“Of course there is always resistance, always a drag on movement toward better things. The dead hand of the past clutches us by way of living people who are too frightened to accept change”.

Kim Stanley Robinson, The Ministry for the Future

He’s building an infrastructure company that’s also an airline, an aircraft manufacturer, a logistics business, and a software platform. He is doing this from Oranmore and Balbriggan. He is Bobby Healy, and he has some thoughts about the future, how it is made, what time scales it makes sense to think on, and what his experience of doing innovation has taught him about what works if we are to escape the dead hand of the past.

In this conversation, we talk about the rise and rise of AI as a societal technology, what progress means, Ireland’s dual economy, how building a $10 billion business is easier than building a new software engineering course. We talk about what new industrial policy for the country needs, and how useless tens of billions of euros of EU research support are for companies like Bobby’s.

We talk about a world where Europe lags the US and China critically in its rate of innovation. We talk about likely interest rates and what they mean for the flow of capital to firms breaking new ground.

In short, we talk about a lot, and in quite some depth. I hope you enjoy the discussion.

*****

“I couldn’t imagine any more difficult, but I also couldn’t imagine anything more fun”

Stephen Kinsella (SK): When I think about the future and think about who will make the future happen, I think about you. You’ve got a track record of innovation. You’ve got a track record of delivering on really big projects. And I can’t think of anything bigger than Manna Aero. When I think about Manna Aero, I don’t think about coffees and sandwiches falling from the sky. I think about infrastructure. So, I think about it as an infrastructure play. And no one does innovation and infrastructure anymore. So, can you tell me how you think about Manna as an infrastructure company as opposed to a delivery company or a logistics company?

Bobby Healy (BH): That’s the way I definitely think about it. We consider ourselves societal. So, something so significant that it has the capacity to change how society operates itself in terms of commerce and economy, jobs, distribution of jobs, distribution of ownership, distribution of products. So, we definitely think that it’s more than delivering coffee or delivering hamburgers or delivering pharmacy.

We see it as something over the next ten to 20 years that allows people to have a device in infrastructure, a device to move goods around and avoid needing to use the road or people or vehicles or CO2 for that matter, to just move goods around efficiently. So, the last mile is… the nice friendly easy term. And last mile is the most difficult unsolved part of logistics. If you look at the big delivery companies, the food delivery companies, the Just Eats and Deliveroos and so on, they do a super job at scaling and in a very difficult environment where you’re scaling essentially low-cost labour. But it’s still pretty shitty economics and in a very constrained industry. It’s an industry that can’t grow as much as the demand requires it to grow. People want stuff delivered but it’s just not possible physically nor economically nor environmentally to do it at scale.

What are we building? You see an aircraft behind me, that’s version one. There will be many, many versions, iterations as we go through it. What we’re really giving society is just a way to move things around. That’s a big dream. It is very difficult. Any fool can build a drone but to build one that will fly a million times a day uneventfully is a different story altogether.

So, you have hardware which is difficult. You’ve hardware that flies which is obviously a little bit more difficult. Hardware that flies, it’s regulated. Incredibly difficult. And then do that at scale where communities and populations are happy for that to exist is a conversation that the world is going to have to have as part of us scaling. So, I couldn’t imagine any more difficult, but I also couldn’t imagine anything more fun, more exciting to build and worthwhile to build. So, it really ticks all the boxes. Most people… definitely when I started this business off, if they didn’t agree with me, they thought impossible or too difficult or too many things to get right. That’s changed over the nearly three years now we’ve been running it, but it’s still very much people still look at me like I have two heads and that it’s never going to happen and that it’s miles away. There’s too many problems to solve. They don’t see what I see. And I’m a pragmatist. We are literally on the verge of this thing going to scale.

Building a defensible position

SK: What’s fascinating about the description that you just provided is how close it is to something like JD Rockefeller’s description of oil wells and oilfields and that. The late 19th century or the mid to late 19th century. So, you had all these little oilfields all over the place and he realised that you needed oil pipes. So, he effectively paid off the railroads to move their oil around but then he… which was really clever. He built the oil pipelines. And that’s what created an enormous amount of the prosperity, and now we see the fossil fuel effects of what we he did. He also probably created most of the anti-trust legislation in the world reacting to it. But I’m struck by the fact that in order to do this, you literally need to build out a vast new infrastructure. You know, hundreds of substations. Effectively a brand new 5G network. Something like that. It’s that kind of scale, right?

BH: Harder. It’s harder because you know, a 5G network is autonomous by its nature, right? You roll it out, you build the tech, you do the R&D, the engineering, and then you roll it out and its deployed infrastructure that very much operates itself bar maintenance. We also have to operate this. You think of us, we’re an aircraft designer and manufacturer but we’re also an airline and we’re also an airport, and then a layer on top of all of that, we’re actually a delivery e-commerce company. So, you have multiple layers of. To roll this business out once we get through the R&D phase and we get our scale manufacturing in place, it’s boots on the ground.

It’s thousands and tens of thousands of people going into each market, deploying the aircraft, operating the aircraft and everything that comes with that. I’m making it sound like a lot of overhead. It’s difficult to scale but once it’s scaled, you end up with a capacity, a very predictable capacity. So, you have flight turnarounds per hour or per day or whatever it is depending on the business you’re serving, but you end up with a certain capacity that you deliver to a segment of the population and then the population will use that capacity just like it did with broadband. They’ll fill it with applications. In our case, there’s coffee and there’s burgers, there’s books, there’s hardware and so on.

But as the population get used to this and they start to treat it like running water and it’s ubiquitous and it just works like a telephone, then other applications will be layered on top of it. And what’s important to us is to build the scale in now. So, think long term. Build something that is capable of supporting any type of application and get it right so it can be scaled now and applied everywhere and to everyone.

And so, that aircraft behind me, version one, version two has 50% per centmore cargo capacity and that’s in response to our partnership with Tesco, the supermarket brand. They’re saying, look, if we want to serve the grocery market then we need this, and so we’d respond with a new aircraft. And what you’re going to see is you’re going to see different aircraft – different battery technologies being used to serve different segments. So, high speed, low value, long distance, heavy, all that stuff. So, think of us as a complex network airline, budget airline, technology company, airport, and all those things. But you have to think that way upfront rather than slow burn. Economically speaking, there is a commanding mode or defensible position that you build if you build for long-term early with this type of infrastructure, and that’s where we want to be. That’s where we currently are. We share the lead with Alphabet today and we think that we can win here. And our limitations are only going to be around our own execution and ability to raise capital through business.

Hearts, minds and societal licence

SK: So, I want to come to that in a second actually – about the next steps, but I forget who was it said that the future of everything is either bundling or unbundling. So, it sounds to me like you’ve just bunded a huge number of different very tricky industries together and applications together to make this work. And the Venn diagram of all of them seems fiendishly difficult until you start in Oranmore. So, let me start by asking you about social licences. So many new innovations find it very difficult to get off the ground, not because their technology doesn’t work but because the people themselves don’t actually grant this technology the social licence to operate. So, you think of the Luddites beating the crap out of the machines and all that.

BH: Windfarms.

SK: Windfarms, the perfect example. I mean, you know, we don’t really think about it as a technology, but Greenways are a technology and in certain parts of the country, they don’t have a social licence to operate. You know, data centres now, they’re kind of losing their social licence to operate. So, how do you think about bringing new technologies into a place where the citizen goes, ‘Yeah, that’s a drone. That’s OK.’ Or that’s insert innovation X, that’s OK. Or it’s not. How does one lose the social licence to operate?

BH: Yeah, so we have that. Our top level OKRs for the business, one of them is right to exist in partnership with community. And so, if you think about what we’re doing. On one hand, we do tick a lot of boxes, so we bring jobs to the local economy, we empower the local economy over the giants, over the Amazons and so of this world, and we bring customers… I mean, honestly a delightful experience. The product is great. It’s exciting. For people that like it, I should say. What I would say is tech-savvy or openminded. I won’t say early adopters but the big centre tail of willing customers.

But there is what I would say is a minority but an important minority that… I won’t call them Luddites. I’d respect them by saying, look, some people do not want to see aircraft sitting across the skyline delivering the coffee. They’ll argue that that’s not something that humans should be doing, right? And so, we have to respect that and understand it. So, our right to exist means that we are for the community, part of the community that we roll out to. So, at least early days we’re very much doing it hand in hand with the community. We go into the Chamber of Commerce. We work with all of the local vendors. In Oranmore, we have 25 local vendors that we work with and we’re giving them a free delivery service to 30 square miles of customers. So, it’s appealing from a small business point of view.

Now, this is easy in Ireland for us to do because we can get to the hearts and minds of customers quickly and educate them very well on what we’re doing. We go to the schools, we educate the kids first, they bring that home. We do shows and tells, and we gradually go in. So, they love us there. They love us in Oranmore. 98 per cent of them vote yes for the product. 40 per cent of the population have used the product, so it’s a great success. And similarly in Balbriggan which is 3.5 times the size population-wise, by and large we have a 90 per cent plus positive rating, but there’s plenty of people there say, you know, I don’t want either the job… There’s perceived negatives around job loss, around noise, that aren’t real. We create jobs. The noise is not an issue. We make less noise than electric cars, so we know that we’re good. We tick all the boxes and they’re genuine ticks on the boxes.

So, what you’re dealing with actually is narrative and negative discourse that’s going to get legs and how you respond to that is actually a branding and public education exercise that I think we understand how to do. It’s difficult to scale, particularly when the business starts to get legs and goes multinational and you’re always going to run into negative sentiment somewhere and there will be pockets and they’ll coalesce and become bigger pockets and then they’ll become lobbies and then it gets difficult. And we’ve already seen Alphabet’s drone delivery programme Wing in Australia having a really vocal objection in a small rural town that they operated in. So, we know what bad looks like. We know when you don’t address it head on, when the process of education isn’t done well, what it ends up like.

So, you know, I think it’s not one that I’m worried about but it’s one that I take very seriously. And you are right, it is a… You need a societal licence to do this. This isn’t… This is even more… You know, 5G and all those crazies about the 5G scares, those people are always going to be there. But people do have a right to say, you know, I don’t like that you’re flying over my neighbourhood. And then the answer is going to have to be, you know what, we respect that but 98 per cent of the community do want it. We’re creating jobs, we’re fixing a lot of problems, and so the balance of opinion will be in our favour, but still, it’s a thing we need to navigate carefully.

Machine learning, AI and the future

SK: When you look around at the infrastructure landscape or the tech landscape here in Ireland or even in Europe, what do you think is the most promising area? Apart from Manna, obviously. But what do you think is the most promising area that has the likelihood of maybe changing things in the next five or ten years?

BH: Five or ten years is too short a timeframe. I think in 30 years, and I really like fusion as a practical – potentially practical energy source – to change things. But look, shorter term, I actually think that it’s more political climate that’s important for the future than necessarily any technology. When I look at policy, the raw materials that go into innovation are brains, right? So, the producers of those raw materials are the universities and the schools.

And when I look at that, the biggest impact that’s going to change things locally for Ireland certainly is that education system, is the courses that we teach to the young girls particularly when they start their education and the whole way through. And when I think about… Well, when I think about what we’re doing with UL, right? If you think about just that small initiative, it’s bang, nail on the head, and this is what we need but we need that in a much more scaled way, and that comes from policy and investment I think in education and right down to primary school. And that is not a technology. So, I think where the big infrastructure or the big thing that’s going to change in the next… or positive change, it’s going to be driven by education.

But if I look at then technologies, then you have to look at 5G. You’d have to say that has to underpin a lot of things for our market, right? But I look at worldwide, then I have to look at machine learning and AI and I have to say look at all of the… particularly in medicine. All of the applications for the processing power and the abilities of ML or AI to solve big difficult problems that have been elusive for our entire existence, then it has to go to AI and the ability that we are going to have – that we already have. Just look at the pandemic, look at all of the technology that came together to solve the virus problem that we have at the moment and then apply that across the broad spectrum of other diseases that we know exist.

And more recently, MS for example. MS now is very confidently attributed to a particular virus that affects you early in your life. Don’t ask me the name of the virus but only in the last few days it was the United States military had a sample of about three million soldiers who’d been taken over 30 years and 97 per cent confidence that this virus is the leading cause of later onset of MS, right? So, if that’s true, and it seems very likely to be true, we now have a tool that actually can produce a vaccine for that virus. So, you could well be looking at the end of MS for mankind because of just state of the art technology in vaccine production. So, I’m very excited about that. Of course, I’m very excited about fusion technology, but again that’s in the 30-year timeframe. But the big one for me is all things AI. And I hate using the word ‘AI’. I prefer to use machine learning or those types of, you know, phrases. But then you look at all the applications, you look at autonomous driving or AV. That’s probably still ten years away. There’s so many applications powered by computing that I’m excited about and will yield in the next decade. And then quantum and quantum computing being an exponential increase in the ability of those core technologies.

And you say, right, what problems can we now not solve? With quantum, if we can get quantum to where we need it to be, and that does feel pretty close, then god almighty, we have infinite computing power and with pretty low energy use that could really solve so many diseases, so many problems that the world has that it’s hard for me to get excited or to even compare that to a drone delivery business. But the difference in the drone delivery is real and going to be growing over the next few years whereas those technologies will start to solve meaningful societal and generational problems in the next decade.

“You can build a small thing or a gigantic thing. It’s still just Lego.”

SK: When you think about bringing something into being. So, you mentioned the immersive software engineering programme. You’re obviously on the industry advisory board of that. That is a big innovation in terms of the university landscape but it’s a tiny, tiny thing in terms of everything that we know we need to do in higher education. But it was an enormous amount of work to make that happen. How do you think about bringing something from a conceptual stage or maybe from a very kind of rough product into something where it’s a slick product, where you have drone for example? You know, it’s a functioning product, it’s in the real world, it’s delivering things to people in the real world. There’s that gap between ideation execution.

You’ve done it multiple times now, so what are the things that you’ve learned about bringing it from I have this idea, I’d like to make a course that is 50 per cent in-company learning. I want a validated model of industry learning that then becomes the immersive software engineering. How do you think about making ideas real? Or maybe what can you tell us?

BH: I actually think what we’ve built in ISE is more difficult than what I’m building with Manna because Manna is obviously a very complex project. But it’s… how do you eat an elephant, right? One bite at a time. Famous saying. And Manna is that, right? It’s eating an elephant one bit at a time. But the difference with Manna and building a new course is that you can see clearly the elephant and which parts to eat first and which parts to eat last. It’s clear to me… I’m a tech guy, right? So, I can… not very easily but relatively in a straightforward way understand the components of building Manna. Where I want to get to in the end to where I am now and the steps along the way are many but clear. So, there’s never been for me a question about what do we do next, what type of people do I need to hire, and what steps do I take. That’s all… Honestly, that’s easy for this business. It’s just there’s so many steps and there’s a complicated plan to building but it’s black and white. Think Lego, you know? You can build a small thing or a gigantic thing. It’s still just Lego. And that’s what Manna is. And there are certain skillsets in there, right? There’s obviously engineering of different disciplines of engineering, but they’re black and white, left brain, easily hired for, easily solved engineering problems.

And then there’s regulatory which is confidence building, storytelling, discipline, and again, good hiring, good leadership, but a project. And then the other things like branding and hearts and minds. All those things I’ve done before and my team that are with me have done before. So, Manna, as difficult as it is, it’s very clear and straightforward as a plan, right? Easier than building an IKEA desk.

But if you’re building something like what you’ve built which is fairly unprecedented. There may be roughly similar models in different places, but it really started from scratch and you’re building it… you’re building it within a traditional environment in the university. You’re fitting something into decades of not… centuries-old architecture of education and you’re disrupting it and you’re saying, you know what? We believe that there’s a slightly different way to teach people how to programme and cognizant of that, we’re going to involve the commercial entities much earlier on in an immersive way as you say. That’s very different. And you’re not sure what the right mix of things is or are and what the entities that you need, so you’re doing something that’s not been done before and there isn’t really a plan for it, you know? So, what you do is you make your best attempt and then you iterate through it, right? So, we’re on version one now for ISE and we’ll see how it goes. We’ll learn a hell of a lot and I imagine you’ll probably need to make changes or… I don’t know how it will pan out. But certainly, it’s going very well right now and I’d say it’s probably the most oversubscribed course in Ireland if not in Europe based on what’s in it. But what you have now is something that is scalable because if that model does work and everyone’s satisfied with it and it’s being received well and it starts to really help these young people develop their careers, then you do actually have a scalable model and it is… I won’t say easy to scale it, but it is pretty straightforward to push that out and to grow it in Limerick but also spread it out across many other locations.

So, in many ways even though maybe ISE is a smaller project, it is a much more difficult one. Whereas what I’m building, people built airlines before. They’ve built aircraft before. They’ve built e-commerce companies before. So, there’s nothing new that we’re doing. We’re just putting lots of blocks together and rearranging them. And what’s hard is actually leadership and command and control and conquer. That’s hard and that’s down to the team that you put together.

Bureaucracy and market failures

SK: Yeah. I’m always struck by the fact that the very big difference between the public sector and the private sector a lot of the time is that in the public sector there is no necessary command. It doesn’t really exist in the sense that I can’t turn around to one of my colleagues and say, ‘I really, really need you to do this now because reasons.’ They can simply say, ‘No. I have other things to do. I’m very busy. I have 25 other things to do. This is not my job. No.’ And if you really pushed them, they’d simply say hard no.

Whereas in the private sector I have noticed that the execution is faster simply because there is actually command. There is ‘I pay your wages, so go do it’. And now, it means that you have to employ a subtler set of techniques to make things work. I’m not saying that I know what those techniques are but I have seen them very ably deployed.

And I’m struck by the fact that we talk about innovation almost always as a private sector thing and when I look at what the state has done over the last two years, a lot of it is very, very innovative. I’m always struck by the fact that if we really wanted to become – and I’ve been writing about this now I feel like for two years – who wanted to become a proper ideas economy, we should probably 10x the R&D budget for the country, right? Which would actually only bring us, in nominal terms, would only bring us into line with Germany.

BH: We need to build a military. That’s what funds all this unfortunately. You look at Israel. Look at the number. Like nine million people, just less than twice our size. 50 unicorns there. They dwarf us. But look where all the unicorns come from. They all come from deep tech military because the country had a big jump with its GDP allocated to defence. So, we obviously are not going to do that, so we need another way to get that innovation, that R&D happening. One way is commercially. Standard old, good old capitalism, right? So, we have companies like mine that are just attracting capital from… usually from foreign sources and we do the R&D here. But then it becomes foreign owned. Not necessarily a bad thing but that should be balanced, right? It shouldn’t all be foreign owned, so we could look at what’s a domestic way of increasing the R&D budget as you say. Why aren’t we exporting our infrastructure? Why aren’t we producing infrastructure the whole world needs? And that’s a tricky one.

Actually, I think we do in all pillars of our society do a pretty good job. I think culturally we are hard workers, and we are creative. We are ambitious. But we have a scale up problem and that’s where Europe is supposed to help us, right? So, then it comes to policy but then it comes to how much alignment can we get with Europe to our benefit? How can we benefit disproportionately in Europe that we get that R&D investment, and we get those start-up funds coming to Ireland? And then I look at Horizon, I look at H2020 and all those things and I hate them, you know, because they’re the opposite of fostering innovation because they-

SK: Massive bureaucracy, yeah.

BH: Aw man. You have no idea. I look at these things and I had a call with my CFO today and I won’t name the funds but there’s funds, right? And they’re European funds or they’re government funds in various different shapes or forms but they’re absolutely zero help at fostering a company like my company and any company like mine that cares about cashflow. The bureaucracy, it’s not even so much the bureaucracy. It’s that it’s almost like… You know the way banks only give you money if you don’t need a loan? They’ll only loan you money if you have loads of money in the first place. It’s not far off the same with a lot of the European grant systems where you have to have matching funding, or you have to be doing something that fits a particular shape for Europe to love it. That doesn’t work for innovative start-ups. So, I write off entirely those big European funds, those long-term funds. They’re good for academia but they’re not good for commercial interest.

SK:  I’m actively involved in three or four European projects, so I know precisely what you mean. And one of the biggest problems that we certainly have and that our education sector is that you kind of have to pretend that you know what you’re going to find before you’ve found it. So, you say we will get this money to do X. And if you knew what X was, you would not need to do the research, right? So, you’re engaged in a kind of speculative fiction, right? Science fiction? It’s a bit like a business plan. A very good friend of mine says, ‘You know, I never met a business plan that didn’t work on paper.’ And I think it’s the same thing, right? Yeah. But from an innovation perspective, the fact that… I mean, you have to have one of the most innovative companies in Europe and the fact that you as the MD of one of the most innovative companies in Europe are saying, yeah, no, the… What is it? I actually don’t know how much money Horizon Europe is but it must be in the multiple billions. And you’re saying, no, not worth my time. That’s a massive market failure, isn’t it?

BH: It’s fair easier for me to rate private capital from venture in the United States or China or wherever than it is to subscribe to that money. I need to be unhindered in how I run the business and what the things that we do next. Here’s the important things. And they might change next week. What’s important is the, you know what? No, actually this is what we need to do. And we need to… I won’t call it pivot but we need to be in total control and to have a project that has a two-year timeline. We are in one tiny little Horizon project that goes back over two years now and it’s still we fill in the forms and it means absolutely nothing to our business. Now, I don’t want to put down Horizon but what we need is we need capital of course. Not Manna but industry, right? Small industry, start-ups, and even companies on the cusp of growth. What we need is a far better and fluid investment infrastructure.

So, we need VCs with gigantic funds all over Ireland and every other country in Europe and we need the same West Coast, Silicon Valley mentality and scale in Europe as they have over there, otherwise we’re always going to be second fiddle to them all, you know? And that’s just the way it is. And what’s our most recent unicorn in Ireland? It’s the Flipdish guys? Great business. Led by a Chinese company. You know? What the hell is going on? Like, congratulations, great job, brilliant business, very successful. But why isn’t Europe backing these businesses? So, I think we have… We need to get our heads around what real commercial capitalism means and venture capital means and that actually is what I would like to see in policy starting to be addressed, and it can start in Ireland and go across to Europe, but I think we can do better.

State aid, level playing fields and FDI

SK: One of the things I’ve been talking about a lot or writing about is what the policy set of a Sinn Féin government might be, you know? And I don’t want this to turn into a podcast about politics but… You know, we just frankly have enough of them like. But what is striking to me is the party is extremely strong on things like housing, and because they’ve got very strong housing spokespeople and a very compelling offering to the public, but you go outside of the two or three main pillars and you just find very little there. So, the industrial policy for example, it’s non-existent. The climate policy doesn’t really wash apart from vague handwaving at climate justice. I’m struck by the fact that you’ve described industrial policy which is extremely muscular. Like it would get in. It would get stuck in. And you know, I can see a situation where you’d much rather a Swedish VC than an American VC at one level. At another level, if you’re talking about pumping the state’s money into things, there has to be some level of accountability which means somebody, some fella has to fill out a form at some point. There is a bureaucracy that is necessary in order to make sure that moneys that are taken legally out of my pay packet are spent legally. Right? And appropriate and appropriately if you like.

So, I’m struck by the fact that, you know, there is a tension in some sense between the need for democratic accountability over appropriated funds and the need to just move very quickly because you’re in an innovative space, you know? Like we have this weird dual structure in this country. This multinational structure and this indigenous economy structure. It’s very clearly tiered. The Tánaiste was on the news and he was chatting away about the fact that we have the best year ever for jobs announced. He didn’t mention Enterprise Ireland’s jobs. He talked about the IDAs. He’s saying, look, aren’t we great at getting other people’s money and turning them into jobs here? Which is true and it’s good and it’s great and I’ve never said a bad thing about it except that it exposes us to a massive downside risk which is these things leaving, right? And I’m struck by the fact that Enterprise Ireland, which had a brilliant year last year, and the new MD Leo Clancy is a great guy. The question is if you always have an indigenous sector that’s second fiddle to the multinational sector, how does it then gather the resources to grow at the kind of speed that you have described?

BH: Yeah, so that’s a pet kind of subject of mine. What I would call the policy imbalance between FDI and indigenous support. And just so everyone knows, we don’t have a single penny of Irish money.

SK: Not a penny?

BH: Not a penny. Enterprise Ireland are awesome, by the way, and so are the IDA. I don’t complain about either of them but what I disagree with is the policy, the mix of fuel and oil. And Enterprise Ireland were really helpful to us because we used them for outreach, right? So, for international outreach, even investor introductions. So, they’re almost like a free extension to the business that gives us scale before we deserve to have the scale. So, they are actually really useful for us and have done a great job. And then similar for IDA, Jesus, they’ve done an unbelievably good job.

But where I disagree is… or where I have the problem is there just isn’t… So, it’s not a level playing field. So, FDI companies are able to get access to better grants and better commercial opportunities via the IDA than we’re able to get from Enterprise Ireland, and the reason, the technical reason that Enterprise Ireland can’t help us in the way the IDA helps FDI companies is illegal state aid rules. That’s what gets thrown to me is Europe is the illegal state aid rule so there can’t be any handouts, but we can help Apple and Amazon all day long. We can give them headcount grants or all sorts of things, right? But we can’t do that for indigenous companies. And maybe that’s a European policy problem. I don’t know.

But the net result is we help FDI companies wonderfully and we should do and continue to do so but we’re not able to do that same thing for indigenous, so therefore indigenous companies, they won’t shrivel up and die but they’re competing with a non-level playing field with FDI companies. And so, how this effects… In practical terms, what does that mean? I mean, I ran CarTrawler for 15 years and to start, our average tenure of engineers was seven years. So, it’s like for the first seven years, we didn’t lose anyone.

SK: That’s amazingly long.

BH: Yeah. Because it’s a good company to work in. We were growth. Everything was going great. But then there was a wave of massive job announcements by FDI companies and they all came to Dublin, and so we were competing with those companies for talent. And worse so, who did they go to when they arrived in Dublin? They look around at all the local Irish companies to hire from. They don’t invent people out of thin air. They come to compete with us for talent. And there isn’t enough talent in Dublin. There just isn’t, right? So, therefore… You’re an economist. What happens when demand outstrips supply? Prices go up.

And FDI companies have absolutely no price sensitivity, so that’s fine. They say they’ll pay Silicon Valley rates in Dublin, and that’s all great, right? You have people now making… Engineers, programmers coming straight out of school making 100k, up to 200k. That all sounds great, right? But that’s short term because that allows people to pay for more expensive houses in Dublin and it all balances, right? Housing supply is problematic, but prices go up and those Amazon guys can afford them, Facebook guys. That’s all great, right? But the short-term picture… Or sorry, the long-term picture is that indigenous companies cannot operate in that environment.

So, every announcement I see from IDA with the Tánaiste shaking hands, I congratulate them and it makes me feel good wearing the green jersey, but I also see the damage that it does to the domestic companies of Dublin.

“Sometimes difficult decisions that have long-term benefits are often hard to make”

SK: I’m an economist. The salaries of software engineers are such that smart people who have already got PhDs in another field should turn around and retrain as software engineers. It is extraordinary. We went looking to compute the wage difference between somebody with five years of medical school and five years of computer science education, I actually had the team check the numbers three times. I couldn’t believe it. I wrote about at the time, and I said it was ridiculous. And the fact that people don’t know about this.

BH: It’s funny, I met a programmer today. I met him for lunch to talk about hiring him. And he made that joke about his salary. He compared it. And he has a brother-in-law that’s a consultant in the Beacon and he’s making more than that. So, that’s great. Brilliant. Everyone should become a programmer. Well, not everyone can be a programmer but…

SK: Yeah, that’s fair. I do feel looking at the prospect for various computer science graduates that, yeah, if I’d known then what I knew now. But when I think about the policy mix, it strikes me that you’re right about state aid but we could easily fix it by producing more close substitutes. If we had more people who could do the things that you need to be done being produced by the higher education sector or the further education sector for that matter. I think we’ve done ourselves a disservice by bifurcating the system into people who do apprenticeships and people who do degrees. I really think that’s a mistake and I hope that they become one system eventually. But the reality is unless we’re producing people who can take ideas and make them real, we’re in real trouble. Because we can’t compete on cost grounds and the taxation bulwark is gone. I personally was really shocked when the Intel announcement came that they weren’t going to bring 10,000 jobs to Galway. I was surprised by the reaction of people. ‘Ah, sure, they were never coming here. Ah, no.’ You know? And I’m…

BH: They were happy to blame our planning system. Like scapegoat the planning system. There’s a lot more to that decision than just planning and power grid, all those things. There’s certainly uncertainty. But that’s a warning shot for sure. I mean, Intel have been our staple. They have been for decades now and always spoken to, and that really is a very worrying development. You have to believe that’s a very worrying development.

SK: You have to believe that there was no stone unturned, there was no phone call that was not made, and all effort were exerted behind closed doors. I don’t know what they were, but I have to imagine that this was the very biggest stretch that was available to do, and it didn’t work out. That tells you something fundamental about the system. I don’t know if it’s the edge of it, the top of it, is it the… Will we look back in five years’ time and go, ah, that was an aberration, or will we look back in five years’ time and go, that was the moment when we really hit the top?

BH: I’d like to think it’s an aberration, but I don’t think that it is. I think, you know, it is… And maybe the tax thing, maybe the OECD thing was the final nail in the coffin. I hope that’s not the case but I do feel it is and I do feel that the rest of Europe has changed their approach to FDI as well and there’s just a culmination of things now where we operate… I won’t say in a vacuum for the last 20 or 30 years but we operated in a relatively uncontended way. Now we have competition and some of our competitive differentiators are gone, and on top of that we have Brexit and the UK with emissions will attract these companies. So, there’s just so many things that happened.

But again, we’re a small economy, so the odd win makes a big impact as well, so if we get, you know, Nvidia instead of Intel or anything, it will be a big impact for us. But we’ve got to fix our structural problems before that and are they… I don’t think in this case they’re policy, I just think that they’re the bit under government, the bit that actually makes planning, that makes infrastructure happen, and that gives confidence to those FDI companies that Ireland will have the infrastructure to dream of from all angles. And I’d love to see the rationale that Intel actually used to say no, or more importantly what they used to say yes to wherever it is that they’re going.

SK: Berlin. I mean, the word is it may be Berlin. But I should say as well that hasn’t been confirmed. That hasn’t been confirmed. But yeah, I am struck by that as an issue. We talked a bit about policy and the need to fix certain aspects of it. I’m very much in the camp of, look, we’ve done things fairly well, much like yourself. We’ve done things fairly well. There’s a lot that we don’t do correctly and it’s around the medium term. We were not able to go, look, it’s 2022. By 2027, we will be X. We will be in X place with Y houses built or something. People produce plans that are ignored by all and sundry. And I’m struck by that. I don’t think that… That is not what happens in other countries. And why do you think that is?

BH: I think you probably read Technocracy in America? There’s some answers in that. I think it’s the culture of our democracy. It comes with flaws and populism and short-termism are some of those character traits of a pure democracy, which is what we have. So, the hurlers in the ditch tend to make people worried about making the right decisions. Sometimes difficult decisions that have long-term benefits are often hard to make, and so policy tends to be with an eye on the next election. Whereas you have Singapore or Switzerland and dare I say it China where the vote doesn’t matter all that much when you’re making these decisions and you have an excellent top grade civil service that are hired almost in the way you would hire for big business that are surfacing good strategies and almost with the tick of a box government will endorse it but not be responsible for it. The electorate are responsible for it and things move forward quickly almost in a… the Singaporean democratic dictatorship wayThey all comes with flaws, right? But the Swiss vote too much but they get a lot done. The Singaporeans don’t really vote at all and look what they’ve accomplished in 35 square miles of sovereign land. And well, the Chinese have other tools at their disposal. So, we unfortunately being an open economy with a democracy that is very… well, right now relatively almost stable, it’s difficult to make those tough decisions.

I always laugh about e-voting machines as a classic example. Something that’s just basic. Should have just bloody happened and yet here we are. And I think it’s very difficult particularly in the current climate where you have Sinn Féin. And I’m not political at all and I’m interested in what people’s stated policies are and I listen to all of them. And I’m always particularly interested in how we solve health and how we solve housing. And for the housing one, I listen to the economists, not really the politicians, right? But the economists do crunch the numbers and do come up with answers. They may be right or wrong, but they’re based on data and not fiction, right? But health, and I look at that and I say, OK, well what are the parties saying about how they’re going to solve those problems? And I really do worry that they’re afraid of the blowback if they made the tough decisions that they need to make. And that’s… Look at the building costs. Like the building cost, what is that? Death by a thousand cuts is where we are now for the price of building a house. How do we roll that back? Well, a lot of vested interests have to be taken on to make that happen and I just don’t think that there’s appetite to do that.

The power – and the limitations – of the state

SK: When I think about the simplest complex policy problem, I can think of is pensions. I have a nightmare that there are people who are coming up to their early 40s and who in ten years’ time will be in their 50s or on the way to their 50s and they will have… They mightn’t have a house. They almost certainly will not have a pension. I’ve been banging this drum for so long and I think the housing problem is so much more immediate, so much more urgent, then it’s very easy to forget the fact that all of these people are getting older. We’re the youngest or one of the youngest economies in Europe. We’re about to become one of the oldest. One of the easiest policy solutions that we could have come up, we actually did come up with, and it failed. It failed because of the last election. And there’s only three ways to do it, right? Either you work for longer, your employers pay, or the worker pays. Now, the government that we have, right-wing government, it says the worker pays. That’s fine. Whatever. And that’s an unpleasant outcome for the worker. Everybody else will move on. It’s not like an unprecedented solution, right? They literally picked another policy solution from another country and copied and pasted it here. They could have picked people work for longer, right? Or they could have picked the employer based. They didn’t. Now the policy problem is still open. They haven’t solved it. And the auto enrolment – when I was in college, we were talking about auto enrolment. It’s 20 years ago. The best next time to do it is now. And we’re not solving the policy problem, you know? And we won’t solve it this side of the next general election. So, it strikes me as interesting that… And what’s interesting about that is there’s no bricks and mortar involved.

BH: Yeah. Maybe there’s not a strong enough mandate to solve some of these difficult… to make some of these difficult decisions. And we’ve certainly suffered from lack of mandate. And if you can be defeated on the slightest thing then when you pick something big that might affect the public service as well, then you’re really… And that division between the public service and private sector, not helpful as well. So, maybe Sinn Féin when they come into government, they’ll have such a strong mandate that they might get to make some of these difficult decisions. Will they? I don’t know because I don’t see the… I’m not hearing that in the policy but I hope. The best thing that we could possibly have is a strong government, whoever they are, with a strong mandate, and that we get some stuff, difficult things done over the coming years. So long as things like border votes and unity things don’t get in the way or destroy that and set us back even further potentially. But I certainly… We have to look at the performance of the last governments, the last few governments, and say we haven’t fixed health, we haven’t fixed pensions, we haven’t fixed infrastructure, we haven’t fixed housing. There’s so many things we haven’t fixed. And I really hope and pray that we figure a way out of this mess over the next generation because otherwise we’re leaving one hell of a legacy for our children and their children.

SK: And I think we’re going to end up with a much larger state anyway, you know? It has to do something to pay for the climate. Climate change to us means more flooding, which means we’re spending more money on flood plans and flood barriers. You’re going to have to pay more for pensions because none of us are dying, you know? And we’re going to end up paying more in health because that’s the only thing… that’s our only solution to health is to pay more. I was just-

BH: It’s also the efficiency. There’s also a lot operationally where, you know, I keep hearing different numbers but most expensive per capita in Europe. We spend more per capita. Are we getting equivalent service? I don’t think so. How do we fix that? Successive health ministers have had little or no impact on what goes on in our health service, and yet could you say the health service are a crap bunch of people doing a crap job? No, they’re not. They’re not. There’s other things at play there and there’s certainly not a great level of transparency there, so I don’t know. If an economist looked at our health service and tried to get the numbers and break it down and do comparisons, I’m not sure how far you’d get.

SK: I tried and you can’t. And not far is the answer. One of the things I really wanted to do was to compute regional spends per person. I was struck by the fact that I know lots of people who have children and they would… Each child that I know has a specific need that is unmet where they are. And I was struck by the fact that these three families that I’m thinking of specifically, all three of them moved to Dublin because that’s where the services are. They literally took their whole life and moved. And I was struck by the fact that they just didn’t exist down here and there was no prospect that they would. So, I wanted to compute an index of where is best for which service and which spend corresponds to that, you know? So, for example if your child had say Asperger’s syndrome, just to pick one, maybe the best place is, I don’t know, Sligo or something. It turns out it’s not. It’s all Dublin. Right? So, the per capita spend on health is by far greater in Dublin than anywhere else. You can see that because the numbers are so big. But you can’t break it down any further than that unfortunately. And it’s a good example of the system doesn’t really generate data. The system is entirely operationalised. It does its job. It moves that to that and that’s it. It doesn’t necessarily throw off any data for nerds like me to analyse, which is obviously a source of tremendous sadness.

BH: There’s other KPIs. Like commercial businesses like KPIs. Managers to employees. Simple KPIs like that that could be used to compare health services across the world and rank them different ways, and it’s not necessarily good or bad but I’d love to see where our own health service compares on a number of different KPIs to other health services and see what we think is good and what we think is bad and how to break it down. But I haven’t seen any change in the health service or the levels of spending or the level of the service being provided for a long, long time. And again, the reason I bring that up is only because, you know, government in order to solve some of these problems needs a really strong mandate and I just don’t think that we have that here. And so, we do face a problem, and we can lift all of the boats by creating more… making the economy bigger, right? Creating more jobs? Doing more exporting and thriving and being better at what we do. But the tide is certainly against us at the moment for that.

Ireland in a post Covid world

SK:  I am struck by the fact that we are in this weird transition between what feels like the Covid economy where the government is propping everything up and there’s lots of government money swishing around the system. But there’s also lots of things that are being warehoused, right? There’s lots of tax and arrears and so forth that are being warehoused. And I’m struck by the fact that at a certain point probably this year those supports are going to start getting withdrawn. And lots of the interviews that Ian Kehoe will have done for The Currency, particularly with liquidators. They’re getting ready for what looks like a bloodbath, particularly in hospitality. So, I’m struck by how you think about the idea of navigating a company like Manna through that kind of post-Covid… You know, the sort of cliff between… I mean, there’s two cliffs, right? There’s the inflation issue and then there’s the problem of what happens when supports just dry up.

BH: I think we’re lucky because we’re a technology company and an exporting company, so we don’t get affected domestically by what’s going on. If anything, we benefit from it. Better availability of talent and the desire, the need, or the positive angle to being a handsfree, human-free delivery system. So, Covid as horrible a thing as this is to say has been good for our company. But longer term, and I look at the impact, yeah. When those foreclosures come in hospitality, and they are coming with the associated long-term job loss. And that’s such a shame but it’s just a reality. You know, I don’t worry about it because I know that there is a way out of that, right? And the hospitality sector ultimately will recover.

The worry I have though is that Covid comes back and that this isn’t the end of it, right? And how long that lasts. Because that then affects confidence. And I think confidence is still remarkably strong. I think psychology may not be as much, but I think confidence is still and optimism is still there that we are at the end and it is going to be better. And confidence as you know, the sentiment affects spending and that’s a vicious cycle if confidence goes down.

So, I do feel that we could recover relatively quickly. There will be a clean out of course and a lot of broke people but I think we can recover quickly.

I look then around the rest of the world, and I say so long as this doesn’t affect the capital market, so long as the capital markets maintain their state. So, what would really hurt Ireland is if the capital market started… if the weather changes there. And what I mean by that is that the ready and easy flow of cheap capital today that exists for companies like ours. And we’re going to be raising money soon. And just look at Flipdish. Raised $100 million. And that’s because the capital markets are really positive right now and hopefully for at least another couple of years. But what would be a dramatic implosion for Ireland’s prospects is if interest rates shot up, if money went to safe harbours, safe havens, and that risk capital stopped getting deployed.

Because then you would see even their tech industry and the really high-quality jobs start to suffer as well. And that wouldn’t be great. But do I think that’s likely? No, I don’t. I don’t think it is going to happen but you’re the economist. You have a better answer than I do. But if I were to worry, honestly my only worry today is… And I’ll go back to what I said earlier. My only concern today in Ireland speaking selfishly with Manna is that the indigenous tech sector is underserved and we are at risk at declining rather than advancing in our indigenous tech sector. And I do not see any government policy to address that beyond what we’ve always been doing, and I’d love to see that change. So, Scale Ireland as you know well is a very positive step in that direction. And if I’m vocal at all during the next election, it’s going to be asking the question of all sides, what’s your plan? Tell me what your plan is to support the indigenous tech sector. Because I do think that is not the lifeline but it’s a very important answer for a small economy to get that right.