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Maybe the Robots Will Give Everyone Free Stuff

There are various solutions to redistribute tech wealth to everyone. 

Is this a good way to run an economy?

Bloomberg

This post originally appeared in Money Stuff.

half-joked the other day that “WeWork’s business model is getting SoftBank to buy beer for software workers,” but of course that basic idea—rapidly growing a business by selling its products below cost, subsidized by huge venture-capital investments, in the hopes of one day flipping to profitability once you’ve achieved scale—is pretty standard in Silicon Valley. There are, for instance, many who believe that Uber Technologies Inc.’s product is a below-cost taxi service subsidized by tens of billions of dollars of venture-capital funding. 

A basic law of finance is that where there is a well-known business model that reliably produces uneconomic decisions—index-fund rebalancing, or let’s say corporate buybacks—then someone will arbitrage it. And here he is:

A new type of bargain hunter has found an Eden in the epicenter of the tech boom. The city is full of growth-hungry startups rich with venture capital, which offer consumers free trials and discounts on a scale that dwarfs the grocery-store coupon flier.

Such profligacy helped Mr. Yu cover most of the cost of purchasing a used Mini Cooper convertible, provided months of free meals, made him bitcoin rich and landed him on charter jets free.

“The entire S.F. economy is V.C. subsidized,” said Mr. Yu, who last year co-founded a blockchain technology startup called Stream. “It’s a historical world of excess.”

There is even an automated scalable version with a pleasingly literal name:

Elad Ossadon and Noam Szpiro, who work in software engineering, have become referring pros. In 2016, they created a website called VC Fund My Life, which catalogs discounts and freebies. When a user signs up for the startups listed, they get a referral bonus ….

Is this … a … good … way to run an economy? You can imagine, if you want—and lots of techno-utopians do—that we are on the cusp of the end of scarcity, a new productivity revolution in which robots will produce everything necessary for human life, freeing us from the need to work. If that is true, or true-ish, or close to true, or possibly true in the very far future, then the big problem will be the distribution of prosperity: If robots produce abundance but eliminate jobs, the concern is that the people—tech founders and venture capitalists, probably—who own the robots will become unimaginably rich and powerful, while the people who don’t will be unemployed and dependent on those founders and VCs for their necessities. Various solutions to this (rather distant and abstract) problem have been proposed, of which two of the most prominent are (1) socialist revolution and (2) a universal basic income; Silicon Valley types seem to like option (2) in part because it might forestall option (1). 

But that is not the entire choice set! You could have lots of other ways to redistribute tech wealth to everyone. For instance the VCs could own the robots and just give away their services. Why would the VCs do that? Well, to forestall a socialist revolution, would be one answer. Out of the goodness of their hearts and a sense of noblesse oblige, would be another. But it is pleasing to imagine that the VCs might give away their products because they are (1) rapacious growth-hungry capitalists and (2) confused. “Please give me free food so that you can grow your daily active user base,” you’d say to the robot-farm monopoly, and its owners would reply “yes, scale, we must scale, here is your food,” and you’d be pleased to have put one over on capitalism.

Obviously the other possibility is that the VCs are completely right about the power of scaling and the functioning of the profitability switch, and that once they give away enough products to become ubiquitous, they can take over the world. Arguably Facebook Inc. is the paradigm here. But if the basic business model of post-post-post-modern capitalism consists of venture capitalists giving people free stuff in order to pursue perpetual user growth, then that model actually seems pretty well suited to address the problems of the future.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Matt Levine at mlevine51@bloomberg.net

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    James Greiff at jgreiff@bloomberg.net

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