AI and the Future of Impact Investing

As a venture-capital investor, I see a particularly strong role for a new kind of impact investing.

I foresee a venture ecosystem emerging that views the creation of humanistic service- sector jobs as a good in and of itself. It will steer money into human-focused service projects that can scale up and hire large numbers of people: lactation consultants for postnatal care, trained coaches for youth sports, gatherers of family oral histories, nature guides at national parks, or conversation partners for the elderly. Jobs like these can be meaningful on both a societal and personal level, and many of them have the potential to generate real revenue—just not the 10,000 percent returns that come from investing in a unicorn technology startup.

Kickstarting this ecosystem will require a shift in mentality for VCs who participate. The very idea of venture capital has been built around high risks and exponential returns. When an investor puts money into ten startups, they know full well that nine of them most likely will fail. But if that one success story turns into a billion-dollar company, the exponential returns on that one investment make the fund a huge success. Driving those exponential returns are the unique economics of the internet. Digital products can be scaled up infinitely with near-zero marginal costs, meaning the most successful companies achieve astronomical profits.

Service-focused impact investing, however, will need to be different. It will need to accept linear returns when coupled with meaningful job creation. That’s because human-driven service jobs simply cannot achieve these exponential returns on investment. When someone builds a great company around human care work, they cannot digitally replicate these services and blast them out across the globe. Instead, the business must be built piece by piece, worker by worker. The truth is, traditional VCs wouldn’t bother with these kinds of linear companies, but these companies will be a key pillar in building an AI economy that creates new jobs and fosters human connections.

There will of course be failures, and returns will never match pure technology VC funds. But that should be fine with those involved. The ecosystem will likely be staffed by older VC executives who are looking to make a difference, or possibly by younger VC types who are taking a “sabbatical” or doing “pro bono” work. They will bring along their keen instincts for picking entrepreneurs and building companies, and will put them to work on these linear service companies. The money behind the funds will likely come from governments looking to efficiently generate new jobs, as well as companies doing corporate social responsibility.

Together, these players will create a unique ecosystem that is much more jobs-focused than pure philanthropy, much more impact-focused than pure venture capital. If we can pull together these different strands of socially conscious business, I believe we’ll be able to weave a new kind of employment safety net, all while building communities that foster love and compassion.

Big Changes and Big Government

And yet, for all the power of the private market and the good intentions of social entrepreneurs, many people will still fall through the cracks. We need look no further than the gaping inequality and destitute poverty in so much of the world today to recognize that markets and moral imperatives are not enough. Orchestrating a fundamental change in economic structures often requires the full force of governmental power. If we hope to write a new social contract for the age of AI, we will need to pull on the levers of public policy.

There are some in Silicon Valley who see this as the point where UBI comes into play. Faced with inadequate job growth, the government must provide a blanket guarantee of economic security, a cash transfer that can save displaced workers from destitution and which will also save the tech elite from having to do anything else about it.

The unconditional nature of the transfer fits with the highly individualistic, live-and-let-live libertarianism that undergirds much of Silicon Valley. Who is the government, UBI proponents ask, to tell people how to spend their time? Just give them the money and let them figure it out on their own. It’s an approach that matches how the tech elite tend to view society as a whole. Looking outward from Silicon Valley, they often see the world in terms of “users” rather than citizens, customers rather than members of a community.

I have a different vision. I don’t want to live in a society divided into technological castes, where the AI elite live in a cloistered world of almost unimaginable wealth, relying on minimal handouts to keep the unemployed masses sedate in their place. I want to create a system that provides for all members of society, but one that also uses the wealth generated by AI to build a society that is more compassionate, loving, and ultimately human.

Achieving this outcome will definitely require creative thinking and complex policymaking, but the inspiration driving that process often comes from unlikely places. For me, it began back at Fo Guang Shan, a monastery in Taiwan.

Posted by Dr. Kai-Fu Lee on Jun 20, 2019 in All Posts AI and You AI & China

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