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Is globalization fuelling inequality?

Posted By Felistus Mbole, Friday, June 14, 2019

Felistus Mbole a member of our Emerging Fellows program investigates the impact of globalization on inequality in her fifth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

The wind of globalization has been blowing for decades and digital technology is fuelling it. The world is more interconnected today than at any other point in history. There has been a significant increase in free trade and cultural exchange. Cross-border trade deals between both private sector players and national governments form part of everyday news. What are the economic implications of this massive level of interconnectedness? What does globalization mean for inequality?

 

Technology has created a connected world where opportunities are shared. Globalization is the integration of markets. National boundaries have become more porous to goods, services, capital, and people. While some boundaries remain physically closed, this does not hinder flow of capital, services, and data. Social media applications like Twitter has particularly accelerated movement of information. The last couple of decades have especially seen a marked growth in cross-border exchange of human capital. The increasing use of sophisticated technology has generated need for specialised skills which are globally limited. Organisations are able to hire such technical services globally. Supported by internet connectivity, technical service providers do not need permits to work in particular countries. They can permeate national boundaries by providing their services virtually.

 

Who are the winners and losers from globalization? Globalization doesn’t seem to be benefitting everyone. Currently, there are an anti-globalization campaigns and policies in countries that view themselves as benefiting the world at the expense of their national interests. Offshoring of certain aspects of business to developing countries has enabled them to participate in global supply chains, positively contributing to their economic growth. On the other hand, labour has tended to flow from the less developed to developed countries and capital in the opposite direction. Developing countries have therefore benefitted most from globalization compared to the more developed ones. The effect has been decreased inequality between the global north and south.

 

Nevertheless, it is only the economically productive developing countries that benefit from joining global supply chain. The less productive ones that are simply an end market for goods manufactured in other countries. For instance, India and China are big beneficiaries of globalization currently. However, many countries in Sub-Saharan Africa continue to lag. The less skilled segments of the population, both locally and globally, are being left behind economically, widening the inequality divergence. Globalization is clearly a tide that is not lifting all boats.

 

What does this mean? The perceived inability of globalization to create mutual benefits could lead to political tensions between countries as seen currently between the United States of America and China. Trade wars and related conflicts could emerge if these perceived imbalances are sustained.  Trade has been shown to be the greatest driver of economic success and thus the convergence between developing and developed economies. Policies aimed at enhancing human capital through broadened access to quality education and healthcare, and reducing barriers to trade could reduce global inequality.

 

Globalization is a good thing. As the ageing economies such as Japan and parts of Europe start to fall short of the labour that is needed to drive their economies, Africa will be experiencing its demographic dividend. The world’s labour can be developed and effectively harnessed and distributed to benefit everyone. This is only possible if the wind of globalization continues to blow unabatedly.  

 

© Felistus Mbole 2019

Tags:  economics  globalization  inequality 

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What’s Cash?

Posted By E. Alex Floate, Tuesday, June 11, 2019

Alex Floate, a member of our Emerging Fellows program examines the concept of cash in a global digital economy through his fifth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

Adam Smith suggested over two-hundred years ago that all money is nothing but a matter of belief. Even with the complexity of today’s economic and monetary systems, it still appears that Smith was right. We believe money has value and that value will be accepted by others. Even commodity-based money systems, such as the gold standard, relied on belief that the commodity is of value and exchangeable for other goods or services. Belief, value and trust is what composes our money.

 

Currently governments serve the function of guaranteeing trust that money is worth the face value printed on it. That as legal tender it is exchangeable for other items of value. This trust and value placed in currencies is based on the belief of the economic and political stability of the country. Some currencies, such as the US Dollar have greater belief entrusted to them and are used more widely than others for both legal and illegal transactions; the USD accounts for more than 85% of currency conversions on any given day. Despite predictions of impending doom of the US Dollar due to quantitative easing during the 2008 recession, those moves by the US Treasury bolster the status of the dollar as it demonstrates the willingness of the government to protect the Dollar based economy.

 

Exchanging money can be simple when the other person is standing in front of you and can be easily handed the preferred legal tender. Try to transact across distance, or with large sums, and gatekeepers to the money will necessarily become involved. These include the treasury that issued the money and create the rules for the currency, the banks or institutions that will carry out the transaction, and the institution that receives or sends the money depending on whether you are the buyer or the seller. 

 

Each of these institutions, in addition to having the mechanisms and expertise to conduct the transaction, are also part of the trust mechanism that ensure the belief in the currency remains intact. However, all these gatekeepers create friction in the system that increase the costs of transferring value. Technology can be key in removing those frictions, but current financial interests who profit from this friction will do their best to maintain the status quo. Smokescreens that create the illusion of digital currency will become more common, but the call will most likely remain for the US dollar to remain the universal currency.

 

But in a global digital economy who will be the new gatekeepers? Though legal tender is the property of the issuing country, value stored in the money is not the property of the government. Value can be exchanged by other means, such as digital currency or credit in exchange for value. A future where Alibaba or Amazon trade in their own currency, with employees and contractors exchanging their value for credits on account, is not that far outside the realm of possible.  

 

A threat to both traditional means of exchanging value and potential new universal currencies are the rise of nationalist and tribalistic movements across the globe. If these movements win out physical and digital borders will become hardened, networks will be splintered, and markets fragmented. In this situation where will innovation come from, and how will value be held and exchanged? Those organizations and individuals with technical knowledge and savvy will be in the best position to navigate and profit from this situation. Those outside of this group may find themselves with either diminished ability to easily transact with the new digital currency or be at the mercy of a new set of gatekeepers, who have ‘digital collars’ instead of white ones.      

 

© 2019 E Alex Floate

Tags:  cash  digital economy  economics 

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In a digital economy will the abundance of data fuel a golden age of wisdom?

Posted By Paul Tero, Thursday, June 6, 2019

Paul Tero a member of our Emerging Fellows program examines the possibility of building an age of wisdom in the digital economy. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

Knowledge in action. Sagacity. Percipience. Having experience, knowledge and good judgement. These words and phrases all describe and define wisdom. But will an abundance of data lead us to a golden age of wisdom? Will a richness of facts and figures, statistics and evidence lead us to a never-ending harvest of good judgement?

 

If we give credence to the DIKW (data, information, knowledge, wisdom) information science hierarchy, the answer leans to the affirmative. For with this framework, the following is the pattern: firstly, an abundance of data certainly leads to a wealth of information, or descriptions, about a plethora of matters. Which should, in turn, facilitate a breadth and depth of knowledge that is available for teaching and mentoring at a level unsurpassed in human history. Where the fruits of expertise, of mastery and of prowess collectively form this knowledge. And where this teaching and mentoring is an enabler to all people across the world regardless of the strata of society in which they sit. Where all of this upward flow of data, information and knowledge leads, finally, to a culmination in a golden age of wisdom. A time of good judgement and wise action.

 

But is the preceding flow true if we use a different time horizon? This piece you are reading is written for a timeframe of several decades into the future. What if you and I were to wind the clock back several decades to a time where “today was that tomorrow of several decades into the future”? Comparing this “back-in-time today” to the “current-time today”, is the latter enriched with an abundance of data? Do we, in the “current-time today” have a wealth of information about a plethora of matters compared with the times past. And thirdly, with respect to the current times, do we not have the ability, through information and communications technology, to teach and to share the fruits of expertise globally?

 

The argument can be made that we are better off today than yesterday. That we are wiser, that we have made sound judgements. While there is so much more to do, we can point to improvements in economic and physical health across the globe. We can make mention of the reduced rates of nation-state armed conflict and of improvements in education. But as we cast our eyes forward, will the teenage grandchildren of today’s teenagers be enveloped in, and benefit from, a milieu of experience, knowledge and good judgement? Consider the following two scenarios.

 

While matters of family are a common thread, that young woman in Asia, on the cusp of adulthood, may well have a personalised AI avatar to guide her through career and social choices. Offering her advice that could be heeded. And what-about that young man? A product of his Western heritage, looking to develop a career in the physical trades, finding his options don’t include the routine work he desires. Just like he was told throughout his schooling years.

 

In both cases, wisdom is offered but not infused. The prospects are that tomorrow will be just like today. Today we have that abundance of knowledge and the capacity for wise outcomes. And tomorrow? Our knowledge will have grown, we’ll have intelligence on hand and our capacity for delivering wise outcomes will be enhanced, but whether or not our results reflect these well-developed inputs is surely debatable.

 

These same arguments can be made regarding the generation of these teenager’s parents. Regardless of whether they live in Africa, the Sub-continent or in the Global North, one can imagine these parental pillars of society having responsibility in business or in policy making. Where the leaders in business are bound to a then long-established fiduciary duty to consult digital oracles. Where the policy makers can freely receive a finely curated harvest of good judgement.

 

Again it plays out in these two cases, decisions not quite fully imbued with the wisdom on offer. For across all four of these vignettes witness a surfeit of data, of information and of knowledge ripe with judicious potential. But where the consumption of this particular fruit is not universal. And the common denominator? What stands in front of this golden age of wisdom is surely our inherent human nature.

 

© Paul Tero 2019

Tags:  data  economics  wisdom 

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Can a Company with No Assets Attract Investment?

Posted By Charlotte Aguilar-Millan, Monday, June 3, 2019

Charlotte Aguilar-Millan checks the possibility of attracting investment in the Information Age through her sixth blog post for our Emerging Fellows program. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

The 21st Century has long been coined The Information Age. There has been a dramatic growth in the use of information technologies. A benefit of the new technologies is that there is a lesser need for tangible assets. Companies can now be successful with only the use of a laptop and an innovative idea. However, for most companies, whether they have assets or not, funding is required at some point within their lifecycle. How has funding changed with the rise of companies with no assets? Take Facebook, Alibaba, Uber and Airbnb as an example. They each do not hold on their balance sheets the assets from which they generate revenue.

 

A small to medium company (SME) can see many routes to growth through funding, but how many of these are open to companies that do not hold assets? The quest for funding of a company with no assets is likely to contain many refusals. The most obvious route for an SME is to take out a bank loan. This, however, requires collateral which a company with no assets does not have. A bank manager cannot reclaim the loan if the SME defaults as there are no assets to sell off. This provides a risky investment for banks. In the US, for example, only 1 in 4 small business loans applied for were accepted in 2018.

 

The two ways in which a company can raise cash is through debt or equity. Therefore, the next option is to look at listing, be this on the main stock exchanges, FTSE 100 for example, or exchanges designed for smaller companies such as AIM.

 

However, in order for a company to list on an exchange, they will likely need an appointed Nominated Advisor, financial and legal assistance. All of this requires cash which is what the company with no assets is seeking to find; not what is already has.

 

An alternative to the company with no assets attracting investment is for their owners to take out personal debt to put into the company. This could be in the form of taking out a mortgage against their personal home. Not only is this route extremely risky; if the company fails then they might end up homeless. This also is only an option when the owner has a home without an existing mortgage. Within the UK, the average age of first-time buyers were 31 years old in 2017 nearly 10 years older than a generation ago. 

 

A final way in which a company with no assets can attract investment is to speaking to that long lost rich Aunt. This itself speaks of rising inequality within the economy. The Information Age has enabled entrepreneurs to discover their vision without the high purchasing costs of tangible assets. However, finance has not kept pace.

 

Finance is restricting the mobilisation of companies with no assets. If the SME owner is not already established with a pot of savings or a house which the banks are willing to re-mortgage, growth can be limited. To the question, can a company with no assets attract investment, the answer is dependent upon the Company’s socio-economic background. This inequality is limiting innovation. 

 

© Charlotte Aguilar-Millan 2019

Tags:  economics  finance  investment 

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In a fully digital economy, will you need the same things as you do today?

Posted By Administration, Monday, May 6, 2019

Paul Tero a member of our Emerging Fellows program thinks that in a fully digital economy we won’t be needing the same things as today, but we will be needing the same types of things. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

We produce goods and services and we trade in those goods and services because we either want them or need them. There is a market for them. But in the decades ahead, in a market of bits rather than of atoms, will we still be using the same things we do today? From a final consumer perspective, will the digital economy of the future be unrecognizable compared to today's economy?

 

Consider the retail sector. Where it’s all about the creation and trade in products for the home, for our relaxation, for our sustenance. Or the business sector, where that same dynamic of creation and exchange can be used to drive innovation, to improve operational efficiency, or to maintain a market profile. Or even the public and the not-for-profit sectors, where those same market mechanics apply. That is, in order to provide services, products are purchased. And where nascent product creators are supported.

 

Reflect too on the structure of this global production and trade system. At over $80trillion dollars, the global economy is broadly comprised of agriculture (primary activity) at 3%, industry (secondary) at 30%, and services (tertiary) at 60%. An important factor in all of this are the sources of government taxation. A third of government revenue is from income, profits and capital gains and a third from taxes on goods and services.

 

Assuming ceteris paribus, in the coming decades you and I will still have need for shelter, for food, for companionship and relaxation. The same argument can be made for business, for government and the third sector comparing the needs of today and tomorrow. Of note, however, is the form through which the need is satisfied. We no longer desire, for example, to take our family in a horse drawn buggy on a holiday to the sea-side, or to join with family and others to around a wireless set listening to the latest play. Nor do businesses require a typing pool for the efficient production of company memos and customer missives.

 

Nowadays digital channels of communication are usurping long establishing temporal forms of connections. Nowadays, micro-targeting of marketing messages is more effective at driving trade in goods and services than legacy mass media. Nowadays, there is a greater level of involvement and transparency with those that are served by the public and third sectors compared to times past.

 

And tomorrow? Through a utopian lens we could see life being further enhanced by digital technology. It could be argued that just like today, where a life stage for an adolescent is marked by receiving a smartphone, that same transition for a teenager in 2050 could be celebrated by receiving their own life-enriching wearable AI tech. A world, for this teenager, where the uncanny valley is no longer a limitation in media and entertainment channels. A world, as teenagers look at the career paths of their parents, that is dominated by the output of firms that have put a high priority on employees with first rate people skills and thinking skills.

 

Likewise, through a dystopian lens, life for that teenager in 2050 could be one that is further controlled by digital technology. AI implants mark the adolescent life transition. Options for entertainment and other daily choices are slanted toward optimal social outcomes. Beckoning career paths are with firms that are aligned with forms of surveillance capitalism.

 

The threads that are common to both scenarios are the changes in social structure and the innate desire to make things easier for ourselves. Over time our social institutions change and the people to which we ascribe status. It could be argued that in recent history major sport clubs and/or political parties have supplanted religious groups as our common social institutions. It could be that the realm of the AI and quantum computing scientist and engineer becomes the new sanctum. A new standard of social acceptance that leads to the erasure of the barrier to all forms personalised AI tech.

 

Regarding the desire for making things easier, the so-called “efficient transaction hypothesis”, witness the smartphone. We embraced it because it made complex or time-consuming tasks (personal transactions) more efficient. It made communication easier, information gathering easier and entertaining easier. A significant factor of human nature that will drive the future acceptance of technologies that we perceive today as pervasive and distasteful.

 

In a fully digital economy we won’t be needing the same things as today, but we will be needing the same types of things. The world of atoms meets our needs today; the world of bits will meet our needs tomorrow.

 

© Paul Tero 2019

Tags:  digital economy  economics  service 

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Can Disembodiment Fuel Equality?

Posted By Administration, Friday, May 3, 2019

Charlotte Aguilar-Millan examines the effect of disembodiment on equality in her fifth blog post for our Emerging Fellows program. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

The gig economy is often hailed as the future of work. It offers more flexibility than standard roles to both employee and employer. It offers greater independence. It offers more variety in roles. Yet with all these benefits, the workforce is experiencing inequality within corporations that is increasing exponentially. Over the past decade in the UK, corporations have seen CEOs’ earnings in the FTSE 100 increase four times as much as national average earnings. It is much higher in other countries including the US. It is little wonder that employees are seeking to take more ownership through contracting or temporary work. Employees do not want to represent corporations that demonstrate eye watering CEO pay and lavish corporate greed. Examples of this were seen during 2018. This includes Credit Suisse’s CEO who received a 30% pay rise whilst the share price fell by 38%.

 

Progress, however, has been made in legislation for greater transparency. From January 2019 within the UK, legislation now requires disclosure of the CEO to employee pay ratio for all companies employing over 250 staff. The inequality within one’s own company can now be brought to light. This will enable easy comparison of companies to measure inequality.

 

Such transparency has already caused staff to act. The CEO of the Financial Times, John Ridding, received a 25% pay increase in 2017 to £2.5m annual salary. Staff within the Financial times, were made aware of this and a revolt took place which saw his salary reduced to less than £1.2m in 2018. Progress in transparency reporting has enabled both consumers and employees to demonstrate their discontent with excessive boardroom pay.

 

This does not solve inequality in companies with no employees. Examples of this include UberEats and Deliveroo who will not fall under this legislation. They have few staff as they resource through contractors rather than staff. For globalised companies whose staff are often located separately from the client, such as Upwork or Gigster, there are no reporting requirements on transparency. Gig work provides no safety nets that accompany being an employee. This includes medical insurance, parental leave or pensions. Legislation has not placed a responsibility on companies to provide these benefits. Unions have developed to protect the gig worker. In February 2019 the union GMB agreed a deal with Hermes, a delivery company, to give enhanced rights to gig workers.            

 

There are other industries from which inspiration can be sought. Acting, historically, has been an industry with many employees on short term contracts. To future proof their careers, the Screen Actors Guild Benefit Fund allows actors to pay into a progressive form of union. This provides a safety net for insurance and healthcare by gig workers earning credits each time they work that are used to contribute towards healthcare and retirement funds. However, organising a global contractor workforce who are located globally is difficult without the contracting party’s support. The gig economy represents a work force who have different expectations in working conditions.

 

It is up to legislators to protect the disembodied workforce. Disembodiment can fuel equality if the appropriate support is in place. Disembodiment gives the worker control over how they work in a way that employment cannot offer. Legislation is being considered to ensure the advantages of disembodiment are equally shared. As detailed in the Taylor Review of working practices, disembodiment benefits need to be two ways. Therefore, two-way flexibility should be in place. This could take the form of holiday pay, healthcare fees, and retirement funding. In this way disembodiment could fuel equality.

 

© Charlotte Aguilar-Millan 2019

Tags:  disembodiment  economics  rights 

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How much of our stuff is Stuff?

Posted By Administration, Tuesday, April 23, 2019

Tim Morgan publishes his fourth blog post in our Emerging Fellows program. He assumes that the digital ecosystems are leading us towards a new form of autonomous capital. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

Virtualizing the real world through abstractions is as old as humanity.  Stories helped humanity thrive for tens of thousands of years by virtualizing knowledge about the world in a way that could easily be shared and remembered. The Sumerians of ancient Mesopotamia created the oldest known writing, Cuneiform, over five thousand years ago. Scribes recorded everything from astronomical calculations, to sales transactions, to battles, to ownership records, and lineages. They recorded significant stories such as The Epic of Gilgamesh and the great flood story Atrahasis. Over a thousand years later King Hammurabi of Babylon wrote one of the earliest and most complete code of laws. Much later Gutenberg created the printing press, which ultimately broke the elite stranglehold on writing and literacy. This in turn lead centuries later to the Enlightenment and the modern era.

 

Humans have virtualized experience by encoding it wherever they could via every means available, from pre-history to modern day. We have now expanded that virtualization via digital information technologies. We encode and store vast quantities of information, moving it around the world at will. Users upload over 300 hours of video a minute to YouTube, and individuals watch over 5 billion videos on their website every day. That is just one example. Development of information technologies is being driven by a very old human need to record.

 

What is new with digital technologies is execution. Ancient stories recounted person to person empowered action via hard won storified knowledge. Writing allowed civilization to further develop via persistent storage of accumulated knowledge. Printing allowed us to grow more complex societies by capturing more knowledge and widely distribute it. At each step, virtualization allowed us to manipulate the world in more complex ways. Our ancestors were living information processors. They transformed virtualized knowledge in the form of stories, writing, and print into actions.

 

Use and control of property has always had a virtualized information component. What is unique about digital technologies and automation is that humans are no longer the sole processors of information for creating value. We learned a clever new trick: how to encode our decision-making capabilities into our machines. We have created a new level of abstraction, one where not only information is virtualized via encoding, but the process of use itself is virtualized in the form of applications and networks. Digital automation is a form of virtualized human judgement.

 

This is increasingly tipping the balance between the value of things and the value of the knowledge about things. Farming was the foundation stone of early capitalism and government. It relied on human judgement, and human muscle. Today it is a technologically intensive enterprise. Modern farms heavily rely on GPS-guided autonomous robots, which still happen to be called tractors. Experienced farm-hands once drove the tractors. Now the tractors are the farm-hands.

 

Even purely virtual economies have arisen with the rise of digital information technology. The online battle game Fortnite made a profit of over $2.4 billion dollars in 2018 purely off the sale of virtual goods like character “skins” and clothes. Other games like World of Warcraft have thriving black-market economies composed of gold-farmers who sell in-game currency for real currency.

 

Virtualized knowledge and judgement are increasingly becoming the key source of new value across all economic sectors. This is creating an unprecedented situation. The physical value of capital is being superseded by its informational value. We are beginning to mimic how nature creates abundance via biological ecosystems. We are creating new interactive digital ecosystems of virtualized information and decision-making entities which are connected to real things. As they become more autonomous agents, more of our digital infrastructure will shift to become a digital ecosystem.

 

Capitalism and markets are facing a new era, one they created but not one they expected. It will be dominated by the ecosystem-like complexity of increasingly autonomous information entities blurring the lines between real and virtual goods. We are instilling a technological version of our anima into what was once passive capital. Ultimately, we may be evolving a new form of autonomous capital. The question remains, will markets co-evolve with it or will they transform into something else?

 

© Tim Morgan 2019

Tags:  capital  digitization  economics 

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In a fully digital economy will the dollar still be king?

Posted By Administration, Thursday, April 4, 2019

Paul Tero a member of our Emerging Fellows inspects the supremacy of dollar in digital economy in this blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

We trade in what we value. Whether it be a young child trading a small coin for a sweet at a corner store, the consistent portion of a wage over many years in exchange for a house, or the complexity of financial transactions to fund a manufacturers expansion. If we value something we will participate in a fair exchange with the seller.

 

We are all aware of the barter economy, of an era long past, where that form of trade was the primary mechanism to establish fair exchange between parties. Over the course of time it was hard currency that first supplanted this ancient mechanism, then promissory notes, until now where digital representations of cash are the means through which value is exchanged fairly.

 

Also today, it is a sovereign currency, the Dollar (or Euro, Renminbi or Yen) if you will, that is king. It is this fiat currency, this legal tender of value backed by an issuing government that is implicitly trusted so that we can fairly exchange value. Whether it’s that young child at the corner shop, or the insurance company guaranteeing the importation of that machinery, we all implicitly trust that issuing authority.

 

We pay, and governments collect, taxes based on that trust. Businesses leverage the inherent strengths of the banking system to invest in growth, based on that trust. Governments trust other governments based on that trust.

 

But in a fully digital economy, what entity will be the foundation of that trust? The case could be made that a single global currency could become king. Where, over the coming decades, a currency founded on blockchain principles could supplant the many sovereign currencies in existence today. The case could also be made for a return to the barter system. Where, again over the coming decades, the nascent peer-to-peer sharing economy becomes the most trusted mechanism for the fair exchange of value.

 

Given the possibility that either of these two paths could be realised, it may well be a fool’s errand to just assume that the future of financial transactions is just a more efficient version of what we experience today. Where this more efficient version still relies upon the sovereign entities of trust. And where these entities of trust are the anchor for computerised exchanges of value. Just as it occurs today at the retail level, at the commercial and at the government level.

 

Consider two scenarios. First, what if the world moves to a type of universal basic income or universal basic services model? Where the accumulation of wealth is a foreign concept to most and bartering is de rigueur. Secondly, what if the digital economy transforms into the intelligence economy? Where real value is no longer held in varying compositions of bits, but in prized abstractions of knowledge stored in quantum computing machines. In either of these two scenarios, what would be sensible: to have a single global currency, a ubiquitous barter system, or just more efficient version of the current way we conduct financial transactions?

 

Finally, if we accept that human nature will fundamentally remain unaltered in the coming decades, we can appreciate the logic in the following propositions. We can accept that in a fully digitised economy there will continue to be shining examples of our “better angels” and likewise examples of those with more sinister intent. We can also accept that, because of our human nature, we will still form systems of governance and administrative oversight. We will still need the ability to enforce exclusion upon those who are a danger to society. We will still participate in fair exchanges of value. For people will still be people. At our core we’ll be motivated by the desire to either work toward goals, to work with people, or to work to accumulate power.

 

Given all this, and as we look far over the time horizon, will the dollar still be king in a fully digital economy? More than likely, the literal dollar won’t be king but the metaphorical dollar will be. Even though human nature is not likely to change, the mechanism for the fair exchange will continue to change. For each of us will continue to have something of value that is worthy of trading.

 

© Paul Tero 2019

Tags:  dollar  economics  value 

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What is Missed by a Focus on Profit?

Posted By Administration, Tuesday, April 2, 2019

Charlotte Aguilar-Millan shares her concern about the mere focus on profit in her fourth blog post for our Emerging Fellows program. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

For a company to grow, profit is required. This has been the age old mantra that those in the world of business have restated again and again. Why, when we look at fast growing companies, do they make limited profits? Deliveroo, a food delivery service, whose revenue increased by 116% in 2017, saw profits grow only by 1.5% during the same period. This is as a result of reinvestment into their technology apps. It is also an indication of the changing landscape. For companies to deliver long term shareholder value, profits are not the key driver. Instead, profits act as a by-product from placing value on other areas.

 

Too often companies focused on profit look to scaling efficiency and reducing costs, resulting in missed opportunities. Amazon is a prime example of a company which reinvested into its services including delivery and inventory availability. This has enabled fast growth and expansion into new markets. It has also added an edge to the market. Companies focussing on profits cannot compete with this edge. 

 

Globalisation has enabled more end user awareness of the behaviour of a profit focused company. Poor treatment of staff stops a brand from being able to convey aspirational attributes. Potential employees are able to research these workplace habits and have become aware of the working environment of a profit focussed entity. This has made potential employees wary of those companies tarnished with a profit only focus.

 

There are longer term impacts on society where companies solely focus on profits. When cost reduction is a main factor, the contribution to the remedy of global issues is weak. Measures to help reduce climate change and poverty from seeking the lowest cost are often retrospective. Often this action is as a result of external pressures only. Take corporate social responsibility (CSR) as an example. This is a tool now used by companies to demonstrate they are ethically aware. However, companies persevere with using suppliers who do not pay a living wage. They offset this in retrospect by allowing employees to take a volunteering day or sponsored run. Rather than take responsibility for the repercussions of their cost saving exercises, companies introduce CSR policies and assume that this is sufficient. It is the individual who has to pay the price for a company focussed on profits. Whether it’s by accepting higher prices or lower quality. Whether it’s by downsizing with fewer staff but the same workload. Or even whether it’s accepting climate change as a consequence of the profit focus.

 

Shareholders have a responsibility to make the directors of a profit focused company accountable. They have the opportunity at least annually to demonstrate an activist investor approach. Activist investors can use their equity stake in a company to put pressure on its management. Companies have historically taken no action where no pressure or incentive is given.

 

The end user can also demonstrate more self-awareness of the products and services they are consuming. We have seen the growth of ethically sourced products, such as Lush and The Body Shop. This is starting to develop within other industries. The size of ethical funds is at the highest level it has ever been before, peaking at roughly £4bn in May 2018 on the London Stock Exchange.

 

The choice lies with consumers. Consumers can use their purchasing power for positive change. Activist shareholders can place pressure on companies in the future to enable the change they want to see. This could change the approach of companies to effective climate change mitigation, reducing unequal director to employee pay ratios and increasing staff welfare. In the future, companies may have to pay more attention to those issues which are missed by a focus purely upon profit.

 

 

© Charlotte Aguilar-Millan 2019

Tags:  company  economics  profit 

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Is the ownership of capital changing?

Posted By Administration, Tuesday, March 26, 2019

Tim Morgan publishes his third blog post in our Emerging Fellows program by asking about the ownership of capital. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

If you can’t open it, you don’t own it. That is the unofficial motto of the world-wide Maker Movement, which emerged along with the early development of the World Wide Web. It celebrates the fusion of art, technology, and do-it-yourself inventiveness. It inherited much of its emphasis on openness from the earlier Free and Open Source software (FOSS) movements.

 

FOSS formed in response to proprietary software which could not be changed by anyone but the copyright owners. FOSS advocates professed that collaboration via sharing source code was the best way to develop software. Makers embraced FOSS sharing sensibilities in no small part because automation was key to many of their projects. It was easier to bootstrap a new creation by copying and modifying existing code or hardware.

 

This free-as-in-speech information sharing ethos shaped the way the early Internet developed. Shared code forms the foundation of many commercial operating systems. Android alone powers over 2.7 billion smartphones and devices worldwide. The Internet and Web as we know them would not have expanded as quickly without shared-source software. This desire to share information is a design consequence of digital networks. Information can be copied with perfect fidelity as many times as desired. Perfectly copying information from computer to computer is fundamental to the design of the Internet. If the medium is the message, then the message of the Internet is to Share.

 

The drive to share is fundamental to human nature. Digital technologies unexpectedly created a new type of social structure that champions sharing - an Abundant Information Commons. Value is added by modifying for your needs; be it code, a design, a formula, or a written work. Those changes are then released back into the commons for anyone to use and improve.

 

Digital technologies are not completely free from restraints though. Individual possessiveness is in human nature too. Information may want to be free, but markets do not. Algorithms and hardware can put controls on data. Laws can penalize unauthorized use. The old ownership modes still exist, but now they are in tension with a network that wants to copy information. After several decades, we have reached an uneasy balance between owned information capital and shared information commons. Wikipedia did not replace Encyclopedia Britannica, but it did force it to adapt.

 

This balance is still shifting though. The more digital technology is embedded into everything, the more networks find new connections into physical, legal, and market domains. Cracks in the foundational layers supporting ownership are being slowly forced open by the roots and tendrils of ever-expanding networks. What was once purely physical is being bonded with the virtual.

 

Nothing owned is safe from this increasing integration with the digital realm. Networks want capital to be data-like and are actively working to make that happen by embedding code and connections in every owned thing.

 

The traditional capital triad of Ownership, Control, and Use is thus giving way to the networkable capital triad of Copying, Modification, and Sharing. The dynamic of how the virtual and real will fuse together will determine how future value is created.

 

The future of ownership is that if you want to own capital, you will need to find a way to open at least part of it and share.

 

© Tim Morgan 2019

Tags:  capital  economics  ownership 

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