When The Logic launched last summer, I wrote about the seismic impact the technological revolution was having on our political, economic and social lives, and how politicians and executives had been slow to adapt to those transformations. Several things happened this week to suggest the tide may be turning.
On the political and economic side, there’s growing awareness that the “intangibles economy,” which includes data and intellectual property, is the key metric for long-term economic growth.
The Public Policy Forum, an influential Ottawa-based think tank, released a report on innovation policy written by two of the leading federal policy minds of our time. One is Robert Asselin, a long-time adviser to Prime Minister Justin Trudeau and Finance Minister Bill Morneau. The other is Sean Speer, a top economic adviser to then-prime minister Stephen Harper. When these two men speak in a unified voice, it’s worth paying attention.
They minced no words in describing how Canada is being left behind in the new economy.
“There is an unprecedented convergence of wealth and power by a small number of tech giants based in the U.S. and China,” write Asselin and Speer.
Those powers are already riding the shift from a world of tangible assets—where capital and labour are the main factors of production—toward one made up of intangible assets.
The authors cite two startling statistics.
In 1976, 16 per cent of the value of the S&P 500 was in intangible assets. Today, intangible assets comprise 91 per cent of the market’s total value.
The world’s five most valuable data-driven companies—the FAANGs—are worth well over $4 trillion combined, around 95 per cent of which are intangible assets. For comparison, Canada’s annual GDP is about $2 trillion.
The report provides concrete recommendations for how policymakers should approach this new world—notably, the authors argue that their thumbs should stop favouring foreign tech firms.
“We can all broadly agree that in a world of scarcity, it makes no sense for Canadian public policy to be pro-Google, pro-Amazon, pro-Facebook,” Speer told me in an interview this week.
But the authors remain undecided on whether that means doing the opposite instead. “Does that mean we need a much more activist regime around cultivating Canadian champions? Frankly, that’s [a question] I’m still struggling with,” said Speer.
I sat in on one of the working sessions that the two held in Toronto while they were researching the report. When the conversation veered toward IP and the funding of foreign companies, the group—comprised of leading economists, technologists, and academics—was polarized about whether IP was relevant to Canada’s future. The authors did not hedge, arguing forcefully that yes, it matters.
“We’re very naive about what we’re giving away. It should not be just about the amount of jobs [created]—it should be about the innovation assets,” Asselin told me.
There are obvious policy implications of the report—which I encourage you to read—but its lasting legacy may be the very act of publishing it, and broadening the new economy conversation beyond the tech ecosystem.
“I don’t think I can convey strong enough that this conversation is foreign to most of our policymakers,” said Speer. He added that Canadian politicians and policymakers aren’t thinking about the intangible economy when crafting policy, but that others—notably the United States and China—are.
“If this paper has any long-term relevance,” said Speer, “it’ll be less about the policy perspective and more just causing people to take notice to see the world for what is.”
The report coincided with the International Monetary Fund’s latest World Economic Outlook, which warned that tech giants are stifling innovation, widening income inequality and threatening global stability. And, the Aspen Institute, a Washington, D.C.-based think-tank, recently released its own report highlighting the policy imperative of addressing the role that automation technologies will have on workers.
Finally, there was renewed discussion this week about how society has been changed by digital platforms’ pursuit of engagement metrics—sometimes for the worse.
Mark Zuckerberg asked governments to step in to help regulate social media companies like his. It was a startling about-face from the Facebook CEO—he essentially admitted that his company was not capable of managing the abuse taking place on its platform.
But it’s not just a Facebook problem: It’s a Big Tech problem. A Bloomberg News report highlighted how YouTube executives knowingly prioritized engagement metrics that allowed conspiracy and toxic videos to fester on the platform.
Meanwhile, New Zealand’s Sovereign Wealth Fund has managed to bring along 23 other funds with a combined US$500 billion in assets under management in its proxy campaign against Big Tech. It’s the first time that institutional investors have raised concerns about the social impact of investing in Big Tech. As BlackRock’s Larry Fink demonstrated with his letter on gun control, global investors can have a massive impact on shifting societal norms.
Stratechery’s Ben Thomson described the fourth Industrial Revolution as being all about removing friction by allowing customers to communicate, make purchases, and work with ease. However, this week, politicians, economists and even tech CEOs themselves may have begun to realize that maybe what’s needed now is more friction—not less.