2020 KOREA BASIC INCOME FAIR DRAWS DIVERSE IDEAS
Gyeonggi Province received more than 500,000 visitors at its online conference on the benefits of universal basic income and how governments can find solutions for change.
When Gyeonggi Province Governor Lee Jaemyung first discussed introducing a basic income program in South Korea several years ago, the idea was dismissed as farfetched. But the pandemic has shifted attention to the program after the Korean central government’s one-off cash payment during the height of the crisis received widespread public support. In mid-September, the Gyeonggi Provincial Government hosted a two-day global online event to explore basic income as a solution to inequity, the largest conference of its kind in the world. More than 500,000 people visited the fair’s website, viewed live streaming of the speakers and discussion panels on YouTube, and visited the site’s virtual information booths. That was a 15-fold increase in attendees from last year, according to Gyeonggi officials who organized the event. The jump was attributed to growing public interest in universal basic income, in part because “disaster basic income” payments—the first of their kind in Korea—distributed to Gyeonggi’s residents in April and emergency disaster relief payments offered to all Koreans in May proved effective in mitigating the economic impact of the Covid-19 crisis. In total, 26 researchers, economists and activists from 11 countries participated in the conference and voiced their support for basic income—periodic cash payments to all citizens—as an optimal model for the future. They underlined the need to develop the program from the experimental stage to actual policy. In his opening address, Governor Lee stressed the importance of public support and participation in the realization of basic income, particularly in a time of rapid change. The traditional distribution structure of income to labor is drastically changing due to the pandemic-induced economic crisis and the development of AI and robot technologies, he said. In the first panel session— moderated by Eduardo Suplicy, Honorary Co-Chair of the Basic Income Earth Network (BIEN)—Kim Jae-yong, Gyeonggi’s Senior Secretary for Policy Commitment, noted Korea’s disaster basic income initiative has shown concrete economic and social effects. Basic income is not just part of welfare policy, but also economic policy, he said, adding, “It is a blueprint for the future.” He was followed by Nam Gi-up, Director of the Institute of Land and Liberty of Korea, who during the second panel session suggested a basic income-type national land holding tax to collect unearned profits generated by corporate land ownership to share with the public. The measure would help promote efficient land use and stabilize property prices, he said. During the third session, under the topic of “Contemporary Capitalism and Quality of Life,” Malcolm Torry, General Manager of BIEN, pointed out, “In a capitalist society, some possess capital or wealth, but some do not. So, it is important to implement basic income schemes that reduce this inequality.” Susana Martin Belmonte, former chief economist of Rec Moneda Ciudadana in Spain, observed in the fourth session, “In just one year after Barcelona introduced [real economy currency], the local multiplier effect of public spending increased by 54%. Local currency can be an effective means of payment and also be a tool to strengthen the local economy.” During the fifth session—moderated by Annie Miller, co-founder of BIEN—Lee Seung-yoon, an associate professor of social policy at Chung-Ang University, said, “While a new paradigm for the welfare state is being demanded, discussion on basic income as an alternative to the traditional welfare state needs to be further expanded and materialized as a feasible policy.” At the event’s close, Governor Lee pledged to promote the basic income policies discussed at the conference and Gyeonggi Province’s internationally acclaimed basic income model.
For more information, please contact: Gyeonggi Provincial Government: https://english.gg.go.kr/ 2020 Korea Basic Income Fair Office: https://basicincomefair.gg.go. kr/2020_en/ TEL +82-(0)70-7722-7010
FINAL THOUGHT
“YOU EITHER ACCEPT THE RISK OF WINNING, OR THE GUARANTEE OF LOSING.”
—F.C. Yee
scent wireless telecom companies in the late 1980s and early ’90s, getting a ground-floor view of the huge economic and societal changes coming as cellphones grew ubiquitous. In 2001, she moved to New York–based AllianceBernstein as chief investment officer for thematic portfolios. But the 2008 financial crisis ushered in an era in which active managers underperformed the S&P 500 and trillions flooded into low-cost index funds. Wood decided a fresh approach was needed. In 2012, she proposed putting actively managed portfolios of innovative companies inside an ETF structure. The idea got nowhere at AllianceBernstein.
Two years later, she launched Ark in New York. Success wasn’t immediate. In the firm’s first two years, its flagship fund placed in the bottom quartile of its peer group, according to Morningstar. By the end of 2016, Wood had attracted just $307 million in assets, and Ark’s 0.75% management fee wasn’t covering overhead. To keep going, she dug deep in her savings, sold minority stakes and struck partnerships with larger firms to build distribution. Japan’s Nikko Asset Management and the mutual fund firm American Beacon now own 39% of the company. Almost 10% is owned by the firm’s two dozen employees.
In 2017, Ark took off, buoyed by surging prices for stocks like Netflix, Salesforce, DNA sequencer Illumina, digital-payments processor Square and digital health provider Athenahealth. Assets rose tenfold, and Ark began to build its brand on the back of bold predictions, an active Twitter presence and the free research it put online. (It also attracted notice for a cryptocurrency fund available only to accredited investors; Wood started buying Bitcoin, which she calls an “insurance policy” against inflation, in 2015 at $250 a coin.)
Wood takes a top-down approach to building portfolios, first identifying disruptions by any means possible, including crowdsourcing—she even opens the firm’s Friday afternoon research meetings to outsiders, who can call in via Lifesize. Economics is central. Wood is most bullish on innovations if she believes their costs will decline over time, creating real demand. When scoring potential holdings, Ark looks at corporate culture and management execution on growth initiatives. Only at the end of the process does Wood value a company, refusing to buy anything she doesn’t expect will rise by 15% annually over five years, Ark’s minimum expected holding period.
The tumult of 2020 has been good for Ark. In March, when the pandemic emerged and stocks plunged, Wood correctly predicted fast-growing tech companies would lead the world (and financial markets) to recovery. She concentrated Ark portfolios in Tesla and other top picks (see table, p. 44) including education-software company 2U and real estate platform Zillow. Then, in late summer, when Tesla soared, she trimmed her holdings and built a large position in the battered shares of Slack.
With all successful innovations, of course, come copycats. Gimmicky themed ETFs have proliferated in everything from pets to sports gambling to work-from-home. Fund giants Dimensional Fund Advisors, Fidelity Investments and T. Rowe Price have all recently launched their own slates of actively managed ETFs.
An optimist by nature, Wood nonetheless offers some unsettling predictions for the next five years. She expects a broad swath of large industries—banking, energy, transportation, health care—to be disrupted by technological change, with many workers displaced. The result, she believes, is that economic growth, inflation and broad market indexes will all fall persistently short of expectations, providing an opportunity for active managers to pick the innovative winners that will continue to drive market-cap gains.
“I think the benchmarks and the indexes are going to go through a terrible period. We’re already seeing it,” she says. “We believe they are being increasingly populated by value traps.”
Does she think the market is now in a bubble? Nope. Uncertainty over the pandemic and the election (Wood supports President Trump “unabashedly”) means money has been flowing out of stocks and into the safety of bonds, she notes. “The fact that people are fearful now that we’re back at the S&P 500 trading at 25 times earnings tells me that we are not in a bubble at all.”