🏛️ Is Shopify acting like a state?
TLDR; not yet, not rly.
Reuters @Reuters
Mark Zuckerberg, Priscilla Chan donate $100 million more to U.S. election infrastructure https://t.co/LuSMCF4LBx https://t.co/EpLeJixmZi
Back in September (AKA when I started drafting this before abandoning it), the internet revolted at Jeff Bezos’ announcement that he was opening a tuition-free preschool for underserved children through his “Bezos Day One Fund.”
The discomfort anchored on resentment of private capital being used to fund what would otherwise be a public program provided by the government and fuelled by taxpayers. Well, that, and just general anti-billionaire/Amazon hate/resentment.
The United States has a large preschool access gap and previously lacked a functioning government. That institutional weakness may have widened the window for technology CEOs to selectively invest in public policy initiatives.
*Amazon more recently announced a $2B Housing Equity Fund for Nashville, Seattle, and DC markets.
In the United States, it is fairly normal for big tech CEOs to invest in [vanity], policy-adjacent projects with their personal capital. “Normal” in that it’s become normalized, not because there is consensus that these investments are desired or impactful. It’s a pretty mixed bag.
For instance, in 2010, Facebook’s Mark Zuckerberg invested $100 million toward creating an education foundation in Newark, New Jersey (this failed, somewhat spectacularly). He and his spouse Priscilla oversee the Chan-Zuckerberg Initiative, which has the goal of curing, preventing, or managing all diseases “in our children’s lifetime.” The prototypical tech investment saviour is Bill Gates’ Bill & Melinda Gates Foundation, which focuses on reducing hunger and extreme poverty in developing countries.
In June, Apple’s Tim Cook announced Apple’s $100 Million Racial Justice Initiative to promote racial equality for people of colour with a focus on “education, economic equality, and criminal justice reform.”
Similarly, Amazon committed to donating $10 million to social justice organizations; Facebook committed $10 million to groups working on racial justice; and Google promised $12M in funding to organizations addressing racial inequities.
Apple also recently allocated more than $400 million towards its $2.5 billion commitment to combat California’s housing crisis. Apple is also striving for Zero Climate Impact by 2030.
Together, the dominant technology companies are also engaged in efforts to close the digital divide and support students with virtual learning in the United States.
*These examples aren’t exhaustive but they give you a sense of some of the big-tech-fuelled interventions currently underway.
In a future-of-work context, Amazon is donating $700 million in re-skilling and up-skilling to keep its entire workforce up to speed - Upskilling 2025. This is somewhat different as it is an investment in workers that benefits the firm, but it is still a significant investment in the labour market.
👼 Big tech CEOs may feel compelled to create philanthropic initiatives that deflect from the more problematic and political dimensions of their business model(s) and behaviours.
Compared to a government, they are able to disburse capital much faster, and their donations are often a convenient income tax shield. It’s great for PR, sometimes good for business, and the new form of corporate social responsibility.
In her past life as a business journalist, Finance Minister and Deputy Prime Minister Chrystia Freeland’s signature observation and critique of the global super elite was their “philanthrocapitalism;” used as a mechanism to shield their income from taxes and take on policy-related projects under the guise of a nonprofit or charity.
The Big Tech era of selective policy activism reminds us that the firms have the capacity to behave like a state. Mark Zuckerberg has been referred to as a ‘king’ of Facebook’s ‘nation-state,’ and the “frightful five” (Amazon, Google, Apple, Microsoft and Facebook) are collectively more powerful than many governments. Policymakers are seeking to reign in this power through new digital taxation schemes and antitrust actions.
🇨🇦 Going back to those massive investments from Big Tech firms: we don’t really have investments comparable in scale in Canada.
This is (probably) partially because we have such strong public education and health systems, but mostly because we (luckily?) lack massive home-grown technology companies looking to solve wicked problems with their wealth. Except for one.
Our country’s largest firm, Shopify, is increasingly - and admirably - activist on a very modest scale, signalling a corporate social responsibility portfolio that is conveniently complementary to government policy priorities. Indeed, Shopify’s engagement with Indigenous and Black organizations, partnership on work-integrated learning opportunities, direct investments in training, and climate commitment make them government-like in that they are involved with a range of initiatives that are typically led by the state. To date, these engagements have been complementary to government priority areas.
🤷 What happens when their initiatives fall out of step, and/or solve for a government gap and assume the role of the state?
💸 And, is Shopify investing *enough* in these initiatives, or are they all investments in business development?
Shopify has partnered with Indigenous organizations reducing barriers to entrepreneurship. To realize their mission of enabling more Indigenous-led organizations to move online in 2020, Shopify has partnered with Indigenous-led organizations in Turtle Island (Canada) and Aotearoa (New Zealand) to co-create locally and culturally relevant ecommerce education.
This announcement is very much in line with Canada’s broader intentions regarding reconciliation, like the Aboriginal entrepreneurship program, which provides access to capital, and other Indigenous business development initiatives.
Shopify also invests in computing education, and has provided work-integrated learning opportunities to aspiring developers through their DevDegree.
The Government of Canada’s Student Work Placement Program helps to deliver work-integrated learning opportunities, which are typically delivered at the provincial-level through partnerships between post-secondary institutions and industry.
Shopify’s founder and CEO Tobias Lütke chaired the Digital Industries Economic Strategy Table, which advised the federal government on how to position Canada’s digital industries for economic growth.
Perhaps the greatest alignment between Shopify and the Government of Canada is around the environment.
Shopify has committed to investing at least $5M USD annually in carbon sequestration.
In 2017, the Ministry of Natural Resources announced that the Government of Canada would be investing $950,000 in state-of-the-art technology that will help turn carbon emissions into useful, everyday products such as building materials, alternative fuels and consumer goods. The Government of Canada introduced a federal carbon pollution pricing system as part of its plan to implement a federal greenhouse gas emissions pricing structure.
More recently, Shopify pledged $5M annually towards protecting the environment with Shopify’s Sustainability Fund, which will invest in breakthrough sustainability technologies. The announcement came one week ahead of Canada’s Speech from the Throne.
The Government will launch a new fund to attract investments in making zero-emissions products and cut the corporate tax rate in half for these companies to create jobs and make Canada a world leader in clean technology. The Government will ensure Canada is the most competitive jurisdiction in the world for clean technology companies.
It has long been anticipated a green recovery lens would be emphasized in the country’s economic recovery plans, and many are betting on more money for green infrastructure. While the scale of the investment is comparatively modest ($5M), it does raise the question of whether clean capitalism will necessarily be led by private firms.
*Not sure where this fits, but Shopify is the sole provider of Ontario’s legal recreational marijuana. Pretty neat that they provide the digital infrastructure for this, and worth noting how a policy decision is an opportunity for profit. Should we expect to see similar exclusivity with contracts for psychedelics? Time will tell.
The company’s enthusiasm for investments that complement the government’s while also building the business is striking.
In October, Shopify joined forces with Operation Hope to help create one million Black-owned businesses in the US by 2030. The intention of the partnership is to provide up to approximately $130M of resources over the course of the initiative. You can learn more about the initiative here.
So - are these social impact investments from Shopify encroaching on or assuming the role of the state?
It is notable that none of these initiatives are a “shield” for Shopify CEO’s Tobi Lütke’s personal capital. In 2019 Lütke and his wife Fiona McKean established the Thistledown Foundation to provide financing and grants to decarbonization technology. The Foundation has since pivoted to focus on COVID-19.
It’s also worth asking whether we anticipate or should expect MORE investment in policy-relevant areas.
📡 For instance, an investment in an initiative like rural broadband would help to unlock more e-commerce.
While it is unlikely that Shopify will revolutionize the employment insurance system or create a national childcare program before the government does (!), their social impact engagements to date have a remarkable parallel to and alignment with federal government priorities in Canada. In fact, Shopify emerged as a “preferred partner” of sorts during the push for “Main street to go digital,” offering free trials of their services to merchants.
🔈 Shopify has a unique policy advocacy opportunity. It could also consider becoming a stronger voice for self-employed entrepreneurs on social assistance reform: EI benefits and eligibility, family leave, and advocate for better access to financial products like mortgages.
Thinking about the investments that technology companies may make in policy-relevant areas is particularly important in a pandemic context, where the role of the state is at risk of shifting as we pursue an economic recovery in the years to come.
If Canada’s largest tech firm is deeply engaged in reconciliation, training, carbon sequestration and investing in sustainability technologies, that feels really promising. Shopify’s continued innovation and participation in relevant policy conversations can make Canada a stronger and more resilient country. One can’t help but wonder whether they will or should do a little more to put capitalism in the hands of the many.
👑 Until then, the firm’s annual shareholder report is a speech from Shopify’s throne.
TLDR; no.
Shopify is not behaving “like a government” in Canada - yet;
Many of the investments/initiatives they are making seem distinctly Canadian;
Their corporate social responsibility initiatives are novel, and tend to also build the business;
It is worth following how these policy areas may evolve and shift as the company continues to grow internationally;
It feels notable that the firm doesn’t (seem to?) fund or publish academic research *though the Thistledown Foundation does accelerate academic research projects via fastgrants.org. In 2016, Shopify had opened a ‘research hub’ in Montreal.
Vass Bednar is the Executive Director of McMaster University’s new Master of Public Policy in Digital Society Program.
Society is in a bit of an uncomfortable place when governments (in both Canada and the US) willingly give up revenue via tax incentives for donations while public discourse increasingly recognizes some of the giving as distortionary and problematic. At least we acknowledge this a bit, since giving away $1000 deprives the government of less than $1000 in tax revenue and the tax benefits for charitable contributions are capped at a percentage of income (net for corporations, ~gross for individuals).
It seems like it's time to reduce the tax benefits of philanthropy (esp. corporate). Canada lets corporations deduct giving up to 75% of net income every year (the US only allows up to 25%). I'm sympathetic to the idea that Amazon or Shopify may want to offset some of the social ills they arguably cause e.g. by community investment or carbon offsets, but the larger these numbers get the more likely I would expect them to become self-serving. I don't really see why we should subsidize corporate charity in direct proportion to profit. Donate all you want, but maybe we shouldn't let you avoid tax on 75% of your profit, especially your avoidance measure may otherwise accrue value to your business?
On the personal side, I don't really understand "the super-rich selfishly engage in philanthropy to dodge taxes; they should just pay taxes intead" take. Absolutely on-board with super-rich individuals paying more tax (and the problems with depriving governments of much-needed funding). But at the same time, giving $1000 deprives you of $1000. Unless I'm missing something, you'll basically never reduce your taxes by more than $1000; it's strictly more selfish, financially speaking, to keep that money for yourself. You get social brownie points/bragging rights, but how far does that really go?
You are depriving the government of some tax revenue: ~39% tax credit on up to 75% of personal income in Canada, ~37% tax deduction up to 20-60% of personal income in the US, possible capital gains tax elimination. That's a problem and IMO there should be an absolute per-person cap on giving incentives...but it seems like success is more likely by advocating for tax reform here, rather than what I generally interpret as advocating for wealthy individuals to give less (or voluntarily forgo tax tax incentives for giving), since the former probably scales and the latter probably doesn't.