by Munly Leong – founder of DestroyAllJobs.com
I spoke to someone recently who admitted that their job could be automated away and they themselves had the knowledge to do so but obviously wouldn’t want to take away their own income. There have also been stories of other programmer/technical types who actually did this but took the risk of flying under the radar of their employers. What if you could instead be open about it and create a win-win situation for both yourself and the employer? This is where the automation annuity comes in.
The basic idea is that instead of chaining yourself to a job for years on end that you know doesn’t even require your physical presence to perform anymore, why not instead earn yourself an “annuity” (description to follow below) as well as a lump sum cash out and a “basic income” along the way? The employer saves of years of ongoing payroll while you get a cash infusion of the equivalent of say one year’s salary and a small basic income-esque monthly stipend going forward with the yearly cost to the employer being a fraction of the equivalent market salary for the same employee. You are now freed from that job and free to pursue another one or your own ventures while as mentioned, the employer saves a lot in the long run. We’re not quite at an annuity yet but now is a good time to define in laymen’s terms what an annuity is.
An annuity is an investment that pays you a guaranteed income for a defined period of time. You can choose how long you want the payments to last, for example, a lifetime or a fixed number of years. This option gives you peace of mind that you will receive a fixed income no matter what happens. At the same time your investment (referred to as the principal) is protected and upon expiration of the annuity term, you can withdraw the annuity.
An annuity (in a nutshell) is how someone can “buy” a basic income for themselves already. Market rates will always vary but a general rule at this time of return seems to be around $80-100k USD for each $800/mnth of income. Typically annuities are not traditionally recommended as investment vehicles due to their low rates of return relative to amount invested compared to other vehicles. but instead they are used as a form of principal protection rather than for growth appreciation. Now that you know this, you can see why annuities are typically used for people retiring who are looking to live modestly but still protect their nest egg. do you see similarities between an annuity and a UBI yet? During the GFC (great financial crisis) of 2007, while everything else lost money annuities themselves did not and people who held annuities in their portfolio came out ahead of those who did not.
The strategy here can be two fold. First you automate your own job away for a basic income and then if the employer agrees to the lump sum, you may be able to reinvest that back into an *actual* annuity and double dip, earning yourself both your own Automation Annuity while also receiving the dividend from an actual annuity. Of course if you have more lucrative investment options or you’d like to invest in yourself to start a business with more potential than the annuity income, that is also an option. The “basic income” automation annuity you’ve created for yourself may be enough to cover your basic needs while you build that business possibly.
If you’re wondering how I arrived at that yearly salary for the lump sum? simple. It’s already happening. In this article here we reported that Fukoku Mutual spent $1.7 million for a system that replaced 34 human insurance workers with a $128,000/year maintenance cost. That means each employee was worth $50k each or likely valued for one year’s salary in the final purchase price. Complexity and costs of systems may vary but we can see a precedent of this happening already and it likely won’t be last.
How much should the Automation Annuity be for? what term? what percentage of salary? We have a floor baseline at least, the total amount per year should not fall below what an actual basic income target should be i.e. $10-12k/year in the US but at the same time, how long should the employer be paying for an employee that is not longer needed (other than perhaps a maintenance cost to retain you as a consultant for your system). A baseline idea for the whole package might be the cost of one year’s salary up front and then another year’s salary divided into the basic income baseline over how many years it would take to roughly pay out the amount in full i.e. $50k + ($50k / $10k) = $50k + 1k a month for 5 years. Perhaps have it written into your contract to adjust that annuity to the annual rate of inflation as well. What are your thoughts? please respond in the comments below.
Going back to the IBM example, what if instead you could capture that value for yourself instead of the money going to an IT Vendor? the Automation Annuity as I’ve dubbed it is powerful food for thought