The War on Normal People

Andrew Yang

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An overview of why universal basic income (UBI) is probably the best bet for our country going forward. While a bit simplistic (perhaps necessarily as a Presidential candidate), Yang did use some great statistics to back up his arguments. If you don’t have any background on UBI this is a well-thought out argument for it.

Notes

Many of them hailed from other parts of the country – Michigan, Ohio, Georgia – and had come to Wall Street for better opportunities. When I talked to them after class, they seemed to be searching for some higher purpose that had eluded them. They reminded me of myself a decade earlier, when I had started my career as an unhappy corporate lawyer.

America is starting 100,000 fewer businesses per year than it was only 12 years ago, and is in the midst of shedding millions of jobs primarily to technological advances.

Yes, the top 20% own 92% of the stock market holdings. This means that the average American benefits minimally from a rising stock market beyond the wealth effect, which is that the rich people around them spend more money and the economy is more buoyant.

So what’s normal? The normal American did not graduate from college and doesn’t have an associate’s degree. He or she perhaps attended college for one year or graduated from high school. She or he has a net worth of approximately $36k – about $6k excluding home and vehicle equity – and lives paycheck to paycheck. She or he has less than $500 in flexible savings and minimal assets invested in the stock market. These are median statistics, with 50% of Americans below these levels.

68 million Americans out of a workforce of 140 million (48.5%) work in one of these five sectors. Each of these labor groups is being replaced right now. [Sectors: Office and Administrative Support / Sales and Retail / Food Preparation and Serving / Transportation and Material Moving / Production]

The year 2017 marked the beginning of what is being called the “Retail Apocalypse.” 100,000 department store workers were laid off between October 2016 and May 2017 – more than all of the people employed in the coal industry combined.

When a mall closes or gets written down, there are many bad things that happen to the local community. First, many people lose their jobs. Each shuttered mall reflects about 1,000 lost jobs. At an average income of $22k, that’s about $22 million in lost wages for a community. An additional 300 jobs are generally lost at local businesses that either supply the mall or sell to the workers. It gets worse. The local mall is one of the pillars of the regional budget. The sales tax goes straight to the county and the state. And so does the property tax.

[Referring to manufacturing workers that lost their jobs after 2008] What happened to these 5 million workers? …many of them left the workforce.

  • One Department of Labor survey in 2012 found that 41% of displaced manufacturing workers between 2009 and 2011 were either still unemployed or dropped out of the labor market within three years of losing their jobs.
  • Another study out of Indiana University found that 44% of 200,000 displaced transportation equipment and primary metals manufacturing workers in Indiana between 2003 and 2014 had no payroll record at all by 2014, and only 3% graduated from a public college or university.

In Michigan, about half of the 310,000 residents who left the workforce between 2003 and 2013 went on disability.

Driving a truck is the most popular job in 29 states – there are 3.5 million truck drivers nationwide…It is impossible to overstate the importance of truck drivers to regional economies around the country. As many as 7.2 million workers serve the needs of truck drivers at truck stops, diners, motels and other businesses around the countryIf one assumes that each trucker spends only $5k a year on consumption on the road (about $100 per week), that’s at $17.5 billion economic hit in communities around the country.

Yang points out the case for lawyers being threatened by automation (I would argue this is possible in banking too):

  • “We used to joke about how much of what we did was “finding and replacing” terms in a contract”
  • “There is a lot of repetition in what we consider high-end professional jobs – what I call intellectual manual labor.
  • “Basically, we are trained and prepped to become more like machines. But we’ll never be as good as the real thing.”

The automation wave is coming in part because, if your sole goal is to get work done, people are much trickier to deal with than machines. Acknowledging this is not a bad thing – it is a necessary step toward finding solutions. It may push us to think more deeply about what makes humanity valuable.

The jobs and roles that are the most human and would naturally be most attractive tend to pay nothing or close to nothing. Mother, father, artist, writer, musician, coach, teacher, storyteller, nurturer, counselor, dancer, poet, philosopher, journalist…On the other hand, the most lucrative jobs tend to be the most inorganic. Corporate lawyers, technologists, financiers, traders, management consultants, and the like assume a high degree of efficiency. The more that a person can submerge one’s humanity to the logic of the marketplace, the higher the reward.

Oscar Wilde: “Work is the refuge of people who have nothing better to do.” Unfortunately that may describe the vast majority of us. The challenge we must overcome is that humans need work more than work needs us.

…The women’s suffrage movement culminated in success in 1920. Socialism, communism, and anarchism were all vital political movements. There was a constant whiff of revolution. Even if you rely solely on history, you’d expect a lot of conflict and change ahead as the labor pool shifts due to technological advances.

The test is not “will there be new jobs we haven’t predicted yet that appear?” Of course there will be. There real test is “Will there be millions of new jobs for middle-aged people with low skills and levels of education near the places they currently reside?”

Successfully retraining large numbers of displaced workers would require a heroic number of assumptions to prove true. (See P77).

There are presently a record 95 million working-age Americans, a full 37% of adults, who are out of the workforce. In 200, there were only 70 million.

Our national universities are effectively a talent drain on 75% of the country. If you’re a high achiever from, say, Wisconsin or Vermont or New Mexico and you go to Penn or Duke or Johns Hopkins, the odds are that you’ll move to New York or California or DC and your home state will never see you again.

  • One college senior at Princeton remarked to me, “Once you’re here, you become awfully risk-averse. It’s more about not failing than doing anything in particular.”
  • You might be thinking, “Who cares if the coddled college kids are depressed?” One reason to care is that private company ownership is down more than 60% amount 18- to 30-years olds since 1989…It turns out that depressed, indebted, risk-averse young people generally don’t start companies. This will have effects for decades to come.

In the bubble, many of us came up through the meritocracy and we’ve internalized its lessons. The underlying logic of the meritocratic system is this: If you’re successful, it’s because you’re smart and hardworking, and thus virtuous. If you’re poor or unsuccessful, it’s because you’re lazy and/or stupid and of subpar character…I know how deeply mistaken these premises are because of my own experiences…We say success in America is about hard work and character. It’s not really. Most of success today is about how good you are at certain tests and what kind of family background you have, with some exceptions sprinkled in to try to make it all seem fair.

There’s a substantial correlation between one’s socioeconomic background and starting a successful company…In addition to resources, you have a mindset of abundance.

A study of tens of thousands of JPMorgan Chase customers saw average monthly income volatility of 30-40% for customers with annual incomes of $35,000 and even higher swing for people making less than that.

They found that poor people and well-off people perform very similarly on tests of fluid intelligence, a generalized measurement that corresponds to IQ. But if each group was forced to consider how to pay an unexpected car repair bill of $3,000 just before taking the test, the poor group would underperform by the equivalent of 13 IQ points.

An Atlantic article in 2016 called “The Missing Men” noted that one in six men in America of prime working age (25-54) are either unemployed or out of the workforce – 10 million men in total. What are these men missing from the workforce doing all day? They tend to play a lot of video games. Young men without college degrees have replaced 75% of the time they used to spend working with time on the computer, mostly playing video games, according to a recent study based on the Census Bureau’s time-use surveys.

In 2016…for the first time, drug overdoses have surpassed car accidents as the leading cause of accidental death in the United States.

Many people who are unemployed end up on disability, then lose incentive to ever go back to work.

  • In 2013, 56.5% of prime age men 25-54 who were not in the workforce reported receiving disability payments.
  • After someone is on disability, there’s a massive disincentive to work, because if you work and show that you’re able-bodied, you lose benefits. As a result, virtually no one recovers from disability. The churn rate nationally is less than 1%.
  • One judge who administers disability decisions said that “if the American public know what was going on in our system, half would be outraged and the other half would apply for benefits.”

As of last year, 22% of men between the ages of 21 and 30 with less than a bachelor’s degree reported not working at all in the previous year, up from only 9.5% in 2000. And there’s evidence that video games are a big reason why.

  • From 2004 to 2007, young, unemployed men without college degrees were spending 3.4 hours per week playing video games. By 2011 to 2014, the average time spent per week had more than doubled to 8.6 hours.

[Supporting the idea that society could bifurcate to people who can limit themselves on technology and those who can’t] Recent studies found that households making between $25,000 and $35,000 a year spent 92 more minutes per week online than households making $100,000 plus a year.

Tangible example of how catastrophe could arise in America (when automated trucks enter the market): Let’s imagine that one of them, Mike, owns a small trucking company with 10 trucks and 30 drivers.

  • His life savings go down the tube because he owes the banks hundreds of thousands in loans on the trucks.
  • Mike says to his team, “Fuck this. We can’t be replaced by robot trucks, let’s go to Springfield and demand our jobs back.”
  • He leads a protest in Illinois and hundreds of truckers join in, some of them bringing vehicles and blocking roads.
  • Inspired by this on social media, truckers across the nation begin to protest in other state capitals in the tens of thousands.
  • The National Guard is called and the President calls for order but it doesn’t help.
  • Various anti-government militias and white nationalist groups say, ‘This is our chance,” and arrive in each capital to support the truckers. Protests and violence spread across states like Alabama, Arkansas, Idaho, Indiana, Kentucky, Mississippi, Michigan, Ohio and Nebraska.
  • Locals take advantage of police preoccupation in these areas and begin looting drugstores.
  • Mike is held up as a symbol of the working man, but cannot control them.
  • The riots rage for weeks with hundreds dead or injured and billions worth of property damage and economic harm.
  • A man in a bunker surrounded by dozens of guns releases a video saying, “Come and get your taxes, IRS man!” that goes viral.
  • Anti-Semitic violence breaks out targeting those who “own the robots.”
  • A white nationalist party arises that openly advocates “returning America to its roots” and “traditional gender roles” and wins several state races in the South.
  • A shooter arrives in the lobby of a technology company in San Francisco and wounds several people.
  • The California secession movement surges as state officials move to protect the border and implement checkpoints.

[Yang goes on to clarify that this scenario might not seem likely, but to him it seems depressingly plausible]

Robert Kennedy famously said that GDP “does not allow for the health of our children, the quality of their education, or the joy of their play…it measures everything, in short, except that which makes life worthwhile.” We have to start thinking more about what makes life worthwhile.

The first major change would be to implement a universal basic income (UBI), which I would call the “Freedom Dividend.” The United States should provide an annual income of $12,000 for each American aged 18-64, with the amount indexed to increase with inflation. It would require a constitutional supermajority to modify or amend. The Freedom Dividend would replace the vast majority of existing welfare programs.

Benefits of UBI listed by Yang:

  • Stimulus to lower-cost areas
  • Empower people to avoid making terrible decisions based on financial scarcity and month-to-month needs.
  • Boon to creativity and entrepreneurship
  • Enable people to more effectively transition from shrinking industries and environments to new ones
  • Reduce stress, improve health, decrease crime, and strengthen relationships
  • Support parents and caretakers for the work that they do, particularly mothers
  • Give all citizens an honest stake in society and a sense of the future
  • Restore a sense of optimism and faith in communities around the country
  • Simulate and maintain the consumer economy through the automation wave
  • Maintain order and preserve our way of life through the greatest economic and social transition in history
  • Make our society more equitable, fair, and just

An analysis by the Roosevelt Institute of this $12,000 per year per adult proposal found that adopting it would permanently grow the economy by 12.56 – 13.10%, or about $2.5 trillion by 2025, and it would increase the labor force by 4.5 to 4.7 million people.

The cost of $1.3 trillion seems like an awful lot…But there are myriad ways to pay for it. The most sensible way to pay for it in my view would be with a value-added tax (VAT) – a consumption tax – that would generate income from the people and businesses that benefit from society the most.

  • The biggest companies, like Amazon, would pay the most into the system because a VAT gets paid based on volume, not profits.
  • Out of the 193 countries, 160 already have a VAT or goods and services tax, including all developed countries except the United States.
  • The average VAT in Europe is 20%…If we adopted a VAT at half the average European level, we could pay for a universal basic income for all adults.
  • A VAT would result in slightly higher prices. But technological advancement would continue to drive down the cost of most things. (With a backdrop of a universal basic income of $12,000, the only way a VAT of 10% makes you worse off is if you consume more than $120,000 in goods and services per year, which means you’re fine and are likely at the top of the income distribution.)

Each Alaskan now receives a petroleum dividend of between $1,000 and $2,000 per person per year.

  • The dividend reduces poverty by one-quarter and is one reason that Alaska has the second lowest income inequality in the country.
  • It has also created at least 7,000 jobs due to the increased economic activity each year.
  • 64% of respondents even said that they would accept higher taxes if necessary to fund the dividend.

Perhaps most crucially, endless new businesses would form. If you are in a town of 5,000 people in Missouri and everyone is struggling to get by, starting, say, a bakery may not be that attractive. But with a UBI, there will be an additional $60 million being spent in that town next year. You personally will have an income to fall back on if the bakery idea doesn’t work out. Now, the bakery idea may strike you as a great idea.

Yang suggests an idea of Social Credits, where if people have extra time (particularly people who have lost jobs), they can do things for the community (such as volunteer at a youth shelter or help a neighbor change a propane tank) to earn Social Credits which they can spend on real things.

  • Some skepticism for this idea, but this scenario is based on a system currently in use in about 200 communities around the United States called time banking. Time banking is a system through which people trade time and build credits within communities by performing various helpful tasks – transporting an item, walking a dog, cleaning up a yard, cooking a meal, providing a ride to the doctor, and so on.

The Freedom Dividend would elevate society beyond a need for subsistence and scarcity. The Digital Social Credit would tie together communities and give people a way to both generate value and feel valued regardless of how the market regards their time.

Human Capitalism would have a few core tenets:

  1. Humanity is more important than money
  2. The unit of an economy is each person, not each dollar
  3. Markets exist to serve our common goals and values

In addition to GDP and job statistics, the government should adopt measurements such as:

  • Median income and standard of living
  • Levels of engagement with work and labor participation rate
  • Health-adjusted life expectancy
  • Childhood success rates
  • Infant mortality
  • Surveys of national well-being
  • Average physical fitness and mental health
  • Quality of infrastructure
  • Proportion of elderly in quality care
  • Human capital development and access to education
  • Marriage rates and success
  • Substance abuse
  • Community integrity and social capital
  • Environmental quality
  • Global temperature variance and sea levels
  • Reacclimation of incarcerated individuals and rates of criminality
  • Artistic and cultural vibrancy
  • Design and aesthetics
  • Dynamism and mobility
  • Social and economic equity
  • Public safety
  • Civic engagement
  • Cybersecurity
  • Economic competitiveness and growth
  • Efficient use of resources

Most of the young technologists and young people I know would be beyond pumped to work on these problems. They’ve been chomping at the bit to do so. We can harness the country’s ingenuity and energy to improve millions of lives if we just create a way to monetize and measure these goals.”

[In regards to big Pharma paying small legal fees in order to reach a profit] If you’re going to make $35 billion, paying $635 million – about 2% – seems like a fine price to pay for success. Meanwhile, the rest of us will be dealing with hundreds of thousands of opioid addicts for years to come.

Another major technology issue that will require government intervention is the effect of smartphones on human minds, particularly those of young children.

[On going to a public healthcare system] What’s require is an honest conversation in which we say to people who are interested in becoming doctors, “If you become a doctor, you’ll be respected, admired, and heal people each day. You will live a comfortable life. But medicine will not be a path to riches. On the bright side, we’re not going to burn you out by forcing you to see a million patients a day and fill out paperwork all the time. We’re going to supplement you with an army of empathetic people equipped with AI who will handle most routine cases. We’ll only call you when the case genuinely requires distinct human judgement or empathy. We want you to become the best and most human version of yourself, not Dr. Speed Demon who can bang out a nine-minute appointment. Let’s leave that to Watson.”

College isn’t always the answer – one-third of college graduates are working in jobs that don’t require a degree. We pretend that a college degree will prepare one for the future and ensure gainful opportunities when that’s often not the case.

Personal qualities today are increasingly marginalized in favor of technocratic, market-driven skills. Instead, finance is the new courage, branding is the new compassion, and coding is the new contemplation. Schools today don’t believe it’s their place to teach toward the big questions. They can barely remember what ideals look like. If they can remember, there will be much more hope for us all.

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