As automation continues to advance, many are concerned about the potential displacement of workers. Some have proposed a Universal Basic Income (UBI) as a solution, but this approach has been criticized by many (myself included) for many reasons. In this article, we will explore a potential solution to some of the problems inherent in UBI that reconcile the ideals of capitalism and socialism in the face of automation. By combining the advantages of decentralization with smart contracts and the flexibility of robotics and AI I will showcase a reasonable method of achieving a flourishing free market society that also has a sustainable UBI.
One of the most difficult issues in any society is public good funding. Public goods funding is the process of allocating resources to provide goods and services that benefit the whole community, such as clean air and water, national defense, public transportation, healthcare, and of course the subject of our debate and the holy grail of a public good UBI. Funding these can be a difficult issue for any society, as it involves balancing the need for public goods with the constraints of limited resources and competing interests. As few would simply donate money to such things, at present the majority of funding for public goods is extracted from taxes in various forms. There are obvious problems with this including the amusing fact bigger corporations typically pay fewer or even no taxes (why pay taxes when you can pay for a good lawyer to exploit the system). So how then does one create a mechanism that scales with the business, cannot be evaded, can compensate for AI automation, and is not an undue burden to not stifle innovation?
The answer, shocking to anyone who routinely reads any of my work, is blockchain and more specifically smart contracts. We can create an immutable environment that is capable of achieving exactly what we want for public goods funding in a trustless manner. To begin, in the not-so-distant future when someone wants to found a company, all they will have to do is submit paperwork and use a smart contract template that complies with government regulations. Unlike contracts of the present, there will be a few key differences.
Often the problem with a UBI and socialism, in general, is that it deters people from investing or innovating. After all, if you are going to be taxed back to the UBI level why even bother? It removed the incentive structure necessary to progress society. To solve this problem we must then factor the variable of investor compensation into our equation. We do this of course with programming in a method to shift the primary beneficiary of the contract’s execution. When the contract is initially created for the DAO it offers an ICO (Initial Coin Offering) to its investors for its governance. This could be public or private funding. The contract will record the addresses that bought the governance token and store the funds generated in this process. Importantly, when the window to invest has closed the contract will have recorded the exact amount of money generated by the initial investment round.
This is where things get interesting as we now have the addresses of our investors, how much each one invested, and the cumulative value generated by the initial investment round. All of this is immutably stored on the blockchain. What happens now? Nothing! The business can run just as any other would in the present. The contract serves as an account for the business to transact and receive funds. The investors control the direction of the company by voting, and can even sell and exchange their governance tokens just like stock. Meanwhile, a clock is ticking now. Whenever the contract is called it issues a percent of the transaction as a payment to the investors proportional to their initial investment. This continues until the point where the initial value invested has been recouped x times, say 100 for example. Once that threshold is reached a crucial part of our contract’s code is executed. Now instead of the investors receiving that percentage payout of the profits, that payout now goes towards the UBI contract elsewhere on the blockchain!
This method of baking a mechanism to shift the primary benefactor of profit sharing into an immutable document creating a business has never before been attempted, and to my knowledge wouldn’t have even been possible even a decade ago. What makes this idea truly shine though is not simply the shift from an entirely human-run business. The flagship feature of this approach is that it solves in a capitalistic way the soon-to-be major issue of hyper-automation and robot DAOs. It preserves the reward mechanism for risk-taking and private enterprise while also striking that delicate balance of support for public goods that ails modern society. This approach is business model agnostic; meaning you could have businesses run entirely by AI or a present-day LCC function on the same contract. Voting could be conducted using the ICO tokens, or vested in a single entity or board through the leasing of the voting power to a board of directors or any other body.
There are a few important caveats to everything I have presented here. Arguably the most important one is valuation. It may be possible for a contract to be initiated and steeply overvalued for an ICO, thereby raising the investment return (and time before the investment is recouped) so high it effectively will never be accomplished. In ideal circumstances, I believe that this can be mitigated. The free market is not the be underestimated in its ability to bring balance and collapse house-of-card investments. That said, it still could be a possible issue to contend with. Another issue I foresee would be the circumvention of the contract through more clever means. For example, avoiding the use of the contract with the UBI code in it in favor of one that gets posted anonymously and does the same task. This issue specifically can be almost entirely removed by making the smart contract a part of the country’s legal framework. Doing so would treat it as official documents and would mean much more legal trouble incurred for trying to circumvent the system. The downside of this though is that it would involve meaningful governmental involvement which could complicate many other issues, especially during the early phases of the adoption of such a system.
One of the greatest strengths of this system however is the very fact it can be used by the government or private adoption. Perhaps more specifically, it can be transitioned from private hands to the government by design. While it certainly wouldn’t have to undergo such a move it would be readily capable of it. If such a measure were to gain traction with the cryptocurrency communities, we would need a safe and fair UBI distributor. While someday this could and arguably should be a government, at present we would turn to the private sector. Though it is not an exact fit the Proof of Humanity project and its UBI are an excellent example. Upon completion, the smart contract of a business would begin sending a defined percentage of profit to the UBI, and from there it would be the task of the UBI project (or government) to ensure it is properly distributed. The wonderful thing about all of this is the very fact that all the infrastructure already exists to institute it.
In a future where AI is becoming ever more present and hyper-automation is no longer a pipe dream the failures of the old system will become more and more apparent. The current system is opaque, slow, and riddled with corruption. How could it not be as its failures are features for those who know where to look for loopholes? A system that embraces transparency by design is the only one where UBI and integrity can survive. Not only survive but thrive! Any system that wants to continue carrying the torch of western civilization must embrace this philosophy. Transparency is not a weakness; it’s a strength. Decentralized systems are not impractical; they are inevitable. Knowledge is not dangerous; it’s power. The concept of governmental reform, deregulation and even UBI can only occur with the embracing of decentralization and transparency. Any system attempting to do without it only will succumb to corruption and break under the weight of the political pigs it will incessantly feed in the shadows. I hold it to be self-evident this is the vision I have, though it’s my hope this will become a mainstream political issue soon. Radical reform is needed for what is to come with technology, and the only way to fight it is to embrace it.