An In-Depth Response to Sam Altman's "American Equity"

Sam Altman, CEO, and founder of OpenAI, published an essay with HackerNoon in 2017 titled American Equity where he makes the case for a Universal Basic Income (UBI) system in the US:

I think that every adult US citizen should get an annual share of the US GDP.

Altman’s essay has taken on renewed relevance with OpenAI’s recent launch of ChatGPT, an amazingly and terrifyingly good chatbot that you can sign up and try out for free here.

Throughout "American Equity” Altman does not once mention the words “UBI” or “AI”. However, I think it’s reasonable to interpret his essay in this light.

I don’t think of UBI in terms of pros and cons. In a few years, or perhaps a few decades, it will be a must. Namely to deal with two issues:

(1) technological inequality and

(2) technological unemployment in the face of the ongoing AI revolution.

As Altman alludes to in "American Equity”, new technologies will create an overflow of abundance and displace a meaningful percentage of the current workforce. UBI is the only fair response to increased automation so that (1) everyone gets a share of the abundance instead of a fragmented techno-elite and (2) the people whose skills are no longer needed can be compensated.

Before we dive deeper, it’s worth remembering that UBI was almost implemented in the US under the Nixon administration. Let’s take a quick history lesson with Rutger Bregman from his bestseller book ”Utopia for Realists”.

When the US Almost Implemented UBI

It was the summer of ’69, the end of the decade that brought us flower power and Woodstock, rock ’n’ roll and Vietnam, Martin Luther King and a feminist revolution. It was a time when everything seemed possible, even a conservative president strengthening the welfare state.

In the wake of promising research on UBI and young people demonstrating in the streets all over the world, five young economists, John Kenneth Galbraith, Harold Watts, James Tobin, Paul Samuelson, and Robert Lampman, wrote an open letter to Congress which was published on the front page of The New York Times: “The country will not have met its responsibilities until everyone in the nation is assured an income no less than the officially recognized definition of poverty.” The letter was signed by 1200 fellow economists.

The following summer, President Nixon presented a bill providing for a modest basic income, guaranteeing a family of four $1600 a year (equivalent to roughly $10,000 in 2016). According to Nixon, the baby boomers would do two things deemed impossible by earlier generations: put a man on the moon (which had happened the month earlier) and eradicate poverty. A White House poll found 90% of all newspapers enthusiastically receptive to Nixon’s plan.

In 1970, the plan was approved by an overwhelming majority in the House of Representatives. Political commentators expected it to pass in the Senate as well. However, in the Senate Finance Committee, doubts reared up concerning the ambitious nature of the proposal, while the Democrats pushed for an even higher basic income. In the end, an agreement between the parties could not be reached and the bill was canned in 1970. And again in 1971.

After 1978, the hope for an American basic income plan was squashed once and for all. New findings from an experiment in Seattle that found divorce rates jumped to more than 50% under a guaranteed basic income program. Other findings such as better school performances and improved health were overshadowed by the fact that a basic income gave women more independence. A reanalysis of the data ten years later revealed a statistical error had been made, and that there were in fact no changes in the divorce rate at all (the paper is here). Nonetheless, UBI discussions in the US faded into oblivion.

Here we are more than fifty years later. As I said in the introduction, I don’t think of UBI in terms of pros and cons. I think it will be necessary for regulators in the US and other countries to adopt a basic income system in one form or another. Let’s take a look at issues of technological inequality and technological unemployment in turn.

Technological Inequality

Earlier this year, I did a fair amount of research on UBI in the face of the AI revolution. The most convincing and hard-hitting piece of writing I came across in support of UBI was The Mythology of Work by the anarchistic think tank/collective CrimethInc. Honestly, there are too many good quotes from this essay to choose from. But their main argument is this:

For hundreds of years, people have claimed that technological progress would soon liberate humanity from the need to work. Today we have capabilities our ancestors couldn’t have imagined, but those predictions still haven’t come true. In the US we actually work longer hours than we did a couple generations ago—the poor in order to survive, the rich in order to compete. Others desperately seek employment, hardly enjoying the comfortable leisure all this progress should provide. Despite the talk of recession and the need for austerity measures, corporations are reporting record earnings, the wealthiest are wealthier than ever, and tremendous quantities of goods are produced just to be thrown away. There’s plenty of wealth, but it’s not being used to liberate humanity.

Altman’s “American Equity model” could mitigate this problem. As he writes:

“ Automation holds the promise of creating more abundance than we ever dreamed possible, but it’s going to significantly change how we think about work. If everyone benefits more directly from economic growth, then it will be easier to move faster toward this better world.”

Altman also recognizes the issue of technological inequality:

“The default case for automation is to concentrate wealth (and therefore power) in a tiny number of hands.”

I would argue that it is not automation but capitalism that concentrates wealth in a tiny number of hands.

Capitalism creates “The Matthew Effect”. Named after a famous quote from the Gospel of Matthew: “For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away.”

Altman recognizes this effect when he says:

Today, the fundamental input to wealth generation isn’t farmland, but money and ideas — you really do need money to make money.

In other words: if you have money you can have more, if you have none, you are left poor.

Automation is now a vehicle for capitalism that accelerates “the Matthew Effect”. What we refer to as “automation” today is often an expression of capitalism on steroids: “Techno-capitalism”.

The King Rules All

On a related note, I am sure that CrimethInc felt the ruthless power of techno-capitalism after they were banned on Twitter last month, allegedly by Elon Musk himself. The suspension came hours after a tweet from conservative journalist Andy Ngo in which he accused CrimeThinc of being associated with Antifa and said that the “group operates like ISIS: makes propaganda & training material to radicalize militants toward violence”. In a public exchange on Twitter, Musk had told Ngo to report “Antifa accounts” directly to him.

According to CrimethInc, they received an email from Twitter on the morning of the suspension saying the company had “received a complaint regarding your account,” but had “investigated the reported content and have found that it is not subject to removal under the Twitter Rules.” This suggests that the ban was dictated by Musk directly without regard for Twitter Rules.

Now, I am not going to be the moral judge of Elon Musk, or say whether he was right in suspending the account. I know some people despise Musk and a lot of people absolutely adore him. So much so that a group of die-hard fans build a $600.000 large statue of him riding a rocket ship with a goat’s body (since he is the G.O.A.T) and placed it at Tesla’s headquarters in Austin.

However, even if you are one of those people who have a framed picture of Elon Musk on your nightstand, there is a larger issue here that should be acknowledged. One man has the power to singlehandedly silence people in a social network with hundreds and millions of monthly active users. Regardless of Musk’s supposedly good intentions with acquiring Twitter, the social platform is evidently not an open town square, but more like King’s Landing where the King rules all with the help of a few trusted advisors.

This story comes as an anecdotal side effect from a much larger, global reality: A few individuals on top of the technological pyramid hold practically all of the power and resources. We call this technological inequality, the widening gap between rich and poor, powerful and powerless, in the age of technology. This dynamic would be flattened out over time if everyone had a small piece of the collective gains from increased automation.

Altman says:

(..)we all work together to create the system that generates so much prosperity.

We contribute not only with our time but also with our data. Our data is used to train AI models which will eventually take over some of our jobs. So why should everyone not benefit?

Technological Unemployment

A pair of Oxford University researchers made an early prediction in 2013 that 47% of the total US employment was at high risk of automation within a decade or two. A report by McKinsey & Company from 2017 indicated that up to 39 million Americans could lose their job by 2030 due to automation. World-leading AI experts Kai Fu-Lee predicted in 2018 that we would be technically capable to automate 40-50% of jobs in the United States within ten to twenty years. The exact numbers can be disputed, but surely the advancement in AI, machine learning, and robotics, will continue to make larger and larger claims on the labor market

The phrase “technological unemployment” was coined by John Maynard Keynes in his essay “Economic Possibilities for Our Grandchildren” (1930). Keynes describes technological unemployment as “a temporary phase of maladjustment” while “mankind is solving its economic problem.” He predicted that the standard of life in progressive countries would be between four and eight times as high in a hundred years. As a result, people would have their needs satisfied, so they could “devote further energies to non-economic purposes.“

Keynes’s prediction about increased living standards seems more or less to hit the mark. Our “economic problem” has still not been solved, but the prospects of a UBI could perhaps change that outlook. As Sam Altman writes:

American Equity would create a society that I believe would work much better than what we have today. It would free Americans to work on what they really care about, improve social cohesion, and incentivize everyone to think about ways to grow the whole pie.

Upskilling and reskilling workers are of course important considerations in the short term. But so is eradicating poverty. Which is increasingly made possible by the automation of a wide array of tasks that frees up wage-earners time and employers’ money. Keynes was optimistic about this development that he foresaw a hundred years ago. Here is a great quote to end with:

I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.