The Inevitable Wealth Gap Crisis
With the spread of Neoliberalism, many global and multinational corporations built upon the free market have flourished since the 1970s. And along with unprecedented economic growth, an unprecedented widening of the economic inequality gap happened. The gap between the rich and everyone else has been growing markedly for some 30 years, and 10% of people in the U.S. now own 90% of the the country’s wealth.
With the rise of Artificial Intelligence, many economists predict that one quarter of current jobs will be replaced by automation software or robots by 2025, and the wealth gap will increase even faster. Multinational corporations like Google and Uber have already developed commercial technology for self-driving cars, and Uber has already launched its self-driving fleet in Pittsburgh. In short, the situation will soon get worse for America’s middle and lower class households.
The fundamental reason for the wealth gap and economic inequality is an asymmetry access to capital and information. Capitalism allows for individuals to pass their wealth down to the next generation and so on, causing the asymmetry of access to capital. Over decades, the concept of private property has proven to have a positive effect on economic development. However, when combined with the asymmetry of access to information and knowledge, it creates an unfair advantage against those who are not able to attain information in the same vein or as easily as others, causing opportunity inequality.
Here is a simple formula to represent how people can pile up their wealth.
Based on the formula, you can see that people can continue to accumulate wealth or lose it, depending on how they utilize given opportunities. At a first look, there doesn’t seem to be any particular issue with the formula. However, due to unequal access to information and knowledge, the operator is different for each person. This phenomenon allows for only a certain group of people to exponentially increase their wealth. When the formula for determining a person’s potential to generate wealth is different for each person, the concept of “fair play” becomes a moot point and could collapse the fundamental system that our credit based modern society is built upon.
Even though society cannot (and should not) interfere with inherited wealth and opportunities taken personally (implying risk), ways to utilize given capital resource and opportunities should be equal for everyone.
Since the introduction of the internet, extensive knowledge and information that used to be available only to a certain group of people have been published for the public. The internet and the following flow of free information online should help us solve the asymmetry of access to information and knowledge, right?
Contrary to expectations, it has worsened the wealth gap. Thanks to the Internet, corporations and large organization now collect information in vast quantities. Furthermore, because these parties have capital to begin with, they have resources to utilize the information that they are able to collect. For example, even though thousands of researchers have been working on Artificial Intelligence, only few entities such as Google and Uber are able to take advantage of the academic research. On the other hand, while individuals have access, they don’t have the resources to effectively make something of the information.
The solution isn’t as simple as making it easier for people to access information. We need to create a new type of infrastructure that provides a way for individuals to utilize resources in the same way that corporations and large organization can.
Efforts So Far
To address the issue at hand, new business concepts have been suggested.
For example, sharing economy-based businesses like AirBnB and Uber have been trying to tackle this problem by helping individuals utilize their physical assets, such as vehicles and properties. However, these businesses require people to own/lease vehicles or properties in the first place in order to add more value. Because of this reason, even though both companies have been able to successfully help individuals increase their earning potentials as a group, individuals are still limited by the fact that they need to own/lease a physical asset to start earning through the sharing economy. Consider this: what percentage of people in the U.S are home and vehicle owners? Because people still rely on initial capital to utilize the sharing economy concept, the wealth gap problem will persist. The problem will be closer to being solved when individuals are able to fully maximize their intangible assets as well.
People also consider freelance economy as another example of the solution. However, the freelance economy, in most cases, helps individuals market simple services, rather than helping them develop their skills and establish an individual brand. For example, many businesses taking advantage of the freelance economy list and market menial services, such as handyman or cleaning services.
The freelance market is highly dependent on the demand; the barrier to entry is low because there are too many people who can provide simple services. This prevents freelancers from being able to increase their market value, improve, and increase the potential value of their business. If someone needs to drive and clean for over 10 – 12 hours each day in order to make a living, they cannot invest their time and efforts to discover and develop their skills and talent. In the end, this cannot be a sustainable model, as these simple services will soon be tasked to AI.
Is It Possible to Reduce the Wealth Gap with Open-Resource Economy?
The sharing economy and freelance economy were created based on the needs of people suffering from economic inequality. In the case of both AirBnB and Uber, they were able to utilize a population that was still absorbing the effects of the recession. There wasn’t much of a choice for people who needed to continue to make a living at the time the two companies were established. Despite their success, AirBnB and Uber do not address the fundamental cause of economic inequality. While they have been able to contribute to reducing the wealth gap by helping individuals generate extra income, they are not the solutions, especially as their origins were an effect of the problem instead of attempts to solve inequality.
For this reason, there needs to be a new paradigm addressing the wealth gap – one that satisfies two conditions: 1) sustainability and 2) ability to help the population utilize intangible assets as well as tangible assets. We would like to dub this new model the “open-resource economy.”
Open-resource economy will be a new type of activity and movement encouraging individuals to utilize available resources in order to add value to society and their communities by creating and developing unique values and branding. The concept not only covers utilizing tangible assets, but also embraces utilizing intangible assets. Its main purpose is to help individuals fully maximize their potentials by building their own brands and businesses, so that they can generate as much output as established businesses.
The current problem that society has is that only corporations can take advantage of new technologies developed and researched by others, while society expects the corporations to distribute their wealth to others. However, most of the wealth in society is being used to generate more profit for corporate shareholders. Furthermore, we cannot and should not force them to redistribute wealth.
The fundamental solution to this problem is to educate more individuals and help them realize their business potentials while convincing both individuals and corporations alike to put an effort toward building an innovative, sustainable market to prepare for upcoming changes. We think that we will be able to accomplish this by developing a sustainable market for individuals’ intangible assets. At the end of the day, donating hundreds of millions of dollars will not solve global poverty. We need to invest in individuals’ potentials by building and improving educational and social infrastructures.
In order to validate this idea, we started a business based in San Francisco two years ago. We first built and launched a completely open marketplace, where people can monetize skills based on their passions. Within one year, we have been able to help people generate significant revenue through our website and while helping them continue to develop their skills, create new services, and expand their businesses to include teaching, selling handmade products, and services. We’ve helped a pottery artist sell out classes every week and expand to selling his own handmade ceramic pieces online. He has generated around $100,000 in revenue within the past two years just by dedicating 8 – 10 hours per week. We’ve also helped individuals market their skills and teach drawing or jewelry making classes at local cafes, connecting them to others with similar passions and allowing them to continue to improve and develop their skills. Every provider on Verlocal has been able to leverage both intangible and tangible assets in order to maximize their potentials.
By following our company’s mission, we have been able to build our community in over 40 cities in the U.S., with thousands of talented individuals and local businesses helping us grow and turning open-resource economy into reality. We aim to become the largest open-resource marketplace and pool for both intangible and tangible resources. For us, this is just the beginning. We believe that more individuals and corporations need to pursue social impact and consider contributing to the open-resource economy.
This challenge could be another opportunity for us to reduce the wealth gap as long as we prepare for the upcoming change.
Until now, physical and capital resources have been considered as the main economic resources. Since the industrial revolution, we have observed that the price of crops and physical goods was dramatically lowered due to the mass production. In the upcoming Information and AI Era, we will be able to observe the growth of intangible assets, such as skills and knowledge based on creativity.
When we empower individuals’ potentials by building new infrastructures that people can use to fully utilize both intangible and tangible assets in the economy, we will be able to see a more balanced society.
Our civilization has constantly evolved by overcoming challenges. Now, we need to be aware of this upcoming change and prepare for it, so that we can help the next generation thrive.