Opinion | The Social Vaccine
Yang's 'Freedom Dividend' reveals the lapses and limitations of VC thinking
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The milkmaids never caught it. That was what Dr. Jenner noticed.
The 1700s were ravaged by smallpox. The French writer Voltaire wrote of the disease, “a fifth part of mankind either die or are disfigured by this distemper.” And while rudimentary attempts had been made to inoculate children against the virus — primarily brought over from Constantinople — results were variable, carrying significant risk.
It was only in 1774 that Edward Jenner, an English surgeon, made his discovery. Milkmaids, he observed, never caught the disease, though their fingers were often covered in blisters. Cowpox was the cause of the pustules, transmitted from the udders of the livestock to the milkmaids’ hands. This much less destructive virus seemed to act as a safeguard, preventing them from catching the more deadly smallpox later in life. It was this insight that led Jenner to his innovation: by using the infected pus from the milkmaids hands, he could prepare an inoculation that protected against the smallpox virus without exposing the patient to the disease directly. It was a discovery that would save incalculable lives in the years to come.
Universal Basic Income (UBI) has been referred to as the “social vaccine” of the 21st century. UBI is essentially the policy of giving unrestricted cash transfers to a certain group, often an entire populace. It is an idea with roots in the 16th century — the citizens in Sir Thomas More’s novel, Utopia all received a guaranteed income, provided by the state.
Over the past century, UBI has been hailed by thinkers as diverse as Milton Friedman and Archbishop Desmond Tutu, finding special succor in the tech industry. Sam Altman, Marc Andreessen, Elon Musk, Tim Draper, Jack Dorsey, and many others have spoken out in favor of the policy, with Y Combinator going as far as to sponsor a pilot in Stockton, California.
This support is both high-minded and unsurprising. Today’s discussion around UBI centers on the destructive impact of automation and the reality that 30MM Americans will lose their jobs. Given tech’s responsibility for this mass-obsolescence, the industry’s optimism makes sense: we need to be a part of the solution to clarify the hazy morality of pouring fuel on the AI-fire and protect against public backlash.
Presidential candidate Andrew Yang has won the support of Silicon Valley in the way only an insider, a former VC, could. Members of the ‘YangGang’ include Elon Musk, Kevin Lin (Twitch), along with some of the established UBI aficionados mentioned above.
Last Wednesday, Yang announced that he would be giving away $1K/month to 12 families as part of his campaign. Even on the stage, the response was somewhat stunned. The words of Pete Buttigieg?
“Well, it’s original, I’ll give you that.”
There’s good reason to balk at Yang’s suggestion. To question the legality of a candidate paying voters, the ethics of setting a precedent for a benevolent gameshow-host government, giving ‘prizes’ rather than building a real safety net; in short, treating a presidential campaign like a prolonged version of Square’s Cash App Fridays.
But in the hours that followed, tech luminaries like Roy Bahat and Alexis Ohanian doubled-down on Yang, applauding his plan. Ohanian even offered to foot the bill.
This is a generous and, I believe, well-intentioned offer. Indeed, beyond tech’s logical desire for exculpation (discussed above), I think supporters of Yang’s plan are genuinely interested in trying to help those at the bottom of the pyramid. But in their fervor, they reveal the flaws of VC-style thinking.
It has to do with point-solutions, complex systems, and second and third-order effects.
VCs are good at identifying direct solutions to problems. It is startup orthodoxy at this point to start with the smallest viable version of a product; to solve one issue, remarkably well. They are, in short, good at identifying point, rather than integrated solutions. I do not mean this in the technical sense — there may be many ‘integrated’ software solutions that solve a single problem well. But in assessing companies, particularly at the early-stage, focus — on customer segment, on product, on business model — is paramount.
Uber is a point solution: it solved the problem of getting you from A to B. So too, AirBnB, Twitter, Facebook, Twitch and countless others. Many others that look like integrated systems today began as point solutions.
This has led to a perception of the world as a series of complicated, but not complex systems. Complicated systems are fundamentally knowable, if difficult to parse. They may be convoluted, byzantine, but the rules of the game are articulated. A Swiss watch is an example of a complicated but not complex system, as is a car engine.
Complex systems are different. They are, by definition, not knowable or predictable. They are uncertain. Traffic is complex. Weather is complex.
It is the job of the venture capitalist to try and make sense of a market, of a product, of a company. That process requires a narrowing of a business’s scope — not in terms of market size or ambition (those go in the opposite direction) — but in systems thinking. In order to assess the potential of a certain company, it is necessary to alter the world around them such that it becomes more complicated, less complex.
To give an example: if you were assessing Uber when it first emerged, you would ask about supply, demand, technological feasibility, regulatory risk. Some of those questions alight on complex systems (regulation), but in order to grapple with the investment, you, as the investor, would seek to transmute each into a complicated ones. Fearful of regulatory blowback? Here’s a 3-point plan. Worried about cabbies fighting back? This is our acquisition strategy.
This trade-off, this translation of complexity into a multiplicity of complications, strips a business to its component parts, but it has consequences. Often, it ignores or minimizes second and third-order effects, repercussions that ripple out from an initial change. To put it another way, venture investors rarely seem to think with much nuance about what the rest of the world looks like if a company succeeds, to imagine what else might change. This is particularly true of negative consequences. (Perhaps akin to willful blindness.)
To maintain the same analogy — would Uber’s early investors really have thought through the congestion ride-sharing would cause in major cities? Or the consequences of a full time workforce with no safety net?
And what of Instagram, or Facebook? Did Peter Thiel (FB’s first big investor) fret about creating a social network so ingrained in public life that it could tilt an election, or alter our perception of what is true?
It is not in the interest of venture investors to think this way. In order to do the job, you need to believe in a company’s capacity to do one thing remarkably well. To a certain extent, consequences, theoretical drawbacks be damned. As investors, we talk a great deal about trying to predict the future, but the futures we envision are siloed from one another, barely touching.
“Don't think; try."
This was the advice received by Dr. Edward Jenner during his surgery apprenticeship. It’s something we should be grateful he took to heart. The spirit of the mantra is familiar to founders and investors — Jenner’s mentor might as well have said, “move fast and break things.”
But while that might be sound advice for the world of entrepreneurship, it makes considerably less sense in the complex world of politics. Andrew Yang’s current incarnation of UBI exemplifies this. The Freedom Dividend is a policy built like a tech product — minimally viable, designed to gain traction and win attention. But apart from a slick marketing page, what else is there? This is vaporware welfare, unconcerned with what it might break.
What can Yang hope to prove with a pilot that is backed by donations from generous benefactors or small contributors? That people would like free money? This is a serious question. In all of the coverage about the Freedom Dividend, I have yet to hear how these individuals will be selected, how their privacy will be maintained, how this ‘experiment’ will actually pass any scientific muster.
We have not heard about these things for a simple reason. This is a stunt designed to collect email addresses, and raise donations. It’s working. In the days after the announcement, Yang’s campaign announced they had gathered 405K new email addresses, and $1.3MM in fresh donations from individuals keen to ‘win’ Yang’s prize. In doing so, Yang has hacked the system, gathering a huge amount of user data (and $$) without needing to shell out for Facebook ads. If this comes with unintended consequences — buying votes, treating welfare as a lottery, using policy’s version of dark-patterns — so be it.
We can end where we began.
It is not surprising that venture capitalists like this idea. It has the same advantages and limitations as many of the successful companies they have funded. It is fast to get off the ground, has viral adoption and sells itself. But the American republic is not a complicated system, it’s a complex one. It requires more than a hastily prepared point solution. As investors, we should not be so quick to apply our lens to the rest of the world. Sometimes, a vaccine is not enough.