A Tale of Money
How Universal Basic Income will Change Society
The promise of universal basic income, to solve all your problems by stuffing €2,300 into your mouth every month, or at least that was the amount floating around in Switzerland, when in 2016 somebody gathered 100k votes to start a referendum on the issue. It caused a huge uproar but in the end it failed, gathering only 23% of the votes. If successful, massive societal changes would’ve happened, something that no one is talking about, and that is what I’ll try to lay out here as best as I can.
Personal Wealth
The first thing that becomes apparent is that you can borrow money. Because it’s guaranteed by the government, banks will lend you money even if you don’t want any. At 18 years old you can get about €1 million and you’ll pay back €1.7 million till you die at the age of 82. That’s the average life expectancy in Switzerland. The math works out quite well and there are already 60 year mortgages so this wouldn’t be something new.
What would change however is that you don’t need a down payment and you can spend it on whatever you want, just stay out of jail and don’t die.
If you’re married that’s potentially €2 million. In the end the amount that you’re eligible to borrow will depend on your age and lifestyle choices as well as your genes. Instead of proof of income you’ll have to show proof of good health as well as submit to periodic health checks. The banks, instead of worrying about credit scores will start worrying about your health score. Sooner or later they’ll move in to healthcare and start offering health products, as well as fund longevity science in order to increase your lifespan. Does this mean that when the aging problem is solved we all become immortal billionaires?
The New Swiss Dream: Married at 18, purchased our dream home plus two brand new sports cars, thanks universal basic income!
Even if you don’t want to borrow all that money up front, you will have it available in credit so you can buy anything you want, literally rendering almost everything instantly affordable. That €8k TV that you’ve always dreamt of, that €30k holiday trip for your family that you keep putting off, or even the new €79k Cybertruck. Just swipe your UBI Credit Card™ and you’re all set.
Eventually you’ll have a life expectancy score that is updated in real time based on your actions and data from all your smart devices. This score will be coupled to your UBI Credit Card™ and a financial A.I. will constantly adjusting your repayment amounts and credit limit to maximize your wealth.
If you’re in a situation where you don’t need to borrow money you’ll direct your UBI to a hedge fund to multiply it several times by the time you retire. The math says that you’ll have around €10 million after taxes and inflation if you start saving at 18. We call it government funded retirement, plus you’ll still get your pension, right?
UBI is also a way to deal with the student debt issue.
Hacking Your Life
In the US the proposed amount is $1,000 per month. This is less less than ideal, you can’t really live on it, and you can’t borrow $1 million with it. Now that we know what the Swiss were trying to do it kinda feels like a ripoff. But let’s go with it.
Micro tribes and communal living will be the name of the game. How can we, not just live, but thrive on universal basic income? Groups of 5 to 50 individuals gathering around a specific interest, hobby or belief will pull together their universal basic income to set out to establish a life of their own outside the current system. I’m mainly thinking here of backpackers and lifelong travelers. $1,000 is plenty enough to backpack and roam free without worry especially if you can band into travel camps and have a supporting community that welcomes you in.
UBI - Become a digital nomad in the truest sense.
With time there will be more and more communities who’ll gradually move towards this kind of life. Think of artists, creators, crafters singers, life long learners, collectors, gamers, fanatics and many other groups of people all coming together to live frugally and hack the living experience. By pulling their UBIs together they will be able to leverage economies of scale and purchase things cheaper and afford stuff that they couldn’t’ve on their own.
Choosing this lifestyle will lead to unparalleled freedom in creative endeavor. Whereas before creators and artists would be constrained by the necessity to produce an enterprise that put food on their table, now that wouldn’t be the case anymore.
Yes, if I was still a student I’d do this in a heartbeat. Another example of this: Gaming House for Esports Teams.
Currently there are a few experiments showing that people wouldn’t quit their jobs or wouldn’t work less hours even with UBI. These experiments are misleading and the experimenters know it very well. Every participant in the experiment knows that the experiment is temporary whereas real UBI would be a permanent change to our social and economic system.
I don’t think people fully realize that we're talking about a permanent change here. The questions are not “will people be happier” (who on earth would report being more miserable after getting more money is beyond me) or “will they work less hours”. The real questions are:
How will people act when survival is not an issue anymore? When you don’t have to worry about loosing your home, paying the bill and putting food on the table? Especially the younger generations, for whom the concept of work will become a strange notion.
How does the economy change when $3.8 trillion is injected into it every single year (until eternity?), and how can you sustain that especially when the economy goes bust?
The Business of UBI
Universal basic income will be the biggest gold rush in history. Injecting 3.8 trillion dollars into the economy every single year will start a gold digging revolution in the truest sense.
Everyone will try to get a piece of that pie. Forget the tech bubble, imagine a bubble where everyone can raise money from their future selves and their friends and families future selves. If you can convince 100 people to invest their next year’s worth of UBI into your startup idea, that’s $1 million raised. We’ll have hundreds and hundreds of ever newer and stranger gadgets, hyper specialized services and ultra personalized products disappear as fast as they appear. This is going to generate a bubble like never seen before.
Every corporation will have one question in mind. How can we direct all that UBI from your pocket into our pockets? A new role will emerge, `The Corporate UBI strategist`, their job will be to sit around all day and have only that one singular question on their mind.
Every company will want to position their products and services in such a way that people would consider them an essential part of their lives, basically rolling out a subscription based version of their products, similar to how Apple is doing it with the iPhone subscription service.
In the end the companies that will be left standing will be those who can figure out what’s really essential, driving the price of those things down to the point where they can all fit into that $1,000 threshold and offering all of it as a package to their users.
Who’s better equipped to do that than Amazon? The idea is quite simple, turn over the entirety of your universal basic income and you’ll get everything you need based on your profile. Think of $1,000 subscription packages for your life.
With economies of scale, these “UBI packs” would allow people to get much more for their $1,000 than they could otherwise.
A few other examples (I’ll let you guess what could be included in them):
City Dweller Pack
Conference Junkie Pack
The 9to5 Pack
Gamer Pack
Design Your Own Pack
The Underbelly
People will inevitably try to game and abuse the system. It doesn’t take much thinking to realize that you can move out of the country while still receiving your UBI. Many people have a second passport with which they can slip out and move to somewhere cheap like Thailand or the Philippines. Inevitably a chunk of the money will be spent outside of the US economy and countries that cater to digital nomads and make this process better for them will benefit the most from it.
Immediate family members who live outside the country will also have a monetary incentive to get their citizenship, and again just as in the first example they can very easily slip back home and cash in the money every month outside of the country. Same applies for your diaspora.
Human trafficking will also be flipped on its head. Whereas before people paid large sums of money upfront to get into a country now forfeiting their UBI to the traffickers is a better incentive to both parties. The traffickers can earn much more money over time than they would otherwise and the immigrants don’t have to cough up a large sum of money upfront, which in many cases they can’t. Traffickers are also incentives to make sure the people they take into the country stay healthy and productive so they can live a long and healthy life.
Another question is who will receive UBI, is it citizens or residents? If it’s resident’s you’re opening the floodgates, especially if we’re talking about Switzerland where there are literally no borders (EU free movement of people). However if it’s only for citizens than you are excluding your expat community, and here is the catch. All UBI proposals so far call for wiping out all other social benefits, and if you do that you’ll end up with your entire expat community having no financial safety net whatsoever.
Inadvertently UBI puts a price on everyone's head. For the bad guys there’s no more “who’s the cash cow?” Everyone is a cash cow now. We can’t even start to imagine in what sort of ways all the twisted scams and frauds that we already have will evolve with UBI in the picture. Think of elderly or homeless abuse, online extortion (or offline), your millionaire Nigerian dead cousin, Ponzi schemes and so forth.
And let’s not even get started with the hackers.
Instant transfers without any friction (read: no verifications) is now the norm. Money flows literally at the speed of light across the continent. The more ubiquitous this reality becomes the easier it will become for bad actors to abuse the UBI program. The only way to encounter this if you have a robust system in place which might cause some discomfort to people but it makes sure that the money distributed ends up where it is supposed to.
Conclusions
As much as I like the idea of free money, after writing this up I can’t but come away with a bad feeling about the whole idea. Although on the surface the idea is wonderful and promises to solve many problems, if I dig deeper I can’t help but notice that such a scheme will have several flaws, some of which quite severe.
It’s not clear if any of the wealth will stay at the intended recipients. Corporations will try to grab as much of it as possible, and the incentive will be to push digital, perishable and temporary good and services, as those are the ones that can be re-purchased constantly. We’ll have short term wealth redistribution but in the long term the wealth still ends up at the top.
I also don’t know what to make of debt in this situation. Basically the government guarantees debt, albeit it possibly could block banks from lending, but the black market and loophole loan companies will be very much still an option to everyone. There is almost no incentive not to borrow, it’s literally a french buffet for everyone who wants to dance with the money man.
What happens when you fall out of the system? Let's imagine you’ve borrowed $300k from your future self and you gambled it away foolishly, and you’ve lost your job too. You don’t receive your UBI, because it’s repaying your debt and there isn’t any other financial safety net in place anymore. UBI will enable people to fall out of the system much more easier than ever before as I don’t see a scenario where you could default on your UBI and get it again.
Coming up with alternative UBI schemes also doesn’t work, additionally to everything above they come with additional problems. Here are the two most popular ideas out there:
1. Progressive UBI.
Basically it means that after a certain amount of income your UBI will drop gradually until you reach a point where you don’t get it anymore. So for each dollar you earn you get 1 dollar less UBI. All that will achieve is to lower all wages that fall into that range to the minimum. Why would a company pay that extra wage when the government can pay it instead? If that amount would start at 2K it would mean that you’ll have salaries below 2K and salaries above 3K and nothing between, basically UBI becomes a subsidy for salaries and getting from 2K to 3K would be almost impossible to anyone at the bottom.
2. More UBI for Education
There was a TED talk where someone was advocating for more UBI for people who finish university, a way to incentivize people to get an education. If you do that, that’s not Universal Basic Income anymore, that’s Universal Basic Income + Bonus Class Privilege Money, and you’re just creating an even bigger gap between the uneducated and the educated.
There are several studies that giving people incentives or actual stuff will have a much bigger intended impact than giving the equivalent of it in cash. As an average individual your best choice would be to use your UBI on one of the “UBI packs”. I believe this is the closest we could get with UBI to actually helping people in need. In fact this way we could call UBI a basic good and because you have a choice over it it’s a “personalized basic good”.
PS: China will couple its UBI with its Social Credit System, which means that you get paid if you’re a good citizen. Nuff said about that.