On Income Inequality and Technology
Montreal, Feb 3rd, 2017
Two groups that held much of American wealth are 1) Silicon Valley algo makers (Google, Facebook, SV high growing startups, etc), 2) hedge fund managers. That is why two of the concentration of wealth happens around postal codes in Silicon Valley and Connecticut.
In his masterpiece Homo Deus: A Brief History of Tomorrow (Hebrew: ההיסטוריה של המחר), Professor Yuval Noah Harari gave a somewhat counterintuitive argument:
You need to blame the biologists for income inequality. It was their idea that humans are data processing machines that run biochemical algorithms.
Sink that statement for a second. For every Facebook post that we see on our newsfeed, fake or not, we feel the urge to react, repost another comment, or write another blog post (like this one), and for each curiosity that we have, we try to solve it by Googling it (another mass audience information retrieval algorithm).
While our needs are satisfied, the people who have wealth invest them in a specialized investment vehicle called a hedge fund. The prophets of the game, the hedge fund managers, like George Soros (one that I am a big fan of), John Paulson, Clifford Asness, or Paul Tudor Jones, makes a directional bet on market movements, sometimes bidirectional with weights. In the process, they take 20% from what is called the total return minus the high watermark and a yearly management fee usually 1–3%, some like in the magnificent RenTech which Professor Jim Simons owns (I am also another big fan of).
Income inequality would never go down unless we have several solutions to distribute wealth from these algo makers and hedge fund managers, voluntarily. Bill Gates has realized this way before anybody else. As a guy who is extremely smart to find the upper bound of the pancake flipping algorithm, he created the living pledge. If you’re a tech titan or a hedge fund manager, you might as well do so.
Another solution might be a universal basic income with an emphasize on easing housing and food supply developments. Currently, the Bay Area has a housing price problem, which creates a lot of social problems including homelessness. Here in Montreal the government is smart enough to not curb developments of urban housing, thus making the city expand even in the cold winter.
I’m working on an economic treaty right now, I wish to finish writing it after I finish my Ph.D in artificial intelligence in Montreal.