A (hypothetical) documentary titled “Software has been eating the world” about Microsoft, would have to cover the first decade (‘75-‘86) before the company went public and the stunning and difficult to replicate nowadays fact that about 12,000 Microsoft employees became millionaires, in addition to the 3 billionaires.
Software continues to eat the world, despite the frictions and obstacles that are mainly cultural but not only. However, the major difference with the ‘80s and ‘90s, is that
The Speed of innovation has accelerated
This is a result mainly of the huge reduction in the cost of technology, which continues and allows for fast prototyping and MVP design. We live in a world that could be described more like a
A venture production studio with 500 if not 5,000 Y-Combinators working fiercely around the globe.
Billionaires like Bill Gates, who have stepped down from the fast-paced business lane, are leading major philanthropic initiatives and are also sharing their concerns about the future of the world. Ethical and moral issues are commonly addressed by such billionaires and this in itself reduces often the effectiveness of their messaging.
So, when Bill Gates spoke in February about the idea of “the robot that takes your job should pay taxes”, the world reacted.
Lawrence Summers argued in the FT article “Robots are wealth creators and taxing them is illogical” that should governments invest in education and retraining to offset the job loss due to the 4th industrial revolution
Just recently, the city of San Francisco announced a change in its public policy framework that will make it the first city to implement a robot tax (Business Insider May 2, San Francisco is considering a once unthinkable measure to offset the threat of job-killing robots). This is the city where robots already run food deliveries for Yelp’s Eat24 and make lattés at a mall coffee kiosk. This also the city (along with Los Angeles) with extremely high levels of income inequality, that could channel robot tax funds to low income residents.
In all justice, it wasn’t Bill Gates that first raised publicly this issue but rather the European commission and Parliament that has already recognized that there is a need for a legal framework around AI and robotics. Such framework is necessary to address issues especially around robot and AI liabilities. The initial robot-tax law proposal has already been rejected by EU parliament but IMHO it will be revisited. Addressing robot liabilities, is more urgent with the acceleration of innovation in the driverless car sector. IOT in the auto industry is giving rise to the urgent need of new insurance frameworks that need original legal thinking. This is not about originating and managing insurance contracts on the blockchain in order to keep costs down, improve risk management and customer service; it is about the need for new legal terminology and understanding of responsibilities and liabilities in the new world.
The EU will be drawing parallels to the carbon-dioxide environmental tax, when rethinking the robot-tax legal framework. It is true that the CO2 tax was implemented relatively late in the 3rd industrial revolution. Naturally, now we are all more preemptive and more concerned as the main differentiating factor with the 4th industrial revolution is the accelerated speed of change. Clearly, if the anticipated job losses from the current tech wave, where comparable with the job losses in the past 40yrs (1975-2016 = roughly Microsoft’s life) then we could sleep at night. But the inconvenient reality is that the pace of job losses is accelerating and most probably, what happened in the past 40yrs may happen now in the next 5yrs. PWC prediction statistics on job losses by continent, suggest considering policy changes and maybe adaptation of a Universal basic income scheme.
Clearly, there are issues that need to be addressed around the impending accelerating speed of innovation. There are multiple concerns:
· Liabilities of robots
· Defining “Robots”
· Future wealth creation being very unevenly distributed
· Reduction of aggregate income taxes for governments, due to job losses
· Increase of Corporate profitability (better productivity due to reduction of labor costs) without a proportionate (to the previous reduction) increase in aggregate corporate taxes.
· Avoiding a tax penalty to innovation; and maintaining R&D tax subsidies
The tech ecosystem continues to be concerned about these issues. In another Techcrunch article Is a “robot tax” really an “innovation penalty”? the suggestion was on eliminating corporate tax loopholes for US companies and not at all supporting, a “robot tax”.
In financial services, there were no such issues raised when ATMs, online brokerage and e-banking transformed the financial industry. In this second wave that follows the accelerated pace of tech innovation of other sectors, we all agree that we don’t want a world in which no bank submits candidacy for the Global Finance awards Call For Entries: Digital Bank Awards 2017. Or a world that has an increased tax for the winner and those shortlisted in the Euromoney Best Digital bank awards: for 2016, Singapore’s DBS Bank, and the short list included BBVA, Citi, and ING. Or a world that taxes more startups providing the “picks and shovels” for the future of Invisible Finance, like:
– Cloud banking platforms offering Banking as a Service, like Mambu
– Cloud based investment financial app stores, like Investcloud
– AI chatbot technology providers like Kasisto
– Self-Sovereign identity solutions, like Uport
– Mortgage enterprise solutions providers like Roostify
The Fintech ecosystem is still relatively un-bundled and it would seem even more problematic to develop and apply a framework for a “robot tax” for the Fintech space. Where do we start? Do we aim at the incubments who are contemplating digitization, because they have a large size personnel that are at risk in the 4th industrial revolution? Do we aim at scale-up Fintechs and maybe start with profitable unicorns but grew up based on a very lean corporate model (small size of personnel)? Do we aim at those providing the “picks and shovels” because they also “own” the network effects? How do we make sure that we are not fostering a new generation of Luddites against robots / AI / IOT that seem to be threatening not only the back and middle office finance services jobs but also higher level jobs, like the packs of financial analysts, investment bankers, asset managers etc.?
Fintech is not exempt from the 4th industrial revolution accelerated pace of innovation. Its side-effects include the rise of Neo-Luddites demanding some kind of “robot-tax”. We will be watching public policy developments and the positioning of self-regulatory bodies and Financial or Fintech associations, facing this new reality.
Efi Pylarinou is a Fintech thought-leader.
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