Capitalism 2.0 At Davos

Fresh Thinking & Insights Into The Future

If you didn’t come across the most brilliant post “Davos 2020” by Dave McKay, President & CEO, RBC — please read it. I’m yet to see any other Canadian CEO offering such a profound summary of the event and a deep, personal reflection. Bravo RBC, bravo Dave McKay! And it’s a pity that no other Canadian bank offered similar commentaries.

Granted, as the CEO of the largest Canadian bank, Dave’s message is as “politically correct” as one would expect it to be. But since I don’t face similar predicaments — I will share with you my observations exactly as I see it — without anesthetics.

David writes: “At the 50th World Economic Forum in Davos last week, a new global divide became apparent”. And he adds: “The 2020s may see a reordering of economies and industries, as societies respond to the threats of climate change and sectors tap the potential of smart technologies” — how true!

So, I decided to do a bit of a reflection of my own — linked to each of the 10 observations made by David McKay. These are highly profound and highly relevant topics. Some, I already covered quite extensively over the last few years. The others, well: “Ladies and gentlemen, let the Hunger Games begin — and may the odds be ever in your favor!”

1. Superpowers As The New Super Platforms…

It’s true: “Superpowers as the new super platforms” and “China’s Belt and Road summit may be the new Davos” — but do we REALLY prefer the “fake capitalism” of China or the “crony capitalism” of Putin to a Made in America Capitalism 2.0 version?

No matter how many smart economic support policies China sets — its “fake capitalism” or the so-called “state capitalism” is never going to open the floodgates of creativity the same way the “crony capitalism” of Putin is not going to work, either.

Remember: you can’t expect the free thinkers to … think, if a bunch of “comrades” can knock on your door at night and whisk you away from your family in a KGB-like vehicle — even if it’s a Made-In-China Tesla knockoff…

The fear of losing it all in a blink of an eye — in China or in Russia, when your new venture is not to the party bosses liking — is not an inducive lever to foster creativity… So, yes, we may call it “politely” state capitalism — but I would rather call the spade, a spade.

On the other hand, we should also not allow the political dinosaurs to call Mike Bloomberg, Bill Gates, Warren Buffett, or Marc Benioff — “the commies”, only because they call for a new, more equitable Capitalism 2.0.

And why do I call the “state capitalism” a fake? Well, I was born in Russia & as a little boy, I witnessed my father being thrown in jail by the Stalin era communists — just because he was a “foreign-born” survivor who escaped Nazi Germany’s invasion of Poland…

And after finally being allowed to return to Poland after WWII, my father was threatened by the Polish communists, again — only because of their antisemitic sentiments at that time. Yes, I saw it first-hand while growing up in Poland as a teenager. It ain’t pretty…

2. Government, Redirected…

Unfortunately, self-regulation seldom works. We tried it with so many industries in the past — without great success. Take the tobacco industry for example… In similarity, could you imagine new drugs flooding the markets WITHOUT the FDA approval?

As an alternative to playing catch-up with disruptive technologies, governments can start leading economic developments — instead of blindly following market forces. Otherwise, publishing, media, financial institutions, and so many other industries and incumbents will face a crippling and lopsided competition.

For example, why automakers such as Ford and GM MUST sell their vehicles through a network of independent dealerships — while Tesla doesn’t? And to add insult to injury, GM and Ford employ almost 400,000 workers — while Tesla employs only 45,000.

In addition, R&D plays an ever-increasing role in all advanced economies. To put Canada’s annual R&D spending of $35B in perspective, one must remember that the US spends on R&D $463B per year. So, governments do have a role to play shaping the future!

It’s time to add more substance to our fight for future prosperity. Experience brings wisdom, and no Twenty-Something CEOs can have a better prosperity plan for the society at large than well-rounded, modern government policy.

It’s time to fix what’s broken so that we can start balancing individual vs. societal good and deflating social media’s balloon. Enough with excuses, otherwise the inept government policies will soon look like the proverbial officials in a famous play by Nikolai Gogol — “The Government Inspector”

3. Capitalism, Repurposed…

In Capitalism 2.0 — Part 1, I spoke about Business Roundtable (BRT) and its Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders. And I stated that such a TECTONIC shift will eliminate the management’s exclusive focus on reaching the ROI figures “by any means necessary”, reduce the financial fraud and help restore financial markets’ integrity.

In Capitalism 2.0 — Part 2, I recommended a practical solution for lifting millions above the poverty line — based on combining my Universal Job Guarantee proposal with Warren Buffett’s Earned Income Tax Credit. I called my innovative solution: “Tax New Deal” as such a framework allows to escape the minimal wage poverty but without an unduly pressure on MSBs — something many governments tend to “conveniently” forget.

Forums & BRT’s declarations are NECESSARY BUT NOT SUFFICIENT! If we are serious about guaranteeing well-being and keeping ALL citizens above the poverty line — why not start by providing Universal Job Guarantee (UJB) first? — see Chapter 10 in my book: “AI Boogeymen”

Guaranteed jobs are far more than meeting financial necessities and putting food on a table. Jobs offer dignity and hope — while at the same time, benefiting society at large. Bravo to Business Roundtable! And bravo to the relentless economists such as Mariana Mazzucato for their remarkable authenticity!

Well-paying jobs are far more beneficial to any society than dispensing cash or shoving the unpaid internships to many students & recent graduates. We need practical solutions for “equitable capitalism”. By combining Universal Job Guarantees (UJG) with Warren Buffett’s Earned Income Tax Credit (EITC) — we can escape minimal wage poverty without unduly pressure on MSBs to raise minimum wages! Let the government take care of minimal wages, instead!

By combining Universal Job Guarantee & Earned Income Tax Credit — we can adequately provide for those who are “unable to be financially successful in a market economy but who are willing to work”.

4. Accountability, Redefined…

How true: “If the new capitalism is to find balance, it will need to ensure it continues to see the concerns of society as an integrated system rather than an itemized scorecard”. How else can we create the link between Green New Deal and Modern Monetary Policy? How else are we going to escape airlines’ long-distance transportation monopoly and develop modern high-speed trains across North America?

It’s time to stop throwing around IDIOTIC cost estimates of ESG implementations and slapping the pathetic “socialist” labels on progressives who take us there. And some recommendations, like merging Ellen Brown’s Public Banks and Mariana’s Mazzucato equitable capitalism into one cohesive roadmap — should not be discounted at will…

As Ray Dalio rightfully mentioned: “The problem is that capitalists typically don’t know how to divide the pie well and socialists typically don’t know how to grow it well”. To institute a radical change, however, one must find a way around the gatekeepers that prevent access to people like Warren Buffett, Bill Gates & Richard Branson! What’s the alternative? Pitchfork Economics? Equitable capitalism provides the best escape from Pitchfork Economics. It’s time to harness North American factor endowment and channel vast financial resources for the betterment of 99% left behind.

5. The New Math Of Net-Zero…

Even the loudest calls for NET ZERO action will NEVER materialize without the carrot and the stick Policies. We need Practical and Pragmatic legislations to move the needle. Example: for years, many builders around the world were often preoccupied with CAPEX economics — to the point that lowering construction costs takes precedence over long-term savings offered to tenants and building occupants.

In spite of the fact that BOMA estimates the costs of maintenance over 25 years being 3X higher than the construction costs — many builders were just as happy to pass higher maintenance costs to tenants — instead of investing in state-of-the-art energy efficiency solutions. But what if builders were FORCED to do BOTH? As mentioned in my previous posts such as: Are We All Barking Up The Wrong Trees? — some of the energy efficiency entrepreneurs realized, that it is possible to use dormant real estate assets such as hollow concrete floors — as a low cost, rechargeable thermal energy battery.

And some vendors rightfully claim that using Building as a Battery (BAAB)™ reduces HVAC costs and complexity, and offers multiple streams of social, economic and environmental benefits — without adding cost to construct. Both: builders and occupants win. However, lower CAPEX is just one side of the story. By the time builders can shrink the duct-work and use less insulation — livable space grows with it. Perhaps it’s not such a big deal if you’re building a two-story house in a suburb. But it’s a different value proposition if your 52-story condo has gained 4 extra Floors.

Paying less for maintenance costs is a no-brainer. Especially, when you consider the limited life-cycle of HVAC equipment and replacement costs after 8–10 years. But what if your offerings are also improving air quality in the building and raise occupants’ comfort level by offering inexpensive radiant heating and cooling?

Yet, NOTHING will happen without a serious PUSH from the government. It’s not just about conventional economics. We need SERIOUS policies and laws to demand that all new residential structures are to be Net Zero Energy (NZE) by 2025! And if the laws are extended to all government buildings by 2025 and commercial structures by 2030. Yes, no ifs or buts …

However, while NZE can be implemented with the relatively small cost at residential buildings, it will be much more difficult to do the same at larger industrial/commercial buildings — a truly compelling argument for using BAAB. A truly pragmatic policy may also include SET ASIDE rules to help MSBs. A great way for the industry laggards to start adopting innovation — mandated by the laws! And while at it: ban the share buybacks in line with BRT declarations.

6. The Messy Math Of Energy…

I can’t emphasize enough the importance of the following statement: “As one China expert told us, the country is on course to open two new coal plants a month for the next 12 years” And, BTW — the same is expected of India. In my mind, there is only one way to explain the disturbing lack of progress at the 25th summit of the UN’s Conference Of the Parties (COP25). To me, it’s all due to a Lopsided Misalignment!

One quick look at the global trends indicates that not all the continents demonstrate the same CO2 emissions trends. While North America and Europe are reducing the overall emissions, countries in Asia do not! And yet, most of the emissions criticism is oriented squarely toward NA and Europe!

Better yet, the numbers don’t lie. We can clap our hands all we want to the “imagine-the-future” narratives of the biggest polluters, but when China, India, Russia & Iran all INCREASE their emissions and countries like Canada actually reduce it by 0.1% — it’s time to stop the generic blame and to focus on the biggest polluters and trend-setters, instead.

I agree that “Climate change and climate risk is a global problem that needs a global solution.” Yet, unless we also see the conscientious pension funds going after provinces in trend-setting countries such as China, Russia, Iran & India the same way they target Canada, Norway, and Australia — it’s a lopsided bias!

Granted, it’s much easier to organize a demonstration in Madrid, Toronto, New York, Oslo, or Sydney — instead of protesting in Beijing, Tehran, New Dehli, or Moscow. Not only it’s easier but also less risky, and you’re not going to be thrown in jail, or executed in front of the cheering spectators.

Chances are that you will also not see bare-chested Greenpeace activists throwing themselves on the swords of the polluters in Beijing, Tehran, New Dehli, or Moscow — the same way you will not see them launching court battles there.

However, countries like Norway, it’s a different story — Greenpeace is willing to go all the way to the supreme court, baby… So, perhaps the real reason for not making progress at COP25 is based on the lack of positive reinforcement toward the countries that demonstrate conclusive results and the targeted penalties toward the countries that move in the opposite direction?

Personally, I’m not surprised. Deep down, we all believe that the same rules should apply to EVERYONE. And the moment the fairness is lost, the process is doomed. My advice: bring back the penalties AND rewards. Carrots and sticks help to restore the balance…

7. The Return Of Malthus…

Yes, food supply is a big problem: “With the world adding 80 million people a year, increasingly in Africa, the Middle East, and other food-challenged regions, Davos renewed its focus on food security and the need to see global food production grow by 60% by the middle of the century”. Yet, you don’t need to look very far to see the slimmer of hope — not in Davos, but right under our noses, in Nunavut. This is the place where in the middle of Nunavut’s tundra, Arctic greenhouses were erected to produce food for the people of Gjoa Haven.

As recently reported by CTV “In Nunavut, groceries can cost 10 times the average Canadian amount, a reality that illustrates the growing food insecurity in the region. According to an area survey from 2007 to 2016, as many as 46% of households had inadequate access to food because of financial constraints”.

“The new greenhouses (recycled sea containers powered by solar panels and wind turbines) were developed by Arctic Research Foundation. The private non-profit worked alongside the Department of Agriculture and Agri-Food to bring the new project to Gjoa Haven, which is home to about 1,000 people. In November, the project produced its first harvest of lettuce, which the team delivered to elders. Cherry tomatoes are expected to ripen soon, and locals have their sights set on expanding the project. For the Arctic Research Foundation, maintaining ties to the elders and ensuring the local community can preserve its unique local heritage are key”.

It took only 2 small 6KW wind turbines and a few solar PV panels to bring the required off-grid electricity for the Nunavut’s greenhouses. Now, imagine what adding a couple of green hydrogen tanks to the mix can do. Essentially, running a small-size Fuel Cell generator will guarantee a 100% clean energy to the greenhouses 24/7.

8. Currencies 2.0…

The disruption of digital currencies: “While digital currencies could make transactions easier, they risk diverting the lifeblood of our financial system to sources outside the system, like the big tech platforms that want the economic value of payments without the regulatory costs”. Well, I’ve said it many times before: disruption is overrated! So, before you decide to disrupt the financial systems that are the foundation of our economy — remember this: “you can also run naked on Broadway in December & get lots of pics taken. But you end up arrested or catching a cold”.

“The consequences are equally unclear if such a currency were to be adopted by rogue actors seeking to evade U.S. financial sanctions — making the notion of a new digital currency all the more appealing to them”. It’s like we didn’t have enough problems eradicating existing financial fraud and money laundering, already?

“For all the frustrations they can cause, America’s legal and regulatory systems remain the gold standard of global finance. Which is why the dollar is backstopped by the most valuable currency of all: trust”. So, before we all decide to jump ship, let’s first focus on fixing what’s not working today…

It was Donald Rumsfeld who once said: “There are known knowns: the things you know; There are known unknowns: the things you know you don’t know; But there are also unknown unknowns: the things you don’t know you don’t know”. Guess what — too many unknown unknowns may turn your dreams of wealth into nightmares of poverty — in a flash! Yes, it’s true — digital currencies may facilitate faster money transfers. They only problem is — transfers to where? And do you really know where did your money go?

9. Organizations 3.0…

Smart companies talk about: “how organizations can ensure their employees work effectively with smarter technologies, and how those technologies can be developed and refined to take advantage of the enormous human skills found in successful companies”. To me, talking about “intelligent augmentation” — the IA that can be just as powerful as AI to an organization” — makes all the sense in the world… This is exactly why I published my book this year, entitled: “AI BOOGEYMAN”.

Dispelling fake-news about job losses related to Artificial Intelligence (AI) — became my mission! Despite the hype, job-losses attributed to AI are mostly fiction and scare tactics of unscrupulous “experts”. There are far more dangerous causes of losing your job than AI. Hint: AI is not even among the first 10 risks.

I say: It’s time we call-out the superficial buzzwords floating around and the hype. And instead, to see more focus on the AI’s impact on many of our problems and potential solutions — large or small. And to all the economists, futurists, scientists, and authors spreading Fear, Uncertainty, and Doubt (FUD) about the shiny robots replacing humans — I like to remind a single quote from Yogi Berra: “It’s tough to make predictions, especially about the future”.

Not since Y2K scare, the predictions of AI-linked job losses have turned the prophecies of FUDs into such a massive cottage industry. In the past, the doom and gloom projections primarily aimed at blue-collar workers — to be replaced by robotics and automation. Now, AI is being perceived as a THREAT TO ALL — including all white-collar professionals. If you’re a doctor, a lawyer, a Fortune 500 CEO, or even a …. book publisher — sooner or later, you begin to think about how AI is going to affect your own job security.

Without restoring common sense — too much energy, time and money will be wasted by both: employers and employees of many progressive businesses and institutions. In some cases — such bad decisions might bring devastating consequences…

10. Education 4.0…

“Technology investments will create 133 million new jobs over the next three years. Many of those jobs will require specialized tech skills. Many will demand trade skills, which the world over aren’t attracting enough young people. But everywhere, the greatest demand will be for critical thinking and communications”.

Suddenly, it seems so real what JFK said, 59 years ago. At his inauguration, as 35th President of the United States, on January 20, 1961, he said: “And so, my fellow Americans: ask not what your country can do for you; ask what you can do for your country”. So, why not begin with JOB CREATION?

The H-1B visa program should help U.S. companies recruit highly-skilled foreign nationals when there is a shortage of qualified workers in the country. Yet, too many American workers who could be trained and qualified — have been ignored or unfairly disadvantaged. The same H-1B program has been a provision in U.S. immigration law for many years. Presently, it allows bringing 65,000 educated workers to the U.S. each year, where no qualified American can be found. The only problem is that H-1B Fraud Rate today exceeds 20%…

More than 5,000 complaints of H-1b visa fraud and abuse have been received by USCIS. And yet, in spite of such frequent reports, most high-tech giants — constantly advocate for an expansion of the H-1B program. So, would dedicated tax incentives to establish full-fledged degree-granting universities at Google, Microsoft and Apple help eliminate the shortage for skilled programmers? Only time will tell but one thing remains clear: “over the next 50 years, our greatest challenge may be to ensure we’re always learning”.

Oleg Feldgajer is President & CEO of Canada Green ESCO Inc. Oleg is positioning the company to become a leader in financing AI-enhanced green energy projects and ventures. CGE’s mission is to guide DISRUPTIVE businesses in ENERGY & TRANSPORTATION toward profitable business models. Oleg is passionate about such a mission and firmly believes that without AI-based innovation, we will all prematurely choke on polluted air and dirty water. CGE delivers 100% financing (levered and unlevered) to its clients — and utilizes large equity pools, and non-recourse debt. Oleg offers creative, fresh ideas to open-minded businesses — that embrace both: logic AND opportunistic intuition. CGE stands against mediocrity & its modus operandi is quite simple: If CGE is not invited to join your BOD or Advisory Board — we failed!