People Are Talking about Wealth Without Prosperity.
This year’s Davos conversations illustrate, for the first time in history, that the world is faced with the paradox of great wealth creation without a corresponding increase in prosperity for the majority of people. What do we do now?
Every year, the elite leaders of the world gather in Davos to try and “improve the state of the world.” For many though, it seems that they are the problem, not the solution.
Don Tapscott is a long-time Davos attendee and one of the world’s leading authorities on innovation and media, as well as the economic and social impact of technology. He worries about the future, with technology and automation likely to increase joblessness and add to economic uncertainty. He concedes that his hopes for the Internet’s potential to spread information and enhance democracy have not been fulfilled, but continues to believe that new technologies, which offer more transparency about how business and financial institutions work, may help improve the world.
In his view, the coming worker crisis necessitates a re-writing of the social contract where income is no longer necessarily tied to work, just as many societies have concluded that education and health care should no longer be commodities to be consumed by only those with means.
The result is that traditional ideas and concepts like nation states, protectionism, GDP, wealth creation, property and a shared information economy may be obsolete.
In their place, we are seeing non-state networks and organizations being talked about at Davos as the real answer to future needs. Talk of cryptocurrency looms large.
Tapscott tells Jeff Schechtman that in his view Davos people really do want deep “structural reform” in market economies that will both fuel growth and reduce inequality. To this end, a second generation of the Internet, a Blockchain Internet of value where digital assets such as money and music are protected and preserved by cryptology, combined with new ways to measure wealth and well being, may be the only answers to the ugly results stemming from a frustrated populism now sweeping the world.
Don Tapscott is the author of many books on technology and economics including Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World (Portfolio, 2016), The Digital Economy ANNIVERSARY EDITION: Rethinking Promise and Peril in the Age of Networked Intelligence (McGraw-Hill Education, 2014), Grown Up Digital: How the Net Generation is Changing Your World (McGraw-Hill Education, 2008).
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Jeff Schechtman: Welcome to Radio WhoWhatWhy. I’m Jeff Schechtman.
Looking at the world today in the wave of populism that is sweeping the West contrasted against the recently concluded World Economic Forum in Davos, you would think that Davos and those that participated in it were the enemies of peace and global prosperity. In fact, it just may be the opposite; that it is only the leaders at Davos that understand the architecture that has held the world together for over 60 years and that growth and prosperity must be enhanced and addressed in such a way as to include more of the world in that prosperity and not in a one-sided game of winner-take-all economic protectionism. So how do we begin to understand all of this and sort it out? For that, we’re joined today by my guest Don Tapscott.
Don Tapscott is one of the world’s leading authorities on innovation in media and economic and social impact of technology. He advises business and government leaders around the world. He has authored or co-authored over 15 widely read books. His latest is The Blockchain Revolution, a technology that he believes will fundamentally change the Internet and its economic promise for all citizens. He’s an adjunct professor of management at the Rotman School of Management at the University of Toronto and he recently covered the World Economic Forum for the Globe and Mail in Toronto. It is my pleasure to welcome Don Tapscott to Radio WhoWhatWhy.
Don Tapscott: My pleasure, Jeff.
Jeff Schechtman: One of the things that you mentioned in one of your articles in the Globe and Mail was that you said you don’t remember ever being more concerned about the state of the world and it was really in the context of thinking that both the left and the right all have gotten it wrong in terms of understanding what’s going on, particularly at a place like Davos. Talk about that first.
Don Tapscott: Well, it’s a curious phenomenon that the left and the right agree on something major about Davos, which is that the Davos man or the Davos class is not the solution, it’s the problem in the world. Now the purpose of the World Economic Forum is to improve the state of the world and for sure, this is kind of a tough assignment given the growing global mess and increasing bifurcation of political perspectives, but it just really struck me that you’ve got people like Naomi Klein on the left and Breitbart News on the right that say the World Economic Forum is hardly improving the state of the world, it’s actually the problem. I disagree with that, of course. I’ll confess some bias; I’ve been going to Davos since 1990. But most people who attend Davos are not the, as the right might say, the cowardly misguided liberals who want to see a government to doing everything rather than what we believe in, which is to have sort of an unfettered and libertarian capitalism. But it’s also not as the left would say, that it’s strictly for show and nothing happens, these are really the corporate titans and just look at the airport with all the private jets. They fly back to their day jobs of pitiless and amoral global capitalism. Well, it’s neither of those. Most people are very thoughtful who attend Davos and a lot of really good things happen there.
Jeff Schechtman: One of the things you talk about is that there has certainly been so much focus over the years and so much success in wealth creation but that the paradox of that is that in so many places, there is declining prosperity.
Don Tapscott: Well, for sure and that’s a tough thing for someone like me to admit, honestly. Because I’ve been writing books going back to 1981, for championing this digital age, saying that unlike the old media that was centralized and one way and controlled by powerful interests, everyone was passive. The new media is distributed, it’s one to one, it’s many to many, it has this awesome neutrality. And I said that in 1994 in my book The Digital Economy, but I said some things could go wrong. I didn’t spend a lot of time on it but I did discuss these and I said one is all the benefits of the digital age can be captured asymmetrically by a tiny handful of corporations. They could end up owning our data, a huge asset, probably the biggest asset class ever and we could see prosperity actually declining even though there was wealth creation. Of course, that’s happened and there were six other things I said could go wrong and honestly, they all have. So, this is something that we need to step up to which is why my son Alex, my coauthor from The Blockchain Revolution is so excited about this new technology because they give us another kick at the can. It’s not going to fix things, but it gives us humans another opportunity to rewrite the economic power grid in the old order of things for the better. We have to will it; we have to be prepared to do it.
Jeff Schechtman: I want to go back. Historically, you talk about 1994 and writing about some of the things that could go wrong, and in fact seeing most of them go wrong, go off the rails, what did we miss? Looking back at that, how is it that the odds really prevailed in everything going wrong between then and now in terms of the distribution of wealth?
Don Tapscott: I think what happened is this wonderful distributed, peer to peer medium called the Internet and the web got laid upon a society that was anything but distributed. It was highly stratified and powerful forces had unique and asymmetrical abilities to capture the value and that’s exactly what’s occurred. This is the first time in modern history that this has happened where you have growing wealth but the 51st percentile family or individual has been declining. That’s of course what’s behind the rise of this populism that you referred to and all of the anger and hatred that exist today. When you have this kind of situation, really the end of the industrial age and a lot of these old industries and parts of the economy being wiped out by a whole new set of technology, a new class of businesses that are capturing all the value, that sets us up for some big problems. By the way, it’s interesting to note at Davos that a number of people cited a research project that showed all this job loss that’s occurred, it’s not because of outsourcing, it’s because of technology. It’s mainly automation that’s replacing humans in the United States. And get ready for the next wave of machine learning and robotics and artificial intelligence, autonomous vehicles and all the rest. The two largest job types in the United States, if you strip away general categories like management or sales, are truck drivers for men and cashiers for women. Well, in a decade, most of those will be gone. So these are the kinds of issues that people are struggling with in Davos and are trying to come up with some creative solutions.
Jeff Schechtman: And when solutions are talked about, one of the things that you touched on in your reporting from Davos this year is this sense of trying to find new metrics by which to measure success beyond simply wealth creation and GDP.
Don Tapscott: Absolutely. That’s a very helpful thought that you raised that, because wealth doesn’t translate into prosperity and prosperity doesn’t even translate into happiness. We measure ourselves wrong and if you can’t measure, you can’t change it. That’s the old law, so we need to start to have some new measurement systems.
Jeff Schechtman: Talk a little bit about what those might look like.
Don Tapscott: Nobel Prize winner Joe Stiglitz has spent a fair bit of time about this and there are measures of wellbeing that have to do with your health. And you look at measures like really basic stuff, like infant mortality where the United States is terrible, should be the best in the world, it’s the richest country in the world but it’s terrible. The percent of the population covered by proper healthcare, the United States is the only country in the OECD, like of 30 countries it doesn’t have a single payer healthcare system so that everybody gets covered. And then it seems that we’re now about to regress on that even further. So these are the kinds of things that make a real difference in your life; not being afraid to get sick and know that you or your children will be taken care of, measures like that.
Jeff Schechtman: It really equates living standards as really the fundamental measurement, even more than wealth and GDP.
Don Tapscott: There’s big questions on the table about how we’re going to achieve that. Ultimately, I think we’re going to need a new social contract in society and there’s a project I’m doing for the Berkman Klein Center for Internet & Society at Harvard. I’m trying to draft such a social contract, the toughest thing I’ve ever done in my life because every time I get into some new topic and peel back the onions, I realize that there are people who spend their entire lives looking at that one little thing. But when we went from the agrarian age to the industrial age, we figured out a whole bunch of stuff. We figured out that people had to be literate. We created public education and we passed a law that you had to go to school. We realized that people are going to live in cities, not in the country so we needed a social safety net. We started to create the Social Security System. We figured out that you can’t have one oil company own all the oil so we developed anti-monopoly legislation. We figured out that if you’re going to be a publicly traded company, you got to tell your shareholders something once a year, that was the SEC Act of 1934 and there were dozens and dozens of these agreements between government, citizens, their organizations like unions and the private sector. Whereby we came to a contractual understanding about how things would work but I don’t think we’ve done any of that for this new age that we’re entering into. Ultimately, there is some big changes in the wind. I think we’re going to have to separate work and income, that your work does not necessarily correspond to the fact that you have enough money to stay alive because if you have structural unemployment, where entire swaths of the workforce are wiped out, then the idea that came from Schumpeter, creative destruction, that’s what’s so great about capitalism. It blows away the old and it brings in the new and with the new, there’s greater prosperity. Well, it’s starting to look like this time, it’s actually different. So some really big thinking is required. Then you factor in this new geopolitical situation that comes from the elephant nod in the room, Donald Trump and boy, this is a time of huge potential disruption, or worse.
Jeff Schechtman: And yet at the same time we’re facing that huge potential disruption, perhaps larger than and more fundamental than we have ever seen, we’re having a hard time talking about it because of the fragmentation of public discourse.
Don Tapscott: Yeah, absolutely and this is one of the things that I said in 1994. I said I think with the Internet, the truth will set us free because we’ll all have access to the facts and the real data. But it turns out that there are things like alternate facts and we are ending up in these little self-reinforcing echo chambers where the purpose of information is not so much to inform us but it is to give us comfort. Honestly, looking at that, it’s not just that we have extreme left and extreme right, there has been a profound shift in public discourse to the right. Who are the left wing extremists today and what do they think? Well, they’re people who think that we should have strong international institutions; that Europe and the EU is a valid organization worth defending and people who think this should be a social safety net and women should have the right to control their own biology; and that science is important and if all the scientists in the world think there’s a huge problem like climate change, we should do something about it; and that there’s one country called China, not two countries. I mean, it just goes on and on and on. That is the extreme left point of view, that 30 years ago would have been dead in the center, even slightly to the right. It’s not simply that there’s a bifurcation, there’s also been a political shift, I think.
Jeff Schechtman: The other danger in all of this, which you touch on in your reporting is the way in which this undermines the structural geopolitical framework that has held the world together for the past 60 plus years and that in this era of sweeping populism and looking for blame in many cases, that it could cause pretty serious geopolitical underpinnings and consequences.
Don Tapscott: I don’t think a country can succeed in a world that’s failing, honestly, but I’m not a political person. I’m an observer of the global geopolitical situation. You look at something like Mexico. If we destroy the Mexican economy and there’s a failed state to the south of the US border, that’s not going to be a good thing. If Europe breaks up and people like Marine le Pen, who is actually, and I don’t use this term pejoratively, I use it in a very technical sense, who’s a fascist, then we start to get some really big problems in the world. And if China becomes really hostile, China is about to become the biggest economy in the world and they have pretty big resources, we need strong international institutions. We need strong cooperation and I’ll tell you, protectionism and patriotism is not going to be a solution to help move this interconnected world forward. I’ll tell you there are lots of reasons for that. Increasingly, we do have a global economy and increasingly, national problems are global problems. There’s a beautiful animation, I don’t remember the exact name of it, produced by NASA that shows pollution flows in the world. Pollution that starts in China or in a coal plant somewhere in the United States, moves around the world. So I think that we need to understand this interconnectedness that we have. The other point I’d make on this is that I think that business can’t succeed in a world that’s failing either. Now if we cut back on public education and we end up with a real huge bifurcation of the smart or the wealthy kids that go to private schools and the rest that really suffer, we’re not going to be able to have not just the capable workforce that’s required, but we’re not going to have good citizens that are capable of voting smartly and acting responsibly. So this is a big theme in the World Economic Forum, that we are all interconnected and sure we all have a natural tendency to put our own country first, but we need to understand that we can never succeed if the world is declining.
Jeff Schechtman: That fear that you talked about at the beginning, did you have the sense that this was a pervasive fear amongst so many people at Davos? And the other side of that is, is there a glance at technology and new aspects of technology as a way to begin to address some of these problems that even technology has brought on?
Don Tapscott: Well, I think at Davos, you do get the complete political spectrum but most people there are pretty thoughtful and have a sort of international perspective in the sense that it’s through working together, collaborating together on common projects that we can solve some of these vexing problems in the world. An exciting big breakthrough to me, and it was everywhere at Davos, there were like ten sessions on this, is about the blockchain.This is, to me, of course we’re talking about the underlying technologies, cryptocurrencies like Bitcoin. It’s not about Bitcoin, it’s about the thing that makes Bitcoin and technologies like that work. To me, this is the second generation of the Internet. We’ve had this first generation, sort of an Internet of information, and it’s been good for lots of stuff but when I send you some information, Jeff, I mean an email or pdf or whatever, even with a website, I keep the original. I’m sending you a copy. So we’ve all had a printing press and that’s been great but it’s also been very limited because when it comes to the things that really matter in the economy and that contribute to prosperity, assets like money or intellectual property or stocks or bonds or votes or art or music or loyalty points or our identities, I mean sending a copy is a terrible idea. If I send you a hundred dollars, it’s really important that I don’t still have the money and that I can’t send it to somebody else.The way that we handle this problem is through huge intermediaries like banks, government, credit card companies, big social media companies, big technology companies; they perform all the business and transaction logic of every kind of commerce and enable us to trust each other. But there’s a growing problem with them in that they’re capturing a lot of the value. They’re capturing our data and we’ve got this crazy, unheard of problem where we have wealth creation and declining prosperity. So what if there were not just an Internet of information, what if there were an Internet of value? Some kind of distributed ledger running on computers everywhere, where anything of value, from money to votes to music could be stored and transacted securely in a way that protected the rights of the owners. So that’s what blockchain is and I think the opportunities are almost unlimited. Alex and I have been doing a number of projects over the years and have resulted in Blockchain Revolution, which of course became a big best-selling book.
Jeff Schechtman: To what extent are these ideas being embraced by the people in Davos and being looked at certainly, as possible ways for deep structural reform to address some of that inequality we’ve been talking about?
Don Tapscott: Well, I was quite struck. I mean a year ago at Davos, if you said the word blockchain, most people wouldn’t know what you’re talking about and today, everyone was buzzing about it. I’m not allowed to tell you what occurred at the meeting because this one meeting was a private meeting, but it was a meeting of all of the central bankers and ministers of finance from around the world and I gave a presentation about what all this means for them and for their economy. Think about if the American dollar became a digital dollar, actually a fiat currency that became crypto. So if central banks wanted to issue funds, they could issue those funds digitally, rather than sending them to the banks and hoping that the banks would spend them in a certain way or lend them out or whatever, they could do helicopter drops into the bank accounts of citizens or of entrepreneurs or whatever they wanted to do with it and then they could instantly track how money was flowing and what was happening as a result. So the opportunities are big. The regulators wouldn’t have to be so heavy handed because transparency would be a powerful force. You make institutions naked and they got to get boss. They need to start behaving better, so that’s just one of literally hundreds of ways that this technology can change the way the economy works and perhaps help us solve this prosperity problem.
Jeff Schechtman: Don Tapscott, thank you so much for spending time with us and sharing your thoughts here on Radio WhoWhatWhy.
Don Tapscott: Okay, my pleasure.
Jeff Schechtman: Thank you for listening and joining us here on Radio WhoWhatWhy. I hope you join us next week for another Radio WhoWhatWhy podcast. I’m Jeff Schechtman.
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Related front page panorama photo credit: Adapted by WhoWhatWhy from logo (World Economic Forum / Wikimedia – CC BY-SA 2.0), Blockchain Revolution cover (Penguin Books Limited) and (CC BY 2.0) The Digital Economy cover (McGraw-Hill).