People are concerned about how AI and robotics are taking jobs, destroying livelihoods, reducing our earning capacity, and subsequently destroying the economy.
In anticipation, countries like Canada, India and Finland are running experiments to pilot the idea of “universal basic income”—the unconditional provision of a regular sum of money from the government to support livelihood independent of employment.
But what people aren’t talking about, and what’s getting my attention, is a forthcoming rapid demonetization of the cost of living.
Meaning—it’s getting cheaper and cheaper to meet our basic needs.
Powered by developments in exponential technologies, the cost of housing, transportation, food, health care, entertainment, clothing, education and so on will fall, eventually approaching, believe it or not, zero.
In this blog, I’ll explore how people spend their money now and how “technological socialism” (i.e., having our lives taken care of by technology) can demonetize living.
As an entrepreneur, CEO or leader, understanding this trend and its implications is important…it will change the way we live, work, and play in the years ahead.
How We Spend Our Money Today
Spending habits around the world tell a pretty consistent story—we tend to spend money on many of the same basic products and services.
Take a look at how consumers spend their money in three large economies: The United States, China, and India.
In the US, in 2011, 33% of the average American’s income was spent on housing, followed by 16% spent on transportation, 12% spent on food, 6% on healthcare, and 5% on entertainment.
In other words, almost 75% of Americans’ expenditures come from housing, transportation, food, personal insurance, health, and entertainment.
In China, per a recent Goldman Sachs Investment Research report, there is a similar breakdown—food, home, mobility, and well-being make up the majority of the expenditures.
Interestingly, in China, consumers care significantly more about looking good and eating better (and less about having more fun) than in the US—nearly half of consumer income goes to clothes and food.
In India, with a population of 1.2 billion people, expenditures on food, transportation, and miscellaneous goods and services are most prominent.
Rent/housing and healthcare represent a smaller portion of expenditures.
These differences likely represent cultural differences in each of the three very different countries—but overall, you see that the majority of expenditures are in these top 7 categories:
- Transportation
- Food
- Healthcare
- Housing
- Energy
- Education
- Entertainment
Now, imagine what would happen if the cost of these items plummeted.
Here’s how…
Rapid Demonetization—What It Means
To me, “demonetization” means the ability of technology to take a product or service that was previously expensive and make it substantially cheaper or potentially free (in the extreme boundary condition). It means removing money from the equation.
Consider Photography: In the Kodak years, photography was expensive. You paid for the camera, for the film, for developing the film, and so on. Today, during the megapixel era, the camera in your phone is free—no film, no developing. Completely demonetized.
Consider Information/Research: In years past, collecting obscure data was hard, expensive in time if you did it yourself, or expensive in money if you hired resea
