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CCC comments on Singularity the hard way - Less Wrong
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There's another effect as well. Humans compete with each other; at the moment, all literate people can claim a legitimate advantage over the illiterate people (and, in the case of some, this may be an excuse to stop self-improving). Once there are no illiterates, that excuse falls away.
Most potential scientists don't view illiterate children in Third World countries as their competitors.