Hedge

by Nicolas Colin

  —Paul Valéry[515]

  In September of 2016, I published an issue of our in-house series The Family Papers, for which I chose a splashy title: “Enough With This Basic Income Bullshit”[516]. Thanks to the piece being touted by Tim O’Reilly[517] and then discussed on Hacker News[518], I was pulled into heated arguments around the future of the safety net. And while my paper was initially written rather hastily in reaction to something I had read[519], the subsequent discussions helped me clarify why exactly I have so many misgivings about universal basic income.

  One of my criticisms concerns the idea that universal basic income would be simpler. It’s true that simplicity exerts a welcome fascination on tech entrepreneurs. After all, entrepreneurship is the art of making things simple. But we shouldn’t forget that the safety net is complex for a reason, namely because it must provide economic security at the scale of entire nations to both households and businesses. And I still don’t get how distributing a fixed amount of money to everyone can cover the entire economy against the many adverse consequences of the Entrepreneurial Age. The main problem, after all, is the difficulty most households have in coping with the rising and oftentimes unpredictable cost of healthcare, housing, higher education, and other critical expenses.

  Another criticism derives from political history. The strength of an institution such as a social insurance program can be measured in its capacity to withstand the inevitable conservative backlash[520]. A retrospective of redistributive government programs suggests that universal basic income wouldn’t pass that test. If a liberal government put it in place, soon enough the conservative opposition would succeed in discrediting it (along the lines of “It makes the poor lazy and the rich don’t need that money anyway”), dismantling it as soon as they were back in power.

  A third argument in my piece was echoed last year by Vox’s Matthew Yglesias: “Silicon Valley’s basic income fans should spare a minute to defend the actual safety net”[521]. Like Yglesias, I think that the heated (and abstract) discussions around universal basic income distract powerful voices in the tech industry from considering the more pressing social challenges of the moment. And as those in power in the US seem to be busy dismantling what’s left of the safety net of the past, the most pressing challenge in the US seems to be defending the very principle of the existence of a Great Safety Net.

  Because really, where are tech entrepreneurs and venture capitalists when it comes to weighing in on safety net issues? Apart from discussing universal basic income, I find that they’re nowhere to be found, heard, or read. I suspect there are several reasons for this. For one, they don’t feel personally concerned. Well-educated white men from privileged backgrounds working in a rapidly expanding part of the economy have no reason to express an interest in the complicated and rough world of the welfare state or trade unions. Also, many entrepreneurs and venture capitalists, especially in Silicon Valley, mistrust the state as a matter of principle and have long preferred to stay away from industries as highly regulated as healthcare, consumer finance, or housing. Finally, there’s the reluctance to join a public conversation that is so polarized on both sides of the political spectrum.

  But let me lay out at least three reasons why US entrepreneurs and venture capitalists—in fact, the entire US tech industry—should very much care about building a Greater Safety Net for the Entrepreneurial Age.

  First, consumers need purchasing power. As US Senator Elizabeth Warren explained in discussing Obamacare at the 2017 Wall Street Journal CFO Network conference[522], once individuals lose healthcare coverage, it drives costs up and creates problems for the entire economy. If people spend all they have on healthcare (or don’t spend because they’re worried about the potential for a future catastrophe), how can they subscribe to the tech industry’s latest product, however cheap and convenient? Less healthcare coverage eventually means less revenue flowing to all businesses, including tech companies, that aren’t in the insurance and healthcare industries. And the same is true for many other parts of the Great Safety Net.

  Second, there are benefits in people’s switching jobs and founding startups more easily. As former Obama economic advisor Jason Furman explained in a 2014 blog post, again discussing Obamacare,

  “Access to health insurance outside the workplace allows people... to take risks that further their careers and benefit the economy as a whole, like going part-time in order to go back to school, leaving a job in order to start a business, or moving to a better job, perhaps at an employer that does not offer coverage”[523].

  Third, it’s actually caring about what matters for people and society. As of today, as revealed by the “tech backlash”, Silicon Valley has a major image problem with ordinary people who fear that they’ll lose their jobs or won’t be able to make ends meet. I’m not sure that a bunch of billionaires discussing the singularity and immortality provides the best impression when millions of ordinary people are feeling the inequality gap widen, their sense of economic security plummeting as most of their safety net disappears.

  Above all, it’s about truly shaping the future. Whatever the outcome of the current administration, many people expect the Democratic Party to strike a determined counter-attack, polarizing the debate on the safety net even more. Instead of looking back at the past with nostalgia, the opportunity that we must all seize together is to imagine a Great Safety Net 2.0 that is more in line with the Entrepreneurial Age. Doing that well requires serious, determined input from many parties, including tech entrepreneurs and venture capitalists. The world will remain open and business will flourish only if pro-business policies go hand-in-hand with building the Great Safety Net 2.0. Once again, it’s about making what Will Wilkinson calls “the freedom lover’s case for the welfare state”[524].

  Now, the Great Safety Net is a complex solution to a complex set of problems. And as stated by John Gall in his landmark (and fun) book Systemantics, we can’t try to design a complex system from the start:

  “A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over with a working simple system.”[525]

  It’s easy enough to draw the Great Safety Net 2.0 on the back of a napkin. But once the overall concept becomes clear, the challenge isn’t to build the entire macro mechanism in just one round. Rather it is to invent solutions to an infinity of simple problems in fields as diverse as lifelong training, occupational licensing, housing, transportation, consumer finance, insurance, the tax system, collective bargaining, and many others.

  Entrepreneurs have a lot to contribute in that regard. Their obsession is not with expressing ideas but with implementing them. Many good entrepreneurs are unable to easily explain what they do because their primary focus is on building things. Why not harness that unrivaled capacity to build things and have entrepreneurs build the Great Safety Net 2.0 one piece at a time?

  It doesn’t mean that governments have no role to play—quite the contrary. But my overall impression is that we’ve witnessed a sharp reversal in who has the capacity to explore, discover, and deliver. In the past, only governments could break the constraints and pull it off at a large scale. Now it looks like governments (at least in the West) are stuck in bureaucratic inertia and partisan gridlock at the very moment when entrepreneurs allied with the multitude are best positioned to harness the power of ubiquitous computing and networks.

  The US is probably the most saddening case. It’s both unable and unwilling to explore the path to building a Great Safety Net 2.0. At best, a significant part of the US electorate is deluded into thinking that they can restore the Great Safety Net of the past. At worst, as in the case of Donald Trump and the Republican Party, it’s actively working on dismantling it. Only in certain limited if large parts of the country such as California can we see the signs of radical imagination[526]. It’s a reason for hope, but hardly a sign that the US a
s a whole is ready for a collective radical effort.

  Europe is another story. I think my continent is marked by a genuine attachment to the idea of promoting economic security and prosperity simultaneously. However the absence of a thriving local tech industry makes it difficult to promote the narrative of Europe leading the way into the socio-institutional phase of the Entrepreneurial Age. Not only is it not forward-looking enough, it’s also encumbered by the remains of the Great Safety Net of the past. We Europeans were once the most advanced in sustained prosperity and economic security. But now it’s as if we’re condemned to lag behind as the new great surge of development forces us to revisit our entire socio-institutional framework.

  Meanwhile, China is making progress in building its own version of the Greater Safety Net for the Entrepreneurial Age. The Chinese government may not be interested in embracing Western liberal democratic values. Yet the flourishing of the People’s Republic depends on the majority of citizens sharing the fruits of prosperity with a reasonable level of economic security. So just as the American Republic saved itself with the New Deal from 1933 onward, China has a vital interest in deploying a Great Safety Net 2.0, as it is a necessary condition for the perpetuation of the Communist Party and the flourishing of the People’s Republic. And the Chinese government knows it[527].

  Why does it matter for us Westerners? Because as discussed in Chapter 3, China is racing ahead in making the most of the techno-economic paradigm of the day. The Chinese version of the Great Safety Net 2.0 could very well serve as a precedent and inspiration for all countries interested in combining economic security and prosperity in the Entrepreneurial Age. The problem is that it would lead to a very different global socio-institutional framework in terms of liberal democratic values than most in the West would find desirable.

  Having ideas is not enough to create the durable and lasting institutions that would form a new Great Safety Net. Building such institutions is usually a long and painful fight, rooted in a clear and intimate understanding of what the new techno-economic paradigm is about and led in a strategic manner over the long term. We owe the Great Safety Net of the past mostly to the labor movement, which fought for more than a century to force both employers and governments to provide workers with economic security and a fair share of value added. The key players in that fight were not the intellectuals who wrote books and spoke at conferences. They were union leaders and activists who lived and worked at the forefront of the new age, organized against powerful adverse forces, established a balance of power with other parties, and sacrificed a great deal over the course of this long quest — including, in some cases, their own lives.

  What’s more, the violence and destruction didn’t stop with clashes between unions and various forces of the established order. The consensus around the Great Safety Net of the age of the automobile and mass production was also a result of the widespread geo-political violence that swept away the decrepit institutions of the nineteenth-century age of steel and heavy engineering. The war effort in the US as well as the post-war tabula rasa in Europe and Japan freed the leaders of those countries from the dilemma of dealing with legacy policies and institutions. In the wake of two world wars, it was simply impossible to hold to the illusions of the past.

  I certainly don’t wish for people to die as a price to pay in designing and implementing the Great Safety Net 2.0. But the importance of starting at the bottom when addressing elementary problems and completely redefining the status quo is the reason why I think imagining this Great Safety Net 2.0 is a challenge that entrepreneurs should tackle. They know what it’s like to start from zero and move up, fast. They need to find ways to reverse the “tech backlash” that puts their businesses at risk. They can maximize the fast spread of knowledge, which makes it easier to design and implement large-scale solutions to today’s many problems. They intuitively understand the mighty multitude, always the entrepreneurs’ best ally when it comes to radical innovation and delivering quality at scale.

  The needed Western version of the Greater Safety Net for the Entrepreneurial Age won’t rise from a magic-bullet mechanism such as universal basic income. It won’t emerge from the murky depths of exhausted neoliberal or libertarian thinking. It won’t be born from the top-down technocratic approach of most progressive government officials. In this new age, entrepreneurs look like the ones best positioned to do the hard, dirty work with levers such as technology and the multitude rather than weapons and propaganda.

  If we only look at how history has progressed to this point, one would be forgiven for coming to the conclusion that a new World War is needed before we can radically upgrade the Great Safety Net from 1.0 to 2.0. But if we also look at the new tools furnished by today’s technology, one could decide that another path is possible. I, for one, believe we should all bet on the latter, and hope this book serves as a contribution that tilts the odds in our favor.

  Acknowledgments

  I would like to first express my love and gratitude to my wife Laetitia Vitaud. Over the past 12 years, she has been so much to me: a friend, a lover, a teacher, a supporter, a fellow traveller, a comrade-in-arms, a co-author, an advisor. This book, to which she contributed a great deal, is dedicated to her and our two inspiring children Béatrice and Ferdinand, as well as to my late uncle Eckhard Strohschänk.

  Hedge also wouldn’t exist without the contributions and support of my cofounders at The Family. Oussama Ammar had the idea of my writing a book addressing the tech industry on issues related to the safety net. Alice Zagury, CEO of The Family, has been an astute contributor in topics ranging from branding and positioning to making sure that the book would be readable beyond the small circle of policy wonks. I’m deeply indebted to Alice and Oussama’s friendship and support. We still have a lot to do together to turn The Family into something even greater and I very much look forward to it.

  Instrumental were those who encouraged the project from the start and were here all along to contribute with remarks and advice. I’m especially grateful to William H. Janeway for being an informal advisor, even approaching something close to a research director. Five years ago, Bill’s own book, Doing Capitalism in the Innovation Economy, opened my eyes to the importance of bringing institutional discussions into the tech world. Later on, as we got to know each other, he contributed with advice on positioning my book and was among the few who read through the entire manuscript.

  I’m also immensely grateful to Carlota Perez, who since 2016 has offered continuous guidance during rich conversations over meals at her favorite Thai restaurant in Lewes (Sussex). In many aspects, this book is a tribute to and a furtherance of her foundational work Technological Revolutions and Financial Capital. Carlota has helped a great deal in my writing Hedge, despite having quite a lot on her own plate. The tribute I wanted to pay to her has been returned tenfold by her kind and inspiring support.

  No book is the work of one person only. During the past 18 months, I’ve enjoyed the help and support of key people in my team. Kyle Hall has been a masterful reviewer and editor, contributing with much more than correcting my language. Laurène Tran has been another pillar of this enterprise, assisting me with research, marketing, the tedious process of publishing, and her unique talent at spotting interesting people, works and ideas. Before her, Virgile Goyet helped bring a first, rough manuscript into existence, which was then reviewed by Sandrine Lacout. Finally, Camille Dubreuil has contributed by creating the book’s beautiful cover and helping with design choices.

  Beyond The Family, Florent Masson has dedicated himself as an informal outside editor, contributing with thorough remarks. Martin Schmidbaur has also been involved in reviewing the manuscript, providing enthusiasm and support on top of crucial editing and marketing insights. Julie Colin did a wonderful job laying out the book. The brilliant Marguerite Deneuville drew all the illustrations to help me make many ideas clearer for a wide audience—a task for which I owe her a great deal! I'm also thankful to Miranda Ber
tram for her help in burnishing the book's storytelling and presentation.

  Many others have been part of the writing process through in-depth discussions or by reviewing some of the book’s draft chapters. I’m especially thankful to Kim-Mai Cutler, D-J Collins, Sarah O’Connor, Vivek Wadhwa, and Philippe Suchet, as well as Younès Rharbaoui, Jasper Sala, and Emilie Maret. I have also benefited from the supportive efforts of Chris Lehane, Guy Levin, Daniel Korski, John Thornhill, Alex Margot-Duclos, Philippe Platon, Marc-David Choukroun, Jonathan Hall, Balaji S. Srinivasan, Tim O’Reilly, Azeem Azhar, Eric Schmidt, Nick Clegg, J. Bradford Delong, and Marc Andreessen.

  Writing a book on the safety net with a mostly American perspective wouldn’t have been possible without all those who have had an influence on me in social policy, American studies, and politics and policy in general. I’m especially thankful to Hayet Zeggar, Gwénaële Calvès, the late Richard Descoings, Thierry Bert, Cyril Piquemal, Jérôme Marchand-Arvier, Elise Colette, Maxime Marzin, Gérôme Truc, Laurent Bigorgne, Patrick Weil, Pascal Saint-Amans, Thierry Pech, Laurent Cytermann, and my parents Thérèse Bécue and Jean-Marie Colin.

  Learning more about China has been made easier by the incredible support of Jean-Jacques Augier, Wang Dadong, Zhang Wei, Mylène Hardy-Zhang, Fanglu Sun, Justin Vaïsse, Sébastien Badault, François Godement, Nicolas de Mascarel, Alisée Pornet, Geoffrey Harris, Benjamin Joffe, Romain Aubert, and Yann Pouëzat.

  Also influential were those who’ve guided me into the world of tech policy through advice and shared works: Charlotte Baratin, Pauline Mispoulet, Sébastien Soriano, Yann Algan, Andrew Wyckoff, Dirk Pilat, Lionel Ferreira, Grégory Edberg, Vicki Nash, Nathalie Collin, Augustin Landier, Anne Perrot, Pierre Mohnen, Bénédicte Tilloy, Duc Ha Duong, Yanai Zaicik, Raffaele Russo, Jérôme Giusti, Pierre Collin, Pierre Pezziardi, Alexandre Pikiakos, Patrick Zelnik, Jacques Toubon, Guillaume Cerutti, Constance Rivière, Jean-Marc Benoit, Godefroy Dang Nguyen, and Ioannis Kanellos.