I am continuously amazed by bank’s appetite to risk. The banks in the UK in general (believe it or not given the last few years) cultivate an attitude of risk aversion. But any basic finance student knows that no matter how much risk you avoid, you are still somewhere on the risk/reward spectrum.

So you come across scenarios where the Bank of Scotland Business Banking will not provide a commercial card (i.e. a credit card that clears automatically 100% from your account at the end of a month) to a startup unless they have been trading for twelve months. Even if you wanted a credit limitof £1k (they’d do it with a personal guarantee, but that would cost you £100 per director of your company). So how is that business to buy online goods for the first twelve months? Most likely it’s through a personal credit card, probably supplied by the same bank….(with less fees for the bank…).

So I’m massively encouraged when I hear of new models trying to take on the banking sector – except I’m not sure that BankSimple which has just raised $3.1m of funding, or Betterment, are anything more than a helpful front end / user experience to a oligopoly on the back end. There’s no doubt cost of regulatory compliance (and understanding regulation) is a massive barrier to entry. But it needs new firms, people that understand customer service. Maybe Tesco Personal Finance can do it, but I suspect they may not be radical enough.

Anyone point me to a new way of banking?

*the above scenario of credit card does not apply to Seven Men Ltd, albeit it did in our first 12 months. I still use my personal credit card – it’s a hassle, but I can’t face explaining why this is a virtually zero risk approval for them.

We’ve given sevenmen.com  bit of a refresh, to try and explain what we’re doing in a better way, to promote the blog content more, and to make it easier to engage with us.

We’re aiming to provide a daily post for the blog during the week, covering the development of Seven Men, our views of matters of current interest, investment topics relating to Elixir, social enterprise, good stories we’ve come across, and maybe even the odd interview.

As we build out the portfolio of projects and investments we’ll expand the content further. We hope you like it, and that it helps you connect more with Seven Men. The website refresh was designed and built in India by Konnect and we think they did a good job. We pointed them towards Plywood People, and Omidyar, as examples of what we liked, but aimed for inspiration from those sites rather than a straight copy – we hope we’ve managed that!

We hope it also fits with our value no.2 – to be open and engaged with our interested parties and community.

I’ve had some great meetings this week, over 15 hours of chat in 5 days on everything from social innovators, to technology & investing, to career paths and BBC World’s domination to capitalism. It made me wonder about memorable meetings in my life, and what still stands out. Here’s 9 (in no particular order):

Lunch with Aditya Mittal. He was the 29 year old, Wharton educated, son of Indian Billionaire Lakshmi Mittal, functioning as CFO of Mittal Steel at the time. An amazingly courteous, smart and very pleasant person. I got to have breakfast with his dad a few months later.

Meeting Gordon Crawford of London Bridge Software in 2000 when he was worth over $2bn and then a year or so later when his equity stake was worth a “mere” $150m.

The Indian guy who ran an IT classroom at a school in Andra Pradesh, who had 3 computers and 5 students. But he explained of his ambition of building an internet cafe, of developing an IT operation capable of taking on BPO tasks from a local charity, and of hiring a bus and kitting it out with wi-fi and taking it around local villages as a travelling internet cafe. Sweet.

Visiting Cleveland Prison in 2009 and meeting Catherine Rohr who founded PEP (and influenced the formation of Seven Men by telling her story in 2007) and a whole bunch of amazing long-term prisoners who had been through the programme.

Having a beer with Graham Rix at Edinburgh Airport, not long before he was sacked. He was the manager of Hearts FC at the time, I was flying up and down from London to watch the games, and he saw me in the bar where he was drinking and noticed I was a Hearts fan, and we sat and chatted about the team, his views on the players, and his playing career, carrying on for around 30 minutes. Few people have good things to say about him, but after that day I certainly have a lot of respect for him.

The Russian steel billionaire Vladimir Lisin, who came in to the meeting with about 8 minders. I suspect there was a lot of security outside too. I wasn’t asking too many questions about how he made his money. I don’t think we ever did invest in his company!

The re-opening of the amazing Cameron House hotel and the dinner with lots of famous Scots and Sir Alex Ferguson at my table and disagreeing on whether Andy Murray could beat Rafael Nadal. Ironically it was the 2nd time I’d met Sir Alex that year, getting the opportunity to meet him after a Lyon game in his private office. He was involved with aAIM, a venture I was involved with also via my Bank of Scotland role. It was also this company that introduced me to the legendary David Frost over lunch a couple of times, and the very very very smart Mark Tagliaferri, a really decent guy.

John Pluthero, founder of Freeserve, in 1998, the early days of UK internet. A very smart guy.

Tony Travis back in the mid 90’s. CEO of UK builders merchant Travis Perkins, he turned up for me (early in my career) on his own with no minders, no advisers, and was very humble, polite and courteous. A true gentleman. And he built a great company.

These were all memorable, albeit some of them were maybe not the most important in my life. The real quality meetings are the shared experiences, the shared values, the shared dreams and the personal connections.

This weekend was an interesting one in Edinburgh. Firstly, I went to hear Joseph Stiglitz speak at the Edinburgh International Book Festival. Secondly, there is a highly active climate change activist protest ongoing, focusing on targeting RBS (the Royal Bank of Scotland).

Joseph Stiglitz’s arguments were pretty much the same as you might hear from any socially minded economist in Europe – the credit crunch was 1) the fault of the bankers 2) the fault of governments. It’s similar to the ongoing discussions about BP’s oil spill in the Gulf of Mexico – the Government took their eye of the ball, and BP were just profit grabbers. Stiglitz argued that the regulation was too light, and that bankers were incentivised to take crazy risk. To me it was somewhat a simplistic argument, and failed to tackle the role (as do the BP arguments) that individual borrowers/consumers played in the crisis. Of course there are no book sales, speaking fees or votes in telling the general public it was partly their fault.

Don’t get me wrong, the credit crunch has had some horrific consequences. Stiglitz talked of 2m houses repossessed in the US in 2008, 2m in 2009 and being on track for 3.5m in 2010. That’s not a good growth chart. Also, with almost no jobs growth, it’s hard to get excited. His solution was to call for 1) higher Government regulation and 2) massive increases in Government investment (a la Japan). His prognosis – the US is set for a Japan type decade. Pretty grim.

But, and here’s where he went wrong in my view, there was no proposal on how to reduce assymetric risk in banker’s rewards (you lose & you need a new job which you’ll get relatively easily, you win and you make a fortune), or how to tackle the global carry trade (borrow at very low interest rates in Japan, US etc and invest into higher yielding (and hence higher risk) assets overseas e.g. Iceland, New Zealand, venture capital, commodities – which leads to bubbles and all asset classes trading in the same way) and finally he failed to explain how leverage could be capped (i.e. how many times your assets can you borrow – for a hedge fund this might be 30-40x its assets, increasing the size of trades (and hence risk) exponentially). These to me are three areas that need to be tackled.

It’s easy (and politically astute) to blame bankers for the credit crunch (and let’s be honest, a lot of us were focused on the wrong things for a period) but it’s simplistic. Little of the regulation, or structural changes, will actually deal with any of these problems. Still, it was nice to sit in front of a world leading economist and think that he might not have it all right!

The talk itself linked into the climate change camp, as it was “stormed” by 5 protestors from the Climate Change camp. They came in, handed out leaflets and took over the microphone. Slowly hustled out (there’s no security at the festival, it’s full of middle-aged book readers), the (middle-aged) crowd drowned them out with “no” and slow hand claps. All a bit pathetic really, and it’s hard not to think of that as having had no effect. Ironically Stiglitz probably would have agreed with their views.

The camp itself has made me wonder about activism. Does it work? I don’t think so, at least certainly not in this case. The way to impact a company is not by direct action, but by causing its profits to suffer. The hand-glueing by activists of themselves to desks or carpark furniture will have no real impact on RBS other than to ramp up its security. I’m not sure anyone outside of their group even knows what they are protesting about. Is there a case to made for a big voice on climate change, funding of coal fired power stations etc? Absolutely. But it’s not by throwing oil over a motorway, breaking into offices, or causing a scene in an entrance way. It seems a touch naive, gives those involved in the social space a bad name, and gets bad press. The majority of people might agree with many of their objectives, so make it easier for that majority to vocalise that objection. Activism works (Gandhi, Claiborne, the Danes in WWII, million man march, anti war protests, campaigns against a specific event) but not like this. Without clear objectives, it’s nothing more than what we used to see at the football – a good rammy, with a few bottles chucked and a lot of shouting. The police used to lay in with horses, riot shields and batons, and that’s sadly what’s about to happen here too.

Of course, this is just my view, tell me if you disagree!

We’re so keen to get into the investing of our profits into projects focused on creating social good, or starting/growing social enterprises. It will be amazing to sit and talk to people who have big dreams and a little bit of funding quickly deployed can make all the difference. We’re finding as we adventure into the Seven Men story, we’re connecting with a whole range of very exciting people. This week we had a great conversation with a new connection in Asia, and also got connected into someone who’s doing good stuff with ex prisoners in the US.

Still, I have to say that Boxed Water is a lot on my mind as a great idea! Can’t wait until it arrives in the UK. Boxed Water that is, not water, we have plenty of that.

Three things are holding us back currently 1) a massive ramp in the way our businesses are building. We anticipate having pretty exciting news on both startups in the next couple of weeks. Sorry for being cryptic but there’s a few loose ends we need to close off before we make our announcements. 2) A lack of funds. We’re looking to build to a sizeable pool before we deploy investments/giving, so that the grants can be meaningful. We’re still too low for that. 3) An ignorance of the opportunities. We sit a lot in the social enterprise space and watch what’s going on, but we’re really keen to connect with the early stagers, the pre-launch ideas and to bring expertise, funds and connections to bear.

So feel free to suggest people we should talk to.

Thanks for continuing with the story. We continue to be about three things: Create profitable businesses; enable change; bring good.

The most amazing story of the last 24 hours has been the rise to fame by James Cunningham, a 17 year old from Dundee in Scotland. He created an app for Twitter called Twifficiency that calculated basically how good a tweeter you were. It had one minor flaw – the results being automatically tweeted to the user’s account without permission. Thus the application spread virally as these results appeared (people like to count things, and rate themselves against others) and early doors there was a lot of frustration against him. Once he had fixed it, the news media kicked in with TIME, Readwriteweb, school for startups and Stephen Fry all communicating with him. A fascinating story and hopefully he will go on to do extremely well out of it. Clearly a talented hacker.

Here’s what struck me though. If a coder can develop a new business that reaches a top 10 trending topic in a day (I don’t know how long he had been coding this for), what barriers to entry are there really for an internet startup? The amount of web 2.0 consumer internet applications (for mobile or SaaS) is phenomenal, and more seem to be flooding out every day. It seems, in my opinion, that there is little competitive advantage in the idea (someone else will have had it too based on the number of people in the market), or arguably in the coding (you can outsource that), or perhaps even in the design (again, with enough funds that can be outsourced too – and it’s cheaper than you think). So it seems that the only competitive advantage is the network effect – the more people that use the application, the more others are likely to use it and recommend it and it becomes sticky (to coin a word of the 90’s web days). But how sustainable is that audience? Why do people use Facebook? Because of the apps, or because all their friends are there? If that audience were to move (and it seems that applications have a very short shelf life as there’s always the latest new thing to jump onto) then there is no real reason to keep going there. For example, who still goes to Friends Reunited, or Bebo, or AOL even?

I worry that we are heading for a consumer internet bubble. That doesn’t mean that we can’t make money as investors in the meantime, but it does mean that not all the things that are being funded will 1) ever be sold or 2) be worthwhile investing into. Unless you have a founder who has had a previous successful liquidity event (i.e. exit at a good price), or you fill an obvious gap at Google or Facebook and they want to acquire you, it’s hard to see how a lot of these companies (especially in the UK where there are less acquiring companies) will make a success for an investor. That doesn’t of course mean they can’t be stand alone successful entities. But it does mean that at some point we will see a shake out of these companies (a la 2000-2002 in web 1.0) and this will be a challenging period for all these companies. Time to build up the cash ahead of that!

Working long hours is something those who run a business are often accused of, and regularly advised not to do. The advice goes something like this – your problems will be there in the morning, it’s bad for your health, you make bad decisions when you are tired, it’s not sustainable, it’s not a good example. And I’d agree with every one of those. I’d also add that a lot of people brag about how long they worked because it’s work that gives them status and so by showing how important they are, then they can also validate themselves in the eyes of others.

But in favour of long hours, there’s two things to say – firstly, most people running their own business enjoy it. Sometimes in a strange sort of way. It doesn’t always go well, but there’s rarely an entrepreneur who would rather be working in a 9-5 office environment for a large corporate. And secondly, sometimes simply the business needs it – and I think that’s ok for a short period of time. All of the caveats above apply for why that’s not good in the long run.

I think I worked about 110 hours in the last 12 days, but it has been good fun. I slept less, achieved more (really) and was more up for it. I know I can’t sustain that – and even in that I took 1 day where I did no work.

My ideal work pattern? Start about 8am, work until 12, go for lunch with a friend until 2.30, do admin until 5. Break until 5.30pm then work through to 10.30pm at night. If only it was that easy!

You can read more about different work styles by Tim Ferriss, Ricardo Semler and 37 Signals.

Having  Seven Men as our name  often means we can Google interesting stories including our title. Another one came up today with the BBC story of the sale of the most remote pub in the UK. Buried in the article is a story about 7 men who once tried to raid land. Now I’m not an expert in raiding, but I would have thought that you had to be able to run away with what you raided?

Anyone know any more about this event? I’ve found this.

More seriously, the clearances and death of crofting as a result led to mass emigration and an end of a way of life that is only slowly being rescued from total extinction.

Oh, and the pub – it’s yours for £790k. That’s a sweet $1.3m.

But imagine what it would be like to live here:

The northern part of what is traditionally known asna Garbh-Chrìochan or “the Rough Bounds“, because of its harsh terrain and remoteness, Knoydart is also referred to as “Britain’s last wilderness”. Only accessible by boat, or by a 16-mile (26 km) walk through rough country, its seven miles of tarred road are not connected to the UK road system. There is no vehicle ferry to Knoydart, but passenger services are operated from Mallaig to Inverie by Bruce Watt Cruises,and from Arnisdale and Kinlochhourn to Barisdale by Arnisdale Ferry Service.

Edinburgh City Bread Group Advert from WeeFlee Productions on Vimeo.

• Wheat shot through the roof, Glencore made a ton of money (as usual) and force majeure was invoked. But now the Russians are letting some wheat out and the price is down. But whilst that’s all going on, what about the price of barley? Food prices in the west are only going one way.
• The UK housing market is apparently heading for a double dip, with prices felling last month. Meanwhile pretty feeble job growth in the non farm numbers out of the US last week seems to have got the US in a tizz that they’re going to be joining us. With UK public sector spending cuts looming in H1 2011, US defence spending starting to be cut, a oil pool closing down the Gulf of Mexico, it would be easy to be negative.
• On the other hand….the US Fed has just announced QE light which will boost the markets, although the Chinese growth slowed, it’s still blooming impressive at c.10% GDP growth, the $ is collapsing which suggests the carry trade is back on with $ assets going to higher risk locations, several tech companies have been funded (there’s a bit of a potential bubble in B2C web apps IMHO) and Skype announced a listing. GM and the banks are starting to talk of getting the Government out of their equity base.
• We could easily talk ourselves into another recession, but there is definitely a boom going on in financial markets (private and to an extent public), there’s good export growth in places like Germany, and Greece and Dubai seem to be past the worst.
• Are we heading for a really strong 2011 as consumer fears begin to dissipate?
• What do you think about where we stand?