Re-defining Monopolies:
Wealth Aggregators and Universal Basic Income
Universal Basic Income is the policy of providing every person in a society with money from the government every month, no strings attached. It is a policy that is becoming increasingly popular and may serve as a key to a prosperous, poverty-free future for human civilization. Critics of this policy argue that it’s not possible, viable, or financially responsible. They ask where the funds would come from and who would foot the bill. They are right to ask these questions; they are important ones that beg an answer. Until very recently in human history, there would not have been answers to these questions. Modern technology, automation, and a new type of economic entity that I have termed a wealth aggregator are the modern answers to these questions. Modern tech companies like Google, Facebook, and Amazon have been able to aggregate their wealth in an unprecedented and radical way. Our government should fund Universal Basic Income from the excess wealth generated by these companies, which function as wealth aggregators.
We live in a time of rapid, unprecedented change. The rise of the internet and its related technologies have changed how we live, communicate, buy things, and work together. It’s time for our government to catch up. Over the past two decades, this shift in technology has shaken our world to its very core. Reckoning with and understanding the power of the internet is an ongoing and seemingly endless feat. These technologies have shifted the foundations upon which we interact with each other and the world. Entire marketplaces now exist in the virtual ether. Political and social movements created online have very concrete real-world consequences.
In decades past, and for most civilized human history, the only way of making large amounts of money has been to produce large quantities of goods: a massive and costly undertaking. Ford, Carnegie, Rockefeller, and the other giants of ages past were successful in their endeavors because they discovered and perfected new ways of producing massive amounts of desirable goods. The number of goods they could create and then sell at a profit directly affected their bottom lines. The price they could sell their goods for and the number of goods they could sell in any given year directly affected the business’s margins- the amount a company makes after calculating for all necessary expenses. As intelligent businessmen, these individuals recycled a good deal of wealth back into their companies. They effectively built the world we now inhabit. Still, they had to be regulated by the government, as they monopolized too large a share of their industries. With the rise of exponential technology, we are beginning to see the rise of exponential monopolization.
Imbalanced Services
Until recently, services remained separate from the clutches of “big business.” One phone line could only connect two people at a time. One postman could only deliver one package at a time. These ancient corollaries to our modern tech-empowered services were relegated to governmental function and provided en masse to the general public. Through the increase in technology, we have seen and continue to see exponential growth in industries that do not sell goods. Instead, they provide services that touch the lives of millions of people at once.
“Big Tech” creates imbalanced services. All that is needed to build the company is someone to write the code and design the user interface. In companies like Amazon, the company owns entire corporate verticals from manufacturing and distribution to physical and virtual storefronts. All of this to streamline processes that replace jobs with automated processes and sell customer data for profit. Again, this is happening to an extreme degree in our modern technologically empowered age. Why? The company only needs to be set up once. Tweaks, changes, even complete overhauls to websites and company structure are necessary. After the inception of the initial product, however: the code, the concept, and the company, any subsequent changes cost relatively nothing. These costs, relative to the returns of these companies, diminish further over time.
Compare Amazon’s return on investment to that of any car manufacturer. A car manufacturer makes cars. They need to buy all the constituent parts of their vehicles and pay skilled workers to build each car. These companies invest in automation, research, and development to update their models continuously. They build systems to distribute their cars to a network of dealerships around the world. Every car that they make requires the purchase of costly parts and manufacturing services. It is safe to say that a significant portion of every dollar earned by any given car company covers the cost of manufacturing and distribution. Intelligent manufacturers divide the rest of that dollar into profit, research, and development. There is a direct correlation between the amount spent and the amount earned. Profits remain reasonable and consistent over time. For example, the profit margin — the amount of profit left over after all costs are covered — of Ford motor company has consistently remained between 8 and 12 percent over the last five years.
Amazon, in contrast, created a website and a data structure that allows them to buy, sell, and distribute goods from and to anyone, nearly anywhere in the world. They have built a fleet of delivery vehicles, warehouses, and distribution centers to move these goods anywhere. Amazon derives revenue from the services they provide, not the goods they sell. The startup cost of these services is undoubtedly high. It takes time, effort, and a good deal of money to build internet services, vehicle fleets, and warehouses. It costs relatively little, however, to maintain them. Sure, cars will need replacing, software engineers will need to remain on staff to fix bugs in the website, and energy costs need paying. Beyond these small pieces, however, little to nothing needs to be updated.
For every dollar amazon makes, a small fraction is needed to maintain what they have built. So where does the rest of that dollar go? Some of it goes back into the company for re-investment and research, to be sure. Much of it goes into the pockets of shareholders, and C-suite executives, increasing the net worth of the company and these individuals to an obscene degree. The profit margins for Amazon over the last five years have consistently remained between 30 and 40 percent.
Wealth Aggregators: The New Monopolies
Amazon, Facebook, and other tech giants that function as a part of the information economy have become wealth aggregators. Their low maintenance costs and high valuation have allowed them to collect an increasing amount of wealth increasingly quickly. They are rivers that funnel money upstream, pooling it at the top. The source of this money is sales, ad revenue, and data collection from their millions of customers who endlessly fund these companies. The executives and shareholders that pool this wealth function as dams, retaining the wealth in ever-increasing amounts. These borderless, leak-proof dams hold every cent that flows into them.
Universal Basic Income is not something we could have instituted twenty or even ten years ago. We had not yet seen the sheer amount of wealth that the decoupling of services from the costs of manufacturing could accrue when made available to entire populations with little or no competition. UBI is a uniquely modern policy, mirroring the uniquely modern technologies that make it possible. Through its institution, we turn wealth aggregators into wealth generators, not for a fortunate few, but the entire population. With UBI, the government requires wealth aggregators to pump their wealth back into the system’s roots: the millions of people that are the foundation of the very business model of the wealth aggregators. UBI can and will create prosperity, vibrancy, and abundance. This policy is necessary for our time; it is essential for the healthy function of our economic system. Without it, the wealth aggregators will continue to grow; they will continue to cripple the healthy flow of money throughout our economy. They will become top-heavy, taking away jobs while increasing the amount of money they make. We must institute Universal Basic Income; the future health of our world depends on it.