilfinger Berger. Disputes that rumble on.
• Medium term, a commercial contractor may default on the contract. The largest businesses struggle to manage hundreds of millions of pounds of unexpected cost. The result can be a half-finished thing, eventually completed late, by a far less optimistic contractor – who has inflated the cost still further.
• Long term, the risk associated with all government contracts rises. Potential contractors increasingly regard public sectors clients as liabilities. Or more likely, greater liabilities.

Evolution of Public-Private

That final observation contributes to the view that it is more cost-effective for the private sector to do everything, with the public sector reduced to buying the result like a service. That the private sector is better at managing risk, and the public sector can only be trusted to purchase at fixed prices – like chocolate bars. It’s one of the logics behind the 1990s-era Public Finance Initiative, Design-Build-Finance-Operate, Public Private Partnerships, and. There’s another problem:

The public sector isn’t sure what kind of chocolate bar it wants. Not just that difficult choice between Almond and Toffee. Rather, today it is buying luxury chocolate, but at some point in the near future its political objectives will change, and the public appetite will be for… somewhat cheaper milk chocolate. Or maybe… biscuits. Feeling hungry yet?

The private sector process is akin to trying to order groceries a decade in advance. A nonsense to consumers that expect to decide while standing in the store, seconds before they buy.

The catch is that, unlike chocolate bars, physical infrastructure lasts decades. The private sector can only invest in, and fund, such infrastructure over decades. Faced with the certainty of political uncertainty – whatever it builds likely won’t be wanted for some of its lifetime – the only sensible solution is not to build.

Box: Over the Sea to Skye
The Skye Bridge connects the Isle of Skye, in Western Scotland, to the mainland. Although technically sea, the crossing traverses a narrow channel of water, about a mile wide. The bridge was constructed as a “Public Finance Initiative” project. The contractor both built and then continued to own the bridge, charging road users a toll. The bridge had replaced a ferry crossing, so rational (economist) planning assumed that bridge crossings could be priced much like the old ferry. Unfortunately people perceive a ferry more like a “cruise”, while a road bridge is considered more like a (“free”) road. A situation that was further confused by the economics of the original ferry operation: In the best tradition of public sector transport operation, the Skye (Kyle) ferry had been cross-subsidising other ferry routes in the Western Isles. So where paid, the Skye ferry fare had been excessive for the distance travelled, and hence bridge tolls became rather excessive. Where paid, because local people had tended not to pay to use the ferry, yet found the privately owned toll-booth less accommodating. Opposition to the toll was initially small (the area is sparsely populated), but intensely passionate. As Scotland gained devolved government (including transport responsibilities) in the late 1990s, the toll was subjected to increased political pressure. Under the previous Conservative administration, Scotland was governed much like an imperial province – devolved government was a very dramatic change to the political landscape. Tolls were first subsidised by government – at significant public cost – until complete capitulation occurred: The bridge was bought (effectively at the price of the contractor’s lost future earnings, not the price of construction), and tolls removed. This political climate then spread beyond Skye – a belief that any Scottish bridge toll was unacceptable, apparent in current discussion about the Forth Bridge. In less than 20 years, the politics of bridge tolls have been inverted. The legacy of the Skye Bridge is not just funding inefficiency (George Monbiot calculated that the bridge should have cost no more than £25 million, but actually cost over £90 million). It also clearly demonstrates how the commercial construction/investment time-scales (in this case, originally a 27-year operating contract) can be completely at odds with far shorter public/political timescales.

Uncertainty can be reduced by what civil servants used to nervously refer to as “the P word”: Partnership. By close communication, shared understanding of each others’ problems, and, ultimately, strong personal relationships between the individuals involved, both the public and private sectors can better predict and adjust to future changes in objectives. Demands that might otherwise appear “from nowhere”. In a stable political environment, this can work – that is, one with rather limited democracy. But it rarely survives the sudden and dramatic shocks to the political system, that are associated with elective democracy: 15 years of gradually evolving, but broadly similar policy by one government, may be completely reversed by a newly elected government. In the British system, literally overnight.

This big uncertainty – the risk of a sudden change in direction – makes everyone cautious. Government officials are reluctant to commit to processes their future political masters may not be committed to. Commercial organisations become reluctant to invest in a process that might be “taken away” at a later date.

The result is a move back to formal contracts, as a way of protecting everyone against this big uncertainty. Except that a “partnership-contract” looks rather too cosy. At best uncompetitive. At worst outright corrupt. And, as the Skye Bridge box above shows, contracts still won’t stop a determined politician. Such contracts merely confuse the strategy, and inflate the final cost.

Now consider that, having merged public and private into one almost seamless project-completing entity, we logically start to wonder why we ever bothered to maintain any distinction? Why not just let government do everything itself?

Why – well, among other things, because the public is too optimistic. Yes, that again. We’re back where we started.

Paradoxes of Uncertainty

The underlying problem is one of time. The paradox, that people excel at evolving and adapting from day-to-day, but struggle to predict their own evolution and adaptation. They cannot conceive in the future, what they can do in the present.

Of course, people tend to live in the present. This isn’t just reflected in the inherent difficulty of trying to order groceries a decade before they are consumed. There’s a fundamental disconnection between the present self and the future self, even though the 2 states of being are logically related.

William Hazlitt is attributed with the observation that our present self views our future self the same way as it views other people. This starts to explain why we tend towards future optimism – we’re applying the same sense of optimism to the future, that we do to other people. That hints at how deep optimism runs through the human condition.

(Optimism could be equally well described as empathy. Which, in turn, probably reveals why depression – arguably a lose of human empathy – tends to make people more rational.)

So:

• Clearly, we are not going to solve the problem by solving optimism. It’s a part of what it is to be human.
• Indeed, managing optimism is no easier than managing people – a largely empathic process that tends to fail when applied rationally, or into the future.
• Meanwhile, optimism appears fundamental to the types of decisions that push society forward. Optimism is what biases human endeavour away from the currently accepted average. Possibly a necessary condition of “trial-and-error” evolution.

I reluctantly conclude that optimism is not only unavoidable, but entirely necessary.

So why is it such a problem for the public sector? Simple: Government doesn’t do uncertainty. Much as it doesn’t make mistakes. Of course it does, it just has terrible difficulty acknowledging that it does.

An investor in a commercial business accepts that some of the money they invest will be spent on unprofitable activities. They judge the success of their investment on the overall return of the entire business. In contrast, public investors in a government enterprise – or taxpayers, as they are called – expect every penny (cent) to be “well spent”. Anything the population deems to be “waste” can approximate to a moral right to “demand their money back”, with almost no consideration of overall performance.

Culturally this makes it hard for the public sector to acknowledge misjudgements, consequently harder to learn from them, and hence, exceptionally hard to learn from them while they are happening – at the time when something still might be done to improve the situation. In practice, either the situation gets so bad that it dissolves into scandal and farce, or once the dust has settled, the National Audit Office (or Scottish equivalent) reports about the woes of British tram procurement. The current generation of local politicians and officials will learn not to try that again (I suspect they already know). But nobody will address the underlying structural problem.

Which leaves an important question: Why do people demand financial certainty from the public sector, while simultaneously accepting uncertainty from the private sector?