Would Free Money Stimulate Sloth or Brilliance? YC Wants to Know

What happens when a group of people are given a guaranteed minimum monthly income to cover shelter, food and clothing? Will they sit around the do nothing? Or will they keep working? Will they be free to pursue their dreams? And will they start companies?

That’s what Sam Altman wants to know. The President of the highly successful venture capital concern YCombinator, Altman posted on the firm’s blog an intriguing proposal for a five-year research project that would recruit U.S. residents to test out the concept of a “Basic Minimum Income.”

The idea of a Basic Minimum Income is that people are probably far better at handling their own welfare decisions if we just give them money rather than force them to run a gauntlet of government bureaucracy to receive defined benefits for defined purposes (food stamps, Section 8 housing vouchers, etc). Additionally, wonders Altman (and many others), would a Basic Minimum Income free us all to pursue our passions? And, if so, would this make the world a richer place both in terms of artistic endeavors and new businesses?

Basic Minimum Income has become an intellectual darling of the Silicon Valley intellectual set and it serves as their answer to the rising chorus on the left to address economic inequality. As Paul Graham, the founder of YC opined in a column, perhaps the problem is not economic inequality but economic insecurity. Meaning, there will always be economic inequality if we are to properly reward innovation. It is this very inequality and the prospect of outsides rewards that drives inventors, creators and entrepreneurs, says Graham and others.

In a world of vast riches, though, abject poverty and economic insecurity are antiquated. Follows the logic, the best way to get rid of poverty is to give everyone enough money to live but get rid of all the different ways the government tells the poor how to spend money. The regularly heard argument against this type of laissez faire charity is that too many of the recipients will drink the money away, spend it unwisely, or otherwise waste their payouts. For people that are mentally disabled, these fears could certainly be justified. There is a dearth of good research on the topic, no doubt. (Hence, Altman’s request).

And yet, Basic Minimum Income is not quite as crazy as it sounds. A charity called GiveDirectly in Africa is pursuing this strategy with apparently positive results as measured through a panel of well-being indicators. WA seven-year experiment with Basic Minimum Income in Canada was abandoned despite positive findings that people were healthier, mothers were able to spend more time rearing newborns, and people did not significantly cut back working hours.

What’s most intriguing to me about Altman’s proposal is that a venture capital firm is willing to underwrite the research. This is research that the U.S. government should be running or some major academic institution. Not that I fault YC for doing this but it speaks volumes that venture capitalists are willing to go where politicians fear to tread in funding research that may well turn into a recipe for a better future for us all. In fact, Silicon Valley may have the most to gain from something like a Basic Minimum Income.

What if the youthful skew seen in startup employment is not ageism but is instead a manifestation of risk-averse behavior in older workers who have far more to lose in situations of economic insecurity? In other words, wouldn’t startups be better off if they could more easily tap talent pools across all the age cohorts? Or perhaps more brilliant but very poor people could focus their careers on more creative pursuits rather than focusing on climbing the ladder out of poverty? Wouldn’t we all be better off if those minds entered the creative marketplace of the world rather than focus on putting food on the table?

Count me intrigued and I hope that Altman’s proposal sparks broader discussion and more programs. The city of Utrecht in the Netherlands is launching a Basic Minimum Income program. Politicians in the United Kingdom are likewise discussing the idea. In Finland, proposals to replace welfare with $1,000 monthly payouts are well underway. Perhaps California, with its mega-billions in surplus revenues, might consider a small experiment of its own. Between YC and Helsinki, we should have some answers on how effective this social policy is over the next few years. Stay tuned — it could be the end of the state as we know it.