Jonathan Brun

AI will Not Cause Structural Unemployment

Last week I blogged about the false arguments for Basic Income, one of which is automation. The media has been talking about automation and its consequences on the job market for the past few years. As with many memes, this is driven by an original set of books and thinkers who identified AI as an emerging technology that will whip out many jobs – both white collar and blue collar. The media then fed on itself, generating more articles and books on the subject. “Newspaper X wrote about it, why don’t we have a big piece on it?” – said some editor somewhere. The thing with this whole automation creating unemployment is that there is no evidence for it.

Automation and technology obviously eliminate jobs; however, the consequence of this is higher economic productivity and wait for it, wait for it,…. more consumption! We humans don’t stop once we have one car, a decent size house and an annual vacation (see 1950s); no, that would be far too reasonable. We need more stuff! We buy a bigger house, a second car, a cottage, and more vacations!

Humans love stuff. After tens of thousands of years of starving to death in caves and mud huts, physical possessions bring comfort, security and status. When we do manage to automate something we just move on to some other problem. Here are some well known automations we have accomplished:

– Farming (unskilled labour) – something like 95% of the population was in farming.
Horse rearing, training, selling, riding – A lot of horses
– Drafting blue prints (semi-skilled labour) – replaced by AutoCAD.
– Making electrochemical film, selling and using it (skilled labour) – Kodak had 350,000 employees at its peak.
– Moving from manual handling of shipping material to standardized containers (unskilled labour) – lots of people!
– Car manufacturing (semi-skilled labour)

The list of eliminated or transformed industries is long and continuously growing. Many of these industries were absolutely massive and represented significant parts of our economy prior to being obliterated by technology. Yes, the jobs disappeared, but new ones appeared. The transition is tough, but we have done alright so far. A basic rule of economics is that if an asset has a utility it will be used. Humans are an asset, they will thus be used to do something – the question is whether they will be used for high value work or low value work. Think – café barista vs. aeronautical engineer.

The second part of the argument about automation is that we will run out of jobs for the displaced workers. I find this preposterous. Anyone who thinks we will run out of jobs simply has no imagination. Here are some straightforward ways we could employ many people:

– More teachers & better teachers
– Rebuild our crumbling infrastructure (just this is likely enough to employ enough people to replace all AI displaced jobs)
– Build high quality housing and more affordable housing
– More caregivers for our aging population
More aid workers and people to help in crises (Yemen, Myanmar,…)

And that is without even inventing new jobs like social media experts, sustainability advisors, artisanal coffee makers, micro-brewers, or Artificial Intelligence consultants! Will technology have a major impact on our communities, of course! Will we have to adjust our political and economic system to compensate for some out of work white collar people and secretarial jobs, yes. But is the world going to end or change dramatically, no.

Like any deployment of technology, AI will be deployed progressively. We should see a progressive impact – not a sudden overnight one. If we really think that automation is an emerging force that will lead to mass unemployment, we would already be seeing signs of this and especially so in the countries that are the most advanced in AI deployment. The countries with the best technology in the world – Germany, US, China, … all have the lowest unemployment rates. It is therefore difficult to see how we can both be creating unemployment through AI and have the lowest unemployment rates.

Published on November 25, 2018

The Problems with the Basic Income Discourse

Basic Income came into the mainstream media three or four years ago when Switzerland launched a petition for a national referendum. Since then, the mouvement has grown but it seems to be stalling in its growth. Pilot projects have been ended or closed and other projects have publicly explained how hard it is to run a basic income project. Nevertheless, thousands of people around the world continue to fight and mobilize for the most important social reform since universal health care. The question I ask myself and the mouvement is, “What is the best way to advocate for basic income?”

Google Search Result Trends for Basic Income over the past 5 years


 

State of Affairs

Since 2014, I have been active in the basic income community, acting as the Québec spokesperson for Canadian Basic Income Part Network and as a founding member of Revenu de Base Québec (Basic Income Québec). We have organized activities, met with political entities, conducted interviews and promoted basic income in Canada. I have participated in numerous conferences, read many books and discussed the topic of basic income with many people.

As Basic Income researcher and activities Karl Widerquist has pointed out, we are in the third wave of the basic income movement. He explains,

“Support for unconditional basic income (UBI) has grown so rapidly over the past few years that some might think the idea appeared out of nowhere. In fact, activists have been floating the plan – and other forms of a basic income guarantee (BIG) – for over a century. It experienced a small wave of support between 1910 and 1940, followed by a down period in the 40s and 50s. A second and larger wave of support happened in the 60s and 70s, followed by another down period in most countries until the early 2000s. Today’s discussion took off around 2010 and has grown in strength with each passing year. It is UBI’s third, and by far its largest, wave of support yet.”

However, this third wave has no guarantee of success. Most importantly, the current basic income mouvement is full of contradictory ideas, incompatible political views and overly simplistic ideas of social change. I will not go into each argument in detail, but suffice to say that the mouvement will likely be undone by itself, not by a malicious external actor or a passive general population. Any successful mouvement must focus on a message and propose a concrete change. The civil rights mouvement in the states advocated for equal rights and voting rights for black Americans, the French revolutionaries advocated for a National Assembly made up of normal(ish) citizens and the women’s voting rights mouvement advocated for the right to vote. Basic income seems simple on the surface, but most mouvements are not clear in what they are asking for or why. Without clarity, we will not succeed in gaining the mass political support that is necessary for changing our social safety net and the power structure of society.

Four common arguments I hear for Basic Income:

  1. Automation will force us to implement a basic income
  2. We can pay for a basic income through more taxes
  3. Massive inequality will force us to implement a basic income
  4. Basic income can be implemented without structural reforms to our monetary system

Automation will force us to implement a basic income

In this age of low cost access to high technology and the constant improvement of Artificial Intelligence (AI), automation is seen as a path towards basic income. We are told that our work will be automated and robots and software will do anywhere between 10-50% of what humans are currently doing. This mass automation will create mass unemployment and we thus we need to implement a tax on AI and robots and use those taxes to fund a basic income. Sounds nice.

The issue with this argument is that it goes against all historical evidence of the impacts of technology on labour and society. There is absolutely no evidence anywhere, at any time, in any country, that automation and new technology created permanent and structural unemployment. Yet, we are told that this time is different and we need to prepare. Why it is different remains very unclear. All historical evidence points to the fact that as we automate an industry, all we do is shift resources to a new industry. The transition can be painful and many people struggle to shift jobs, but the main impact of higher levels of automation (otherwise known as efficiency gains) is increased consumption.

One such example of increased consumption when you expect the opposite is the claim of dematerialization – the idea that new technology allows us to replace physical things and will reduce our consumption of raw materials. Vaclav Smil outlines this phenomenon in his excellent book Making the Modern World,

“In an overwhelming majority of cases, these complex, dynamic interactions of cheaper energy, less expensive raw materials, and cheaper manufacture have resulted in such ubiquitous ownership of an increasing range of products and more frequent use of a widening array of services that even the most impressive relative weight reductions accompanying these consumption increases could not be translated into any absolute cuts in the overall use of materials. Indeed, there can be no doubt that relative dematerialization has been a key (and not infrequently the dominant) factor promoting often massive expansion of total material consumption. Less has thus been an enabling agent of more.”

Basically Vaclav Smil is saying that though we have dematerialized industries (paper vs. Digital, phones vs. Letters, digital cameras,…) – all we do is consume more of those materials in other industries.

This counterintuitive phenomenon was first described in relation to energy consumption by William Stanley Jevons, an English economist in 1865,

“It is wholly a confusion of ideas to suppose that the economical use of fuels is equivalent to a diminished consumption. The very contrary is the truth. As a rule, new modes of economy will lead to an increase of consumption according to a principle recognised in many parallel instances
(Jevons, 1865, p. 140;).”

He is saying that savings from increased efficiency of energy conversions have been a factor in promoting more frequent use of that energy source and in driving up the overall use of the energy source. Personally, I can attest to the fact that the reduced cost of air travel has led me to travel more (it’s not just me). The reduced cost of food has led me to eat better food. The lowered cost of telecommunications has led me to get a better phone and send more emails, etc. The list is long.

A few years ago I saw the Canadian ecologist David Suzuki speak. He explained that when he grew up in the 1950s, houses in Canada were on average 1000 square feet. Today Canadian houses are well over 2500 square feet on average. He explained that if only we could stay in 1000 square feet, our consumption levels would be such that the environment would be in better shape and our lives would be better. The problem is, humans enjoy creature comforts. We could all live with less, but we do not want to and never will.

Some on the left blame this on our capitalist marketing driven society that leads us to become mindless consumers. But even they do not shun the luxuries of modern life. They do not give up their phones, safer cars, lower priced clothes or other items that were brought to them thanks to higher efficiency and cheaper labour. The truth is humans want to feel safe and lead rich lives. We do not actually want more than 6-8 weeks of vacation a year and we prefer nice stuff over time. This is just human nature and it is malleable to a certain extent, but not that much.

Bullshit Jobs

A subsection of the Automation Debate, is that we have created a enormous quantitates of “Bullshit Jobs”, a term coined by anthropologist David Graeber. These jobs are defined as soul crushing, mindless jobs that entail either bureaucracy or producing some service that is not really “needed” by society.

My engineering program at University was a Co-Op program, meaning we were placed or took jobs in our field when we were not following courses. I distinctly remember a classmate who got a promising Coop position at a mine in British Columbia. When he returned from his job at the end fo the semester, he explained what he did. He was responsible for monitoring the pH levels of a variety of materials in the mine and titrating the substances and then logging the information in Excel. The job was excessively boring as he was repeating the same task day after day. At the end of his internship, he asked his employer why they did not buy a titivating machine to automate his job. They explained that they compared the cost of the machine with the cost of his internship and decided he was cheaper.

The lesson here is that the cost of labour is a major driver of automation. Had he cost more, they would have bought the machine. Henry Ford said, “If you need a machine and don’t buy it, then you will ultimately find that you have paid for it and don’t have it.”. This is generally true. Increasing labour costs will lead to more automation, but it will just lead to higher productivity and more consumption, not unemployment. Basic income will likely drive up labour costs as workers will have more negotiating power.

Another subsection of the automation argument is that we do not need to work, or we do not need to work in a patriarchal capital directed economy where we do not have freedom. While we could easily debate the benefits and downsides of cooperative organizations vs. hierarchical ones, I prefer to focus on the fact that people get most of their human interactions, identity and self worth through the work that they do. The work we engage in and the people we spend our days with are a huge part of our lives.

Though our work environments are never perfect and our work is never as engaging as we might want, the net benefit of working with other people towards a common goal – even if it is making hamburgers at a fast food chain – responds to our basic human need to feel we are part of something larger than ourselves. This topic of alienation in the workplace is well studied, needless to say I will not resolve the question here. But, if the Basic Income mouvement needs to change one thing – it is to stop labelling people’s jobs as pointless or bullshit. They are not and it is insulting to tell someone that their job is stupid and useless, because if you do you are in a rather direct sense insulting the person for the choices they made or had to make.

So, in conclusion, automation will not lead to mass unemployment, just more consumption and do not tell people there jobs are useless, because they usually are not.

We can pay for a basic income through more taxes

The way you pay for basic income determines what basic income is and how it is perceived. If basic income is paid though increased taxes it will make people perceive it as another social welfare program. This is a massive problem. Last time I checked, people are not marching in the streets for more welfare programs – rather the opposite.

Many participants in the basic income Mouvement do not see paying for BI through taxes as a problem. They proudly proclaim that we can pay for basic income, which at a rate of 1000$ per person per month generally amounts to doubling the government’s budget, through taxes on the rich and corporations. The practical implementation of such a radical tax increase in a globalized world with high capital mobility boggles my mind.

At a recent basic income talk in Montréal, I asked Evelyn Forget, the famed researcher who studies the 1970s Mincome basic income project in Manitoba, “How should we fund basic income?”

She responded that “increase everyone’s taxes and the taxes on corporations.” While there is certainly room to increase taxes on certain parts of society, you cannot double state revenues through income or corporate tax increases. No economist, politician or sensible person thinks that a basic income is fundable through tax increases and if the basic income mouvement proposes this as the path forward it will realize that it has no political or social support from the middle class, who already feel overtaxed and underrepresented (see Brexit, Trump,…). Proposing large tax increases is a death sentence for the basic sentence movement.

Two factors severely limit our ability to raise taxes. First, capital is more mobile than ever. Companies and people can move their money and investments across boarders and into new legal entities faster than government can catch up. If the basic income mouvement proposes to increase taxes to pay for a basic income, they will find that a tax increase of 20-40% is required. This will position basic income as a social welfare program that is transferring money from hard working citizens (who pay the majority of taxes in modern society) to people who want to engage in their passion for African drums.

Basic income advocates need to clearly state that BI will not be paid through income tax, otherwise, the mouvement will never succeed. There are other taxes we could use, but not labour related taxes.

Massive inequality will force us to implement a basic income

Another argument is that the increasing inequality in society will lead to basic income. Again, I do not think there is much historical evidence that massive inequality is met with better distribution of resources by the society’s leaders. The only way to improve distribution of ressources is through social mouvements and though BI may be a social mouvement in some senses, there is nothing inevitable about it correcting inequality. We lived under aristocracy and insane inequality for all of human history and the European revolutions took hundreds of years of work to build materialize (with many failed attempts). The communist revolutions in Russia, China and elsewhere were battles drenched in blood. The only way to reduce inequality is through a massive social battle (usually bloody). Generally speaking, people are willing to live under massive inequality for centuries (not saying this is good, just true).

Even today, fear is an important driver of the modern economy. You cannot eliminate all of that with a basic income. There are some jobs that need to get done, we need people to take out the garbage, man the airports, clear the roads and do the millions of other low paying jobs that a modern global civilization requires. Should these people be paid more? Yes! Should they have better working conditions? Yes! Should they have better social protection? Yes! Should they be better recognized by society? Yes! But, is basic income the solution to their precarious social position, as proposed by Guy Standing? No.

Unions, higher minimum wage and better social programs for daycare, medicare and education are the solutions. Basic income is not a replacement for the social safety net or labour law improvements, it is complimentary. There are a lot of jobs that need to get done and the way to close the inequality gap between low paying jobs and high paying jobs is too increase minimum wage and wages in general (see Australia, Europe,…). Inequality will not lead to basic income and basic income is not a solution to inequality – though it will help.

Basic income can be implemented without structural reforms to our monetary system

Let’s be honest, a real basic income is a massive injection of capital into the lower part of society. This injection of capital into the economy can be done; we saw it happen with the quantitative easing of the banking sector after 2008 where trillions of dollars were injected into the economy without inflationary consequences.

First, it is important that we clarify what money is. Most people think of money as a physical thing, which of course it is not (see Gold standard people). Sometimes they think of it as an immaterial thing that government manipulates and it should be made physical or restricted (see Bitcoin). In the end, money is an accounting system with credit and debt. A central government controls this system (that was not always the case) and tries to keep the credit and debt in check as the economy grows or contracts. Your dollars are simply credit from the government – it is money the government will give you, but in the meantime you can trade it for goods and services. See Graeber on the history debt. This system of credit and debt is pretty good (see modern society), but it has some accounting problems.

Some basic income advocates such as Stanislas Jourdain of BI France have moved from the BI mouvement to a quantitative easing for the people mouvement. There are also basic income advocates who are Social Creditists. Social Creditists are an old and fascinating mouvement who advocate for a form of basic income that is calculated through the purchasing power of consumers and the costs of doing business. They state,

“The faulty nature of the financial system has two fundamental and complementary aspects. On the one hand, the financial system, as it presently operates, generates an ever-increasing gap between the rate at which the prices of ultimate goods and services are produced and the consumer incomes that are simultaneously liberated in the course of their production. This is primarily, though not exclusively, due to the way in which real capital (machines and equipment) are financed and their costs accounted for under existing financial and industrial cost accountancy conventions and the concomitant displacement of human labour. On the other hand, a particular monopoly, i.e. the monopoly of credit-creation currently exercised by banking institutions, makes use of this artificial scarcity of consumer credit to enforce a self-serving policy on the members of economic associations. They relieve the lack of consumer credit (chiefly by issuing loans) but only on asymmetrical terms that transfer purchasing power, property, and control over the economic policy of governments, businesses, and individuals to themselves.

8.The solution to these problems is to create and issue a sufficient volume of debt-free money in the form of the compensated price and the National Dividend to equate the rate of flow of final prices with the rate of flow of consumer purchasing power. This would restore balance or financial equilibrium to the circular flow while simultaneously ensuring that all prices are fully liquidated as they come on to the consumer market. A sufficiency in the rate at which consumer credit is injected into the economy would also provide adequate support for the issuance of additional producer credit up to the physical capacity of the economy or the psychological satiety of the consumer. The rate of flow of producer credit would be released so as to finally correspond isomorphically to the real demand of consumers. Whatever production is physically possible and desired by the population could be made financially possible.”

http://www.socred.org/s-c-theory/what-is-social-credit

While they do not mention a basic income explicitly, the consequences of their proposal are pretty clear. They are particularly concerned about the correction of accounting issues in the modern economy reflected in the gap between wage growth and purchasing power. This blog post cannot outline all the challenges and benefits of that, but suffise to say they are advocating for massive monetary policy changes.

At the end of the day, a real basic income will require monetary policy changes to balance the growing inequality of return on capital with the growth in labour wages. This can be done in a few ways, but basic income may be the most elegant solution. It is important that Basic Income advocates properly understand money and the system that creates and destroys it. We cannot take shortcuts and a real basic income mouvement will advocate for reforms to the monetary system that compensates humans for their participation in society.

Conclusion: A dividend or death

At least to me, it is clear that if the Basic Income mouvement wants to continue to grow, we need to stop stating things that are not true. We cannot pay for basic income through income tax, automation will not lead to unemployment or to a basic income, basic income is not going to solve inequality and monetary reform is necessary to basic income. We need to build a coherent message that is based on a concrete proposal for reforming society and changing the very nature of our relationship to money, debt and labour.

In my opinion, the only viable path for basic income to be put in place is through a dividend system. This system would pay out from our common ressources, state corporations and the issuance of new money at a calculated rate. It’s not complicated and frankly, I think it is an easier sell than a vague and idealistic proposal of taxing the rich or letting robots pay for basic income.

Published on November 17, 2018

Basic Income Pilot Projects Won’t Work

For many years basic income advocates have lobbied for pilot projects to demonstrate the power of giving money to all citizens. Advocates all seem to use the short lived Dauphin, Manitoba project in the 1970s as an argument for further pilot projects. This lobbying by advocates of Basic Income led to two pilot projects – one in Finland and one in Ontario. Both are already over. The recent ending of the pilot project in Finland and the cancellation of the pilot project in Ontario, Canada mark significant setbacks for the Basic Income mouvement around the world.

The purpose of these pilot projects was to gather meaningful scientific data on the effects of basic income and use that to convince the public, bureaucrats and politicians that basic income was a feasible and logical idea. However, reason rarely works in the public sphere. Instead, both projects were shutdown or ended. The reason they were ended was certainly not financial or scientific, but rather political. Therein lies the problem, if basic income projects are launched by politicians, they will be shutdown by political situations.

Both of these pilot projects made a fundamental mistake – they targeted poor people. The projects were designed to show the benefits of a basic income over the traditional welfare system. They were not designed to show the benefits of a basic income for a wider part of society such as students, taxpayers or elderly people. By restricting the projects to people on or near welfare levels, the projects positioned themselves as yet another welfare program for the poor. As in most countries, the hard working, tax paying middle class has limited patience for welfare recipients. This is partially due to constricting disposable income and partially due to pure human nature. We have seen country after country downsize their social welfare programs in an attempt to balance budgets, gain votes or free up cash for other programs such as tax cuts. Almost no country in the past thirty years has increased the size of their welfare programs. This should be a (big) hint to basic income advocates.

It’s actually quite simple, most taxpayers have limited patience for people who do not work (for money). To think otherwise is simply idealistic and not aligned with the average (voting) population. At a recent discussion on basic income debate in Montréal, Québec, I asked the famed basic income expert Evelyn Forget how she thinks we should pay for a basic income. Her response was that we should raise taxes on corporations and on people. When I replied this seemed challenging in the current political and economic situation, she responded that it was the best way to do it and people would just have to “deal” with higher taxes.

I strongly believe that the way you finance a basic income is THE defining feature of a basic income. If you finance it through taxes, it will be viewed as another social welfare program not terribly different from numerous existing programs. This is a major problem. The entire idea of basic income is that it is different from other programs. If you finance it in the same way, through tax and redistribution, you are undermining the argument that makes basic income so appealing. Basic income is supposed to break the mold, join the left and right, simplify bureaucracy and give more freedom for individuals to build up their lives. If you fund it through taxes on workers, it will be viewed (rightfully so) as a transfer from workers to non-workers.

As an analogy to basic income advocacy, we can look at advocates for affordable housing. Both groups of advocates believe that what they are proposing is a basic right and should be made readily available. In the first case, basic income advocates argue that all members of a developed nation should have a minimum level of income that assures the essentials in life. Affordable housing advocates lobby that housing is a right, not a privilege, and it should be affordable for all members of society. I agree with both, but the way you go about implementing either is fundamental to the perception of the project by the general public.

For example, affordable housing levels in most western countries has actually decreased as an overall percentage of the housing market. This is due to the fact that affordable housing advocates are taking the same approach as the basic income advocates – namely that affordable housing is there to alleviate the stress of expensive housing and that the affordable housing should mostly benefit the less fortunate. By casting their lot in with the poor, they are severely limiting the base of their political support.

Contrast that with Vienna, Austria. In Vienna, about 50% of the housing stock is owned, managed and maintained by the City. Basically, 50% of the housing stock is a public good, not a private good. Rents are remarkably affordable for a world class city and this brings dynamism and diversity to all the neighbourhoods. However, the main reason this was possible (besides WW2) was because both the middle class and lower economic classes have a vested interest in the success of this public housing. This much larger political base assures that the affordable housing projects continue. Basic income needs to take the same approach and stop advocating for basic income pilot projects as welfare replacements or as a poverty alleviation tool. It may indeed by that, but you should not advocate for basic income in that way.

Contrast the success of these basic income pilot projects with the Alaskan Dividend Fund, that was instituted in 1976. The fund remains tremendously popular and has little risk of disappearing. Why? Because everyone gets it! No pilot project was done prior to the institution of the Alaskan dividend fund and no negative effects have emerged post implementation. If there is one path forward for basic income, it is through the implementation of a lower level of basic income, but that goes to everyone – especially hard working taxpayers who vote.

It is time for basic income advocates to change their tune and thing strategically about how they plan to convince the average person to vote for this. It may take a distinct political party (for another post) or a clear advocate of basic income such as Andrew Yang in the United States, who has placed basic income at the center of his presidential campaign. No matter how you look at it, trying to get basic income to become reality through the path of replacing or supplementing welfare payments is a doomed idea that will never work. Get the middle class on your side and you will win the war, do otherwise at your own peril.

Published on August 21, 2018

Jordan Peterson is very dangerous

Council of Nikea, where the roman emperor became Christian.

There are two ways or organizing the world. The first method is the most common and the oldest. It involves the collective adoption of a set of social rules that are imposed though a mixture of state institutions, religious institutions and social pressure. Most traditional societies functioned this way. Grossly simplified, from an anthropological point of view, this way of organizing groups of people evolved first from a “respect your elders mentality”. The young and adults of a group could easily overthrow the elders of a group, but the elders managed to impose a set of rules and convince them to respect the wishes and opinions of the elders. This is referred to as a gerontocracy – where the old are in charge. This then evolved into a system where the old men were the dominant actors in a society and could set the rules, expel unruly members, arrange marriages, etc. Most religious societies and many aboriginal societies still function this way. See the Amish, the Hassidic Jews, religious Muslim society, etc.

The alternative way of organizing society is a loose set of rules that are mutable and changeable, with open membership to that society based on merit and physical and mental force. This way of organizing is more chaotic and unpredictable, but it can lead to more innovation and creation that upsets the current order. Examples of this are societies such as ancient Greece, ancient Rome, and of course, western society since the French Revolution – give or take a bit. No society is uniform and the switch between these two modes is not binary, parts of society can live in a highly structured environment while other parts are far more open and flexible. I live in downtown Montreal, an open and welcoming city, surrounded by a highly insular group of Hassidic jews. We get along, but we share few fundamental values.

These two ways of organizing society appeal to different people at different times. In times of strife or stress, order and rules are nice. In times of abundance and growth, flexibility and loose rules are great. For Western Civilization, the collapse of the Roman Empire gave rise to a static set of Christian rules. The collapse was largely due to the Muslim (read: old style world) expansion through North Africa and the Middle East around 750 AD. This expansion pushed the Roman empire north and finished it off after a slow death since Constantine converted to Christianity.

It took 1000 years for the Christian order in Europe to give way with the renaissance and the levy really broke with the enlightenment and the French revolution, where a static old order was literally decapitated. This opened up room for groups to manoeuvre and eventually led to the industrial revolution in Britain, creating material abundance and further disruption. Two hundred years later, give or take, we are feeling a backlash. With economic growth and wages slowing since the 1990s, certain people who were previously on top due to inherited wealth of the industrial revolution (read: white men) are starting to long for that old world order, one set by old men with clear rules.

Along comes Jordan Peterson. For those who have managed to avoid the guy, he is a University of Toronto professor who is leading a charge towards a return to traditional values. He published a bestselling book, 12 Rules to Life, that lays out a set of rules to put your life in order (and those of others too!). He is a very compelling speaker, storyteller and a passionate advocate for a return to something more primal, older, simpler and more ordered than our globalized, equal opportunity, women laden workplaces. He has a tendency to use hyperlatives and extrapolate from small issues to global crises that will create a world catastrophe. He equates the loss of traditional male masculinity with the death of god, for example. In this Vice interview, he states that “Can men and women work in the workplace… we do not know! [if women and men can work in the workplace]. Lipstick … is a sexual display in the workplace. A women [wearing makeup in the workplace who does not want to be sexually harassed] is hypocritical.” This is  a common strategy for Jordan, things are either clear and simple or unknowable. Nothing in between!

Peterson has been on many, many shows in the past few months and this is not to mention his own YouTube channel, that inclues thousands of hours of video. Whenever someone speaks that much, it is easy to pick and choose their mistakes. I do not know the guy, but after originally being intrigued by him, I find myself called to speak out against this false prophet who is contradictory, scheming and lying. He advocates for monogamy and honesty, but says he would vote for Trump. He refuses to dissavowe right wing white supremacists and believes that college campuses are festering pools or revolutionary children who need to be taught a lesson. I do not really have a bone in this fight, except that I believe in an open society that welcomes honest hard working people and strives to improve the lives of the next generation.

The best and most detailed damaging take down of Jordan Peterson that I have seen is the letter in the Toronto Star by his former mentor and advocate at the University of Toronto, Bernard Schiff. This is a man that housed Peterson and his family for months and lobbied the University to hire Peterson in the first place. In the article, Schiff states plainly,

“He was a preacher more than a teacher.” and goes on to say…

“Jordan is a powerful orator. He is smart, compelling and convincing. His messages can be strong and clear, oversimplified as they often are, to be very accessible. He has played havoc with the truth. He has studied demagogues and authoritarians and understands the power of their methods. Fear and danger were their fertile soil. He frightens by invoking murderous bogeymen on the left and warning they are out to destroy the social order, which will bring chaos and destruction.

Jordan’s view of the social order is now well known.

He is a biological and Darwinian determinist. Gender, gender roles, dominance hierarchies, parenthood, all firmly entrenched in our biological heritage and not to be toyed with. Years ago when he was living in my house, he said children are little monkeys trying to clamber up the dominance hierarchy and need to be kept in their place. I thought he was being ironic. Apparently, not.”

Need I say more? Of course, Peterson’s Darwinian social views also presupposes that there are no institutional prejudice towards certain people and that everyone as an equal shot at life. He seems to think that the game is not rigged and if you follow his 12 rules, you will be ok. To believe something along those lines it to be a complete idiot.

In this BBC interview, the interviewed really pins Jordan to his own cross. One of Jordan’s philosophical cornerstones is that Western society is by nature more individualistic and freedom loving than other society [read Asian and Muslim]. This is both clear and good according to Peterson. Yet, with a bit of pressure it becomes quickly apparent that there was nothing terribly individualistic about the Catholic Church (or the Orthodox Church for that matter). To be a member of Catholic society between 700 AD and 1700 AD was very much a collective act. All your sins could only be forgiven by the church and you could only reach heaven through a clear set of rules and an institution ruled by older [celibate] white men. By the way, Peterson was celibate before marriage. However, Peterson on the one hand labels himself as a liberty loving liberal who believes in individual freedom. Yet, he advocates for a set of clear rules that everyone should follow. Peterson is on the express train to hypocrisy town! The BBC hosts correctly identifies Peterson for what he is, “a fiery evangelical baptist preacher”.

What is so dangerous about all this? Peterson (and others) are creating a narrative for angry white men who feel that they are losing their place in this world. The place they presume to have, is at the top. The presumption of superiority is not based on skillsets, culture, or intelligence – it is based on looking at the past and saying, “that is how it was, that is how it should be”. Yet, the real reason western society excelled and grew over the past three hundred years (after 1000 years of stagnation) was not because of a strict set of rules or a set social hierarchy. Western society grew because we destroyed the rules of yore, tore down oppressive institutions, created the industrial revolution, took land and ressources from the weak and used slave labour to grow our wealth. It wasn’t pretty, but it did establish Western society as top dog. Losing this position is scary and some look towards the past for a solution. This is dangerous and not unlike past social convulsions.

Perhaps the most devastating attack on Peterson was done by standup comedian Jim Jeffries. Jim Jeffries came to fame thanks to a hilarious (and scary) video about gun control in the United States. He simply explained that Americans love their guns, not for freedom and liberty, but because guns are fun! He is correct.

In Jeffries’ interview with Peterson, her gets Peterson to very clearly state that we should not force people to bake cakes for homosexuals or blacks if the [professional] bakers do not want to. A few seconds later Jeffries confronts Peterson with the challenge of getting southern US restaurants to serve black people during Jim Crow era. Peterson’s position crumbles like the cheap deck of cards that it is. Peterson confesses he was wrong and we should force bakeries to serve everyone. At least Peterson admits he is wrong and frankly speaking, he is wrong – across the board on many issues. Peterson has other ridiculous positions such as the one where he says gay marriage is acceptable (barely) because it will reduce the amount of extra-marital sex homosexuals have and they may have sex with less people. Terribly utilitarian, terribly stupid.

Augustus, emperor of Rome

 

There is a tomb in Rome. The tomb of the first true emperor, Augustus. He inscribed his accomplishments and his tips and tools for governing Rome. He stated, you have to build, build, build and invest in conquest. That, my friends, is the solution.

To keep our world of progress and democracy alive, we must build and conquer new frontiers. We must build new technology, roads, bridges, Hyperloops, reusable space rockets, electric cars, artificial intelligence, technology to clean the oceans and the air, and robots to relieve us of menial tasks like driving cars and trucks. We must build social systems that distribute collective wealth to allow for each person to have an equal opportunity in life. We must build tools to communicate across cultures and preserve cultures. We must build systems that welcome immigrants and integrate them into our societies. We must build infrastructure so other countries and civilizations can grow and prosper. Through collective building, we align our visions. When we sent a man to the moon, the whole world looked up to the stars, together. Humans are social creates – we want pride, acceptance, comfort and opportunity. We can try to offer that one of two ways, through a strict set of rules that puts everyone in their place or through a collective effort to build a better world for which we do not yet know the rules.

Additional Links

Mary Beard Documentary on Rome

Published on June 23, 2018

B2B SaaS in China

China is a large and tempting market for software vendors. In April 2017, our Canadian based SaaS B2B company Nimonik acquired a similar company base in Shanghai, China. The company in Shanghai is called Envitool and was setup in 2010 by a Swedish company.

Envitool is a Wholly Owned Foreign Enterprise (WOFE) and it offers an online service that helps businesses understand and monitor environmental, health and safety regulations. It also offers some consulting services that are critical to the use of the software system. When researching the market and legal requirements in the run-up to the acquisition, I read some interesting articles about selling software as a service in China and insightful articles on dos and dont’s on China Law Blog. Despite our research, there was not a lot of positive articles on B2B SaaS or SaaS in general in China.

Since the acquisition we have learned that running SaaS in China is not as hard as you might think, but it does require additional resources, costs and complexities. For one, you need to pick the appropriate legal arrangement for your entry into the Chinese market. The company was already a wholly owned foreign enterprise (WOFE), but we did look at various options below.

Legal Options for SaaS in China

  1. Do business through a Reseller:

Keep the server is located outside China to reduce risk that the Chinese government would put up a firewall and block access. At a minimum, the reseller locates customers for the foreign company’s SaaS product. The reseller provides the ultimate customer with a username and password that allows the customer to connect to the foreign server hosting the SaaS product. The reseller collects the fee from the customer and deducts and pays applicable Chinese business and income taxes and then remits the remaining amount to the foreign software provider.

  1. Set up a WOFE

We estimated it takes about 6 months of time and  $50K to $100K USD for paid up capital. Once paid up capital is resident in China, restrictions apply to taking out 50% of it, once the WFOE is profitable. Basically, you need to park money in the company in China and you can never take all of it out.

  1. Do business through an Agent

Licence the your software to a Chinese entity that obtains the commercial ICP license that allows for offering the SaaS service to Chinese customers through a Chinese server. If a partnership type arrangement is set up, the Chinese Agent would invoice and collect payment from customers, and continue to be responsible for the operations in China.

  1. Do business directly in China from Overseas:

You are short paid for the amount of taxes (withholding tax 10% & VAT). Payments may be delayed and clients may not receive permission to send payment as they cannot easily send money overseas. As a non-Chinese company, it would be difficult to get approval to run the software on a Chinese server, and if run on a non-Chinese server, you run the risk that the Chinese government would put up a firewall and block access.

Key Lessons Learned So Far

For a variety of reasons we opted to acquire the existing WOFE and continue to run the company from China. We are in the process of integrating the data from the Envitool software into our more modern platform, NimonikApp. Once that is complete, we will move all of our clients and data to the new platform and offer only that to the Chinese Market. We maintained the legal entity in China, maintained our ICP licence and ensured that we have trademarks in China.

To setup the Swedish Envitool company in 2010, the services of Scandic Sourcing were used. This is a Swedish consulting company that helps businesses setup in China. They also offer back-office services related to accounting, taxes, payroll and other items. We are still using their services and are very satisfied. They work with our team to ensure that all of our documents and paperwork are in order.

Getting Paid

Though all the legal questions are fun and interesting, the main worry for many foreign businesses is “will I get paid and how!” If there is one thing the Chinese Government is serious about, it is the collection of Taxes. Invoicing in China is interesting, the workflow is as follows:

  1. We speak to an existing or a new customer
  2. We send them an order form with a quote, this order form is stamped with our company seal (called a Chomp)
  3. They sign and return the order form (sometimes in paper format and sometimes in electronic format).
  4. We then send a real invoice (FaPiao), this is printed from a specific machine that is connected to the government servers, so they know exactly how much we charged, when and to whom
  5. We stamp the invoice with another company seal (you have three different ones, one of which authorizes the sale of the business)
  6. We then physically send this invoice to our client
  7. Our client pays us via bank transfer
  8. We charge a 6% VAT on all of our invoices and we have to remit that amount immediately, not when we get paid.
  9. If an invoice never gets paid, it can be cancelled, but it is complicated. This happens in less than 2% of our cases.

I could go on with the intricacies of managing a team of Chinese sales and EHS experts, the cost pressure from local Chinese competitors and the demands for constantly increasing salaries – but I will spare those details for now. Long story short is that you can do B2B SaaS in China, but be prepared to invest at least 500 000$ before you see profit and make sure you work with local partners who really understand the system. Feel free to contact me with questions or comments, always happy to help a fellow weiguoren!

 

Published on January 30, 2018