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.

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.

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. 

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.