Residential Lease Buyback Pools

Nearly 25% of the occupant mortgaged residential real estate in the U.S. has pay-off principals that are in excess of expected proceeds of sale based upon current market value. In the venacular, they are 'under water.' Few of these situations will be resolved without resorting to a short sale or foreclosure. What this means is that the five million families who have owned homes and currently, due to damaged credit, cannot get financing are likely to grow over the next five years to over twenty million. This creates an opportunity for alternative financing mechanisms.

RLBF enables credit damaged families to enter into long term occupancy arrangements that offer a blend of owner and renter features. The family will be able to consider homes that are currently for sale but not available for rent. Clearly, this could begin to heal the severely bruised existing home market. Based upon the family's preferences, they may participate, to a greater or lesser degree, in potential capital appreciation of the property. Additionally, unlike traditional rental arrangements, the occupant can control and benefit from property improvement projects.

RLBF will allow real estate professionals to productively expand their property search on behalf of families who are currently restricted to the rental market. It will provide loan originators with a powerful new tool to get the credit damaged family into a home. It will provide to the bond market an investment product that is real estate backed, not mortgaged backed and that, with the generally depressed housing prices, represents a significant decrease in risk.

Because the three separate functions of home ownership, occupancy, investment and property control are severable through RLBF, housing budgets, depending upon the decisions made, may prudently be increased to as much as 4.5X annual income. Because of this, over time, this home financing option may expand to credit healthy families.

The Information Age Income Explosion

From 1875 to 2010 U.S. GDP per capita increased 13.67 times. If the same growth happens during the Information Age, median household income will increase to about $760,000 per year . The good news is that it most likely will happen and this time it will take about 35 years not 135. The bad news is that there will be no jobs in the traditional sense of the word. You will not be able to go to a ‘Help Wanted’ site and get ‘hired’ by a ‘company’. These terms will all be casualties of the Transformation. Consequently, wise and clever people should immediately begin planning how they, personally, will become an Information Age entrepreneur.

In our writings on the Transformation, we state that prevailing standards of living in the developed world will double in ten years and quadruple in twenty years. At this rate, the 13.67 multiple will be reached in 2048. This is a prediction we are willing to endorse. It will be the result of the implementation of state-of-the-art robotics and artificial intelligence deployed within the agricultural and industrial sectors. The inescapable corollary to this is that few jobs will remain untouched and most will simply disappear. In fact, for most people, their whole job category will be eliminated and most likely sooner rather than later. So, it seems, you will need to find something else to do. What you are doing now won't be an option. Even if your job category remains, your employer will not. You will need to find somewhere else and some other way to do it.

With regard to occupation and income, we expect that the population will experience a socio-economic trifurcation. In fact, this is happening already. At the bottom will be people who will receive a supplemental stipend that will assure some minimum standard of living. In the middle will be people who engage in productive activities within semi-automated service industries and will enjoy incomes substantially in excess of the established minimum income. At the top will be the entrepreneurial knowledge workers. This is description, of course, is a vast oversimplification. However, it is a wonderful starting point as you become familiar with and conversant in the economics of the Information Age.

In a civilization where nearly half the households will have annual incomes in the millions, it is unlikely that political sentiment will countenance any penury whatsoever. Consequently, we suspect that there will be a stipend for those without sufficient self generated income. It most likely will meet or exceed a level of income that, today, would be considered middle class income. We can imagine that what will be considered the poverty level in twenty years will have quadrupled right along with the quadrupling of average and median incomes. In other words, one person will be guaranteed $40,830 per year, a couple or a custodial parent and child will be guaranteed $72,840 per year and the classic ‘family of four’ will be guaranteed $136,200 per year.

These rates, however, would be subject to some adjustment in order to assist in balancing the labor supply and demand. When the number of people searching for work is less than is required, the level of support provided to those who do not work will decrease, thus encouraging to supplement their income. When the number of people searching for work exceeds what is needed, the level of support will increase.

The middle socioeconomic level will be engaged in service activities that, while automated, retain a human function primarily because humans wish to interact with humans when they are consuming them. Take for example, a fast food restaurant. Even now, we could probably build a restaurant that, through automation and AI, could function without human intervention. However, generally, people would prefer to interact with a person during the ordering, delivering and paying process. The price differential between a $4.00 hamburger in a human mediated fast food restaurant and a $2.65 hamburger at a totally automated restaurant, in a very affluent society, is going to be insufficient to cause the majority of people to frequent the totally automated one

Of course, with a median household income of $760K per year, one may assume that, over time, even a $4.00 personally delivered hamburger is likely to be an endangered species. It will be replaced in most settings with a more leisurely fine dining experience. A $15 fast food bill for an average family today will be proportionately the same as a $190 restaurant tab in 2048. Consequently, we will expect that frequently the purchased meal will involve a chef and maitre d’ overseeing an automated fine dining experience.

From landscaping to interior design to medicine, even if AI programs can perform as well or better than humans, the customer will still want to interact with a person. For example, a landscaper may interview a customer and then go back to his office and create a computer assisted design. The computer did much of the work, but he will present it and, if the customer accepts the design and price, he will arrive with landscaping robots and oversee the work while interacting, again, with the customer.

An AI diagnostic software program may provide the doctor with a list of diagnoses in descending order of probability and suggest further diagnostic tests. Already these programs outperform most doctors. Another AI program may give the doctors a comprehensive list of treatment options with the likely probability of success and suggest possible combinations of treatments. However, no matter how AI assisted, the patient will want to talk to the doctor, ask questions of the doctor and feel reassured by a person, not an AI program.

At the highest socio-economic level will be knowledge professionals, for the most part Polymaths, who will create and communicate visions and apply volition to the social, cultural and economic systems. They will engage in activities that, even if a computer could do them, humans will prefer to retain as their prerogative. This will include great thinkers, pundits and leaders who will teach, present and discuss. It will include great designers who, with the assistance of AI programs, will create new products, new services, comprehensively designed communities, etc. It will include scientists, artists, composers who will drive human progress in a uniquely human way. It will include entrepreneurs who will oversee the automated production processes.

These three categories are arbitrary. Many people will spend portions of their lives in different ones. A person may be on stipend during periods of intense learning, in service activities early in their life and then, over time, find that their productive activities evolve into one or more of the knowledge professions. Additionally, some activities are actually a spectrum that bridges the service sector and the knowledge professions. Many people will engage in both. For example, a person may design clothes but also oversee their robotic manufacture. So, while the trifurcated socio-economic description is basically correct, it is not exactly correct and should not be interpreted too rigidly.

It is manifestly clear, however, that there is not a category designated as ‘employee’, professional level or otherwise. As we all are very aware, manufacturing jobs left developed countries to chase cheap labor in low labor rate locations. Today, we now find that professional jobs are chasing cheap labor in underdeveloped countries. These activities will be returning, but they will not reemploy the previously displaced workers. Rather, they will be automated.

to happen very rapidly. Right now at the larger companies, automated AR and AP software is being installed. From the time of order to receipt to payment, human hands will not touch the process. It is important that everyone Google ‘DARPA 2007 Urban Challenge’ and see what was possible three years ago. Today, the technologies have progressed and the results are amazing. By 2020, anyone who currently makes a living by driving a vehicle will most likely be out of a job. Nearly half the jobs done on a residential new construction site are well within the current robotic technology. Clothing will be custom tailored by robot. We could go on and on, and we will. You may be skeptical. We understand and we will address those reservations as we continue.

Very quickly, because we deal with it elsewhere, we do not expect that there will be an unabated geometric explosion past our income levels due to a 'Singularity'. We believe that the rate of growth in computer technology is abating already. Clock rates on retail computers are not going up. Rather than more powerful CPU's, multi-core computers are being built. While Kurzweil, et al, are their pinning hopes upon carbon nanotube circuitry, the pace of technological development there is already falling behind where it needs to be to continue the geometric progression. It is beginning to appear that computers are reaching technological maturity, at least for now. However, much of what is already possible is not implemented. Consequently, robotics and applied AI will not reach economic maturity at least until 2050.

So, for those who would not only like to learn more about this, but also affiliate, associate and collaborate to take advantage of the opportunities presented by the emerging global, Information Age civilization, we are providing the Polymathica Fellowship. If you are ready to consider developing an entrepreneurial and polymathic knowledge career, your first step is to join the facebook group, Polymathica Entrepreneurs.

More on the Transformation

Several interesting comments have been made recently as one of the messages of Polymathica, that of the imminent Transformation, begins to sink in. These comments, both agreeing and disagreeing, can be summarized by the basic question, ‘How will this all happen?’ We have dedicated an enormous amount of energy in trying to understand how the Industrial Age civilizations will turn into the Information Age civilization – The Transformation. So, although, we don't have a crystal ball, we do have a deep, perhaps the deepest, understanding of the forces and mechanisms at work.

If we are to learn anything from the prior transformations, it is that they are messy, often violent, affairs that really are not under anyone's control. As we have stated on a number of occasions, the recent string of crises, of which the financial crisis was one and the current nation state credit crises are the latest, are directly related to The Transformation. Here in the U.S. we have Herculean efforts of sweeping reform which are exactly ‘the status quo’ attempting to reassert itself.’ These efforts, like those of the European Royal families in the previous Transformation, will ultimately fail.

The Transformation is an extremely complex phenomenon that cannot be adequately explained in an article or, most likely, even in a book. Understanding The Transformation is more a matter of a dedicated, ongoing course of study. However, there are three major factors that we attempt to emphasize.

First, we are entering a period of unprecedented occupational displacement. Nearly all clerical, and many entry level professional, jobs are at risk to AI applications. The current AI state of the art can duplicate most clerical functions cost effectively. It’s really a matter of product design and marketing. It is happening right now, actually, with large corporations, such as Target and Wal-Mart, that are promulgating electronic invoicing and payments in their formats upon their vendors. We need a data interchange format for business paper with translators. Then, all clerks are basically out of a job.

The DARPA 2007 Urban Challenge, and the work of Stanford/Audi since then, has demonstrated that millions of jobs in the transportation industries are terminal and have years, not decades, to live. Audi has the stated goal of fully automated vehicles by 2028. Given the state of the art as demonstrated to date we conclude that, if they take that long, someone will beat them to it. It seems unlikely that the other manufacturers will not respond and instigate a technology race. Consequently, it is unlikely that this technology is no more than a decade or so from commercial applications.

There are few, if any, construction jobs that cannot be cost effectively replaced by robots with current technologies. Again, they will be gone in our twenty year time frame. There are even AI programs being marketed today that threaten the jobs of classical K-12 teachers and replace most of the diagnostic functions of physicians.

So, Factor One, is the emergence of huge worker displacements with no straightforward road to a replacement career. As we have often stated, paradoxically, all of the implemented robotics and AI will cause an explosion in GDP per capita. When we say that it will double in ten years and quadruple in twenty, we are actually being very conservative. The elimination of labor cost constraints to production results in no definite limit to incomes. Many people are beginning to understand that something very fundamental is going to need to change in the economic mechanisms of society in order to get all of the income of production into the hands of the consumer.

Second, the emergence of cable and satellite television created a situation where a few of the major cultural perspectives are now living in totally separate and robust memic universes. In other words, people who watch MSNBC for their news, analysis and commentary are being immersed in a culturally comfortable world view that is quite different from the one received by people who watch Fox News. Essentially, the Public Discourse is being undertaken by groups with different sets of 'facts'. There are no significant homogenizing forces and those that do exist are becoming progressively more overwhelmed by the forces of fragmentation.

Furthermore, as radio and television move to the Internet small print/audio/video enterprises, targeted at markets with total customer bases in the hundreds of thousands or several millions, rather than tens or even hundreds of millions, will become viable. Polymathica, a global community of refinement and erudition, Project Venus, Gaians, New Agers, Polyamorists, and many, many more will float their own news outlets and television networks. Some will undoubtedly fail. However, many will succeed and the march toward a massively heterogeneous, multicultural world will continue.

As ‘live anywhere’ economics take hold, combined with the Information Age Income Explosion of Factor One, an increasing percentage of the population will move to comprehensively designed communities that are facilitative of a specific set of values and lifestyle preferences. Because, at the time, the major nation states will be desperately trying to maintain a semblance of cultural homogeneity, many of these communities will be found in smaller nations who are welcoming the economic benefits of the new communities. The notion of cultural sovereignty will emerge. Along with it will come the concept of Market Based Governance.

So, Factor Two, the emergence of memic propagators that will cause the currently fragmenting cultures of the Industrial Age to coalesce around a relatively large number of new and old memically isolated global communities that will begin to express themselves in a growing number of culturally homogenous ‘bricks and mortar’ communities.

In economics and business there is a perverse, inverse relationship between industry stability and barriers to market entry. This is critical to the nature of The Transformation. The Internet is currently completely disorganized. Small businesses that are primarily information enterprises have as their primary barrier to success, the inability to efficiently find their customers. Polymathica has as affiliates some magnificent blogs that have readers numbering in the hundreds rather than hundreds of thousands, primarily, because they can’t efficiently find their readership. The very large information brokers such as NewsCorp and NBC like it this way. However, it will not last. As Internet television and radio create targeted networks, barriers to market entry will fall and, as the saying goes, ‘all Hell will break loose.’

So, Factor Three, the Mega corporations will experience increasing competition from networks of small enterprises that have affiliated in a non-corporate, non-hierarchical fashion. The large corporations of the Industrial Age will fight the process, of course. However, in the end, they will lose. The world economy will become far more organic.

Unlike The Singularity and other Transhumanist movements, The Transformation is not a vague, ‘someday this will happen’, kind of story. These three factors are all emerging today. They will accelerate over the next ten years and by 2030, the global Information Age civilization will be here. It will look far different than the world of today. The differences will be 'in kind' not degree.

It will most likely be a rough ride. The large, multinational corporations and institutions of geographic governance will not ‘go quietly into that dark night.’ National governments will attempt, as China and some of the more fundamentalist Islamic states are doing now, to build information barriers that will protect their citizens from the onslaught of myriad memic propagators of other cultural viewpoints. Mega corporations, which are generally proscribed from overtly predatory practices in most nations, will attempt to create multinational strategies to fend off the attack of the hordes of small, niche creating Information Age enterprises. They will search for, and most likely find, corporate havens where the local governments will turn a blind eye to these tactics.

For many the large, Industrial Age institutions seem too powerful to be displaced. However, as the feudalism and Nobility of the Agricultural Age gave way to the new institutions of the Industrial Age, the Nation State and Multinational corporations of the Industrial Age will succumb to new Information Age institutions. Ten years ago when some of us began telling this story, it seemed unrealistic and distant to most people. They believed that they had some time to watch how it all unfolded. They were correct. However, now, more people accept the story and time has run out. The Transformation is happening right now. Historians will view the U.S. taxation of worldwide income and the 2008 ‘Exit Tax’ legislation as important early salvos in the Industrial Age/Information Age conflict.

So, this is not going to be pretty. The people who have the easiest time with it will be the people who are anticipating it and acting upon it in real time. The person who sits back, feeling secure in their job as, for example, a clerk in a public library, will find themselves totally unprepared when public libraries become a virtual, Internet based affair, delivering their ‘borrowed books’ to people’s Kindles, Ipads, etc. They will lose their jobs and find that everyone with their skill set and occupational expectations are in the same boat. They will ultimately adjust, but it will be an uncomfortable time. Those, however, who begin now to craft a new Information Age career, will have a much easier transition.

People who are vested in the Industrial Age fiction of a bipolar political universe will find the new Information Age realities confusing. Republicans/Democrats, Conservative/Labour, et al will become false dichotomies. The new realities of ‘voting with your feet’ will completely confound Industrial Age thinkers. Liberal Democracies that have become comfortable in the political strategy of making promises to the majority, financed by the affluent minority, will find that the affluent minority is gone and no longer taxable. We suspect that the reaction will not be pleasant.

In conclusion, the greater your involvement in Polymathica, the more comprehensive will be your understanding of The Transformation. We are searching for all the refined, erudite people on the Internet. For the most part, it is an effort to create an audience and customer base for refined, erudite content, networks, products and services. However, the process of educating its Membership about the Transformation and mobilizing them to create Information Age strategies to address the problems and capitalize upon the opportunities is a non-trivial pursuit, as well.