Jonathan Brun

[:en]Basic Income Pilot Projects Won’t Work[:]

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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.

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Jordan Peterson is very dangerous

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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, he 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[:]

[:en]B2B SaaS in China[:]

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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.

2. 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.

3. 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.

4. 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!

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[:en]Who will lead the world?[:]

[:en]Western media is biased against China. Then again, the west is biased against everything that is not western. From ancient democratic Greece, to the Roman Empire, to the Christian world, the renaissance, the enlightenment and the industrial revolution and putting a man on the moon – we think we are the the best off the best. Nevermind the slavery, the crucifications, the witch burnings, the constant warfare, rape, pillage, massive environmental damage, imperialism, the holocaust, foreign wars and the treatment of minorities – we are the best! We are taught at nearly every level of schooling that the logical endpoint of human societal development is the path the west is on, the ideal system, though imperfect is the liberal representative democracy. What if we are wrong?

History is a long and winding road, the victor never permanent nor clear. Today’s global geopolitical situation is as cloudy as it has been since the 1930s. Back in the 30s, many leading politicians and thinkers were engaged in a serious debate over the merits of capitalist market economies, fascist dictatorships and communist nations. Capitalist market economies won out, proving many smart people wrong. However, this does not mean that our system is the long term solution or that it beats all other potential solutions. It might, it might not. Today, the rise of populist protectionist anti-immigration nationalists in the UK, Austria, Turkey and the United States, contrasts starkly with the defence of globalization by China, France and Canada. To add to that, the ongoing regional wars in the Middle East create great uncertainty over the future of that part of the world. Where will Saudi Arabia, Lebanon, Iran and Tunisia be in 20 years? I have no clue. More and more, I am asking myself what Europe and its former colonies will look like 40 years? Will we still be the dominant economic an cultural powers or will we have returned to an Asia centric world that dominated the world from 400 AD – 1700 AD? If so, what will happen to the west?

For most of human history, the economic centre of the world was Asia. Asia had the most advanced technologies, the most complex societies and the wealthiest nations. For a variety of reasons, Europe emerged as a leading intellectual powerhouse with the Renaissance and then with the Enlightenment and the Industrial Revolution. This took about 800 years after the fall of the Roman Empire. Why this happened is well dissected in books such as Guns, Germs and Steel and other anthropological studies. One of the standard narratives we tell ourselves is that West’s rise required democracy and competition. We explain to our muslim friends or our Chinese friends that our democratic institutions allowed for the intellectual freedom that led to the three iterative improvements during the Renaissance, Enlightenment, and the Industrial Revolution.

Of course, there was no true democracy until 1776/1789, so maybe democracy was not the key. Despite a rather monolithic Church, the competing states and aristocrats in Europe along with physical mobility allowed for competition, innovative ideas and eventually, massive cheap labour for factories. In a sense, though there was no democracy until the late 18th century, Europeans had more individual liberty than Asians as they could and did move from one nation to another with their ideas and projects. The famous story is that of Christopher Columbus who visited three kings before obtaining the venture capital to set off for a route to the Indies and needing up in the Americas, the rest is history, as they say. We are told that without individual freedom in Europe, the momentous inventions and advances that led to most of our modern day wealth would have not been possible.

When the European powers controlled most of the world and invaded China in the mid and late 1800s, our production capacity was 10 times more efficient than China due to the use of fossil fuels and the invention of the steam engine. (See Richard Baldwin, The Great Convergence, p. 59). 10x times can be hard to imagine, but try to imagine a country that is 10x more productive than the United States (or Sweden) on a per capita basis. This discrepancy is so massive it would inevitably lead to domination of one nation by another and likely to a sense sense of superiority.

In contrast to clearly divided European powers post Peace of Westphalia, China had a centralized imperial system that shut its doors to outsiders and trade in 1422, starting its decline to a impoverished nation. Some argue that had China been more fragmented and more individualistic, it might have had the ability to innovate like the West. Additionally, its lack of rule of law and democracy prevented new innovative ideas or progress from being made. Some argue that Asia is less prone to innovation than the West, making a clear implication that the west and caucasians have an inherent cultural advantage. That is the story we are told and like all stories, it has an element of truth.

Culture is a technology. As Lawrence Lessig has said, our laws (and culture) are the source code of our society. The laws and regulations determine what we can and cannot do, the method of innovation in society, our interactions and the way we offer opportunity to those who strive to build something better. Culture enables us to interact with each other, it sets societal norms and defines what is acceptable and what is not. Cultural norms and legal systems change for better and for the worse. But, it should be noted that anyone can steal and borrow both our hard technology (plans to a nuclear plant) and our soft technology (culture).

Our culture that lynched blacks, castrated gays, and caused wars and devastation has changed dramatically for the better. Asian culture has and will evolve as well, so we must avoid assuming that the rise of China is a temporary event – inevitably to be set back by the realities of their lack of a liberal democracy. China Economic Quarterly made a point recently that the west has been predicting the demise of China for more than 20 years and that has not yet materialized (thought it does not mean it will not).

Between 1880s and 1950s, many educated and intelligent people believed that the World would move from capitalism to socialism. The tremendous progress made by the Soviet Union and then China in improving the welfare of their people seemed to signal that a centralized and powerful state would beat out a decentralized and less organized Western Democracy. Yet, the revelation of the excesses of Stalin and Mao along with the collapse of their economies laid bare the failures of that system, With the fall of the Berlin Wall, the victory of liberal democracy over communism that was not at all obvious in 1930 or 1950 became self-evident.

But what if we are wrong? What if the Chinese governance model of a strong state and the interaction of government bureaucracy, state owned enterprise and government officials is actually a better model than universal suffrage and representative democracy?

China’s rise is still confounding many researchers. It goes against the narrative that without liberal democracy, a nation inevitably collapses due to corruption and nepotism. Xi Jiping’s 3 and half hour speech in 2017 on growing Chinese power and their preparations to open their economy, invest in clean energy and engage the world would not have been imaginable 40 years ago. His shorter version at Davos hit many of the same critical points. Many western commentators still write it off as a ploy and that the country actually has little intention of doing what it says. The west seems to confuse what we want from what is and this can be a deadly mistake. With 6,8% growth in China and a stable political system that is generally well liked by its people, it is becoming less and less obvious who will collapse first – the West or China.

This interesting talk outlines how the Chinese political machine works:

One of the reasons the West continues to culturally dominate the world is the narrative of freedom and democracy. We can rightfully claim that our rule of law and low(er) corruption levels will carry us in the long term as investors and people prefer to live and be members of a society where they are not subject to arbitrary decisions by government officials. However, our story is starting to show cracks at the seams.

The United States, the most democratic country in the world, has severely overextended itself in the Middle East and its internal infrastructure is crumbling. Additionally, its continued problems of racism and the mass imprisonment of millions of its citizens is undermining its ability to convince anyone, let alone China, that it has the right political and economic model. The capture of Congress and even the presidency by lobbyists and powerful interests makes it difficult for anyone to believe that the US is less corrupt than the average country. Additionally, the US has lost a great deal of support in the developing world as its proposed solutions for development, offered through the World Bank and the IMF have failed to deliver real gains for citizens. More and more countries are looking to China’s model as an option for development.

Speed of delivery is a core part of the satisfaction of the recipients. From the mundane to the geopoliticical, speed matters. Domino’s Pizza is famous for its commitment to deliver your Pizza in 30 minutes or its free. Despite mediocre pizza, this time limit made Domino’s into a financial success. At the national level, the speed of the reforms politicians deliver is just as important as the type or reforms.

At the U.S. Republican National Convention during the 2012 US election campaign the Hollywood actor and director Clint Eastwood improvised a skit. He stood on stage, in front of the nation and talked to an empty chair. He rambled about the lack of progress and lack of change for the American people. The imaginary chair represented Barack Obama.

At the time, everyone mocked Eastwood for an incoherent speech, but looking back on it may have been prescient. Obama did make progress, but for a few reasons the progress he made was marginal and slow. No significant metric in the US moved significantly – education, infant mortality, social mobility or disposable income. Some people received cheaper college and some people got insurance, but in the grand scheme of things it was too little, too slow to stop the rise of Trump.

Speed is of course a double edged sword. You can move fast in the wrong direction and part of the reason we endorse representative democracy is to avoid fast decisions made by one person that lead to disaster. However, as more and more countries are turning towards the Chinese approach of making big and relatively fast decisions on a 5 year scale and using state tools to accelerate implementation – notably State Owned Enterprises. Western commentators often brush this off as a desire for third world leaders to clamp down on opposition and that China is simply offering them a dictatorship model, not an economic model. However, I think that more and more countries are looking seriously at the type of State Capitalism that China has demonstrated and saying – why should we outsource our projects and thinking to western companies and institutions? We need to build up our internal capacity and remain independent. It is of course much more complex than this, but at a high level, Western development models have hit a brick wall and the past poster children of our development models – South Africa, India and Brazil – have seen their rise stall.

If we cannot deliver economic growth to developing countries, at least we can show them the moral high ground of democracy and freedom, right? Yet, our moral high ground (which was dubious to start with is eroding due to our wars, growing nationalism, refugee crisis handling and high incarceration rates in the US. If the West loses its moral high ground it will be near impossible to counter Chinese political and economic initiatives in the developing world. Countries will increasingly turn towards a Chinese type model of a strong state, large state owned companies and limited individual freedoms and liberties.

Yet, the recurring response to all this is that the West will rise again. That our system of governance, imperfect though it may be, offers the greatest freedoms and the greatest opportunities for individuals to create value for society. That, despite our challenges, we will rise again and hold high the light of liberty that all humans desire. This is a dangerous strategy. Many empires and ideologies thought themselves better than everyone else and then crumbled. The West’s wealth is primarily built on technical innovation (steam engine, …) and a bit of exploitation of people (slaves) and natural ressources (colonies). We are still living of our lottery ticket from 1700 when we invented the steam engine, extracted natural resources and colonized the world. What happens when we use up our winnings?

There is no doubt that an overhanging question that remains for the great Chinese expansion is, “Can you develop a society with rule of law and low corruption within a one party system?”. In concept it would seem not. An independent judiciary requires a political system that is not beholden to one set of people. Yet, the Chinese Communist Party is a party that has changed dramatically in since its inception in 1921. It has gone from a Soviet allied party to the Great Leap Forward that tried some pretty insane things and then to the Cultural Revolution that attempted to put farmers in prestigious universities and now to a form of state(s) directed and dominated market economy that is focused on technology and science advancement. China has shown a tremendous ability to change over the last hundred years. The west has not, though our civil liberties have greatly improved, our political institutions are basically unchanged since 1776.

Political systems aside, there is one trump card: technology. At the end of the day, all other thing aside, the rulers of history had the best technology – the best tools for farming, for production, and for war. As Vladimir Putin recently said, “the country that controls Artificial Intelligence, will control the world.” If the West wants to stay competitive, let alone rule, it needs to dramatically accelerate technological innovation and its deployment into society. We know what we need to do – autonomous vehicles, AI, hyperloops, better food production, space travel – the governments need to have the courage to invest and to act. I fear that our governments do not have that courage, the fear failure more than they believe in the potential for big projects to pay off. If we can say one thing that is without debate, the Chinese communist party believes in doing things on a massive, massive scale. From high speed rail to electric cars and AI, when China decides to go big, it goes very big. The next economic revolution is coming and it is not clear the West will lead.

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Useful articles on China

A Chinese Empire Reborn – The New York Times
Brrr … Xi’s short-sighted pollution policy goes up in smoke
What to do about China’s “sharp power” – Sunlight v subversion
Do you still want to bet against China?
Year 2018 in China
Behind the Fall and Rise of China”s Xiaomi
The traditional Chinese dance troupe China doesn’t want you to see
China’s Top Ideologue Calls for Tight Control of Internet
Maybe China Can”t Take Over the World
Wang Huning: China’s Antidote to Strongman Politics
The Western Elite from a Chinese Perspective – American Affairs Journal
China Busts a $3 Billion Underground Bank as It Tightens Its Grip on Money
China Looks to the Dumb Money for Its Financial Industry
China”s Quest For Clean Air Could Hit You in the Wallet
What a debt crisis in the provinces says about governing China
4 Attitudes of Chinese Young Women Impacting Their Lingerie Preferences | Jing Daily
Pollution curbs set to make skies clearer – China – Chinadaily.com.cn
Air Quality in China: Improving But Still Not Healthy
As Trump turns his back on the world, the stage is set for President Xi | Larry Elliott
China’s Silk Road Illusions
Opinion | Will the Next Steve Jobs Be From China?
We are obsessed with Brexit and Trump: we should be thinking about China | Martin Kettle
Xi Jinping heralds “new era” of Chinese power at Communist party congress
China’s Electric Car Push Lures Global Auto Giants, Despite Risks – The New York Times
The future China chooses will dictate the future of the planet
China encourages environmental groups to sue polluters
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“You should consider our feelings”: for Chinese students the state is an extension of family | Merriden Varrall
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China”s Asian Dream
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As Hong Kong Chooses Its Next Leader, China Still Pulls the Strings
China Poised to Take Lead on Climate After Trump’s Move to Undo Policies – The New York Times
China to Plant ‘Green Necklace’ of Trees Around Beijing to Fight Smog – The New York Times
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“Half these apartments are empty”: Mao’s former home city struggles with growth
China Pushes Legal Overhaul That Would Bolster State Power
China’s Plan to Build Its Own High-Tech Industries Worries Western Businesses – The New York Times
Chinese premier declares war on pollution in economic overhaul
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China”s premier unveils smog-busting plan to “make skies blue again”
Beijing is replacing its entire taxi fleet with electric cars to fight pollution
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China”s Outstanding B2B Invoices Grow | PYMNTS.com
Selling your software in China
What’s Causing Those Capital Outflows From China: QuickTake Q&A
China “eliminating civil society” by targeting human rights activists – report
Why Europe Is Warning of Pax Americana”s End
How Xi Jinping”s global ambitions could thrive as Trump turns inward
Getting Money Out of China: The Reality Has Changed | China Law Blog
SaaS in China: The 101 | China Law Blog
Selling Software as a Service (SaaS) in China
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Watch Out For Saas Startups in Asia[:]

[:en]Business Books for Scaling Up a Successfulish Startup[:]

[:en]When I started Nimonik in 2008 I had read some key books on business and software. Nimonik is my main occupation and our stated goal is to Improve the world by helping businesses comply with environmental, safety and quality regulations. We offer a software as a service and now help over 500 companies track and comply with both regulations and internal standards. Though we are doing well, the company is still in its infancy.

Many of my friends think I know what I am doing and they ask me about their business ideas or how to get started. To help, I thought I would discuss a bit of the knowledge I have acquired and that now helps Nimonik grow sustainably. Ten years ago, I blogged that books such as Good to Great and Getting to Yes were respectively helpful in understanding leadership qualities of great CEOs and negotiating tactics for getting deals done. Both of those books were critical to what we have done at Nimonik. Another key book that helped us start was the 37Signals book on developing software, Getting Real. The book and blog posts by 37Signals came to my attention prior to starting Nimonik and they had a major impact on our choice of the programming framework Ruby on Rails and our approach of building clean and focused software based on the user’s real needs. For anyone looking to start a software project, I think Getting Real is a critical book to read.

10 years after I first blogged about Good to Great, I have learned a lot and made many mistakes. Starting a business is one thing, growing it is way harder! Nimonik was a tiny and fragile operation between our start in late 2008 and 2013, we were focused on securing key clients and slowly growing our operations and our product. In retrospect, we probably underinvested in the company and this hampered our growth. When we started, my two partners and I put in $25,000 and started with two clients who provided revenues of about $40,000 per year. However, the counter point is that had we taken in more investment, we likely would have wasted more on the mistakes that we did make. Who knows!

Starting in 2013, the company started to pick up steam and we have seen a doubling of revenues nearly every year since then. In 2016 we acquired a Toronto based company that was both a supplier and a competitor and in 2017 we acquired a company in China that had good market penetration there. Both of these deals were primarily equity swaps and the book Getting to Yes and its companion book, Getting Past No, were instrumental in our negotiating tactics to obtain a fair deal for all the parties involved. This KMPG webcast, Why most Acquisitions Fail has been very helpful for our integration of the two companies we have acquired. These books were all critical to keeping us alive, but growth was another challenge.

Starting in 2015-2016 we started to have growing pains. Staff turnover was higher than we wanted and team members were struggling to adapt to a small organization that was growing. I must admit that I was underprepared for growth and struggled to figure out what type of leadership I should offer, what I should prioritize and how I could delegate responsibility. Happenstance is a critical part of life. I regularly play hockey and though I must admit to being a fairly poor player, I believe that everyone (and especially entrepreneurs) should engage in regular team sports – it really helps clear the mind and it sets a weekly pace with regular games. One day, in the hockey dressing room one of my teammates mentioned an entrepreneurs club he was part of and I explained some of my challenges. He recommended a book, Scaling Up.

I read the book fairly quickly after the meeting and it opened my eyes. For any entrepreneur who wants to grow their business, I cannot recommend it highly enough. In contrast to many business books, Scaling Up is very actionable and clearly explains the four critical parts of a successful operation.

1.  Attract and keep the right people : People

2.  Create a truly differentiated strategy : Strategy

3.  Driving flawless execution : Execution

4.  Having plenty of cash to weather the storms: Cash

Though we have not yet implemented everything in the book, we have clarified our mission, our values, improved our cash position and improved our retention by leaps and bounds. There is a good summary of the book here. Through the Scaling Up Newsletter (which I very highly recommend), I was put onto other critical books.

Confessions of a Pricing Man is an amazing view into the world of pricing. At Nimonik, we feel regular pressure from certain clients to reduce costs and with other clients we see opportunities to offer more services at higher prices. Our challenge has been how to price our services to maximize our profit and minimize lost opportunities. This book is a must read for anyone running a business. If there is one message it hammers home, over and over again, it is that you must focus on profitability – not revenues. This same message was passed along to me by one of my uncles a few years ago.

My uncle was a mid-level manager at a company in France. The company built and sold systems for train navigation to the French national railway company (SNCF) and to many metro systems in France. He worked there for many years and at a certain point, the owners of the business wanted to retire. It was a family owned business and my uncle, having been a manager and having raised a family did not have a large investment fund he could use to acquire the business from the owners. However, he had made a critical insight into the business, the French rail and metro companies were tied to this supplier. This supplier’s products were the best on the French market, having been developed by the French military and it would be very challenging for the French rail companies to switch suppliers. This meant that the rail navigation supply company he worked at had pricing power which it was not using. My uncle ran around and gathered as much money as he could and even then it was not enough. He explained to the widowed owner of the business that he could not pay the price they wanted, but that he could pay out of future earnings. Remarkably, she agreed.

After the acquisition, my uncle simply went to their customers and informed them of a substantial price increase. Of course, they objected and fought. He held firm and informed them that they could simply purchase other products if they wished, knowing full well they could not easily do this. Eventually, the customers agreed and overnight, the business became highly profitable. He then went on to sell the business a few years later and he intelligently played two potential acquirers against each other. He leveraged the French-German rivalry of the acquirers to get them to outbid each other and he increased the purchase price of his company by over 50%!

Of course, this all sounds very easy in retrospect, but it took good timing and smart moves. He had worked at the company for many years and so he knew the industry and the owners, he was at the right place at the right time and he had the courage to increase pricing overnight. My uncle always told me, “Profits are all that matter, not revenues.”. Confessions of a Pricing Man propounds the same message and offers fascinating examples of different markets, businesses and strategies to improving the profitability of companies.

The last book to mention is Mastering the Complex Sale. This book outlines what it takes to make sales to large companies with committees, competitive bidding and complex and imperfect decision making processes. At Nimonik we sell mostly to mid and large organizations – L’Oréal, FedEx, Bosch,… and though our contracts are relatively small – $5,000 – $80,000 per year, we are faced with complex decision making and conflicting priorities from our clients. Our sales strategies and tactics have been developed mostly by trial and error and gut feeling. We tried more and less aggressive tactics, more or less phone calls, more or less email, and a variety of permutations in between.

To date I have been responsible for most of the larger deals we have signed at NImonik and as I tried to scale our sales operation I kept hitting a wall with the sales team. They could land smaller contracts, but the larger, more complex contracts kept coming back to my desk. It was partially domain knowledge, but I could tell it was more than that. I tried training, explaining and doing problem shooting with the sales team, but it did not stick. They kept asking me questions like, “How do I gain the client’s trust?”. This question baffled me, I would simply reply, “By being trustworthy!”, but that was not enough. We needed a how-to guide for the sales team.

The book, Mastering the Complex Sale is the best framework for larger complex deals that I have found and we are starting to implement it at Nimonik. Here is an excellent summary of the book here, which states,

A smarter way to sell transforms the conventional sales pitch that customers must endure into a high quality decision-making process that customers value. It transforms salespeople from predators into valued business partners in the customer’s mind. It transforms the sales process from premature presentations to a process of mutual confirmation. And it transforms the conventional solutions-based, seller-first approach to sales into a diagnostic-based, customer-centric approach. In fact, a smarter way to sell, Thull [the author] persuasively argues in Mastering the Complex Sale, is to stop selling in the conventional sense and adopt a practical proven approach called Diagnostic Business Development (or the Prime Process).

There are other great business books that I have read recently, such as Double Double, High Output Management, Only the Paranoid Survive and Epic Content Marketing. However, if you are in a decision making position at a company, whether it is your own or someone you work for, I think that the three books mentioned above are the most powerful and actionable business books I have found so far. My colleagues, who completed MBA programmes at prestigious schools agreed that they probably could have skipped MBA school and simply read those books – it certainly would have been a lot more cost effective!

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