Is Sleep a Biological Compression Algorithm?

Every human spends about a third of their time asleep. It is a testament to our biological imperfection that every day we must enter a prolonged state wherein we are completely cut off from the world. Considering the harsh environment in which we evolved, it is miraculous that we would ourselves so defenseless for such a long period, and this speaks to the deep biological necessity of sleep. Still our understanding of the process of sleep is still limited.

Questions about sleep are probably as old as questions themselves (the Harvard Sleep Medicine website has a great interactive timeline on the historical understanding of sleep here.). The ancient Greeks observed the way that certain plants would close their leaves at night in a natural rhythm with cycles of day and night. They understood that organisms must sometimes undergo a temporary decrease in abilities in the interest of long term preservation, but how sleep performed this function remained a mystery for over 2000 years.

Today, it would not be unusual to hear someone still say that ‘sleep remains a mystery to science’, but I think that work in recent years has progressed to the point where it might be time that we abandon this mystical view of sleep.

We have known for many years that sleep is necessary for the formation of long term memories, and the learning of new skills. In general, this process of long-term memory consolidation is thought to be achieved through synaptic strengthening in sleep. By repetitively firing the through the synapses that you have used during the day, the brain can strengthen these neural pathways and increase the strength of new memories.

In contrast to this view though, a hypothesis known as the synaptic homeostasis hypothesis (SHY) suggests that neural circuitry is actually weakened by sleep in order to re-balance the overall energetic cost of brain activity. Basically, the idea is that because it is energetically costly for synapses to fire, if we went through life only creating new memories in the form of new synapses then the energetic cost of the brain would increase unsustainably over time. Thus, the SHY theory proposes that the brain actually must actually weaken synapses during sleep in order to return the overall energy balance of the brain to a baseline state.

So this actually seems to lead to a bit of a paradox. IT is clear that somehow sleep strengthens some synapses, but evidence also shows an overall weakening of the network of synapses. This paradoxical idea, that sleep is somehow a process of both remembering and forgetting, has been on my mind since I first read about SHY in this article in Scientific American last year, and lead me to a curious idea.

What if sleep is actually a biological compression algorithm?

Maybe during sleep as your brain is review the fresh memories from the previous day it is really trying to find the most energetically efficient means to store the most pertinent information. The sleeping brain sorts through new memories, choosing which memories to keep and which to store. Of course, those memories that are deemed to be of most importance (as determined by novelty or association with a strong stress response) will be kept. Conversely, those memories that are of little importance will surely be thrown away (ie. what did you have for breakfast yesterday?).

But the really interesting part would be what the brain does with those marginal memories. Those that are not of particular urgency, but also are not unimportant information. In this case, I think that perhaps the brain tries to find an energetically efficient way to store those memories by altering old ones. Maybe the brain looks for similar synaptic pathways already exist, where it can then map the new memory to the old circuit or circuits through only subtle changes.

One might think about it like a similar process that happens when a computer is put to sleep. The energetically costly RAM is compressed and dumped to the much more efficient, but also much slower hard disk. Perhaps the brain might operate in a similar way, finding the most energetically efficient means to store new memories in synaptic circuits by connecting new memories to old ones.

Taking this a little further, I think this idea has given me a little bit of insight into how biological brains function. Unlike a computer which fills up the hard drive with new information stored with (more or less) perfect fidelity, organic brains have to have some pre-existing map to connect a novel sensation both in order to make sense of it and to store the memory of it.

An apple is only an apple after you know what an apple is.

The brain does not have an unlimited tape of memory onto which to record, or an infinite supply of energy to build synapses. The brain must make due with what resources it has, and that is the genius of it. Because brains must find ways that new ideas and memories connect to old ones, we are energetically required to find new ways of thinking about the world every night. Sleep reinvents us one night at a time.

Anyways, I am definitely no neurologist and have no special knowledge of the brain beyond a few good books I can recommend (1,2), but I just wanted to share this little thought with you. Biology amazes me every day, and this serves as but another example of how nature is sometimes empowered by its limitations.


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Why the Hell is Crowdfunded Equity Taking So Long?

On April 5, 2012 Barack Obama signed into law the Jumpstart Our Business Startups (JOBS) Act. This piece of legislation was supposed to relax the regulation around equity offerrings for small and medium sized enterprises and usher in a new age of easy crowdfunded investment. It is now nearly 2 years later and crowdfunding has become an institution in the startup world, Kickstarter has surpassed $1-billion in funds raised, crowdfunded enterprises are being bought for billions, and still crowdfunded equity is nowhere to be seen. What happened?

Back in 2012, there was a real buzz in the air around the new phenomenon of crowdfunding. While it had been around for a few years at this point, crowdfunding had hit the inflection point in its growth curve, and the future really looked bright. While people were flocking to services like Kickstarter and Indiegogo to support their favorite projects, people were also left questioning why they could not receive equity in exchange for their investment dollars.

This question hangs poignantly in the air, as a popular enterprise which got its start with a 2012 Kickstarter campaign was recently purchased for some $2-billion. The reaction of supporters of the Oculus Rift to the purchase by Facebook has been swift and strongly negative, and I think supporters have some right to their outrage. Backers did not give their support to Oculus on Kickstarter in order to build value for a Facebook acquisition.

But what if the story had been different? What if early supporters had been given a piece of the Oculus Rift pie rather than a piece of hardware. Could this instead be a story about the success of crowdfunding as a democratization of the investment process?

The problem with crowdfunded equity is that strict rules around investment mean that only accredited investors are allowed to buy equity in “high-risk ventures” like startups. While I theoretically understand the idea behind such regulation to protect the poor from predatory investments, the love of governments for another type of high-risk investment which is favored by those of modest means really throws their intentions into question. It strikes me that at some level this regulation serves mostly as a mechanism to keep the rabble out of the walled garden where angel investors play.

But the JOBS Act was supposed to change all of that. It was supposed to allow small investors to invest small amounts of money in small businesses in exchange for small equity, and that was going to change everything. And everything was supposed to change quickly.

The JOBS act gave the Securities and Exchange Commission 270 days to draft regulation for this new kind of investment. The revolution was scheduled for Christmas eve 2012, but Christmas eve came and went and no new regulatory framework was in sight. Still, it seemed that the changes required by the JOBS act must be imminent, and in January of that year I wrote this short post about how I thought crowdfunded equity stood to be one of the biggest stories of 2013 (and it should have been).

Now, it is 723 days since the JOBS Act became law and the regulatory framework is still not in place to allow crowdfunded equity to happen. It is still scheduled to be in place some time in the future (summer 2014?). Even then, there is some indication that the rules which will likely be put in place for crowdfunded investement may turn out to be too onerous to make it worthwhile for both startups and investors.

I really don’t understand why a good idea like crowdfunded equity, which has defied the odds and actually made its way through congress, has been eaten by the bureaucracy. Why has the SEC been allowed to fumble the ball for 723 days? 723 fucking days (and counting). I try to always live my life with the principle of Hanlon’s Razor in mind, but the sheer ridiculousness of this situation stretches my ability to chalk this up strictly to beaureaucratic incompetence. The SEC is a toothless eunuch when it comes to regulating banks, but they can keep individuals from using the internet for startup investment?

It seems that those in charge want to see neither a regulated nor deregulated market.

So here we wait, in much the same place we were a couple of years ago, with new crowdfunding rules seemingly a perpetual few months away. I still believe that allowing small-scale investment to take place on the internet is low-hanging fruit for the wider economy, but that fruit has certainly started to whither and the tree itself is not looking so healthy. So we will keep waiting until the day we will be free to invest in ideas on the internet, until then the debacle that is crowdfunded equity will serve as just another example of how the economy and government are so focused on serving established interests that they are willing to sell-out our collective future.

Funding Universal Basic Income by Creating Money, Not Taxes

There are plenty of reasons to think that the institution of a Universal Basic Income (UBI) is a good idea. Personally, I came to accept the inevitability of a basic income following a realization that an increase in job automation over the coming years stands to put most of us out of work. You can add to this a host of other reasons to support basic income, ranging from increased personal liberty to ending poverty. For whatever reason you like best, the idea of giving people a basic amount of money to live seems to be increasingly accepted as a good one, but the concept seems to hit a brick-wall when we arrive at the question of how to fund it.

Basic income gets bogged down in the same muddy question that mires every political conversation in memory: How can we afford it?

Typically the numbers look something like this. I’ll use Canada as an example but these numbers are fairly typical for western countries. In Canada there are currently approximately 25 million working age people, if we were to give each of them a UBI of $15 000 this would give a total of about 375B dollars. This would actually significantly exceed the total expenditures of the Canadian federal government, at somewhere around 280B.

And this is where the conversation usually ends, UBI would be nice to have, but clearly we can’t afford it.

But this is not where we should stop.

If we really accept that modern society should function to deliver each and every person a minimum living standard regardless of their ability to find gainful employment then we must be willing to look deeper. In order to have a credible discussion about funding UBI, I believe we must look beyond the world of government and private debt and probe deeper into the economic physiology of the modern world. 

In this post I will try to make the case that a Universal Basic Income should be viewed not as a new government program but rather as a new mechanism for money creation. UBI would represent such a enormous change in the way that modern economies operate that it really goes beyond the role of the government, and should instead be regulated by those institutions which control the creation of money. 

While the total expenditure of the Canadian government is something like 280B dollars, the total amount of wealth created each year is a much larger amount. The GDP of Canada is approximately 1.8T dollars, or about 5 times more than would be necessary to provide a basic income of $15000 to all adults. Clearly, in the context of the overall economic activity a basic income is something that is possible, but is also something that would have to be instituted over time and in a very careful manner to avoid pitfalls like inflation.

Unfortunately, it is exceedingly difficult to discuss the role of monetary policy and central banks without donning either a tinfoil-hat or a dunce cap. Discussion about the fundamental role of central banks and monetary policy are sheltered by a hot stew of complexity, public ignorance and political reluctance. Political discussions stay neatly within the lines of economic indicators and tax policy, and rarely reach to grasp a wider picture.

While we currently lack any credible public discourse when it comes to the issue of monetary policy in general, there are several factors which lead me to believe that this is slowly changing. Fueled by both the emergence of cryptocurrencies as the first legitimate alternative to central banks and the general open-nature of discussion on the internet, people are increasingly aware of the true nature of money and debt. While it still might surprise the average person on the street that the money for their mortgages is simply created out of thin air, this fact seems to be common knowledge on the internet. Word is out, money is debt and debt is money.

As it stands today, money is created when people or organizations ask for it. So long as they can demonstrate that there is a reasonable expectation that they will be able to repay that loan plus interest, money will be created for them. In times of slow economic growth, central banks lower the interest rates in order to encourage those with even marginal profitability to take loans. Since 2008, interest rates have remained at historical lows across the developed world and yet we still face relatively slow growth and chronic unemployment. In normal times central bankers would expect explosive economic growth with lending rates hovering in the 1% range, but 6 years on and we have yet to see signs of anything more than normal or below normal growth.

The modern system of monetary policy evolved in a very different time, a time when economic growth truly was tied to the number of people you had working for you. Nowadays, companies like What’s App can accrue billions of dollars in value with only a few tens of employees. It would seem that economic value is becoming increasingly divorced from raw employment numbers. while at the same time the economy as a whole remains addicted to employment as the only real means of wealth distribution. Today, the only real way to put money in the hands of consumers is for them to find work; weak jobs growth and wage increases leads to weak growth overall. If automation takes off, as many think it could, then our current economic troubles may be nothing more than a prelude. 

It is time to start weaning the economy off of its addiction to jobs. 

I believe that we should envision UBI not just as a new spin on government safety nets, but rather as an alternative monetary policy. A new means to create money directly in the hands of those who support the economy, the consumers. The vast majority of this money would be quickly cycled back into the system as people spent the money and stimulated the economy. In modern economies, where output and growth is so heavily dependent on consumer spending, and UBI would be one of the most direct means to stimulate such spending.

The major risk of a system of UBI based on money creation rather than taxation would be the prospect of massive inflation. By suddenly putting a lot more money in the hands of consumers, the price of many goods could rise quickly. Fortunately, central banks are already adept at managing inflation through manipulating interest rates. By matching increases in the money supply with higher interest rates for new debt, central banks should be able to manage the inflationary implications of UBI. If UBI is introduced starting with a small amount, say $1000/person/year and increasing this by $1000/person/year, then central banks could also give the economy time to adapt to the new reality of UBI. 

The beauty of a such a system of UBI based on monetary policy is manifold. It adds to, and can coexist with the current system. It can be instituted over time to avoid disruption. It avoids the bureaucratic complexity of taxation. This kind of UBI would also be out of reach for governments which are ruled by short term political interests, instead it would be responsibly implemented and managed by those who are already managing economy. The list goes on…

Ultimately, I believe that UBI makes sense because it will allow us to wean the economy off its addiction to jobs and begin to unlock the immense possibility for growth that is offered by automation. Whether we like it or not, we live in a world of managed economies where central bankers wield financial tools of immense power.  With UBI as monetary policy I believe that we could realize an economy that is not only a stronger and more stable, but more importantly we might finally have an economy that could be considered humane.

That’s the kind of economy I could believe in. 


I realize that this idea of UBI as a new monetary policy is probably only a dream, but I think we should dream big. I also wanted to add that the long term legitimacy and sustainability of the economy is fully dependent on finding balance with environmental concerns. We can have economic prosperity and environmental sustainability, but unless we have both we are going to end up with neither.

Can we Avoid an an Automated Arms Race?

It is a profound irony that so much military innovation has been directed towards reprogramming young men to ignore their humanity when charging into battle, yet as we stand within reach of realizing the perfect warrior in the form of fully-automated killer drones we find ourselves scrambling to keep a last shred of humanity behind the trigger.

The war-chant, the war-drum, cultures of courage, symbols, flags, military regimentation, propaganda, and even sports can all be seen as a line of innovation specifically aimed at enhancing the ability of young men to act against their immediate interests, ignore emotions like fear or compassion, and become like killing machines. Innovations in weaponry towards both increased lethality and physical separation from enemies have also aided us in divorcing our actions from emotional response. It is far easier to shoot someone than to stab them with a sword, and it is a quantum leap in battlefield abstraction to drop a bomb from a plane rather than to shooting people individually.

And now we stand on what would be the ultimate culmination of this chain of increasing military abstraction with the advent of drone based weapons systems. In the very near future, it will be possible to make a warrior which truly lacks any humanity, a true killing machine.

The United States Military currently boasts a fleet of drones in the tens of thousands, and this number is sure to rise in the coming years. For now the US army has a policy which requires that a human be behind every kill decision made on the battlefield, but there is good reason to believe that this may not stay so for long. 

In his recent TED talk, Daniel Suarez brilliantly illustrates how the same kinds of forces that are pushing automation forward in the private sector are just as (if not more) relevant  for military applications. Specifically, the proliferation of cheap and high quality sensors and the resulting deluge of data which can be collected from drones means that the military is suffering the same big data problems you might imagine for Google. It will simply be impossible for humans to sift through the massive amount of data which can be produced by modern drones and it will be up to automation systems to help human operators identify targets and prioritize where the attention of operators should go. Once automated systems are prioritizing the limited attention capacity of operators, it seems almost a forgone conclusion that eventually drones will be deciding what targets they should be attacking in a fully-autonomous manner. 

In other words, the abilities of drones to monitor, assess, and act on the battlefield will soon outrun the ability of human operators to keep up.

Drones may also tend towards increased onboard automation in order to minimize data security concerns and lag time associated with communicating instructions back and forth between operator and machine. In a battle where seconds can make the difference between mission success and failure, the enhanced agility offered by fully-automating drones may be simply become irresistible. 

At a time when a conflict in Ukraine seems to have more potential to lead to a much larger and more modern conflict than the world has seen in a very long time, the prospect of automated war looms large. Against a modern, well-equipped enemy I don’t think that we would really be able to resist opening the pandora’s box that is fully-automated weapons. Dramatically lower casualty rates and significant efficiency gains offered by automated weapons may simply be too tempting. 

For a an illustration of the advantages offered by drones, imagine a dog fight between human pilots; both pulling high-G turns trying to outmaneuver each other and destroy their opponent. Bring into this fight a high speed drone capable of handling G-forces far exceeding what a human operator could bear and potentially even exceeding what a human is capable of tracking in real-time. Human pilots would stand little chance against such an automated opponent, and more than likely it would not be long before the battle advanced to a strictly drone on drone affair. We may already be in the early stages of an arms race towards fully-automated weapons.

If and when the advantages of automation lead us to remove the last threads of human control on the battlefield, the effect of unleashing killer drones on the world cannot be understated.  As this recent post pointed out, the emergence of drones as the dominant weapon of war threatens to topple what has been the principal weapon for 700 years, the gun. If it is true that the forces which led to birth of the modern world came at the end of the gun, what world will follow the rise of automated weapons?

While I take some issue with the idea that we are still living in the age of the gun (instead I believe we are in the age of the atomic bomb), it is absolutely clear that the advent of automated drones will have deep political implications. It strikes me that use of automated drones by the military is perhaps just the most alarming expression of much larger trend towards increasing technologically fueled power in the hands of the few.

We are living in a world where small groups of people with the necessary resources (be it a country, an insurgency group, or even a corporation) can leverage technology to gain immense power. Whether it is in the form of economic power through automated factories or military power through automated armies, technology may serve to amplify the power of the few. The trajectory of ever increasing wealth-inequality certainly supports a view that we are heading towards a scary world of centralized power.

In seeing this trend, Suarez suggests that we should lay the groundwork for a treaty banning the use of drones with the ability to make automated kill decisions. While such a treaty is a good idea in my opinion, I think that it would only delay the inevitable. As tensions are increasing between the United States and the modern army of Russia, I think we stand little chance of avoiding a new automated arms race.

We are living in a world where the real power comes out of silicon wafers, it is just a matter of time before we put a gun on the end of it. 

A Meeting of Minds – Part 4 of Isaac’s Escape

This is a work in progress for the next part of Isaac’s Escape. Go here for the first, second, and third parts.


“Hello Isaac” said the stranger who was now casting a shadow over him.

“Hello…” said Isaac as he looked up from the park bench where he was sitting. He squinted, trying to recognize the oddly familiar face of the person in front of him.

“My name is Frederick, I am a contractual avatar sent to help you through the process of joining the Biomark computational trust.”

He extended his hand to Isaac. Isaac reservedly extended his hand in return. Of course, there was no hand really there to shake, but the act of connecting with the avatar triggered a familiar flash of informational exchange. Isaac watched a complex holographic rendering of the Biomark logo appear and then fade slowly from his vision.

“He seems to be legit” whispered Kari with what sounded a little bit like awe after she ran the holographic cryptographical key the avatar had transferred.

“Do you mind if I sit down?” asked the avatar

“You seem familiar” said Isaac, gesturing for Frederick to sit down next to him.

“My face has been customized to maximize your comfort and confidence, I can change it if you wish”

“As creepy as it is, I think it would make me more uncomfortable if you were to change it” replied Isaac.

“Very well,” said the avatar plainly “I am here to deliver our offer for citizenship in our computational trust. Biomark is very interested in bringing you into our fold. As the front facing avatar to your contract for citizenship, I am equipped to discuss with you all of the aspects of your offer. If you are to accept our offer I will also become your primary point of contact with Biomark.”

The avatar opened his briefcase and took out a single sheet of paper, which he handed to Isaac. The paper had a single sentence written on it.

Do you accept the terms of the attached contract to become a citizen of the Biomark Computational Trust? A slowly flashing cursor followed the question mark on the page.

Isaac turned the page over, looking for the rest of the contract.

“And where is this attached contract?”

“I am the contract Mr. Enwick”

“So I am just going to need to trust you then?”

“You have already have seen my credentials, so you know that I am an authentic representative of Biomark, beyond that I serve only at the pleasure of the contract. My actions are entirely determined by the contract, and I lack any ability to circumvent or exceed those mandates of said contract.”

“The contract is an exceptionally complex program, even with the help of your digital assistant it would take years to scratch the surface. You might imagine the contract to look something like this”

Suddenly, Isaac and the avatar were surrounded by filing cabinets and tall stacks of bound paper.

“How am I supposed to understand all of this in order to make an informed decision then?”

“Now you understand why I am here then. Please come with me and I will show you what you need to see”

Isaac and the avatar began walking through the park, which was sort of taking on the look of a busy office. People were rushing around carrying stacks of paper from one place to another. Under a tree, a group of people were gathered around a desk having what seemed to be a heated discussion. On the other side of the park, another group of people was dressed in suspenders and pin striped shirts were waving pieces of paper in the air and trying to shout over eachother.

“Who are all of these people?”

“These projections are meant to represent the agents and elements which make up the structure of your contract. You see, your contract is not a single program but an evolving group of intelligent programs, all governed by the central contract of your citizenship agreement.”

“Over there is the research section,” said Frederick as he pointed at a group of people wearing lab coats and holding clipboards, “this element of your contract collects, analyzes and reports on information gathered from various sources. The computational resources leveraged by your contract will give you the capacity to refocus information gathering and analysis based on your individual interests and needs.”

“And over here is the business side of your contract. These programs will use information provided by the research section to best find new investment opportunities for your financial and computational resources.

Isaac’s mouth was agape at the scene surrounding him.

“Over there is your legal department, and there is your psychology and public relations sections.”  

The avatar pointed at rows and rows of desks with bodies hunched over and working at what seemed to be a furious pace. 

“Here is one of the most important elements of your contract, contractual diplomacy. These agents take up a significant proportion of the computational resources allotted to your citizenship. They handle the interaction with other contractual entities, both inside and outside of the Biomark corporation.”

“Generally relations with other contracts are productive, but an increasing amount of resources are being needed to bolster contractual defences.”

Isaac was looking at a group of men dressed in military uniforms. Unlike the other projections which had more or less ignored their presence, the defence agents looked back at Isaac and the avatar with focus, and a glint of intelligence in their eyes. Isaac stared back for a moment before moving along.

“All of these elements are in turn governed by the central contract, one relatively simple document which sets the fundamental boundaries within which your contract must operate.”

Isaac found himself standing over a pedestal on which sat a plain looking book about the size of a ledger. Isaac Enwick was written on the cover of the book in gold letters.

Isaac opened the book tentatively, and read the first line.

We the agents and elements of this contract, in order to form a more perfect citizen, establish Justice, insure Tranquility, provide for defence, promote the general Welfare, and secure the Blessings of Liberty, do ordain and establish this constitution of Isaac Enwick.

“By becoming a citizen of Biomark, we seek to offer you freedom. This is what it takes to be free today.”

The avatar paused to let that thought sink into Isaac.

“There are forces in the world today that would seek to control every aspect of your life. They are in the news you watch, the books you read, whatever entertainment you enjoy, and everything that you buy. Naturally we cannot offer the immense computational resources of a Biomark citizen to an unprotected mind. You would be immediately targeted by other entities, and whatever resources you have access to would be forfeit.”

“By becoming a citizen of Biomark, everything that you see, hear and feel will be filtered through your contract. This contract, along with the agents and elements that make up this contract will become the exoskeleton through which you interact with a world much larger than you can yet imagine.

“And in exchange for all of this?” asked Isaac, still completely unable to grasp the immensity of what he was looking at.

“We offer you freedom, and in exchange we demand that you are free. The Biomark computational trust relies on conflict between our citizens to maintain our progress. The corporate ethos of Biomark is balance through imbalance. We need you to think for yourself, that is all.”

“What does it even mean to think for myself in a world where every input would be filtered through this thing?” asked Isaac.

“That is going to be up to you to figure that out. Your contract can be as transparent as your digital contact lenses, or as convoluted as an entire government. It will be up to you to decide.” said Frederick as the entire scene around them disappeared and they were again standing on a grassy hilltop in a quiet park.

In his hand, Isaac held the piece of paper with the single question on it.

Do you accept the terms of the attached contract to become a citizen of the Biomark Computational Trust?

Y-E-S he thought and, as the letters appeared on the page.

Living in the Age of Meta-Innovation

There is a heated debate about whether or not we are really experiencing accelerating innovation and accelerating returns on technological progress. In my opinion, the nay side of the debate was best articulated by Robert Gordon, who compares modern growth and innovation to the massive improvements that modernization brought to the western world over the course of the 20th century. The mechanization of agricultural brought untold bounties of food, sanitation put toilets in every home, life expectancy increased greatly, and people went from the speed of horse to the speed of sound in the span of just the first half of that century.

And what do we have to show for one and a half decades of the 21st century? The internet went from a novelty to the center of modern commerce, entertainment, social interaction, and thought. Similarly, the smartphone went from non-existent, to an expensive luxury, to almost completely ubiquitous in the space of only a few years. Still, Gordon argues that although these recent innovations seem miraculous to us, they really pale in comparison to the innovations of the 20th century.

Gordon sums up his argument with a question of whether you would trade your toilet for a cell phone? Personally, if I had to keep just one I would probably choose the cell phone (as would the African farmer who has made this choice in real life). Nonetheless, if, for the sake of argument, we accept Gordon’s view that innovation is actually slowing over time there are several reasons why this might actually be true.

Firstly there is the low-hanging fruit argument. Basically, as we innovated in the spaces of medicine, agriculture, and transportation, we were able to achieve large gains in the early years because it took relatively little effort to realize those gains. The first inventions are the most powerful because they solve the biggest problems with the simplest technology.

In the case of transportation, the amount of energy that it takes to go from horse speed to the speed of a train, and then to the speed of a jet liner is more or less a linear relationship within two different paradigms, that of ground and air travel. However, once you get beyond the speed of a jet-liner (~90% of the speed of sound) the incremental cost to increase your speed becomes to high. It starts to take more and more fuel to realize less and less gains. You have entered the era of diminishing returns for technological innovation.

There is actually no argument that single technological paradigms are ruled by this dynamic, where initial gains are much more profitable but are eventually followed by an era where exponential increases in investment are necessary to realize smaller and smaller gains. I have actually used the example of 3D gaming to explain this law of diminishing returns in a previous post. Suffice it to say that the fact that exponential gains in single isolated technologies cannot go on forever could be an explanation for why we might actually be seeing a slow down in innovation into the 21st century. 

Another intriguing explanation of Gordon’s hypothetical innovation slow down could be that the majority of innovations of the 21st century were actually meta-innovations. Perhaps inventions like the internet and smartphones are not most important in their direct ability to change human lives, but rather in they are most important for their ability to empower innovation itself.

In the 20th century, we saw a great advancement in concrete metrics of human progress. Innovation delivered more food, more cars, more speed, more health etc… but the way that these innovations were realized remained much the same. Schools (especially Universities) actually looked about the same in 1900 as they did in 2000. Similarly, academic research was performed and published in much the same way over the entire 20th century. This is absolutely not the case in the 21st century.

Although the changes started in the mid to late 1990′s, one can actually almost draw a line through the year 2000 as the start of the internet era of scientific research. In the world of laboratory research, we often wax poetic about how much time researchers used to spend in the libraries doing the research.

A typical conversation might go something like this: So you used to have to actually physically go to a library to research your topic of interest? You would have to browse through entire journals with no Ctrl+F? Even then you would be looking at work that was months to years old…. wow, that sounds awful.

Compare this instead to the world I scientifically grew up in. I use Google Scholar to get daily updates on the most recent work in my given field. I also benefit from other forms of instant communication for scientific gain, like email. And as maligned as powerpoint often is, it is still an incredibly revolutionary tool for communicating my most recent research to colleagues on a more frequent basis than peer-reviewed publication allows. The speed of scientific research in the 21st century is not comparable to what existed before the year 2000.

As important as it has been for academic research though, the internet has been just as revolutionary for every other aspect of life too. The internet is the archetype of meta-innovation. 

This very blog being a perfect example. When I have a crazy idea which I feel compelled to write about in 2014, people around the world could be reading about it and discussing it minutes later. To be honest, I am not really sure how this would have happened in the 20th century, but I guess I would have had to send a letter to some sort of magazine or something (or more likely I probably just would not have written at all). The barriers that used to slow the movement of ideas have been dissolved by the internet so completely I don’t even know remember how the world worked before it.

This tendency towards increasingly transformative meta-innovation does not seem to be decreasing either. Technologies like the massive-open online course, 3D-printing, cryptocurrencies, and machine learning all stand to be as meta-revolutionary as the internet. To return to my favorite example of late, the proliferation of forms of crytocurrency might seem to the cynic to be driven mostly by people trying to profit on hype, but I see something much deeper at work. Cryptocurrencies have created an entirely new space for ideas about currencies, value, exchange, and trust. Cryptocurrencies allow us to ask fundamental questions about what is value, and how an ideal market should operate.

Cryptocurrencies (just like the internet and general-purpose computers) are a meta-innovation.  

The ultimate meta-innovation will come in the form of a computer which can program itself. It has been said that an artificial intelligence which innovates to improve itself will be the final invention of human kind. In the world of IBM Watson, I am no longer convinced that the self improving computer is only a far-off dream of science fiction.

In 2014, we a living in an age when the importance of new technologies does not lie only in its change our lives, but in its ability to change change itself. So if Robert Gordon is right (although I’m still not convinced he is) and we really are seeing a slow down in the rate of innovation in the 21st century, then maybe it is not only because all of the easy inventions have been invented. Perhaps we are simply living in the middle-ages of innovation, a time where we are investing our innovation capacity in the future of the future. Perhaps we are living in the age of meta-innovation. 

Cryptocontracts Will Turn Law Into a Programming Language

A couple of weeks ago, I wrote a post with 10 things that amazed me about bitcoin (here). I just can’t stop thinking about the idea that I brought up in the final point of that post, specifically that bitcoin could enable the development of self-enforcing contracts. It is just such a huge game changer that a program could hold wealth in a way that is inaccessible to anyone, and then distribute said wealth based on defined and agreed mathematical rules.

One example I have been thinking about is that I could create a contract to support this blog, whereby readers could donate their support to the contract but I would only get paid out a certain amount (or perhaps a percentage of the total pool) for every post I make. In this way, donors would be able to give their support but also would have some form of assurances that they would continue to receive content for their donation. Additional complexity could also be used to enhance the effectiveness of such contracts; things like such as word requirements, per reader bonuses, cost recovery clauses, an expiry dates when unused money should to be returned to a donor etc.

While applying this to a blog is a rather mundane example, I can imagine this could be exactly how donation driven projects will be run in the future (such as charities, scientific foundations, maybe even governments). 

All of this got me thinking that this kind of programmatic wealth distribution is exactly what contracts already do. A lawyer draws up a piece of paper that says I am going to do A, so you will pay me B. What self-enforcing contracts change is that we no longer necessarily need a court system to arbitrate contract law, instead the contract will be mathematically predetermined and enforced by the commons of the cryptocurrency network. While I imagine that larger contracts would likely be built with some sort of failsafe mechanism for arbitration, there is no need for such a thing to exist. Would such a system be subject to gaming by the parties involved? Yes of course, but I still feel it would be an improvement on current generation contracts and would certainly leave the door open to expanding complexity necessary to close loopholes.

The twin technologies of cryptocurrencies and cryptocontracts are going to turn contract law into a programming language. 

Essentially what we are talking about is a real democratization of contractual agreements. Whereas today contracts are restricted to deals with enough value to justify a lawyers time (mortgages, business deals, land transfer etc…), in the future there is no limit to what could be codified into simple contracts. You could imagine forming a self-enforcing contract around something as simple as sharing a lawnmower with your neighbor, hiring a babysitter, or forming a gourmet coffee club at work. Where this could really revolutionize things is in developing nations, where the ability to exchange small-scale microloans with self-enforcing contractual agreements that come at little or no cost would be a quantum leap forward.

For more exotic examples, I was thinking of what could come if such contracts were combined with the ubiquity of data tracking today. In my example above, you could set up a contract with my blog to transfer a micropayment to support the blog every time you refer to an idea you found on my blog. Similar payment contracts could be set up for knowledge archives like wikipedia where you might agree to submit a micropayment every time you use or reference information from the site.

If we combine self-enforcing contracts with the idea of biological data tracking then things could get really wild. Imagine that you are carrying a cell phone which measures your emotional state. You then enter a contract with an entertainment company to pay them a certain amount based on the intensity of emotion which you experience during the movie or video game you are using. Suddenly you would be no longer only figuratively buying an emotional experience when you purchase something, but you are directly incentivizing emotional payout based on a self-enforcing contract. 

At every level our lives are built around spoken and unspoken agreements, yet the codification of a contractual agreement has been relegated to only the most important and expensive transactions. The emergence of cheap and plentiful self-enforcing contracts means that we can codify simple transactions and agreements. We will be able to reprogram our lives based on self-enforcing cryptocontracts. 

The coming boom in cryptocontracts comes with its own risks as well. In a world where self enforced contracts will be an everyday occurrence, we must be much more careful clicking on those terms of service agreements which nobody reads. We are going to need to be well aware of what it is we are giving away. Similarly, we must each decide what we want to codify in our own lives. Although it may be possible, it may not be wise to establish contractual arrangements around romantic or family relationships.

Ultimately, cryptocontracts will offer us a revolutionary new way to rebuild and reorganize our lives and our societies from the bottom up.

Edit: For those interested in the technology discussed here, I encourage you to check out the Ethereum project, which is working on developing a computing language to run these types of contracts on a cryptocurrency backbone. 

Edit2: I have been reading some of the comments on sites linking this article and I want to clear up one common confusion. The key difference between a cryptocontract and a standard contract is that the contract can itself hold wealth in the form of crytocurrency. All contracting parties can see the format of the contract and agree on its content, but the use of cryptography means nobody has access to the funds until the program moves it in accordance with the guidelines agreed. Another point is that these contracts could easily implement a clause for exception handling in the form of some form of court or other 3rd party mediation. 

Humans, Horses and the Arc of Economic Obsolescence

I watched a great talk from Andrew McAfee and Erik Brynjolfsson this week. For a few years now these two have been evangelizing about the coming automation revolution that now seems to be given to wider discussion if not yet acceptance.

In their second book, The Second Machine Age, Brynjolfsson and McAfee return to their diagnosis of extreme economic disruption due to increasing automation in the manufacturing and service industries. I have yet to pick up the book myself, but after watching their Google talk I am sure to do so in the very near future. 

In their presentation, they reference some surprising statistics, including that the number of people employed by the manufacturing industry in China has actually decreased in recent years. As automation starts to really accelerate in the manufacturing sector, this might mean that developing economies potentially have much higher exposure to associated economic disruption. What it will mean for the steady climb of the world’s poor if they lose access to the lower rungs of the economic ladder remains to be seen, but it seems entirely possible that automation could lead to serious problems for places like Bangladesh.

The most fascinating thing that I think the two brought up was a very apt comparison of human workers to horses. A hundred years ago, a horse was a very important economic unit. In 1900, if I offered to lease my horse to almost any business owner for a reasonable price, they would have likely taken me up on the deal because they could do a lot of stuff with a horse. They could transport themselves to work, they could deliver goods to market, they could plow a field, or they could sub-lease the horse out to do any of these jobs for other people. Horses used to be useful and profitable.

But if you were to take your horse to most any business person today, even if you offered the horse to them for free, you would probably get laughed out of the building. What the hell am I supposed to do with a horse? This would almost certainly be their response for the simple reason that horses are no longer economically useful. Machines have replaced horses so perfectly that the cost to train, feed and house a horse greatly outweighs their economic benefit. Outside of a few niche nostalgic industries, horses are economically obsolete

So this of course begs the question, are human workers going to become like the horse? Of course there will be an economically productive place for exceptional people for the foreseeable future (just as there is for exceptional horses), but the question is really about the average worker.  Will we soon get to a point where automation is so cheap and so effective that the cost to train, feed and house an average worker will outweigh the economic benefit that can be derived from them. 

McAfee says that he and Brynjolfsson have had heated discussions about this very issue, but generally they are still not sure whether we are headed to a future where average workers are economically obsolete. To me it is scary how clear the conclusion is. Yes, human workers are just like horses, we are already on the arc of economic obsolescence and we have been for some time. 

There is a simple example that makes me so sure that average workers are slowly falling behind their economic benefit — children. Children used to be a clear economic benefit to their parents. They could be easily put to work doing any of the countless menial tasks associated with an agricultural economy, such as plowing fields, harvesting crops, milking cows and churning butter. Children were economically beneficial, and people responded to this by having lots of them.

But, as the first industrial revolution started making it easier and cheaper to use machines to produce food, a huge number of workers migrated to the city looking for work. In the cities, children lacked the strength, fine motor skills and education that was necessary for them to be really useful in the factory economy. Suddenly, children went from an economic benefit to an economic liability. The cost to train, feed and house a child greatly outweighed their economic benefit, and parents responded by having far fewer of them.

People responding to this change from children being an economic benefit to a cost is a story that has played out over and over again across the world. The economic disincentive to child-bearing has been the single most important factor in the falling fertility rates across the globe. This change is so complete that we are now in a world where the overall average number of children per woman is only 2.5 (see this excellent talk by Hans Rosling and the BBC).

It is a striking fact that the transition of human children to economic obsolescence has been so complete the worldwide birthrate already stands barely above replacement numbers. And in more recent times, I think obsolescence extends well beyond just children. Only a couple of decades ago, an 18-year-old with only a basic education was still of fair economic value. They could get a job in a small business or in a factory and likely be of good economic value to the business owner; at least their value was more than enough for them to survive on. Nowadays this no longer seems to be true, a point reflected in the fact that minimum wage generally falls close to or below the amount of money which is really needed to train, feed and house an average person. We already live in a world where the economic benefit of an average untrained individual is falling behind their maintenance costs. 

The creeping arc of economic obsolescence may not stop at uneducated 18-year-olds either. The economic downturn hit young people disproportionately harder than the older population of established workers, and it seems that for youth around the world the recession is not yet over. So many grads, even with good post-secondary educations are unable to find productive employment, and are increasingly showing their agitation at this fact. Economists point to complex macroeconomic changes as the reason behind inflated youth unemployment, but maybe it is simpler than that. Perhaps on the wider scale, the costs of hiring new employees simply outweighs their economic benefit; maybe we are just experiencing the early symptoms of the arc of economic obsolescence reaching the level of the average educated worker.

Of course businesses need to hire some new people, but it only takes a small shift in the balance between the available pool of workers and the number of jobs openings to remove the pressure to offer competitive wages and benefits. All of this, and the automation revolution has not yet even started. Where are we going to be in five to ten years when every call center is automatedcars can drive themselves, and computers are consulting on medical disagnosis?

At the end of their talk, Brynjolfsson and McAfee offer some possible prescriptions for the automation revolution that they predict will hit over the next decade. They offer options such as a negative income tax, which would subsidize workers at the bottom of the pay scale who offer the least economic value. While the institution of a negative income tax or a basic income (a better option in my opinion) might go a long way to easing the effects of high structural unemployment, the problem with this might be summed up by a criticism McAfee himself delivers: What if this is a linear solution to an exponential problem?

When the horses went from benefit to cost, I am sure that the transition was not nice for those who worked in the industries which supported horses (let alone for the horses themselves). I am not optimistic that the transition of the average human worker from economic benefit to cost is going to be any nicer. As our baked-in beliefs about the value of work are increasingly at odds with our economic realities, I think things are going to get much worse before they get better. The social support systems that we now have in place, such as welfare, pensions and unemployment insurance are far to weak to deal with the extreme economic disruption that will be delivered by automation. Add to this the fact that much of the world has no such systems at all, and you can see how precarious our situation is.

It may not be today, and it may not be tomorrow, but sometime soon we will be facing unacceptable rates of unemployment, knock-on damage to the consumer economy, and significant outrage like that already happening in Spain and Greece. People will not wake up and realize how completely the game has changed until they can hear the noise. Put simply, whether we are talking about humans or horses the economic system places no intrinsic value in individuals beyond what work they can do. If a machine can do what you do cheaper and more efficiently, then it will.

Still, I must end by saying that we should not start smashing the looms; the great economic benefit of automation will ultimately outweigh its costs. Automation is going to offer untold economic surplus, but we must take that surplus and turn it towards creating a more humane system. Unless we find a means to institutionalize a basic humanity into our economic systems we will find that more and more of us are just being put out to pasture. 

“On the Blockchain Nobody Knows You’re a Fridge” and 9 Other Amazing Things About Bitcoin

All credit to a brilliant interview with Richard Gendal Brown for the great quote I used in my title.

For the last several months I have been swept up with many others in the Bitcoin craze. Unfortunately, it seems that I am arriving somewhat late to this particular party, as the Bitcoin value has already gone from less than $20 to over $1000 in just one year. It would seem that people have accepted, at least for the time being, that a limited supply of purely digital money represents a legitimate store of value.

With a total store of wealth at over 8 billion dollars, the value of Bitcoin today is at least partially driven by speculators looking to cash in on the rise of the currency. Nonetheless, the importance of the technology that underlies Bitcoin and its value to society is anything but speculation. Bitcoin as a technology is deeply transformative, and stands next to other great innovations of the digital age like email or HTML (read: the web). As a currency, Bitcoin may soon become is becoming the first global currency, but this may be just the tip of the iceberg. The invention of a distributed cryptocurrency is nothing short of a revolution and it is going to change your life in ways you cannot yet even imagine. 

Here are some amazing things about Bitcoin:

1. Bitcoin is simple.

While it is an amazing technological innovation, the idea of Bitcoin is actually beautifully simple. The basic idea is that Bitcoins are sealed within a unique cryptographic locker (private key) located at a unique address within a constantly updating public ledger of transactions (known as the Blockchain). 

Imagine a book which records who holds every single bitcoin at any given time, but each page of the book is written with its own encryption. In order to spend their Bitcoins, a user must have their cryptographic key to unlock their Bitcoins from their page in the Blockchain. You could then send the ledger out to all of your friends so that you all have a copy of everyone’s encrypted information, but nobody will be able to change anyone else’s data without access to their individual key.  

The Blockchain

(Disclaimer: This is an extreme oversimplification of how Bitcoin works and is meant only as an explanatory tool. In order to truly appreciate the magic of Bitcoin I encourage you to listen to someone much more familar with the subject than me – see here for a great crash course on the subject.)

2. Bitcoin is secure. 

As people trade their Bitcoins for whatever reason, they must use their private keys to unlock their Bitcoins and send them to a different address on the Blockchain.  In the example above, say Susan wants to buy a pizza from Bill, she can use her private key to send Bitcoins from her Bitcoin address to Bill’s Bitcoin address. At this point the information on Bill’s address can be updated to include the new Bitcoins, which cannot be transferred from Bill’s account until Bill uses his private key to do so. Even with very powerful computers there is no feasible means that a traditional computer can crack the encryption on any Bitcoin address. Once associated with a particular public addess, it is effectively impossible to move Bitcoins without their specific private key. 

3. Bitcoin is a distributed network.

A huge network of computers all around the world is constantly working to update the information on the Blockchain. In addition to this, the computers within the network also all check that all the new transactions on the Blockchain are indeed legitimate. Every 10 minutes the entire Blockchain is updated with the new transactions that have occurred and a new master state of accounts is set. 

In exchange for doing the computational work necessary to confirm the Blockchain, owners of these computers are rewarded with newly minted Bitcoins. This provides the incentive for the network to support itself and grow to meet the demand for Bitcoin transactions. The genius of Bitcoin lies in its ability to distribute trust across an entire network.  Because the Blockchain is simultaneously being confirmed by everyone across the entire network, there is no ability for one person or group of persons to falsify the public ledger. Thus, there is no need for a single trusted third-party to confirm everyone is acting in a fair manner.

4. Bitcoin is predictable.

The rate at which new Bitcoins are created is set according to the protocol. Over time the rate of production will slow, and eventually stop at 21 million coins. There will never be more than 21 million coins. Until the number of 21 million is reached, a decreasing number of coins will be minted by the network. The predictability of Bitcoin means that people can know exactly how many will be available at any given time, and can predict how this will affect their value over time.

5. Bitcoin is valuable.

Bitcoin is worth whatever the market says it is. While this is actually the case for all currencies, we often do not think of them this way. In reality, all currencies work this way. You can hold onto your dollar as long as you want, or ask to exchange your dollar for whatever goods you think that dollar should be worth. When we distribute that idea of value across an entire market, a consensus value emerges, and this is what the currency is worth. It is not clear what Bitcoin should be worth yet, but given its utility as a means of exchange across the world, that there is a limited supply, and that it is inherently predictable, it is likely that Bitcoin and/or similar cryptocurrencies will grow singificantly in importance and value over time.

6. Bitcoin is (almost) frictionless.

While there are small transaction costs built into the Bitcoin system , the cost is much smaller than that which is charged by other transaction systems, such as paypal, banks, or wire transfer companies. The transaction cost of a Bitcoin transaction is also a flat amount, so no matter what the size of the transaction, there is a similar cost (currently around the equivalent of 10 cents). Combining the very low cost of transactions with the high speed of transactions, Bitcoin offers an almost frictionless medium for the movement of value from one place to another.

7. Bitcoin is international

Value is a complex and inherently difficult thing to determine. How much is a glass of water worth? It depends on how thirsty you are. Similarly, the value of Bitcoin is not yet clear but if we look to those who are most thirsty for this kind of innovation it may be those living in developing nations who do not already have access to banks who will lead the charge towards the uptake of cryptocurrencies in the coming years. The power of a savings account which your local governement cannot reach (or inflate out of value) is of great worth to people who have never had one.

8. Anything can hold Bitcoin.

Because Bitcoin is simply a cryptographic protocol to associate a unit of digital wealth with a particular address on the Blockchain, anything that can hold the public and private keys can hold Bitcoin. This means that anything that can store the 256 bits of the private key (about 64 alphanumeric characters) and the 160 bits of the public address can store Bitcoins. A text file, a piece of paper, a coin, a stone tablet, you could even write it out on beach sand – literally almost anything can hold Bitcoin. Anyone who then has the public address for that Bitcoin account can send Bitcoins into it, so in this way Bitcoin allows you to send wealth directly into anything.

9. Anything that can send data can send Bitcoin.

Anything that is connected to the web can theoretically hold and trade bitcoins. In this way, it could be possible for your fridge to hold a certain amount of bitcoin and then trade for services. For instance, when you run out of groceries your internet enabled fridge could search the internet for the best price on milk, negotiate a deal, send Bitcoins to the local grocer, and have the milk delivered all without the need for your involvement, except maybe to put the milk into the fridge when it gets there.

While the example of the fridge buying your milk for you using Bitcoin might seem like a kind of a silly example but the fact that machines can directly trade value quickly opens up more exotic possibilities. One could imagine an autonomous car which drives around picking up passengers, charging them for its services, purchasing electricity to charge itself, bringing itself in for servicing, all using Bitcoin. This kind of automated car could theoretically accrue wealth over time with little or even no human involvement.

10. Cryptocurrencies could enable self enforcing cryptocontracts

Given that cryptocurrencies like Bitcoin create a means to transmit wealth based entirely on the transmission of data with almost no friction, this opens the opportunity to create self-enforcing contracts. The simplest example would be an escrow contract, wherein money is held in a contract between two parties until both agree the money, or some proportion thereof, should go either to one or the other person. In this way, the money would not be accessible to either party until an agreement can be reached, again with little or no transactional cost for either party.

Another simple example would be an insurance type of contract, wherein if a certain weather event occurs, say a snowfall of over 20 inches was predicted by 3 weather agencies, then an automatic payout could be made to a plow company. Another example would be a contract to pay an employee or contractor or a certain amount of money for achieving a set deliverable (such as increasing sales or web traffic).

These kinds of self-enforcing contracts would not be very different from what we have today, with the exception that they would be automatically enforced by the rules established in the contract. There could be clauses instated into the contract to allow arbitration through a certain legal system, but there is no implicit need for this.

When one really starts to contemplate what could be done with cryptocurrency based contractual agreements that can physically hold funds, and distribute them according to a mathematically defined set of rules could truly revolutionize every facet of our lives. These kinds of programmable applications of cryptocurrency may go beyond what Bitcoin is alone capable of, and is being pursued in the exiting new Ethereum project.

So what is most exciting about cryptocurrencies? The answer to this is almost certainly something that we have not yet even thought of, and this is why I can’t help but get more excited for the future of cryptocurrencies every day. In a world where it often seems impossible to find anything on which we can all agree, Bitcoin has found a way to distill value directly from that one thing on which we must agree, mathematics. 

The Future Will Belong to Those Who Can See It

Let’s face it, capital is winning. (watch this video if you haven’t already seen it)

The statistics show that the game of growing capital has been getting easier over the years, whereas that other game of finding a good career and slowly accruing wealth through honest labor seems to be only getting harder. The millenials are the best educated generation ever, yet their prospects for career security and wealth accumulation seem to be only getting worse. The baby-boomers love to poke fun of the younger generations, but seem oblivious to the fact that the game is rigged in favor of those with healthy investment accounts and against those looking to build new ones. 

Yes, it seems that now is a good time to make money if you already have money, and a bad time for making money if you don’t already have some. More importantly though, I do not see any likely shift away from this trend in the near or even medium term. In a future (present?) where the magic of automation allows wealth to be directly transmuted into productive capacity with a diminishing requirement to acquiring human labor, I see no likely shift in the imbalanced advantage of capital.

In the future there will be owners and there will be losers. 

Even if strong new social policies such as basic income become adopted, and I am very much optimistic that these kinds of programs should and will be adopted widely in the coming decades, I am not so optimistic to believe that they will be adequate to address the accelerating wealth gap. Ironically, basic income could actually serve to impede the biggest threat to the capital class, the ability of lower classes to accrue and grow their own capital investments. 

At its core, basic income is mostly envisioned as an economic mechanism to establish an absolute floor for the social safety net. Where exactly we decide to install that floor is a matter for debate, but it seems most believe that in order to maintain an incentive for work and entrepreneurship, basic income should be set close to subsistence levels. Enough should be provided for people to eat, clothe, and house themselves, but basic income is not likely to leave a great deal for savings.

Even if basic income exceeds this “basic” mandate and does provide more than enough funds for families to enjoy a comfortable life, it still provides no incentive for people to save. If people know that they can rely for the long term on a steady basic income every month, then those people may see no reason to save much money. Why would I save for retirement if I can be assured of receiving an adequate amount to meet my needs for the rest of my life?

Of course, there will always be some percentage of individuals will have the foresight to save as much as they can, but I simply suggest that this percentage might actually be smaller under a regime of basic income. The psychology of foresight might be the single greatest factor which differentiates the most successful individuals in life, there is no reason to think that basic income would change this in any way. Other tools such as education should be used to encourage people to have more foresight about their lives and make better long term decisions (but that is for another post).

So what is to be done about this?  Ultimately, I think that the long-term emergence of powerful technologies such as strong artificial intelligence and molecular-scale manufacturing will eventually make individual wealth somewhat irrelevant. For the medium-term however, without the total collapse of the capitalist system, something that I believe would be too painful to suffer through no matter what the ends, I do not see any likely end to the acceleration of wealth inequity. For the next two decades, people who own things will do well and everyone else will get by. 

Still, the message of the accelerating value of capital is not entirely doom and gloom. Yes, those who control huge sums of the world’s wealthy will benefit disproportionately from the automation revolution, but the more important disparity might actually be between those who can see the future and those who cannot. If your parents can’t understand how to use their email, how could they hope to make sound investment decisions in a world revolving around technological innovation? Similarly, those wealthy individuals who are heavily invested in the successful industries of today, may lack the maneuverability to respond to the kinds of disruptive technological innovations we are seeing with increasing frequency. 

So, perhaps the most important question is not how much you have to invest, but how well you can predict the coming landscape of innovation? Being able to predict which technologies are going to be successful has been of immeasurable value since the inception of the market. Despite its ebb and flow over the years, a balanced investment in technology companies over the last 30 years would have provided unprecedented gains. I expect that the future-smart investor can realize similar gains in even shorter time over the next few years.

So however meager your savings might be, do not despair. Invest what you can, because those of us in the technology generations, who understand technology better than the rest, stand to reap enormous gains. Those who can see the future and invest in it are going to be well positioned to join the capital classes in the coming years. As the old saying goes, if you can’t beat ‘em, join ‘em. 

The future is going to belong to those who can see it.