Jim Balsillie at the IMF Statistical Forum and Q&A with Christine Lagarde

November 28, 2018

Jim Balsillie at the IMF Statistical Forum and Q&A with Christine Lagarde

With the rise of the “intangibles economy,” including artificial intelligence and the growing importance of data, how do we measure the digital economy? Jim Balsillie, CIGI founder and chair, delivered a keynote speech at the sixth IMF Statistical Forum on November 20, 2018, followed by a one-on-one discussion with IMF Managing Director Christine Lagarde.

Louis Marc Ducharme: Welcome back. We're reaching the last session of this fascinating forum and it's my great pleasure to invite the IMF managing director, Christine Lagarde, to introduce our keynote speaker.

Christine Lagarde: Thank you so much, Marc, and good afternoon to all of you. It's a great pleasure to be here with you today and I understand that you had really constructive discussions on topics that I'm actually quite fond of, how to better measure economic welfare in the digital age. I have to give you a bit of background as to why I'm interested. I'm not joking about it. It's often the sort of typical thing that any introducer would say, I'm very interested in the topic that you've been discussing. Well, I'm really interested, not so much from the digital angle, but it goes back to my earlier days as finance minister when back in, I think it was in 2008 or thereabout, we were dealing with the financial crisis, granted, but very early on, together with a few of my staff at the Ministry of Finance, we were interested in how we were valuing economic contributions and how, in particular, what was not accounted for could be properly valued.

And I managed to convince my president at the time that it was something that was worthy of his consideration and that could be taken up even at the level of the G20, given that France was president of the G20 and G20 presidencies are always in search of a particular project or something that they can focus on in order to harness the goodwill and the brain power of some people in order to have some legacy. And we at the time then set up that commission, which was known as the Stiglitz-Sen-Fitoussi Commission, which had other luminaries in the grouping, actually. And the aim was to identify the limits of GDP as an indicator of economic performance and social progress and to consider what additional information might be required for the production of more relevant indicators of economic welfare.

I'm looking at the script because I want to pay tribute to the purpose that we had identified at the time. And it's something that produced a really interesting report and all these Nobel Prizes that were actually gathering in Paris, not only had good dinners and good wines but they also produced good work. And I'm really pleased to know that this topic is still being considered. We did not focus so much at the time on the digital economy as it has developed over the course of time but we were really also looking at the uncompensated work that I think you may have been discussing in the last couple of days. The unrecorded, unremunerated and yet value- producing work.

And the example of the gardener was a fantastic one that I've used over time later on. I think it was used in a different way because there were many more men than women on that commission, but at the time I turned it on its head and decided that the gardener whom I was paying, who was producing value, who was accounted for and whom I subsequently married and continued to maintain my garden was no longer accounted for. Anyway, so it was a really a good beginning of much more work that has been continued under the leadership of We Mark here at the IMF under the statistical department and including many other departments in that really great adventure.

My job here is to introduce somebody that I highly respect and for the accountants in the room, you might be delighted to hear that actually, Jim, our speaker for the next sequence, actually started, if I remember, his career as an accountant. He talks the same language as many of us or many of you, rather, before he became the chairman and the co-CEO of Research In Motion, which is the wireless technology firm that literally revolutionized the communication industry with the development of something that I dearly held until the day when I joined the IMF and I was told not to use it anymore, which was my dear BlackBerry. But now, as chair of the Centre for International Governance Innovation, Jim is bringing his experience of innovative thinking in the private sector to innovative thinking for global policy making.

Alan Greenspan once said that the economy is becoming weightless. This is not only true for the bytes of data that course through the digital economy, it is true for assets as well. And I think that you would agree with that. He has said that over the past 30 years, the most valuable corporate — he is not Alan Greenspan anymore, of course, but it's Jim Balsillie. He has said that, "Over the past 30 years, the most valuable corporate asset has become intellectual property, yet conventional business accounting methods haven't necessarily evolved to measure the value of intangibles as effectively as they do for tangible capital. And although some progress has been made in measuring some intangible capital, such as software research and development, in some cases, which are capitalized in macroeconomic statistics, information on other intangible assets, in particular data, that drives much of the modern knowledge-based economy is lacking."

And I know you've been debating that to a great extent and I'm sure that the two previous speakers who were on this podium here have delved deeply into those issues. Your keynote speech is, as I understand, going to be measuring intangible assets, IP and data for the knowledge-based and data-driven economy. And I think it's just perfect for this year's forum, which has been focusing on those particular issues. We look forward to hearing from you and for logistic purposes, for those of you who are not interested in a debate afterwards, please leave the room after the speech but for those interested in a debate, please stay because the two of us are going to have a conversation about those issues and a few others and then the floor will be yours for questions. Jim, if I can give you the floor, it's yours. Thank you.

Jim Balsillie: Madame Lagarde, distinguished guests from the IMF and beyond, conference attendees, members of the media, it's my pleasure to share my ideas with you on the socioeconomic implications of digitization for welfare. I reviewed the online material from previous forums and attended all of this year's sessions, where many of you are working to address the challenge of measuring the digital economy, illuminated by the fact that digital consumption over the past 20-plus years has grown at an explosive rate that far exceeds reported GDP growth rates. I commend you for your excellent research and look forward to seeing it manifest in policies that advance all of our economies. On its centenary, I'd like to give special nod to Statistics Canada, represented here by chief statistician, Anil Arora, which started life in 1918 as the Dominion Bureau of Statistics, for its 100 years of trusted, exceptional work, including adopting how Canada measures our own digital economy. Measurement is the indispensable handmaiden of theory, never has this been more true and relevant than today.

The digital economy is growing exponentially in multiple complementary dimensions, processor speeds, memory capacity, fixed and mobile broadband for both adoption and bit rates, e-commerce activity, sharing economy, Internet of Things installed and data generated. The mutually reinforcing effects of these innovations are resulting in a turbocharged transformation of the global economy, societies and the way we govern ourselves. The production economy of the twentieth century created rising tides that lifted all boats. But today, data is everywhere but in economic accounts, and it is not currently governed in a manner that lifts many, let alone all boats. This puts massive strain on economic policies and has major implications for societies across the globe. That's why I'll argue today that we need a second Bretton Woods moment that fully incorporates this digital age in a strategy to promote international stability, cooperation and sustainable growth.

Big data, artificial intelligence and machine learning are revolutionary in two fundamental ways. First, they industrialize and accelerate the very act of learning. Second, they allow learning to access and mobilize information beyond the reach of the human mind. They create a veritable technological sixth sense. These new capabilities, applied with industrial strength, are starting to open up revolutionary new potential in virtually every sector of the economy, including food and agriculture, health care, financial services, retail and commerce, education and research, transportation, government services and more. But along with the potential economic benefits, these same capabilities also confront policy makers with equally profound challenges. Like, number one, the implications of winner-take-all-economics and the emergence of a new factor of production, machine knowledge capital for marketplace frameworks. Second, the implications of increased concentration of wealth for distributional equity and the integrity of democratic processes. Third, new risks to national security. And fourth, the unleashing of new strategic rivalries in geopolitics.

The digital transformation has the potential to be both a panacea and Pandora's box. As a wise person once told me, the internet is a paradise for consumers and hell for citizens. As a capitalist and an optimist, I believe in the ability of the market economy to unleash the power of human ingenuity, to drive innovation that enhances the quality of life for all of mankind. Technology has been a force of good for decades and it still has potential to continue on that path. However, the pervasive information asymmetries of the data-driven economy are a real threat to market competition and to our democratic systems of governance. For today, I will first talk about the transformations driven by the new digital dynamic and then share with you some thoughts for measurement and policy.

Over the past three decades, a new global rule of law framework has been forged to govern the way that innovation is incentivized and the way that gains from innovation are captured and distributed. This new global economic framework is based on the internationalization of increased protection of intellectual property rights, or IPR. The development of this framework was motivated in the first instance by the rise of the knowledge- based economy, in which the strategic focus of business shifted from generating and controlling traditional IP assets, such as patents and copyright. The framework has been further elaborated to reflect the emergence of the data-driven economy, in which the strategic focus of business has shifted increasingly to generating and controlling data assets, as well as the valuable intellectual property developed on these assets through the application of artificial intelligence and machine learning.

Today, IP and data are the world's most valuable business and national security assets. In 1976, 16 percent of the value of the S&P 500 was intangibles. Today, intangibles comprise almost 90 percent of the S&P 500 total value. To give you a sense of scale, the world's most valuable data-driven companies are worth well over four trillion together but their balance sheets report only 225 billion of tangible assets or just over five percent of their total value. The vast majority of the market value is comprised of IP and data, not bricks and mortar or even machines. According to the US Chamber of Commerce, IP and data-intensive industries already contribute almost $6 trillion annually to the US economy. But as we know from current accounting of these impressive growth figures, the rising tide lifts mainly only a few yachts.

Let me see, the pace of this is accelerated as evidenced by the rapid rise in IP filings in the past couple of decades, as shown on the two charts in this slide. A recent US National Bureau of Economic Research reports, patents are the most concrete and measurable innovative output over countries and time. They have a direct impact on wealth and power at both the firm level and nationally, which is why smart innovation countries focus on owning and protecting these assets. With the digital transformation, this accumulation of intangible assets is about to be turbocharged by the big data tsunami sourced from a vast array of sensors that form the Internet of Things. IBM recently estimated that 90 percent of all the world's data has been created in the previous two years. Juniper Research estimates that the number of connected devices will triple to 46 billion by 2021.

The scale of this shift in the source of market value recalls the shift in the source of wealth from land to capital that started with the Industrial Revolution and marked the transition from the feudal to the capitalist system. While equally profound in terms of its implications for the organization and governance of economy and society, the current shift is unprecedented in terms of its rapidity. The tangibles and intangibles economies are fundamentally different in many ways. In the production-based economy of tangibles, the ability to produce efficiently at scale and to sell at lower prices enables the capture of markets, which underpins profitability. In the traditional economy, trade agreements open up foreign markets to gain greater access to production economies of scale. Competition naturally emerges from the removal of restrictions of commerce. Efficiency is based on optimization of value chains on a global scale. The win-win dynamics of trade spreads the benefits. These instruments designed to govern this international economy are properly called free trade agreements and we currently have solid measurement tools to track their socio and economic impacts.

But the intangibles economy is based on amassing rent-generating assets. Digital products based on IP and data have effectively zero marginal production costs, which results in a winner-take-all economics. Market opening thus drives concentration, not competition. The instruments designed to govern this type of economy focus on the protection of IP and data assets. The main thrust of these so-called twenty-first-century trade agreements, including the original TPP, CETA and USMCA have been to entrench and expand protection for intangible assets. Protection of intangible assets is also the main bone of contention in the current trade war between the United States and China. With the shift from the tangibles economy to the intangibles economy, protection becomes the new liberalization. As economist Dan Ciuriak has suggested, trade agreements are now more appropriately called asset value protection agreements.

As part of this fundamental shift, we've come to depend upon a vast network of internet and telecommunications infrastructure developed for the open and rapid exchange of information and services. Big data assembled from these ubiquitous sensors, coupled with ever more powerful AI machine-learning engines and deployed through the next generation 5G networks will transform this from a passive infrastructure into a veritable digital nervous system. And this is why I argue that data governance is the most important public policy issue of our time. Whoever controls the data, controls who and what interacts with it. Furthermore, any data collected can be reprocessed and analyzed in new ways in the future that are unanticipated at the time of collection and this has major implications for the global economy and for democracy. It is essential to look at data governance as an integrated whole because the exploitation of data generates a new feedback that modifies the behaviour of the society and economy that generated the data in the first place.

This slide is a mandala schematic representation of how I think schematically about the crosscutting issues that the digital transformation raises. It is about values, the distribution of wealth, preserving competitive markets, preserving privacy, maintaining the integrity of democratic process and, very importantly, ensuring national security. I would argue that it is even more important as a policy challenge than climate change because abuse of data compromises the very democratic processes on which we rely to intelligently and effectively address challenges like climate change. We already know that Facebook's algorithms played a central role in creating the genocide of Myanmar. Quantitative social psychology that leveraged social media information was used to influence outcomes in Kenya's election, to Brexit, to Trump's presidential campaign. Who will be next? Tailored national strategies are of the highest priority, which I'll discuss in a couple minutes.

The internet was not originally designed with security in mind. Moreover, with the innovation and rapid expansion of our digital economy and society, we are now creating new vulnerabilities faster than we are finding remedies for old ones. The billions of new and potentially unsecured network nodes of the Internet of Things that are now being installed create an ever-expanding zone for cyberthreat actors to exploit. This slide is my effort to concisely lay out the primary dimensions of complexity that cybersecurity presents. The targets of cyberattacks are both strategic public sector assets, including military systems, and private assets, such as technology and trade secrets or energy and banking systems. And sometimes, there are almost random denial of service attacks unleashed by hackers playing online games. This realm is much more covert than traditional overtness of engagement and technology levels the playing field for parties with asymmetrical physical assets.

There are challenges in establishing the responsible agents because of the remoteness of cyberattacks. Altogether, this is a wickedly complex issue with no complete solution on the horizon. What is clear is that security and economic realms are now completely melded in the digital space so it is existential for a modern nation-state to have sufficient sovereign capacity and resilience to manage and contain these cyberthreats. Security will always trump economics and in the cyber realm, it will be difficult to dismiss precautionary measures because of the complexity and lack of transparency. Many consider the US national security duties on imports of steel and aluminum from its allies to be risible precisely because it is possible to do the math. Not so with cybersecurity. I will come back to this point in discussing the overall policy architecture for the digital transformation.

I end the discussion of the present point with the observation that nation-states are increasingly migrating from primarily surveillance toward cyber warfare and precisely because of the complexity and lack of transparency, there are growing risks of this getting out of control, which would have profound negative impacts on the global economy and welfare.

The data-driven economy is an unprecedented economic and societal force that is revolutionizing nearly every industry and leading to new power dynamics between countries. Data capital stocks create critical new issues regarding ownership of data and national regulations for the data-driven economy. This is not a parochial or xenophobic instinct. It is simply a result of the fact that data ownership is akin to land ownership in feudal times. It makes those who control the data permanently wealthy and powerful, and leaves those who supply data at the owner's mercy. This is very different from a production economy, where there's an exchange of products based on comparative cost advantage and where global cooperation is of the benefit to all parties. Because of its distinct properties, the data-driven economy has created rivalrous systems between China, the US and EU. Each of these three economic regions is creating distinct and fundamentally divergent strategies, consisting of rules, regulations and international agreements that embed their norms, advantage their own economies and advance their broader geostrategic interests.

The Chinese quote in this slide is a good example of their deliberate and systemic approach to managing the digital transformation. China has its Great Firewall and aggressively supports national champions like Baidu, Tencent and Alibaba. The US aggressively pushes for open data flows that support Silicon Valley superstar firms. Because Europe does not have large pre-existing data-driven companies, it takes a more defensive approach by focusing on data standards and regulations such as their General Data Protection Regulations and competition policy. But it, too, is now looking to go on the offensive building on its digital single market policy. These three approaches beg important questions such as, how do we address the incompatibilities in these strategies? And second, what should be the strategies of the rest of the world? National industrial and security strategy is very different when you're the home country of one of these successful national champions, rather than being just a customer state. Compelling strategies for small open economy and for the developing economy have yet to be set out.

There is a global race under way by large firms and nation-states to own critical IP, especially for key emerging areas such as blockchain, AI and machine learning. Last year, for the first time, China received more patent applications than the US, EU, Japan and Korea combined. In advanced policy circles, the competition to dominate AI has been characterized as AI nationalism or techno nationalism. Machine learning is a general purpose technology that will affect all sectors and all parts of society. It leads to winners gaining enormously enhanced economic, technological and military powers. You cannot patent data but you can patent around it and block access even when the data is shared. We're already witnessing protectionist state actions played out in real time as part of this new geopolitical race. The US blocked Broadcom takeover of chipmaker Qualcomm and in response, the Chinese blocked the Qualcomm takeover of chip maker NXP. The EU created a new screening framework for foreign investment alongside France, UK, Italy and Germany, creating new rules for how they govern foreign investment, precisely focused on valuable AI and data assets.

President Trump has cited China's ambitions in technology as justification for imposing tariffs on Chinese goods and the US Congress approved new sweeping powers for the Committee on Foreign Investment, partially to target minority stakes taken by Chinese venture firm VC funds active in Silicon Valley. Policies for the knowledge-based and data-driven economies must be properly integrated for the benefit of every country's security and sovereignty. This also includes inward foreign direct investment policies and strategies. Traditional FDI into a country's industrial base means capital and technology inflows. Foreign branch plants secure global production mandates for exports that create good jobs and also provide positive knowledge spillovers to the host country. We know how to measure traditional FDI using existing tools and models. But FDI into the innovation economy is extractive. It's difficult to capture the exact effect of these transfers because it focuses so much on emerging potential.

This distinction is best summarized by economist Dan Ciuriak in his recent paper, Rethinking Industrial Policy for the Data-driven Economy, where he writes, and I quote, "In the knowledge-based and data-driven economy, FDI comes mainly through mergers and acquisitions and targets knowledge assets, patent portfolios, promising startups or knowledge benefits from participating in research intensive hubs." He further observes that where trade liberalization takes out the least productive firms, in the knowledge-based economy, FDI of the M&A type tends to target the most promising, fastest-growing firms with potential to become gazelles. The host economy is the left in the mediocre middle.

Foreign branch plants in the innovation economy do not create jobs in zero-unemployment STEM areas, which is why we have a global contest to capture tech talent. Foreign tech branch plants poach scarce talent and often expatriate key personnel abroad, reducing knowledge spillovers in the host economy. And they exfiltrate the most valuable intangible assets, such as IP assigned to headquarters abroad and data flows to established data centres. This creates the need for a new public policy filter for screening inward FDI for IP and data-driven realities to measure the net benefit of the host economy.

As advanced machine-learning algorithms effectively mine these enormous and rapidly growing stocks and flows of data, we're seeing the emergence of a new factor of production, machine-learning capital and a new mode of innovation, machine-generated IP. This has profound impacts on how we measure the digital economy. Machine-learning capital competes with and complements human capital the way robots compete with and complement unskilled labor. With the extra catch, its replicator economics can collapse the value of traditional forms of human capital. While some skilled workers will see the returns enhanced as they are empowered by complementary forms of AI, the total wage bill flowing to skilled workers seems almost certain to fall as wages are displaced by rents flowing to the owners of the dominant AI. Meanwhile, the marriage of AI and robots will put new pressure on unskilled labour.

If even the more dire predictions of job losses from robotics and AI are not borne out, this much is clear, career trajectories and the nature of work are being transformed. Career changes would be much more frequent, skills upgrading will become more frequent and multiyear upfront education experiences less the norm or even they will be complemented by lifelong learning programs. At an extreme, the traditional firm-employee relationship might devolve into a series of simultaneous or sequential multiple contractual relationships between a worker and employer or between workers. Social policies must adapt to this. In areas like transport, childcare, education and pensions, the focus must move from job centred to person centred. Student loan programs, tax deductions for fees and learning currently often related to the age or income of the individual should become universal. Barriers to re-skilling and public-private partnerships in learning will have to be removed. Limits on tax free savings might give way altogether while pension plans might go either entirely public or have total portability as a central feature.

Indeed, a universal basic income scheme could be the dominant form of social safety net, with public goods like education, perhaps transport, paid for by taxes on economic rents and wealth. We need to think and plan carefully about what this means for skills development and for labour adjustment strategies and, ultimately, what it means for preserving domestic policy flexibility. I'm going to come back to this at the end. As for machine-generated IP, new questions arise as regards to who owns it and whether incentive frameworks for innovation, originally formulated in the Renaissance, continue to make any sense. These are important questions given that maximal IP protection is being globalized through trade agreements.

Because intellectual property is essentially a monopoly and ideas have little or no marginal production costs after invention or creation, this naturally leads to inequality between those who create and own ideas and those that don't. The rise in inequality in the United States since the end of the 1970s is largely due to greater earnings inequality, but this is substantially amplified in this era of accumulating intangible asset — stock asset — wealth. If not properly addressed, the powerful AI and machine-learning revolution will drive this inequality to ever greater extremes. We can't ignore the signals from the recent rise of populism from both right- and left-wing nationalism that large percentages of the populations are anxious and frustrated and questioning their faith in Western liberal democracy and the global trading system. The distributional issues that are generated by the economics of intangibles must be addressed. With solid GDP growth numbers and low unemployment, now is the time. As the experts in understanding and measuring the digital economy, your work in measuring the effects and potential consequences of potential economic structures is so important, ongoing research that needs to be done.

We are in the midst of an historic technology-driven transition in the way value is created and captured in our economies, in how our societies function and in the sources of national wealth and power. Here, I lay out four core elements that must be resolved together to craft a stable system that can advance welfare globally. One, safeguard national security in the cyber era. Two, enable fair access to the new factors of production to participate in the value created in the knowledge-based and data-driven intangibles economy. Three, protect and even enhance citizen welfare in the non-economic realms for privacy, democracy, ethics. And fourth, of course, comply with all international commitments under various agreements, including GATS, TRIPs and FTAs. I submit to you all today that the top three — cybersecurity, fair economic access and preserving sovereignty over social choice — can be resolved together and, in fact, can only be resolved satisfactorily if done together with appropriate national-level implementations.

Data-driven technologies are becoming the core infrastructure around which most of society operates so states need to be able to shape approaches if the system is to be sustainable and accountable to citizens. Different countries will have different implementations. The EU's implementation places greater weight on privacy and circumscribes the ability to capture economic value. The United States places the emphasis on capture of economic value but national security is also a major interest. China primarily emphasizes national security but economic value capture is also a great priority. The challenge comes with reconciling national-level choices in these domains with commitments and trade agreements that remained under a different technological conditions and for the most part in ignorance of the value proposition in terms of the international distribution of benefits, because the rising tide in this older system generally lifted all boats.

Trade agreements have general exceptions to cover national security and fundamental social policy objectives. In principle, these exceptions can be called on to address problems as they surface. However, countries must be shrewd when it comes to their twenty-first-century economic strategies or they will be outmanoeuvred by more sophisticated states and private companies and, in the process, lose their security, sovereignty and a fair shake at capturing their share of potential economic returns. Pay close attention to who controls the data.

The digital transformation has more than emerged and runs the risk of overtaking traditional measurement and reporting systems. In 1987, Robert Solow famously said that "the computer revolution was everywhere but in the productivity statistics." Today, a similar statement can be made about data: it is everywhere but in the national economic accounts and in trade statistics. It is essential for good governance that this information deficit be closed. The IMF's work on updating its statistical approaches, the interpretation of data and the formulation of economic advice is important and urgent. I believe the IMF, with its mandate to promote international financial stability and monetary cooperation, as well as employment and reduction of poverty, is in a unique position to catalyze a new Bretton Woods moment, a gathering of its 198 members to address these new global realities as a result of unprecedented digital forces shaping our world. Nothing less than a historic gathering of key decision makers will forge a new global framework for addressing current challenges posed by the data-driven economy. Few leaders in the world have the leadership skills, credibility and impact as Madame Lagarde, an inspiration to women and men alike.

And wouldn't it be powerful to see the IMF, a child of the original Bretton Woods agreement, give birth to a new system of rules for the twenty-first century and carve the path forward that enhances global digital cooperation and welfare? Digital technologies bring profound structural changes in all economic and non-economic realms but we need not fall prey to technological determinism. I'm confident that these changes will be managed to the benefit of all. If you measure well, you signal to all politicians what is valuable and empower informed choices. Thank you.

Christine Lagarde: Well, I don't know how you feel at that point but it feels like you have touched on every possible topic and I would love to go back to many of the subset and the subpoints on the many, many derivatives of the main themes that you've addressed. I'm not sure that my questions will do justice to the depth and the density and richness of that but I'll try. And to the extent that I fail, you can try. We will save a little bit of time. Think about a couple of questions that you might want to ask.

I'm tempted to go back to the story that everybody knows about Henry Ford, who was having difficulties with his union leaders and who took him to a particular room where he was having robots developed. And he showed the robots sort of dealing with assembling bits and pieces of cars and he said to the union leaders, he said, "Now I won't need you anymore and we will not argue with each other because robots will do the cars." And the union leaders looked at him and said, "Yes, but who will buy your cars?" How would you move forward, let's say, 10 years from now and try to adapt that story and explain to us how the transformation will apply to those relationships?

Jim Balsillie: Well, that's an equally challenging question, so thank you for a challenging question back. I think the important lesson is that we manage the governance systems as we evolved to an industrial production economy. And I won't go into it, but the birth of these measurement agencies and all of the structural governance systems, labour, social welfare, environmental, we're all a product of that. My call is that we need to very actively do the same here, that this kind of hands-off techno determinism, I don't think will serve us well. In a sense, I believe in the car but I don't believe there shouldn't be speed limits and blood-alcohol-level measurements in front of a school at 9:00 o'clock on a Monday morning. We manage these systems to the benefit of society and I would say, whatever level of stakes you think are on the table right now, they're bigger.

Christine Lagarde: Right. That's what the founder of Baidu actually said to me when we were having that conversation about three weeks ago at this, wherever it was. He said, "If people liked internet, that was just the hors d'oeuvre, artificial intelligence," and you said artificial intelligence and robots, he said, "artificial intelligence and biotech will be the main course."

Jim Balsillie: Well, that's true. I'm not much of a cellular person but I'm not going to dispute a man like that saying that. I think when I mention about the physical manifestation of this digital nervous system, it really is the infrastructure of the twenty-first century and it is determinative of how your state operates and thus it embeds critical national sovereignty issues and critical normative issues and critical economic issues. And that's why I went at the resolution of it. I think the most important thing we have to realize is how we shape the system will determine what it looks like in 10 years. And I think we really are at a juncture right now in terms of shaping it. And I think that's the call before us. And I think the expertness of the people here to move themselves up and go back down and the convening power and representation of the IMF and your respected leadership puts you at a unique place and time to begin to insert the main meal or this hors d'oeuvre and ask what we want to eat.

Christine Lagarde: And do you think, that's a question because you are sort of setting us up for that, but do you believe that addressing those issues — in a way the measurements and the measuring of value associated with data — is actually the right entry point? That's where you sort of suggest that we start at that point, move it up to a more governance issue and as to how the rules of the roads are going to be defined to, then move it down again to how it's being allocated in terms of value, redistributed in terms of taxes and what have you?

Jim Balsillie: I would say, a little more differently, that the value of data is symptomatic of what's valuable underneath it. And so I tried to insert what are some of the compositional parts of that? It explains the geostrategic rivalries. It explains the centrality of cybersecurity. You cannot measure an economy without measuring its cyber resilience. It explains the distributional elements of that and the need to zone in on that. It also explains the need to look at the strength of the economy, particularly in competition areas where data is prone to market failure because of its scale, scope and asymmetries.

I'm not saying it's one number but I think we've had discussions that you need GDP, but you need a few other numbers, and when you lay them out there, you get a picture. And I think that's where you have to go. And that's what I mean by your measurement capacity and these other things I mentioned, ideally positions you. You know the old joke, you're the second-worst organization in the world to deal with it, everyone else is tied for first worst. And so I mean that as a compliment, because it's impossible for anybody but it's less impossible for you than anybody else, I think, which is why I'm so honoured to be here today to talk about this.

Christine Lagarde: We are privileged to have you and to have you sort of address on such a broad basis and so comprehensively those issues. Back to my example of Henry Ford and his union leaders — in those days, at least there were union leaders to argue the case and to be on the other side. In our current circumstances, do you see any actor? Forget about the IMF for a second as the second best or second worst. Each and every one of us is a data owner without us really knowing about it, but is there somebody who can actually represent the collective interest, appreciating the value of what we carry and what we have to offer?

Jim Balsillie: Yeah. I think that's an incredibly important issue — what is ownership? It's a function of context and content, or consent, and it's almost always in relation to someone else so that's a very challenging issue. And I think it's being actively debated in Europe and other places and very responsible agencies like the IEEE, which I would encourage you to partner with, who's grappling with the normative elements of that. I think that we've organized the world in a lot of these nation-states, we've got democratic or quasi-democratic structures. I think as long as you have some form of citizen accountability and policy flexibility, we can work it out. But if you notice a lot of the movements are really not supporting that direction and the tricky part of the ideas economy is it's a product. First, it's got zero marginal production costs, which means it scales infinitely. And it's a product of geopolitical legal structures, of which the strong have a disproportionate say on it.

Therein lies the Pandora's box, but be careful not to kill the very thing or take down the very thing — the Henry Ford story that you need to survive. I think that's why we have a Bretton Woods moment here. And if we don't do it, I think the trend will be much more turbulence before we come to the final realization. We should have done that some years before and not had to pay this very difficult price of this extreme turbulence era.

Christine Lagarde: You're familiar with FTAs, TRIPS and what have you, do you believe that even the latest development and iteration of FTAs like TPP11, which is probably the most advanced one, which includes, well I have not studied the...

Jim Balsillie: The carve-outs? Yeah, I have.

Christine Lagarde: No, no.

Jim Balsillie: The TPP11 carve-outs.

Christine Lagarde: No, no, no. I was thinking about the second generation after the US, whatever it is.

Jim Balsillie: No, don't get me going.

Christine Lagarde: USMCA, the USMCA one, which I'm sure has some dispositions about IP as well, but in TPP11 and TRIPS and others, the view was always that the rules were decided on a national basis and that the trade agreement would sort of overcome and bring together those systems. That applied reasonably well with product, goods with tangibles. It applied less so with other, with TRIPS in particular was a little bit more complicated. Do you believe that with data and data flow, which probably determines more or less the value of data, do you think that those principles still apply and can continue to govern the relationship, or not?

Jim Balsillie: Well, the issue we is that there is an enormously critical role for TRIPS but TPP12 was TRIPS plus and the new NAFTA is TRIPS plus plus and that's why I call these asset value protection agreements. There is no research that says higher protection spurs innovation. It just drives more inequity and more entrenched power of those that are there. I think, and then as you see, when certain nation-states become very good at the WTO role then some other states who like the WTO start to like it less and it's creating a revivalist system, which is neo-feudal based on rent extraction. And then when you put in machine-learning capital, what happens when a machine is able to generate as much IP in a day that a nation-state can in a year and you industrialize the IP creation function? Forget the compression of work, it changes the dynamic of the commons, where the machine can say, "Well, this works better and this works better." And they file claims on just as fast as a processor can process.

And then the common claims goes to the landlord position of the digital infrastructure and digital nervous system that has economic and non-economic elements that I talked about, including the security realm. It really does call for a Bretton Woods moment to look at these arrangements, to put them in accord that — I personally believe there is a path where everyone can win here. I think there's so much welfare in this system, the potential for growth is unbounded. The potential for welfare is unbounded, really. I come at this as an optimist but I implore seeking the responsible space for this and I don't think the trade-offs are hard. I don't think they're hard.

Christine Lagarde: What is that part that you're seeing?

Jim Balsillie: Well, I tried to represent it in that schematic of preserving sufficient national policy space. It's ironic that China and EU are just saying, "Let us have our policy space domestically." It's very ironic that they're different but the same at the same time. And in a sense, I think that part but still having resolution to global agreements that underpin our system, but you have to rethink the national security and, I think, test, because it's become a different thing because it's the nervous system. And then I think when development goes, Ian was having some comments yesterday on Africa and the gentleman from Nigeria, then you can move development into their ability to be a bit more sovereign there, both economically, and craft industries can have fair access to data and all of a sudden you flourish the system.

And I think, quite frankly, the very good companies will continue to prosper mightily anyway, but it has to have some form of spreading and looser coupling. We saw what hard coupled systems look like in financial system. I think there's a place for loosening the coupling but still having responsible system structure. And I think you need — led by these kinds of measurement experts but bring in other subject matter experts, like cultural anthropologists and philosophers and those types, and I think you would have an usually rich and emergent conversation that will take us where we need to go.

Christine Lagarde: Jim, what would you see as common denominator? Because I hear what you say about China and the EU in a way claiming their policy space but they're driven by completely different motivations, aren't they?

Jim Balsillie: Well, we have to also look at the role of the firm in the political economic realm right now and are they over flexing their muscles? And I think both, from my read, are coming at this from a place of defensive nervousness and I've never seen elegant solutions come out of that kind of orientation. I think the more the IMF can create safer spaces for discourse where this can emerge and they don't have to be the principal actors in a drama that is rational for the narrow and specific characterization.

Christine Lagarde: But back to my question, where do you see the common denominator that would actually bring all of them, not just China and Europe, but also the United States and other players, where they would see common interest in actually agreeing the rules of the road? Because you start from one end, where there is a definite determination to control and based on a very, very large market where you can enforce localization of data — it puts you in a relatively comfortable situation — to another end, which is far more into data flow and the best will survive and we have sufficient advance anyway, which might be true, might not be true, to set the rules and be the first winner takes it all. And then in the centre, you've got this whole area, which is a little bit soft, which has a few champions. I would put Spotify in one of those, actually.

Jim Balsillie: Great, great. Love fellow travellers.

Christine Lagarde: It's predicated on protection of the individual and privacy rules eventually prevail. You've got sort of three different mobile, or motivations, behind probably at least two policy space claim and one that is not a policy claim on the assumption that it will take it all.

Jim Balsillie: Well, I'm not sure the individual conflates as much with the geostrategic. I would say, the individual was the pretext for GDPR but there's a lot more in the subtext.

Christine Lagarde: Possibly.

Jim Balsillie: I think China demonstrated their orientation toward forbearance in the global financial crisis. And I would think there's a lot more forbearance there if you just give it a place to tease out and everybody realizes that there's not a steamrolling exercise at play. I think the degree to which China's over harnessing the WTO and TRIPS — which would make anybody nervous — but if they shifted that to more of a forbearance role where maybe they assigned their IP to Africa and let them do that and say, "This is not a steamroll exercise, it's a sovereign space exercise and we want others to have their sovereign space," then maybe the actors in the United States will see them less as a threat and just as a nation-state trying to move themselves forward.

There's always going to be skirmishes and nobody's a saint. I'm not being Pollyanna here but I actually do believe that there is an elegant path through here, which brings the rest of the nation-states into play. And a lot of the, I say, there's four groups in this world: there's China, there's US, there's EU and there's everybody else who's really, really, really nervous. And so if you create a space where the rest can be okay but still be part of the global economic zone, I do think that the potential for human welfare and the potential for growth is unbounded. I come at this as an optimist.

Christine Lagarde: Okay, good. I tend to be an optimist as well so we can — yet, when I listen to you, I see the seeds of multiple divides. The divide between those who have skills and those who don't. Those who will earn a decent living and possibly make a lot of money in the system and those who won't. The urbans and the rurals, probably. The young and the not so young, maybe. And you can sort of correlate that with education and skills and access to understanding these new technologies, and possibly men and women. I can see one common denominator to bring all those divides down to a very small number, which would be education, education, education, but how do you go about that?

Jim Balsillie: Well, I don't think education is sufficient because it still doesn't deal with the distributional elements for whoever owns them and you've seen some of these charts where they compress the value there and lifelong learning. I guess in my experience in business and policy is that people are very good at coming up with unifying theories that serve narrow and specific interests that they like. And so I think we have to have a more enlightened conversation. I think this nationalism came about because theories of finance that was the end of risk in fact was the brittlizing of risk. And then we had to revisit these theories after the crash. And so I think we should have updated theories. I actually do believe there's a very, very expansive place for all. But I think the absence of governance, the critique of absence of governance in the financial sector pre-crash, is modest compared to a critique of absence of governance in this data-driven, knowledge-based era.

And therefore we have to have — the ounce of prevention is worth a pound of cure kind of thing. I think it would be very wise to revisit these things. My understanding of the system is I cannot see how this can't be reconciled to the reasonable benefit of all. I can't say it's just a question of how you design the system and the system is abstract, it's going on steroids so it's how you define an abstract system. I think one of the things, which was touched on, is because of the feedback loops of the system and the affective nature of the manipulation, which is a central part of the IEEE's values-type stuff, we have to pay particular attention to that because it's driving people in a certain direction, which I think is actually the part that I would jump on as a citizen very, very quickly because of firms' interests are very narrow but citizen interests and state interests are different. And so I do think that there's nothing I can see that can't be resolved here with deliberate, thoughtful leadership by incredibly smart people, many of whom are in this room.

Christine Lagarde: It's hard to resist. But I guess just like you fight fire with fire, you can use artificial intelligence to actually identify those not so friendly and pretty devious mechanism that are intended to move people in one direction or the other, not necessarily for their good.

Jim Balsillie: Provided you have sovereign capacity of that tool to manage your circumstances.

Christine Lagarde: Hence the governance.

Jim Balsillie: There's a lot to be said about that. There's a lot of answers there that — there's a lot philosophers and anthropologists and game theorists and political, it's a political choice. This is really about political policy, but I think if you know anything, what you measure properly and frame, it puts it into the political space and this idea of a composite of dashboard elements, if you choose well and kind of generally frame it. I have an expression I use in life — I'd rather be generally right than perfectly wrong. And I think if you orient to the messy general place, it gives people a place to react to and I think you'll start to see that it orients people responsibly, I do.

Christine Lagarde: There's a good professor of marketing at Northwestern University who used to say that all the time.

Jim Balsillie: Oh, I thought I invented it. I guess I heard it as a kid.

Christine Lagarde: Do you think that IP protection is excessive?

Jim Balsillie: Without a doubt.

Christine Lagarde: Should be reduced massively? Should be completely eliminated? Transformed?

Jim Balsillie: Oh, I don't think it should be eliminated. I think there's a place where it was born of a time in the Renaissance and every reasonable and respectful study says it's at a point where it reduces innovation, it reduces dynamism, there's thickets and geopolitical rents. And how can you have such a high-stake system determined by several layers of discretion in terms of novelty and prior art and infringement and that. But the problem is, is you have the firm actors who are strong. I said that the role of the firm in pushing the change of the system — very effectively, I might add — and trade agreements, which used to unlock very narrow forms of bargaining, of reducing tariffs to accrue, have now that closed doorness is now dealing with elements of soft law that reaches into countries and frames a much bigger structure of the society. Yet it's still done within that closed-doorness framework.

Things that should be democratic are done in closed doors now because of the character of the intangibles economy and that's what I was trying to talk about. The shift from the rising tide trade-offs of the tangible, the intangibles being construed and dealt with in non-democratic spaces and non-economic spaces, I would argue. And I think that's very wrong. And I think I can't see a way it won't turn against us if we don't make it more democratic in our approaches. And I don't think these types of agreements have been democratic at all for the element of the degree to which they reach into a niche and state, and hard law and soft law, how they run themselves, and trade used to just be a border adjustment thing and a bit of national treatment for investment. Now, they're not trade agreements anymore, they're something else. Let's come up with a word, asset value protection agreement captures a good part of it, but I think there's even more that can be put in that bucket but I'm not trying to be pejorative.

Christine Lagarde: Is it the wrong fight to actually ask the, as some do, not saying that we are doing that here, but that some ask China at large to respect intellectual property rights? Or is it not the battle of the last century?

Jim Balsillie: Well, but what is an intellectual property right that's violated is an abstract construct based on a social bargain that's now being internationalized and TRIPS was a minimalism but there's no maximalism to the system. If you keep raising the maximalism, you'll always manufacture everyone to be a violator.

Christine Lagarde: True. But if you're the one who's filing the largest number of patents in the world, then you put yourself in a good position.

Jim Balsillie: Then you say, "No, I like this enforcement of non-theft anymore." The one side becomes the other side and all of all of a sudden it's very rivalrous and threatening and that's where you get this cascading and that's why I would say, I don't think it's going to end well for anybody if we keep on that path. And that's why I'm saying — you asked me the path forward. America is a place that will always find a good path.

Christine Lagarde: After it has tried everything else.

Jim Balsillie: I'm not going to say.

Christine Lagarde: Well, somebody else did.

Jim Balsillie: And I think China has shown forbearance when the chips are down. And I think the stakes are very great for all the other nation-states and Europe is showing a bit of a way, though they're not saints in these issues either. I think it's a very, very appropriate time and needed time to revisit these systems, which are just running under their own momentum and force right now. And I think we've seen what that looks like when anachronistic vestigial systems just keep running on their own momentum too far. I don't think that's the place I would like to see us go.

Christine Lagarde: But do you think that GDPR, for instance, could be one of the bricks of that? I don't want to use the wall analogy, but of the construction that will be developed?

Jim Balsillie: I think the powerful thing about what Europe has done is articulate very forcefully the policy flexibility is the nation-state's realm in a lot of spaces that involve GDPR. But that principle is also the same for China, though the specific normative implementation is different and things change over time, norms change over time. And so if you have that flexibility, who knows how the word world will converge or diverge? But I think it has a lot to teach for Western democratic societies. It has a lot to show in terms of the flexibility. I think it could crew a lot to places like South America and Africa and if you construe it right and there's proper forbearance, it allows China to be China. US is still succeeding mightily despite the GDPR and so on and so forth. I think there's a, a place to finesse through, to navigate the current path. I see it's there but digging in and coming at it from a defensive hardened spot, I don't think that's the solution orientation — the orientation to find a solution.

Christine Lagarde: If we listen to you and you are right, growth is going to explode, productivity will massively increase and we are not at all at this sort of peak of economic development and creation of values as some would agree.

Jim Balsillie: No.

Christine Lagarde: No.

Jim Balsillie: Oh, the potential is unbelievable. And I know it's apocryphal but the head of the patent office in the US apparently said in 1899, "We can shut down the US patent office because everything's been invented."

Christine Lagarde: When was that? 1899?

Jim Balsillie: Yeah. Yeah. But it may be.

Christine Lagarde: Well, they wanted to shut down the IMF in 2007.

Jim Balsillie: Yeah. Well, I will tell you a bit of a funny story that at CIGI, we started this breaking global deadlocks and we had this thing on forming the G20 and I was in meetings with very famous people who you know, and they were looking at, I think it was 2004 or 2005, and they said, "Okay, what's going to catalyze the G20?" And they said, "Well, environment, migration, war." And he said, "Well, it can't be finance because we solved risk." And I'm rolling along thinking, well this is interesting, I'm learning. And of course, that was very funny, looking forward, back. But I think the potential — look at these innovations.

Look at the stuff on fintech today. That's the Grameen Bank on super steroids. Banking the unbankable and the welfare of that. And Ian was talking about people sharing, who are informing communities. I think the potential is, and it scales infinitely. Wow. But you need to guardrail it, that's all I'm saying is, is we need a guardrailing moment. And that was kind of the UN — it's we need guardrails because we didn't like what happened without guardrails and the Bretton Woods. It's just a bit of system design and I would just say let's do it without a big crisis.

Christine Lagarde: We're trying to help a little bit.

Jim Balsillie: You're doing great. I'm honoured to be here.

Christine Lagarde: We've produced these Bali — did you see the Bali Fintech Agenda?

Jim Balsillie: Yeah. That was excellent.

Christine Lagarde: We should just pursue — we've tried to do that at a sort of ground level in order not to attract too much attention, not to be bashed on the head for being excessive in that respect. But there's clearly work from there, and further.

Jim Balsillie: But if I will say, if you don't put proper guardrails on it, you could destabilize the financial system. And if you saw the presentation earlier today, they talked about, and now we've melded all these data sets and we figured out everybody for everything. And then it goes, the thing about human beings, that they will take things too far. And so, there is a place, fintech's enormous, but there is a place for guardrails on all of it all the time.

Christine Lagarde: Yeah, yeah, yeah, that's true. Who would like to ask a question? I'll come to Gillian later. I promise you, you'll have a question but I would like to start with some — okay, you have the floor.

Monisha Das: Thank you so much.

Christine Lagarde: Say who you are. Can you say who you are? Sorry. Can you say who you are first?

Monisha Das: I'm a college professor, Monisha Das, University of Maryland system.

Christine Lagarde: Thank you.

Monisha Das: Even before AI and machine learning has come to us, we've already seen a Cambridge Analytica that weaponized data. But my question is not just about Cambridge Analytica. My question is, is a future Cambridge Analytica a bigger threat? Or is a neighbourhood McDonald's run by robots with minimal humans a bigger threat? What is your thinking on it?

Jim Balsillie: Without a doubt.

Christine Lagarde: Thank you.

Jim Balsillie: Without a doubt Cambridge Analytica because the robots are coming and I think the whole shift of work, as long as you manage the adjustment systems well. And we've had folks from the OECD talk about how people can choose jobs that attune to them happily. And so that frees the ability for that, as long as you get the adjustment systems, I think that the future of the McDonald's is just fine. But I think what you're seeing is — and I did that mandala — is there's a grabbing of other forms of social and democratic and normative capital and security capital and health capital being appropriated into narrow and specific private corporate capital because they can. But that's not abnormal for the production economy when it appropriated social capital and then we came up with workers' rights and environmental rules. We know how to put these guardrails in. I'd say if we lose the democratic space...

Christine Lagarde: We lose it all.

Jim Balsillie: I think we lose it all. And the private sphere underpins the whole emergence of democracy and I tried to comment on that.

Christine Lagarde: Okay. You over there. There are mics on both sides so why don't you run to that? And then I'll take one in the middle and Gillian.

Noriaki Kinoshita: My name is Noriaki Kinoshita. I work for the IMF statistics department. When we heard about the second Bretton Woods moment, three things came to my mind. One is the founding document of the IMF, which is the articles of agreement. And second is IMF as an institution. And the third is two economists who led the discussion at the Bretton Woods, Harry Dexter White and John Maynard Keynes. Do we need to start thinking about those documents and institution and also where should we look for the thought leaders? Maybe this time, it may not be economists, but where should we look for these thought leaders who will be leading this effort?

Jim Balsillie: I think your founding documents are pretty clear, this is your job. I don't think you have to study that too hard. I think the place I would go in a very specific response, 700 of the top global experts with the IEEE out of Geneva spent six or seven years working on that, had two versions. I sent it to Gabriel and Louis and Marc and I think that's a place to go. And you look at that and you say, "How do we meld the financial architecture from the technical standard, normative elements of these systems?" And they call upon social philosophers and anthropologists and all of that. And I think you'll find that you can create a very special mixture of capacities to launch forward clarity from what seems overwhelming. I think if you break it down, it's just not that overwhelming if you start to break it down and begin at the beginning.

Christine Lagarde: And it may well be that that group had a few women, whereas the Bretton Woods founders had no women, speaking of Gillian, please.

Gillian Tett: I think it's a really fantastic vision that Madame Lagarde can lead a group of new Bretton Woods leaders to sort of save the digital economy and ourselves but I hate to be a cynic but I am a journalist. Bretton Woods was created by a group of allies who'd fought together against a common enemy in World War II. Today, there isn't — short of an attack from Mars — you don't have a global group united against a common enemy. On the contrary, you have two great powers rising in rivalry and who aren't necessarily united in common interests. Eric Schmidt spoke about a future internet that's going to be not so much a splinternet but essentially two internets, a Chinese one using Belt and Road initiatives to essentially create a Chinese area of influence and an American one and maybe even a third one as well.

How on earth do you hope to create Bretton Woods in this very different situation where there isn't necessarily an overwhelming need or instinct to cooperate? And if you don't have that, what do you think is going to happen? Are we going to have a collapse of the internet in the future? Would you agree with Eric Schmidt, we're going to have two or three internets going forward, a splinternet? Are we going to have a massive social explosion revolution? What will happen?

Jim Balsillie: Well, let me break that down a little bit. And remember my further comment, it's amazing how people can create theories that serve their narrow and specific interests that seem so benign and all encompassing. A global open internet is really good with dominant pre-existing positions and just want to spread that. And I think Europe persisted that for good reasons. And you talk about agreement between allies like Stalin and Roosevelt were fishing buddies. And so I think the issue is, is you have to construe the reason they're not allies — we haven't construed the questions properly.

Christine Lagarde: Or we haven't faced the crisis.

Jim Balsillie: Or we haven't faced the crisis but I'd rather make it that we haven't construed the questions than go through what I call extreme turbulence. Because I don't think it's three rivalrous systems in that sort of narrow construction. I think it's three colliding systems, and I don't know what that will look like but I know it won't be the way we want it to be.

Christine Lagarde: But sort of follow up from what Gillian's questions meant. Unless you demonstrate the counterfactual, which is probably difficult because unless you have the collision, you don't really believe in the outcome of that possible collusion. And in terms of common threat, I was thinking, that's what I was trying to decipher from you. Apart from the toxic non-state actors, which could eventually target all of the three and more, can't think of any sort of common denominator that would be the beginning of a platform from which you build something on a broader scale.

Jim Balsillie: Well, but I would say, if you respect policy space of zones and there's certain realms of forbearance and there's tremendous shared interests and certain principles.

Christine Lagarde: What are the shared interests?

Jim Balsillie: Well, the shared interests that we don't have an extreme collision, the shared interest in the West, that there's something very central to the human being and the rights and the decency and the sovereign determination. Well, and then you ask those critical questions in context of what's happening right now that if you hold those values, then how is the current system manifesting those values? And that's where people go to the "look over there" strategies of tech determinism and utopianism and all of that. There's a lot of "look over there" that goes on. And I think that's where we have to have more honest conversations and I still think the corporate actors will still do extremely well because growth is unbounded. The worst thing for them is to have a clashing of the system. And the worst thing for China is to make people nervous.

Christine Lagarde: Where do you think the private actors prosper best? Is it in this internet? Or this, what do you call it, Gillian? Distinctnet?

Gillian Tett: Splinternet.

Christine Lagarde: Splinternet, that's right.

Jim Balsillie: Yeah. Well, the splinternet is, and that's the Great Firewall and then the GDPR-type stuff. But as we've seen in a very short period of time, sentiment has turned away from these, the highest public approvals gone to kind of the lowest public approval in six, seven months. And the greatest icons are now pariahs. I think we're getting a taste of what the existence looks like. And I think a reasonably intelligent person can extrapolate that given also the geopolitical games that are at play right now. I think there is unambiguously a solution but if people need rock hard proof of the benefits of the counterfactual, well, mankind has proven it doesn't always need a massive crisis that's existential to find its way forward. As you're the cynic journalist, I'm the entrepreneur optimist, details at 11:00.

Christine Lagarde: Yes. Please.

Mark Tenney: Yes. My name is Mark Tenney, Mathematical Finance Company. And my question relates to the question of risk and how to help the national income accounts, people in this room at risk to national income accounts, because everything seems to drive in that direction and even many of their own questions in other sessions came to that. But they don't really see risk. They're not familiar with risk models of banks and insurance companies. I'm part of the calibration process for the American Academy of Actuaries to calibrate what are called economic scenario generators, which are used to then determine the actual capital level of life insurance companies in the US and similar things are done in Europe as part of solvency, too. However, the calibration data, which is not a lot, is very hard to find and there are bits of it that you have to pay money for — maybe not, but you have to pay some. And the American Academy of Actuaries is actually a volunteer group, surprising as that may sound, that the economic scenario generator used for required reserves and capital is done by volunteers like me who are uncompensated, as you mentioned earlier.

And so what we need is a little bit of help from the IMF to put together the benchmark data that's used to calibrate risk models in each country for its life insurance but banks use almost the same thing. It's government yield curves, some standard data that these gentlemen already produce and ladies, some options, some option data, option on interest rates and options on stock indices and a couple other things. And I've talked to some of your colleagues at the IMF. They've all told me I was talking to the wrong person. And so maybe you're the right person. Will the IMF support such a project? It's not a lot of data and it's not a lot of money to do it but what it would do is allow everybody — whatever profession you are, whether you're a cultural anthropologist or an economist who does income accounts or you're a risk manager or you're a quant or whatever it is you are — to see what the calibration data is and then to incorporate that into their new ideas.

Christine Lagarde: May I suggest that we follow up? I'm not sure that everybody is fascinated by this particular project but if there is data that is publicly available and that we can sort of focus for that particular service, if it's a public service, I'd be very happy to entertain this.

Mark Tenney: Okay, thank you.

Christine Lagarde: All right. You'll have the last question.

Marshall Reinsdorf: I'm Marshall Reinsdorf from IMF statistics department and I wanted to turn the sort of statistics-oriented question for Jim to end the thing. We heard from Gillian about the importance of barter and barter coming back and we heard from you about intellectual property and I've often wondered — in national accounts, we tend to only recognize intellectual property if there's a transaction, if somebody buys it. But in business, there's a lot of cross-licensing agreements. And I'm wondering, are there a lot of barter-related transactions in intellectual property and use of intellectual property? And is this big enough so that us statisticians should worry about it?

Jim Balsillie: All day, every day. Massive.

Christine Lagarde: And not knowing about it.

Jim Balsillie: Yeah. And it looks like — and carving up IPR makes those financial derivatives, it makes the carving up of derivative financial instruments look modest by comparison. It's an all day, every day. And the core principle is called freedom to operate. It's a management principle in tech where you're always manifesting and trading off rights to expand your freedom to operate on this abstract construct based on restriction and restrict the other person so that you can extract rents. And what's happened is that the system is based on a public-private framework between the public and the public sector who creates this system and changes it 100 times a day and the private, and it's abstract and it's got discretion to it.

It's prone to rivalries much more than the trading system and the stakes are enormous and they're being done there's state-level activities with national labs and sovereign patent funds. And then there's private sovereign patent funds and there's firms. And this is all done without any transparency to it. And it underpins the whole system. And I think when I retired from RIM, I think I had 450 active IP files that I was dealing with as part of the all day. Anyone who's in this game of intangibles, this 90 percent piece I talked about.

Christine Lagarde: The game.

Jim Balsillie: That's the piece that is going on all day but nobody talks about it overtly because it's a game of poker and stealth and all that kind of stuff. And so, I would encourage that be a realm and then you move it to the data assets and the IP filed around the data assets, which I tried to just give some indicative things here. And then you see how that plays out in trading agreements, which are corporately advanced to try to unlock value or advance a value when we do it. And because the stakes are so much higher, that's why I said that. To answer the question, that's a big zone, well worth, if you can get at the data but firms put that under a big lock and key. I wish you well.

Christine Lagarde: I was just trying to figure out how we would get access to it. With that, there is something that I'm sure you all want access to and that is food because lunch is overdue. We are immensely grateful to you, Jim, and I think a big round of applause is more than deserved.

Jim Balsillie: Thank you.

Christine Lagarde: Thank you.

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