Simon Denny Takeover 3/3

While in Shenzhen, Simon Denny talks to the Chinese architect and urban planner about the complex ecosystem of China’s instant mega-cities.

 

Simon Denny    So we were talking about adaptive hacks, even in context of residences.

Tat Lam    Right, right. It’s actually not just a technology phenomenon—it’s more of a bottom-up hacking, almost like a dialectic power between the centralized and the grassroots. I think the problem right now for any bottom-up movement isn’t that it’s not generating value—it’s that the value isn’t being recognized, not being measured. That’s why I started this company, Shanzhai City. I became very interested in thinking about how we can calculate social values, and how this value is linked to an economic or financial space. So that’s really the focus of my research, or at least one part of it. The other part is more about my practice. When I graduated from the UK and came back to work in Shenzhen in 2009, you saw a lot of government and development projects—very large-scale, almost like regional planning. But it’s about more than just having a good idea. Say there’s a 500-page report—the government will only care about maybe five pages of that, and even those who care will only really act on maybe one page. There’s 1% of that good idea being executed, which made it a pretty frustrating situation for a consultancy.
It was that way for me until I started getting opportunities to work on more rural projects, speaking with villagers and farmers and saying, „Hey, you guys are already doing all of this planning—maybe you should do something with us. You’ve got all this land, all these resources, all these assets.“ They’d say, „Sure, how much will you pay us?“ And of course, we didn’t have any money, so we’d say that we were doing it as a matter of social responsibility. I focused on those projects for probably two years, working for free, but that ended up being a key to the way I think about my professional practice. I realized, „Oh, maybe it’s time to actually do something for the grassroots, serving those with capital in order to benefit others.“ So I started Shanzhai City in 2015.
At the very beginning, we only had a name and a two-page manifesto. So we put some of our own money into the company, got some outside people working with us, and after six months, we started to get a better idea about these impact measurements, and how to measure social value created by bottom-up movement. At the very beginning, I’d created a case study to develop an entire system for the company, so it wouldn’t just be this geeky, technology-driven thing, but would also work with the grassroots. But it’s important to understand that if, say, Steve Jobs is seen as the avant-garde, then Huaqiangbei is the antithesis of the avant-garde. It’s more like the idea of the zeitgeist: it’s about how many people do the same thing at the same time. The question is, how did it all come together and become so powerful? So I became really interested in this bottom-up movement, especially as it’s happening in China, where there’s all this incoming technology, and hardware is so cheap. It’s actually more and more easy for a grassroots movement to create a zeitgeist.
So our program is really about, first, finding a way to quantify all of these activities. Especially in the more rural zones, where they ofte have very different habits than people in the city. A lot of people in these areas aren’t even using a 4G phone—they’re using a 2G, and they maybe can’t afford going onto the Internet. They use lots of text messaging, rather than downloading so apps. Their entire culture is different. So the main issue for is really about how we can use affordable and adaptive technology to solve the problem of data divide.
The more research we’ve done, the more we’ve grown concerned about the global picture, because it seems like interactive technology is helping the first half of the world really develop convenience and get rich, while the second half of the world, with its different technologies, different access and different habits, are suffering from that inequality. So we’re working on case studies in both rural and urban China to measure the impact of social investments. If there’s a government project, or a philanthropy project, or really any project with social responsibility, they always want to know about two things: First, what’s the return of investment? If I put in all of this money, what will I get back? Then it becomes, what’s the return of my social investment? If I contribute this much money towards helping a village, how much will those people’s quality of life actually change? If I’m developing an economy like Huaqiangbei, I’m more interested in understanding how many people I’m actually supporting, rather than how I’m helping one particular person make so much money. Those are very different mentalities. I think society’s interest in social impact has a lot to do with the fact that social issues are becoming more and more problematic—particularly in China, where it seems like we’re reaching a bottleneck of development. Our urbanization is at 50%, but to break through that and keep going will mean spending so much money. So we actually need more bottom-up strategies to keep the country developing. But if you do that, it means that whatever we’ve used for the past ten years is no longer going to work. Land development is not going to work. Infrastructure, like building highways and high-speed trains, is not going to work. So you really have to understand the values of this grassroots economy. You also need tools, to monitor and measure the progress of the work.
So that’s one major issue. The other is the emergence of the so-called young generation, especially those born in the 1990s and after. Those people actually have a lot of concerns about social responsibility. They’re willing to pay five more RMB to buy their coffee if the company uses organic methods. That market share is getting bigger and bigger, growing almost exponentially. So there is actually huge demand in the market for social impact. They want to buy it, they want to consume it, they want to trade it. But at the end of the day, the problem isn’t that the grassroots aren’t generating social value, and it’s not that the market’s lacking in concern for social impact—it’s the lack of linkage. There’s not really an easy-to-use interface that allows them to get to each other. If we can work out a way to allow that access, to serve as an intermediary, then I think there would be a lot of people who would support this sort of social integration. That’s really the main idea behind what we’re doing.
As a startup company, we’re basically burning cash from our investors. We cannot provide a lot of quantitative figures for our investors, telling them that this business will make a lot of money, do this and that, simply because the market’s not that mature. But we can give a lot of qualitative information to our investors, saying, „Hey, if you invest in this kind of company, your money will actually work so much better, because we’re generating impact, and the future of the market is going to be about impact. That means we’ve got a big future.“ That’s how we’ve been able to get people to put money into this kind of business.

 

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That’s smart. In light of all you just said, what do you think about top-down governmental responses to these issues—the Mass Innovation, the Mass Entrepreneurship movements?

On one hand, I think they realize that grassroots entrepreneurship is a solution. The fundamental reason for that is they simply cannot afford to give everyone in China a job. They’d need to spend, say, a trillion RMB over five years. But if they ask everybody to start their own businesses, they will only need like 10% of that. This is one of the concepts that we keep using: the social return of investments. Basically, they’re spending 10% of their budget to achieve a trillion RMB policy, which means the impact goes from 1 to 10. That’s what grassroots value is all about, and I think the government really understands that, so they’re encouraging young people especially to start up new businesses, providing a lot platforms in terms of financials, knowledge, technical mentorship and so on. But I think the issue for them right now, in order to really move to the next stage, is having a better understanding of the actual change that they’re making—especially if it’s a negative impact. After all, good hearts don’t always equal good impact. So at the end of the day, it’s about knowing what you’re actually doing, and knowing what you’re actually causing.

And this is why you’re focused on data and metrics so much?

Exactly. The point is that we aren’t really inventing some entirely new space—we’re just putting all of these existing spaces together. All of these foundations already have their metrics; they’re measuring so many things, but the information’s just sitting there. Nobody’s using it. And then all these rich people are complaining, saying, ”I have all this money I want to give this year, but I can’t find a good project,“ while all of these social enterprises are saying, „I’m doing so much good, why won’t anybody give me any money?“ And then you have these poor people saying, „Thanks for the social enterprise, but what you’re doing doesn’t actually benefit my life.“ This is what’s currently happening. It’s a misallocation of resources. So what we’re doing is about is linking things together vertically, from the people with money all the way down to the poor villager who’s raising pigs.

Is there a story you can tell me that illustrates how you’ve linked those different strata together?

We’ve been working with a foundation called the China Green Foundation. They’re relatively small-scale, but they’re owned by the government, run by the Forestry Bureau. Over the last ten years, they’ve developed this program where they crowdfund online and give the money to villagers to buy trees. On that level, they’re their job, which is to grow more trees. But they’re also tired of just solving the environmental problems—they want to change the industry structure for these areas—so they encourage the farmers to grow trees that can generate fruit, which will give them additional income. This is a very typical case for us, in that where we’re talking about doubling ones investment. We try to help develop an entirely new system, all the way from the top to the bottom. Let’s say four to six areas in China need this money—each area’s local government needs the technologies to manage their share of the money and report the impact back to the foundation, so it has a better sense of the farmers’ quality of life. That’s already in place. So basically there’s a matrix we’re trying to plug into. The local governments already have people collecting data; we’re just trying to show them how to use a cell phone rather than paper to record their data. That way, all this data comes from the local government as real-time reports to the foundation, so rather than generating a big report every two years or something, you can see in real time exactly what’s happening, in the moment, which allows them to react and make immediate decisions. This is what we call the actionable data, offering real-time insight. The foundation can then say, „Oh wow, the money I’ve been giving to these farmers isn’t really helping their situation in any precise way,“ and they can then adjust their approach.

That’s amazing. But I wonder, what’s so special about Shenzhen? Why do this here rather than somewhere else?

I came to Shenzhen in 2009, after I returned from London. At that time, I was working at this company called Urbanist. In starting my research, there were two options: Beijing or Shenzhen. I eventually chose Shenzhen because it had uncertainties. All designers and critical thinkers like uncertainties, because they mean potentials. There were way more opportunities here in 2009, not only because there really wasn’t much competition, in terms of the urban development consultancy space, but also because there was a flooding of problems in the city, especially in terms of the „urban village.“

Is that related to rapid growth as well? That’s something that’s defined this city, in a way.

Well, there was this rapid growth, but at the root of it was the financial structure of the government. The government actually needed to generate income from the land in order to sustain their operation. It’s a major source of income for them: the entire tax system in China is kind of not working out, so the government really needed to use the land to generate income, and that’s really what triggered this rapid development. It’s not that the citizens, or even the developers, wanted it to go that fast. It’s just a financial thing. So I think at that time, when we got to Shenzhen, the city’s core had already developed—you could just build whatever you want to build. But the reason we’ve stayed is that Shenzhen is really friendly towards social entrepreneurship, especially compared to other cities in China. In terms of social enterprise, they’re far more bold in trying new things. There’s also a lot of small-scale social entrepreneurship here, rather than big foundations like in Beijing or Shanghai. The policy here is really avant-garde. So although we still have our Hong Kong office, which is really for administration, and our San Francisco office, which is mainly for technology, we’ve chosen Shenzhen for daily operations. It’s where we engage with the client—go to the farm, go to the village—in order to understand their lifestyles, the problems they have, and come up with impactful solutions.

 

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What’s happening in San Francisco, with your technology?

We have a small team there—maybe three or four people—that’s responsible for developing the back-end of all the technologies we’re talking about. The idea is that we use all of the front-end—the technologies—here in China. We try to understand the data, the way the grassroots community is using these technologies, and the potential functions they can serve. Then we feed all that information back to San Francisco, where we can develop the back-end. It’s much more efficient for that work to be done out there. We have tried to set up some the back-end, the programming parts, out here as well, but it just seems like the technology community here isn’t ready yet for this kind of social activity. The tech community in Shenzhen is actually quite capitalist, almost venture capitalist. They’re much more about working on an app that, you know, lets people order a lunch box, than about these social enterprises.

Why is it particularly hyper-capitalist here? Is it a timeline thing?

I think the capital space in China is lagging five or ten years behind—more in terms of mentality than actual technological advancements. In China, from the investors down to the R&D people, everyone’s thinking like ten years ago: „I want to create a new cell phone that will change the world.“ But I think over in San Francisco, they’ve already gone through the dot com bubbles, many times already. They’ve started being more cautious about just throwing random products into the market. They want to be much more thoughtful about these things. Investors are also becoming quite sophisticated in many senses. They’ve already earned enough money in the past ten years—now, they want to do social good. They also see the future market as the government, and social enterprise can be an entry point into the government side of things.

Given that you’re based in these various locations, I wonder how you feel about globalism—especially as nationalist movements come back into play, and protectionist regulations are being held up everywhere. As somebody that’s clearly engaged in what you are doing globally, I wonder what you think are the benefits of that system?

Of course, as a company, we sometimes touch on sensitive data, so we need sensitive solutions. There’s a huge list of solutions in data science about how to protect data. But to me, it’s more like a white elephant: people are talking about it, and everybody’s so scared about these global barriers, but I’m not so sure that it’s really happening. That said, I haven’t really positioned the company as a Chinese company—I’ve approach it as a global company. We want to move quickly from China through Southeast Asia and beyond. But we still want to keep an arm in China, because it’s so accessible. Ideally, we’d want to build a model, using the database in China, that lets us understand what they’re doing in other parts of the world. It’s really about exporting the experience of China, in terms of the data aggregate.



Photography by Ann Woo

Tat Lam founded Shanzhai City after dedicating over a decade of working in urban, informal, and village developments throughout China, identifying the need for a social development agency that addressed both market and policy failures in a rapidly developing country. He directed an urban development think tank in China (URB), consulting private and government entities on large-scale developmental projects. He has been lead research scholar and founder at China Megacities Lab at Columbia University since 2007 and is a faculty member of the Chinese University of Hong Kong.