Basic income is a contentious – and common – subject these days.
The concept of robots taking over people’s jobs used to be something out of science fiction movies, but that’s not the case any longer.
Automation is real. It’s increasing and improving. And it seems increasingly likely that there will be far less jobs in the future, especially for people who lack the education, intelligence, or interest to participate in the new economy and workforce that will develop as a result.
And so you have a lot of people who believe that basic income is the only possible solution at this time.
Just ask Elon Musk.
Basic income is essentially unconditional money that’s provided to citizens by government. It’s like Social Security, except people receive the money while they’re young. In my opinion, it’s best thought of as much like Social Security: it’s designed to prevent mass poverty. (Social Security was originally designed to prevent mass poverty in old age; basic income is designed to do the same for all adults across the age spectrum.)
I wholeheartedly believe that basic income is inevitable.
Self-driving trucks are likely going to replace truck drivers at some point in the near future. After all, why employ truck drivers when a machine can operate 24/7? An army of automated trucks could draft each other on highways, saving on fuel.
Similarly, self-driving cars could potentially replace all of these Uber drivers. (You don’t think Uber is researching a self-driving big rig for no reason, do you?) And, of course, there’s the original Uber driver – the cab driver. Cab drivers aren’t just fighting ridesharing services but also automation.
Heck, I’m even concerned that writers like myself will one day be obsolete. Robots are starting to produce more and more content – and they’re obviously quite prolific.
So on and so forth. I see a future where far less jobs exist.
Now, there are going to be some jobs that are created out of all of this. But I can’t imagine it’ll be anywhere near a 1:1 ratio.
There are millions of truck drivers, for instance. But there won’t be a necessity for millions of people watching these automated trucks. Furthermore, many of these displaced workers won’t be qualified (or interested) to make that leap. Suddenly being an unemployed truck driver at 45 years old doesn’t mean you just leap right into robotics. That’s not how it works.
And so basic income is going to come at some point down the road. Governments will have to figure out how that works (and tests are already being launched all over the world), but I’m confident that the kinks will be worked out over time.
Of course, citizens in developed economies will be the best off in regard to the oncoming changes. Winning the ovarian lottery is the gift that keeps on giving, and I count my lucky stars every day.
Creating Your Own “Basic Income”
Now, this isn’t basic income by the strict definition of receiving unconditional money from a government.
However, I do look at the growing dividend income my Full-Time Fund generates as akin to basic income.
After all, the income is averaging close to $1,000 per month these days, which is on par with what a lot of basic income advocates are calling for.
And it’s unconditional in the sense that I don’t have to do anything to receive it. I simply continue to hold on to my ownership stakes in high-quality businesses that reward me as a shareholder with pieces of their growing profit pies. (Yum, I like pie.)
That’s right. It’s pretty much unconditional. I wake up and get paid. As long as I don’t die, I’m collecting that income. And I certainly don’t need to worry about getting fired.
Better yet, it’s growing much faster than inflation. The vast majority of the companies I’m invested in have been growing their dividends at a rate faster than inflation for years, or decades.
Johnson & Johnson (JNJ) is my largest holding. It’s a $320 billion company (by market cap). You might think to yourself that their days of strong growth are long over. Nope! The company increased its dividend earlier this year – the 54th consecutive year it’s done so. And that increase was almost 7%. Take that, inflation!
I’m not sure how fast basic income will grow, if/when it’s rolled out broadly. But if Social Security is any gauge, I wouldn’t expect much year-over-year growth, unless inflation is high, which would render most of that growth moot anyway.
I created this basic income for myself over the course of approximately seven years.
I averaged a savings rate of well over 50% of my net income over that time frame.
When I thought I couldn’t save any more, I saved more. When I thought I couldn’t work any harder, I worked harder. When I thought about giving up, I marched forward even faster. I thought about every penny that left my pocket. If I didn’t find value in what I was spending my money on, what was the point?
And then I took all of that money I was saving and I invested it as regularly as possible into wonderful businesses that reward me as a shareholder with growing dividend income.
Think companies like The Coca-Cola Co. (KO), AT&T Inc. (T), and United Parcel Service, Inc. (UPS).
I want to be behind products and/or services that are practically ubiquitous. Well, there’s not a day that goes by in which I don’t see someone consuming products and/or services from these companies I just listed. The same can more or less be said for all the products and/or services I have an economic interest in.
The odds are good that the ubiquitous nature of these companies’ products and/or services will continue on for years to come. In fact, automation could make their businesses far more profitable, allowing for even more “basic income” for their shareholders.
Finally, consider that everything I’ve read on basic income indicates that it would be unconditional. As one would expect, the government doesn’t want to punish people for continuing to work in an economy in which jobs will be more sparse but more specialized. As such, any basic income the government would be sending out to citizens could then be added to the “basic income” one’s able to build for themselves via high-quality dividend growth stocks.
However, it’s not something I stay up at night worrying about. Basic income or no basic income. It doesn’t really matter to me. I mean, I hope that we avoid mass poverty and starvation. I hope reason prevails. But for my own personal situation, I have no worries.
That’s because the dividend income the companies I’m invested in send me enough passive income to cover the bulk of my core personal expenses, rendering me financially independent. Regardless of whether or not basic income comes to pass in my lifetime, I’ve circumvented the whole process by going around it. It’s essentially a basic income hack.
Basic income is inevitable, in my opinion. However, I’m not sure when it will come. It could be in 10 years. Or maybe 50 years. I have no clue. The speed of its institution depends largely on the rate at which automation renders jobs obsolete. Based on what I’m seeing now, I suspect basic income will come sooner rather than later.
But this needn’t be a concern for people. If you stay ahead of the curve, save a lot of your money, and regularly invest in high-quality dividend growth stocks, you can create your own “basic income” long before the government finally figures out how to make the numbers work. If I have a choice of counting on the government or Johnson & Johnson, you can guess which way I’m going.
Furthermore, the passive income that these high-quality dividend growth stocks provide typically grows much faster than inflation, even decades into these companies’ life cycles. Growth doesn’t slow to a crawl simply because a company is 100 years old.
Lastly, I think building one’s own “basic income” via growing dividend income allows one to sleep soundly at night. Instead of worrying about the onslaught of automation and artificial intelligence and how the destruction of everyday jobs might leave me unemployed, I’m instead thinking about stuff like what time I want to hit the gym. Financial independence is just a wonderful lifestyle that allows one to pursue happiness with maximum chances of success, which is a much better use of time than worrying about automation and whether or not the government has my back.
What do you think? Are you creating your own “basic income”? Want more information on building your own basic income? Check out my coaching service.
Full disclosure: I’m long all aforementioned stocks.
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.