Should we take 'free money' from venture capitalists?

If a venture capitalist came to you and offered you, say, $20,000 a year, would you take it?

Yesterday, Sam Altman of the renwoned tech accelerator Y Combinator posted an intriguing (and quickly viral) "Request for Research":

We’d like to fund a study on basic income—i.e., giving people enough money to live on with no strings attached. I’ve been intrigued by the idea for a while, and although there’s been a lot of discussion, there’s fairly little data about how it would work.
It’s true that we have systems in place to give people resources, but the bureaucracy and qualification requirements make it a very imperfect approximation of what most people mean when talking about a basic income. We have some examples of something close to a basic income in other countries, but we’d like to see how it would work in the US.

This might seem like a bit of a surprise, but it's not coming out of nowhere. A year ago I wrote an article for Vice about "why the tech elite is getting behind basic income," in which I quoted Altman's statement that the idea of basic income is an "obvious conclusion." Silicon Valley's unofficial, for-profit theological think tank, Singularity University, was hosting discussions about it. Universal basic income (or, as Altman seems to be describing here, just basic income) is increasingly popular among techies for a number of reasons, some of them good: It's a simple, elegant way of addressing lots of complex problems, from poverty to the need to enable innovation; it's a way of addressing the worst inequalities caused by sectors like high finance (and tech itself); and when you give people free money they will probably like you (and be less likely to throw rocks at the Google bus).

But, while I was reporting the story for Vice, I started to get troubled by some of the visions tech folks had for the idea. In some cases, people I interviewed seemed most interested in using it as an excuse to strip away the existing social safety net, which they regarded (both rightly and wrongly) as wasteful and ineffective. In others, what they had in mind seemed to resemble a new kind of feudalism, in which the bulk of the population would be dependent on the largesse, and the business models, of a few.

For instance, an influential novella self-published by founder Marshall Brain, Manna, describes a basic-income utopia called the Australia Project. There, a guy named "Eric" colonized huge swaths of the Australian Outback (no mention of Aboriginal peoples, of course) where immigrants could come and live, invent and imagine with his basic income forever. They all share the resources produced by his corporation, and nobody except the corporation owns anything. The means of production are thoroughly centralized; all benefit from the proceeds, sure, but all are dependent on them as well. Tellingly, in Eric's utopia, there is no privacy whatsoever. Everything you do is logged and monitored. There is, inevitably, no crime.

Traces of this utopia are available to us in the technology that venture capitalists have already provided. We get to use Google Docs and Facebook and all the rest for free, provided we're willing to relinquish the rights to our private data, and we permit these monopolies to do what they like with it all. For the sake of something ostensibly free, we accept unknown hidden costs and very little accountability. If an entity like Altman's Y Combinator were to be the source of basic income, we can expect similar trade-offs. The bottom line for such firms, after all, is massive monetary return on investment. Just as many of us are now utterly dependent on Google's supposedly free services, and thus its extractive business model, it is easy to imagine how people receiving $20,000 a year could become that much more dependent on their investor-benefactors.

Lest you think I am opposed to the idea of basic income in general, see my argument for it in a recent print column for America. In fact, I think it is an idea with a lot of potential, but what matters is how such a policy is implemented. Contrast Eric's colonial utopia, for instance, with an approach in line with Catholic distributist thought, in which the means of production are shared broadly across a society, and ordinary people retain control over the levers of the economy. In the context of shared ownership, rather than centralized ownership, basic income becomes a collective responsibility, not a favor bestowed from on high. Silicon Valley's skepticism of old-fashioned government notwithstanding, I think the approches to basic income being considered in countries such as Switzerland and the Netherlands, where the payouts come through taxation and elected officials, are far more promising.

We should also ask who receives the income, too. Altman's post talks about trying out basic income on a small number of people, but he choses not to employ the often-used term universal basic income. To me, the universal (everyone receives it, whatever it is) should come before the basic (that the sum is sufficient to meet a person's basic needs).

It's exciting to see the idea of basic income being taken more seriously in more quarters. But this is also a vital moment for us to sort out what we really mean by it, and what forms it might take. We should be careful what we wish for, and careful whose patronage we accept.

Joseph J Dunn
1 year 7 months ago
Nathan Schneider's column is meant to invite more thought on this topic. He comments, "I think the approches to basic income being considered in countries such as Switzerland and the Netherlands, where the payouts come through taxation and elected officials, are far more promising." Regarding that particular approach to 'universal basic income', we should not forget something else that Tom Paine wrote: “Some writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins. Society is produced by our wants and government by our wickedness; the former promotes our happiness positively by uniting our affections, the latter negatively by restraining our vices. The one encourages intercourse, the other creates distinctions. The first is a patron, the last a punisher. Society in every state is a blessing, but government, even in its best state, is but a necessary evil."("Common Sense", p. 4) Maybe that helps explain the skepticism of some who ponder this issue?
Nathan Schneider
1 year 7 months ago

Thanks for these thoughts. It's certainly fitting to turn to Paine here, considering his ideas are some of the earliest articulations of the idea of a universal income (which, by the way, he envisioned as taking place through public policy).

It certainly is sensible to consider where government is appropriate, and where not. But I'm not sure that Paine's view articulated here quite applies. Generally, in the case of providing universal goods and incurring universal costs, government is an appropriate tool; this is why government social security and military defense are quite popular, as well as, in other industrialized countries, universal healthcare. It's often ill-advised to hand basic infrastructure like roads and water to private concerns, because there's significant moral hazard that private profit will conflict with the common good. Where government is less effective is in the challenges of risk-taking or meeting the needs of certain subsets of the population; we wouldn't turn to government to design the next iPhone (even if much of the technology in it depends on government-sponsored research). I think that universal basic income falls into the former category; it is a universal benefit, and it should incur universal costs, so the most accountable way of overseeing it is through a government elected by the people affected by it.

That said, there are some really interesting experiments in non-government basic income models, such as in the cryptocurrency community. I personally have toyed with the idea of setting up a universal income scheme for the whole planet that could be funded from a multitude of sources, both private and public—but the question of how it would be governed is a very tricky one without being able to rely on an existing structure of accountability.

Nathan Schneider
1 year 7 months ago

People interested in exploring these questions further might be interested in my exchanges about this article with Scott Santens, one of the leading advocates for basic income (and one of the few who is actually receiving it, sort of): on Twitter and Reddit.

Perhaps a humbler way of phrasing this article would have been simply to ask the investor the same question investors ask everyone else: What is your business model?

John G
1 year 7 months ago
Maybe not coming from these shores, I'm not sure I understand the enthusiasm for UBI. Designing structures for funding & accountability looks like trying to reinvent the wheel. Seems like a convoluted way of doing things - why not just expand and strengthen the social safety net, if the goal is to ensure folks aren't mired in poverty? In Australia for e.g., unemployment, healthcare, pharmaceutical benefits could total up to $20,000 a year. Not something anyone wants to be stuck in forever of course, but it provides the basic necessities in life for folks who's fallen on hard times.
Nathan Schneider
1 year 7 months ago

Part of the interest in UBI is that it strikes many people as, in principle, fairer and simpler than means-tested programs; everybody gets the payout. Also, means-tested programs inevitably come with some degree of paternalism, in which the state dictates to people facing poverty what they can and can't have provided for them. Basic income gives them that choice.

I take your point, however. Until society is willing to accept the tremendous expense of UBI payouts, means-tested programs will be necessary.

John G
1 year 7 months ago
"Also, means-tested programs inevitably come with some degree of paternalism, in which the state dictates to people facing poverty what they can and can't have provided for them. Basic income gives them that choice." I'm not sure what you mean here? In Australia, means-tested benefits do come in the form of cash payments (sometimes lump sums, sometimes installments, depending on different situations). So this is the same as getting cash from a UBI scheme, no? The state doesn't dictate to people how they should spend this money. For the unemployed, it's not no-strings-attached in the sense that there are provisions put in place to ensure that people look for work.
J Cosgrove
1 year 7 months ago
Let's take a scenario. Sean is 20 years old, is unemployed and has shown little aptitude for education and has poor job prospects. He is given $20,000 a year to live. He spends most of the money on beer and junk foods and spends most of his time playing video games. In a bar one night he meets Sophie who is19 and also has $20,000 a year and is part time employed as a cashier in a pharmacy where she makes another $6,000 a year (by the way the national drinking age has been lowered to 18). They go home together and do what two young people do these days. After a couple weeks of this, they decide to combine their incomes and get one place so they are making $46,000 a year and have all the free time one can imagine. Sean has an idea. Why don't we have a baby and then we will have another $20,000 a year and have over $60,000 a year. We could travel, have even more fun and take the baby with us or leave it with Sophie's mother. Then Sophie's mother realizes that if Sophie has another child, they will have $80,000 a year and she could move in and take care of the babies bringing her $20,000 a year. After all she is in her early 40's and still has a lot of energy. So the family of 5 with $100,000 moves in together. Sean still spends his days playing video games and Sophie and her Mom go shopping. Boredom sets in with Sophie and she meets Jack at a bar one night. Yea, she is going out to bars at night because she has nothing in common with Sean who ignores her as he plays video games and watches sports on TV. Sophie leaves Sean for Jack who also has $20,000 and has plans for a child to raise their income to $120-,000 a year. Jack doesn't play video games but is a full time triathlete who like to train 25 hours a week to get better and travels around the US to compete. Sean doesn't care because Allison down the street from his house wants him to move in with her and her $20,000. Sophie and her Mom continue to shop and raise the 3 kids who spend most of their time in day care. But wait a minute, there is no day care because those who would ordinarily do this are getting $20,000 a year so who needs to work anymore. Life is peachy. If anyone doubts this might not happen, then the experiment has already been done. In a couple of larger mergers in recent years many of the employees where given buyouts. A person I know who administered the proceeds from the buyouts visited the terminated employees. A large percentage were living in disheveled apartments drinking beer and playing video games. It is amazing how fear is a motivator. It has existed since the beginning of mankind and now some forward looking people want to take it away.
John G
1 year 7 months ago
This is a dark view; I think most people do want to get ahead and work (wherever there are jobs for them). That said, I'm not sold on UBI either, but for different reasons. Although it's yet to be tried, UBI as a concept doesn't strike me as a particularly good mechanism for poverty alleviation. I'm not sure why everyone has to get a payout. Means-tested programs would direct money to where it's needed most. I don't have a problem with having a paternal state (I'm not sure if Mr Schneider does, or he's just pointing it out) - it's part of the social contract of the state to look after society's most vulnerable.
Joseph J Dunn
1 year 7 months ago
Actually, UBI has been tried, right here in America, twice. And in both cases, it was an undeniable social failure--social failure in the sense that the societies that tried it nearly became extinct. First attempt was Jamestown, 1607, and second attempt was Plymouth Plantation, 1620. Several accounts worth reading: "Bradford's History of Plymouth Plantation Settlement" describes both the problems, and the changes that had to be made to avoid a mass starvation. As to Jamestown,William Kelso's "Jamestown: The Buried Truth" and "The Shipwreck that saved Jamestown" by Lorrie Glover and Daniel Blake Smith, describe a similar disaster. Both stories are told from a humanist perspective, but the economics of these societies are made clear also. I suspect that these experiences are part of the study being undertaken by those who are, as Nathan Schneider highlights, exploring possible approaches to UBI. Paine's "Agrarian Justice", which Schneider mentions in his earlier article, is also worth reading, although it was written in 1795 for an agrarian society.

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