Happy New Year from the manufacturers of economic inequality
January 3, 2016 7:38 PM   Subscribe

Venture capitalist Paul Graham starts 2016 with an essay on Economic Inequality
Since the 1970s, economic inequality in the US has increased dramatically. And in particular, the rich have gotten a lot richer. Some worry this is a sign the country is broken. I'm interested in the topic because I am a manufacturer of economic inequality. I've become an expert on how to increase economic inequality, and I've spent the past decade working hard to do it.

And a sibling piece that contains an encapsulation of Graham's worldview:
The Refragmentation
January 2016

One advantage of being old is that you can see change happen in your lifetime. A lot of the change I've seen is fragmentation. US politics is much more polarized than it used to be. Culturally we have ever less common ground. The creative class flocks to a handful of happy cities, abandoning the rest. And increasing economic inequality means the spread between rich and poor is growing too. I'd like to propose a hypothesis: that all these trends are instances of the same phenomenon. And moreover, that the cause is not some force that's pulling us apart, but rather the erosion of forces that had been pushing us together.
Reactions are mixed...
Good example of the naive stupidity that gives Silicon Valley a bad name
Real economic inequality is lower than ever. Thank tech.
"Ending economic inequality would mean ending startups" is nonsensical no matter how much you pad it
Great defense of the value of income inequality. It's not a bug, it's a feature.
Words of wisdom.

...and range from generous – the talk of ending economic inequality makes Graham scared, for society and startups – to cynical – Spoiler: Turns out rich people in Silicon Valley deserve to be rich.

Graham's own community sees a straw-man and is naval gazing as other venture capitalists start to distance themselves.

Today, Paul Graham seems very satisfied with himself: "In a way the volume of ad hominems is a good sign. It implies I didn't leave much to refute. http://paulgraham.com/disagree.html"

Born in Britain, Graham emigrated to the United States, where he studied at Cornell and Harvard. He sold his first company to Yahoo in 1998, and subsequently went on to start the Y Combinator programme. Y Combinator is now the most successful startup accelerator programme in world, credited with launching almost 1,000 companies in the the last ten years. Those companies have a total market capitalisation $65B – putting the collective group in the top 150 market caps worldwide.

Y Combinator's roster includes AirBNB, Heroku, Instacart, Reddit, Stripe, Twitch, amongst others.

Graham's full collection of essays.
posted by nickrussell (88 comments total) 54 users marked this as a favorite
 
"In a way the volume of ad hominems is a good sign. It implies I didn't leave much to refute."

I didn't read Graham's essay, but on behalf of mathematicians everywhere, I beg him not to say "implies" when he means something closer to "suggests" or "is not inconsistent with the claim that." Not that he's the only offender.
posted by escabeche at 7:41 PM on January 3, 2016 [6 favorites]


It turns out, Graham uses a lot of that kind of language.
posted by Phssthpok at 7:45 PM on January 3, 2016 [5 favorites]


Fallacy of composition all the way down. Incoherent and fails to understand financial flows/stocks.
posted by wuwei at 7:52 PM on January 3, 2016 [5 favorites]


Today, Paul Graham seems very satisfied with himself

"Y-Combinator" is actually named after the days Paul Graham is satisfied with himself. They're the ones with "Y" in.
posted by Jon Mitchell at 7:55 PM on January 3, 2016 [14 favorites]




I was reading Paul Graham back in 2006, before Y Combinator really got off the ground. Thought he was an idiot at the time. I feel dumb now.
posted by miyabo at 7:55 PM on January 3, 2016


Good number of critiques on the piece were posted to Hacker News afterwards:
"A Response to Paul Graham’s Article on Income Inequality" by cryoshon
'How Paul Graham gets it wrong in “Economic Inequality”' by Seth Bannon
"Income inequality is not the problem, it's a symptom" at Ronda Ramblings
"An open letter to Paul Graham" by Rick Webb
posted by Apocryphon at 7:58 PM on January 3, 2016 [7 favorites]


I was expecting a single link to his Paul Graham's pro-inequality essay, with a predictably negative comment thread, and instead got a thorough and well-put-together post with background information and reactions elsewhere on the net. Thank you, nickrussell.

I've found some of Graham's essays insightful, others less so. For me, this was one of the latter, and many on Hacker News agree (which is saying something given that he founded the site). Will be interesting to see if this has longer-range consequences, good or bad, given the publicity.
posted by Rangi at 7:59 PM on January 3, 2016 [9 favorites]


[A] good number are merely being sloppy by speaking of decreasing economic inequality when what they mean is decreasing poverty. But this is a situation where it would be good to be precise about what we want. Poverty and economic inequality are not identical. When the city is turning off your water because you can't pay the bill, it doesn't make any difference what Larry Page's net worth is compared to yours. He might only be a few times richer than you, and it would still be just as much of a problem that your water was getting turned off.
The conclusion is actually sound imho, but the first 3/4 is classic, can't-see-beyond-my-own-asshole startup/capital ideological BS.
posted by wemayfreeze at 8:01 PM on January 3, 2016 [1 favorite]


Watching the tech/silicon valley people discover the social darwinism of the Robber Barons is weird.

Brandeis was a product of the Gilded Age, and things have changed since then. It's harder to hide wrongdoing now. And to get rich now you don't have to buy politicians the way railroad or oil magnates did. [6] The great concentrations of wealth I see around me in Silicon Valley don't seem to be destroying democracy.

I think it's wrong to assume, as he is here, that the tech moguls of today are the Rockefeller and Carnegie of old. Rail and Oil magnates didn't buy politicians to get rich, they did it to stay rich.
posted by Ray Walston, Luck Dragon at 8:12 PM on January 3, 2016 [18 favorites]


pg;dr.
posted by mhoye at 8:13 PM on January 3, 2016 [73 favorites]


When the city is turning off your water because you can't pay the bill, it doesn't make any difference what Larry Page's net worth is compared to yours.

I don't get this. Why doesn't he think it makes any difference?
posted by escabeche at 8:16 PM on January 3, 2016 [6 favorites]


What an asshole.
posted by dazed_one at 8:21 PM on January 3, 2016 [6 favorites]


Most people who get rich tend to be fairly driven. Whatever their other flaws, laziness is usually not one of them.

And by implication, poor people are lazy. How Victorian.
posted by GuyZero at 8:30 PM on January 3, 2016 [63 favorites]


[A] good number are merely being sloppy by speaking of decreasing economic inequality when what they mean is decreasing poverty. But this is a situation where it would be good to be precise about what we want. Poverty and economic inequality are not identical. When the city is turning off your water because you can't pay the bill, it doesn't make any difference what Larry Page's net worth is compared to yours. He might only be a few times richer than you, and it would still be just as much of a problem that your water was getting turned off.
The assumption behind proposals to reduce income inequality is that, in the counterfactual world where our whole economy is more equal, your water wouldn't be getting turned off in the first place.

I was just re-reading zompist's defense of New Deal–era liberalism, and it emphasizes this point. If more progressive taxes were keeping inequality down, total wealth would still grow, but a greater share of it would go to those who make less. (If I'm interpreting this chart correctly, it might grow less than it could if there were more inequality; but then we're debating about a tradeoff of values, "more wealth vs. fairer wealth", not just dismissing inequality as irrelevant to the problems of poverty.)
posted by Rangi at 8:38 PM on January 3, 2016 [7 favorites]


I don't get this. Why doesn't he think it makes any difference?

My reading of it: his claim is that the wealth of the rich (at least the entrepreneur startup rich who he's lauding) is generated from scratch, not taken from the poor, so Page's wealth is simply not a cause of someone else not being able to pay bills. He concedes the idea that other bad rich Wall-street-types may be stealing from the poor, but he doesn't dwell on that much because he is writing to defend Silicon Valley style wealth, not to explain the causes of poverty.
posted by xris at 8:41 PM on January 3, 2016 [2 favorites]


The great concentrations of wealth I see around me in Silicon Valley don't seem to be destroying democracy.

I'd love to see Snowden respond to this.
posted by ryanshepard at 8:48 PM on January 3, 2016 [9 favorites]


I'm surprised he went with "NO MORE START UPS!" as the terrible promise of socialism. I mean, yeah, we'd get less apps, but some of us want to pay rent and go to college without too much debt. I'm sure the vanishing of startups would have lots of terrible indirect impacts, but the concept is so abstract I'm not hyperventilating or anything.

And the whole thing is a weird willfully ignorant thesis based on the assumption everyone upset about income inequality wants a flat income distribution where literally everyone has an equal bank balance. In reality, it's more a case of people arguing rich people should pay progressive taxes to fund programs to help the poorest and create a society with more upward mobility.
posted by mccarty.tim at 9:05 PM on January 3, 2016 [29 favorites]


The point is that wealth is not a zero-sum game/not necessarily gained at the expense of others. That's something of a strawman though (hold on accidentally hit post)
posted by atoxyl at 9:07 PM on January 3, 2016 [2 favorites]


I imagine "I create real wealth, unlike those fat cats" is a sentiment in every high salary position. The boogyman high frequency trader is probably very quick to point out he created jobs for some F# coders and yacht builders.
posted by mccarty.tim at 9:08 PM on January 3, 2016 [19 favorites]


This is who I want to fund my Uber-for-pitchforks idea.
posted by Lyme Drop at 9:10 PM on January 3, 2016 [18 favorites]


It's something of a strawman, or rather a response to a worldview that is rather out of the mainstream these days. I don't think he does a very good job at all responding to the idea that concentrated wealth is corrosive to democracy. The best he's got is that a power curve distribution is a natural outcome (perhaps) and that it's not possible to do do anything to reshape it without bad results (poorly supported, kind of missing the point).
posted by atoxyl at 9:14 PM on January 3, 2016 [2 favorites]


Like Uber, but for strawmen.
posted by pompomtom at 9:23 PM on January 3, 2016 [47 favorites]


The reason they go into finance is not because they love finance but because they want to get rich. If the only way left to get rich is to start startups, they'll start startups. They'll do well at it too, because determination is the main factor in the success of a startup.

Well, that and a sturdy pair of bootstraps.

Maybe there's some good ideas in there, but between the glaring blind spots and the fakemath terminology, I have to take a break halfway through to rest my eyeroll muscles.
posted by Dr Dracator at 9:37 PM on January 3, 2016 [6 favorites]


lowering my opinion of the rhetorical move of declaring that (unnamed, unquoted) critics are all guilty of a "fallacy"
posted by thelonius at 9:45 PM on January 3, 2016 [1 favorite]


The pie fallacy — tastiest of the informals!
posted by Coda at 9:50 PM on January 3, 2016 [3 favorites]


Silicon Valley (the show) is so much less bizarre than the reality.
posted by benzenedream at 10:12 PM on January 3, 2016 [2 favorites]


Written like a true visionary from the marketing department of the Sirius Cybernetics Company.
posted by fifteen schnitzengruben is my limit at 10:54 PM on January 3, 2016 [5 favorites]


I thought we weren’t supposed to make posts making light of unfortunate freakish individuals.
posted by Going To Maine at 11:21 PM on January 3, 2016 [4 favorites]


Naval gazing?
posted by Apocryphon at 11:38 PM on January 3, 2016


Ugh. Some days I can be OK with Silicon Valley as a nice place for science and computers and the people who like that sort of thing, but today is not one of those.
posted by Maxwell's demon at 11:42 PM on January 3, 2016 [1 favorite]


I read this and it prompted me to start writing a blog response that I haven't finished yet. Graham makes some points that are worth addressing, namely the zero sum question and the idea that entrepreneurial fortunes reflect productivity increases.
posted by ropeladder at 12:12 AM on January 4, 2016


I don't understand how someone can believe the (ridiculous) idea that the most "driven" members of society magically gravitate towards whatever field pays the most, and not immediately leap to the conclusion that the big payouts should therefore be offered for something more valuable to humanity than...startups?
posted by threeants at 12:25 AM on January 4, 2016 [12 favorites]


Also, LOL:

The public conversation so far has been exclusively about the need to decrease economic inequality. We've barely given a thought to how to live with it.

Buddy, most people spend all fucking day having to think about how to live with economic inequality, even if they don't happen to know the term.
posted by threeants at 12:33 AM on January 4, 2016 [56 favorites]


"Yes, there are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum. But there are also a significant number who get rich by creating wealth."

I have a hard time imagining how any one person can create $1B of wealth. Has to be more like $1M of wealth creation, tops, and $999M in rents.
posted by BentFranklin at 12:38 AM on January 4, 2016 [10 favorites]


I think he's confusing arguments that reduce people to incoherent rage with arguments that are good. They're not the same thing.

The problem isn't the engineer with a new idea who wants to make it into a successful product, not really. The problem is that the first place winner gets the vacation to Hawaii and the jet ski, and the #2 gets the home edition board game. #3 gets to keep his pancreas and most of his teeth.

The problem is that there is an entire class of people who know nothing, who have no special knowledge or abilities, but who are getting even richer than the engineer based on aggression, status, and willingness to screw everyone else in pursuit of money. This isn't particularly clever stuff. Anyone who isn't living in a damned bubble, anyone who's recently had to think seriously about how to pay their bills, knows this crap. Anyone who grew up working class in a coastal city and sees that people who build nothing, know nothing, invent nothing, create nothing are now the only ones who can afford to live in our own home towns knows that "learning to live with it" isn't on the menu. But Graham might be.

Hard work and a good idea? Who does he think he's fooling?
posted by 1adam12 at 12:40 AM on January 4, 2016 [31 favorites]


Buddy, most people spend all fucking day having to think about how to live with economic inequality, even if they don't happen to know the term.

It’s one thing to think about how you’re going to survive if you’re broke; it’s another to think about how you’re going to survive if someone else is rich. I can’t tell if you’re drawing that distinction or not.
posted by Going To Maine at 12:41 AM on January 4, 2016 [2 favorites]


No, I'm not drawing any particular such distinction; I think the idea that some people's state of poverty can be usefully separated from other people's state of wealth is bizarre and inane.
posted by threeants at 12:47 AM on January 4, 2016 [7 favorites]


The great concentrations of wealth I see around me in Silicon Valley don't seem to be destroying democracy.

Paul Graham argues from a position of vast and dangerous ignorance.

Democracy and the Policy Preferences of Wealthy Americans

We report the results of a pilot study of the political views and activities of the top 1 percent or so of US wealth-holders. We find that they are extremely active politically and that they are much more conservative than the American public as a whole with respect to important policies concerning taxation, economic regulation, and especially social welfare programs. Variation within this wealthy group suggests that the top one-tenth of 1 percent of wealth- holders (people with $40 million or more in net worth) may tend to hold still more conservative views that are even more distinct from those of the general public. We suggest that these distinctive policy preferences may help account for why certain public policies in the United States appear to deviate from what the majority of US citizens wants the government to do. If this is so, it raises serious issues for democratic theory. (emph. added)
posted by a lungful of dragon at 1:00 AM on January 4, 2016 [49 favorites]


The inherent problem with income inequality can be demonstrated even in the barest terms. Many-- most?-- things in the world are not of unlimited quantity. So:

Goldnugget McStartup and Debby Pleb are both at the General Store to buy Items. The General Store can only keep 20 Items in stock. Goldnugget has 1 million Chits whereas Debby possesses only 100. The store only pays 10 Chits for an Item, so one certainly could be sold to Debby at an affordable price, but why would it sell any to her at all when Goldnugget can easily buy all 20 for a much higher price? So here's the income inequality bit-- even if Debby was raised up out of Chitbareness and came to have 200,000 Chits, there is no reason Goldnugget still couldn't and wouldn't clear the store's supply of Items.

Finite items might include: homes in the city you grew up in; specialist doctors in an area of medical expertise; public spaces that could either display or not display certain messages; etc. etc.
posted by threeants at 1:04 AM on January 4, 2016 [28 favorites]


You can't end economic inequality without preventing people from getting rich, and you can't do that without preventing them from starting startups.

So much wrong with that I won't even start.

More importantly, nothing in this essay addresses the two main points in

Pickerty findings in Edge.org

which are structural problems in our world as it exists now.
posted by C.A.S. at 1:18 AM on January 4, 2016 [3 favorites]


The ad hominems are deserved, if you call yourself an "expert" and undermine that within the first 3 paragraphs of your essay.

It's an added inequity that people who have these intellectual bubbles get so much media / airtime to blab their half-formed ideas. It's a social disservice. It's exploitative of the rest of us, who have to say something towards their bullshit.
posted by polymodus at 1:25 AM on January 4, 2016 [6 favorites]


I found the research paper from reading this article:

A Wealthy Governor and His Friends Are Remaking Illinois

The rich families remaking Illinois are among a small group around the country who have channeled their extraordinary wealth into political power, taking advantage of regulatory, legal and cultural shifts that have carved new paths for infusing money into campaigns. Economic winners in an age of rising inequality, operating largely out of public view, they are reshaping government with fortunes so large as to defy the ordinary financial scale of politics. In the 2016 presidential race, a New York Times analysis found last month, just 158 families had provided nearly half of the early campaign money...

Most of them lean Republican; some are Democrats. But to a remarkable degree, their philosophies are becoming part of a widely adopted blueprint for public officials around the country: Critical of the power of unions, many are also determined to reduce spending and taxation, and are skeptical of government-led efforts to mitigate the growing gap between the rich and everyone else.


Concentrated wealth is working hard everywhere to guide public policy to maintain and expand economic inequality. Paul Graham is a liar or a fool.
posted by a lungful of dragon at 1:27 AM on January 4, 2016 [25 favorites]


I can completely understand wanting to make a fortune in the Internet. It's wanting to spend the next 20 years hanging around smelling the farts of VCs and other Valley types that I don't get. I guess the man loves what he does.
posted by thelonius at 2:14 AM on January 4, 2016 [2 favorites]


Finite items might include: homes in the city you grew up in; specialist doctors in an area of medical expertise; public spaces that could either display or not display certain messages; etc. etc.

etc. includes elected and appointed government officials at all levels, highly-skilled lawyers, and all the other things that promote extreme privilege.
posted by Kirth Gerson at 2:15 AM on January 4, 2016 [2 favorites]


My own response to Paul Graham:
@paulg good start. Missing basic nuances. Functional vs dysfunctional levels, wealth vs income, income vs capital gains tax differences, etc
I was actually quite surprised with how tone-deaf his post came across. At a time when thinkers like Paul Mason discuss post-capitalism and the majority of Paul Graham's cohort have pledged to use their fortunes for social development, Graham's views seem antiquated and anachronistic.

Regardless, the three key pieces that I saw missing started with what is a functional level of inequality look like versus dysfunctional? Sweden has both one of the highest rates of income tax, broadest social system, and also most startups per capita in Stolkholm. Suggesting that while economic systems must allow for personal preference on risk vs. reward, that doesn't require a brutal winner-take-all market. Rather, the dials can be adjusted to both incentivise innovation, and redistribute gains across society at large. If some level of inequality is required to incentivise risk-taking, where is the discussion about what level is appropriate?

Secondly, there's a substantial difference between income inequality and wealth inequality. The former tends toward the latter, however, the latter is also a problem and seems to go unaddressed completely in his view. Yes, in the job market, there are levels of income inequality that are functional and dysfunctional (as mentioned), but that doesn't begin to touch the below-the-line accumulation of capital that is never recycled into the system. He doesn't address how gross income inequality results in money being taken off the table and out of the system.

Finally, I had hoped he would go into this in his tax point, but he doesn't really make a tax point, which is disappointing. One question that none of these guys ever seem to answer is the difference between income and capital gains taxes. Generally, the rates are different, and often weighted more toward income and less toward capital gains. Predictably that results in accumulation of personal capital from capital gains, while income is redistributed. I've often wondered if we would see the same backlash toward wealth if the tax rates were the same. As it stands, the current gap shifts the burden of wealth redistribution largely from owners to workers, and results in conflict between workers in terms of tax. Low income workers want higher taxes, high income workers want lower taxes, but then capital itself escapes relatively unnoticed and without substantial demands.

Finally, we cannot argue with the effectiveness of what Graham and his colleagues in Silicon Valley have created. There is a huge amount of innovation and positive results coming out of the valley. It's just a bit quixotic that the same people who were drawn by the liberal open environment of creativity, now espouse politics more suited to Wall Street and Ayn Rand.
posted by nickrussell at 2:57 AM on January 4, 2016 [15 favorites]


The inherent problem with income inequality can be demonstrated even in the barest terms.

Yes - and another one I liked from some of the commentary this weekend was pointing out that there is very little practical difference between a tiny Gosplan group planning your economy and a tiny group of billionaires doing so (by dint of their massive concentration of wealth distorting the "free" market beyond recognition)

Which makes it depressing when the latter group defend this miserable system by ranting about the horrors of a planned economy.
posted by bonaldi at 3:59 AM on January 4, 2016 [18 favorites]


I think PG has a much higher opinion of his argument than is merited. His "gotcha" move is to argue that if one favors eliminating economic inequality, one eliminates startups. But it's hard to see why this would be so awful -- that is, if one is not a VC profiting from the startup ecosystem. The startups that PG funds are quite controversial: AirBnb, Uber and Reddit, to name a few. And in the grander scheme of things, scientific and technological progress (what I think polemics that discuss "startups" are often talking about) can clearly come about through other means.

PG has half of a good point when he says economic inequality per se is not the issue, poverty is. Yes, one can ponder IF we lived in a society in which disadvantages of living on the low end of the wealth distribution were eliminated what the downside of being "poor" would be. But that world remains quite hypothetical. People in poverty in the real world are the ones losing the wealth inequality game.

And, as others have pointed out, the problem with wealth inequality (besides poverty) is that these inequalities are multiplied via the rich's control over the state. Economic inequality does undermine democracy, sorry PG.
posted by Noisy Pink Bubbles at 4:06 AM on January 4, 2016


[A couple comments deleted. As a reminder, please don't do the fantasizing, imagining, joking, etc. thing about killing or torturing people.]
posted by taz (staff) at 4:23 AM on January 4, 2016 [2 favorites]


Finally we cannot argue with the effectiveness of what Graham and his colleagues in Silicon Valley have created. There is a huge amount of innovation and positive results coming out of the valley.

if you look at the set of problems we face as a society and look at the set of technologies invented in "silicon" valley, it's hard to argue that any of it has been "effective" or innovative.

the sooner you realize you are coding 60hrs a week to make socially useless software so morons like pg can get even more obscenely rich, the better.
posted by ennui.bz at 4:27 AM on January 4, 2016 [11 favorites]


If you want to understand change in economic inequality, you should ask what those people would have done when it was different. This is one way I know the rich aren't all getting richer simply from some sinister new system for transferring wealth to them from everyone else.

what is this

i can't even

your job is literally to fund startups, each of which has the express stated intent of taking a little bit of money from a lot of people, and using it to fill a scrooge-mcduck-like swimming pool with money for its founders enhance shareholder value
posted by Mayor West at 4:29 AM on January 4, 2016 [8 favorites]


PG has half of a good point when he says economic inequality per se is not the issue, poverty is.

Of course! The problem is not that rich people don't pay enough taxes, which could be used to pay for education, health care, etc. of poor people. The problem is that there are poor people to begin with. If there were no poor people, nobody would be bitching about economic inequality.
posted by sour cream at 4:29 AM on January 4, 2016 [16 favorites]


Also I will never get tired of that oldest of chestnuts, "It's not that the wealthy are controlling more of the pie, it's that the pie is getting BIGGER and the absolute share of wealth held by the poor is staying the SAME, and this is an ineffable magic situation that cannot be expressed by ratios or lines or your primitive mathematical systems." Right. The pie is getting bigger, and all the new wealth is going to 1% of the population, and wealth is basically just a measure of ratio (if everyone makes $1 million a year, then no one is wealthy), but it's cool, because we great titans of industry with our huge swinging dicks are the only ones creating things of VALUE.
posted by Mayor West at 4:34 AM on January 4, 2016 [4 favorites]


Sweden has both one of the highest rates of income tax, broadest social system, and also most startups per capita in Stolkholm

Shhh, no, don't even mention that, it doesn't fit in the picture here. This is American exceptionalism squared - Silicon Valley is not an area within a state within a nation within a world, no, it's a planet off on its own orbit within a galaxy far far away. It's all about exceptional individuals within an exceptional environment in one exceptional state of an exceptional nation, and how such a galactic convergence of exceptionality is making things awesome and allowing unending progress for everyone in the world, amen.

And don't even mention taxes, or a social system, or rights and safeguards for workers and employees, no, those things don't belong in the galaxy of exceptional awesomeness - you can safely brush them away (without even mentioning them!) with a simple reference to some vague and nonexistant but potentially catastrophic attempt to "make it impossible to get rich".

It doesn't matter what anyone else says or how many words people write to refute this message, the only people who need to support it are those in government, and as long as they keep making exceptions for the exceptional, that's all that matters. The exceptional don't need a government to do anything else. Freedom! America!

The cold war is over, freedom won, and who do you have to thank for that? surely not small insignificant pseudo-socialist neutral countries like Sweden! tsk! where would Sweden be now if it wasn't for America anyway? and - roll drums please - where would America or the world be today without the wealth and innovation created by its Paul Grahams?

That's what this is about, in essence. You can't argue with this augmented version of American exceptionalism, no matter how badly worded and poorly argued. It's unassailable from within.
posted by bitteschoen at 4:40 AM on January 4, 2016 [26 favorites]


re: refragmentation - "The two forces were war (above all World War II), and the rise of large corporations."

Depressing thought: "Maybe war is key for building effective national institutions (Tilly)"

Sweden has both one of the highest rates of income tax, broadest social system, and also most startups per capita in Stolkholm.

Contra @paulg, "The notion that entrepreneurship and inequality go hand in hand is I suspect a myth."

speaking of which...
In Norway, Start-ups Say Ja to Socialism :P
Whereas most entrepreneurs in Dalmo's position develop a retching distaste for paying taxes, Dalmo doesn't mind them much. "The tax system is good—it's fair," he tells me. "What we're doing when we are paying taxes is buying a product. So the question isn't how you pay for the product; it's the quality of the product." Dalmo likes the government's services, and he believes that he is paying a fair price...

Last year, Dalmo paid $102,970 in personal taxes on his income and wealth. I know this because tax returns, like most everything else in Norway, are a matter of public record. Anyone anywhere can log on to a website maintained by the government and find out what kind of scratch a fellow Norwegian taxpayer makes—be he Ole Einar Bjørndalen, the famous Norwegian biathlete, or Ole the next-door neighbor. This, Dalmo explains, has a chilling effect on any desire he might have to live even larger. "When you start buying expensive stuff, people start to talk," says Dalmo. "I have to be careful, because some of the people who are judging are my potential customers."

Welcome to Norway, where business is radically transparent, militantly egalitarian, and, of course, heavily taxed. This is socialism, the sort of thing your average American CEO has nightmares about. But not Dalmo—and not most Norwegians. "The capitalist system functions well," Dalmo says. "But I'm a socialist in my bones."
oh and from the anti-pmarca:* Silicon Valley utopia ain't gonna happen - "Over the last two decades, most of my adult life, I’ve watched as the world has grown more interconnected than ever, fuelled by changes in information technology which have almost universally been treated as a force for good. This interconnection was supposed to improve scaling, transparency, productivity and bring western peace and prosperity to all... None of this has happened."
Instead of scaling, we’ve seen descaling because individuals need to adopt more jobs, more skills, more crafts just to get by — meaning professionalism is being lost. As well as our day jobs, for example, we are now also being asked to be hoteliers, cab drivers, propagandists, writers, advertisers, administrators, promoters and renters of all our possessions.

Instead of transparency, we’ve seen the emergence of echo chambers, filter bubbles, encrypted comms, noise pollution, single-interest groups, propaganda, misinformation, internet brigandage and the burying of real news in the cacophony of low-base (advertising saturated) media output.

Instead of productivity, we’ve seen working factories shut down, output stall, public resources be pulled, health services be cut, inequality rise, output be redirected to luxury goods, corporate taxes be dodged and energy be burned for no real good reason at all.

Instead of peace and prosperity, we’ve seen the world become fragmented, divided, politically charged, cult-minded, intolerant, enraged, hateful, hurtful, spiteful and malevolent — now with the added advantage of all this hate being zapped directly into our consciousness 24/7 via the power of our mobile phone or computer laptop.

Instead of coming together, political systems have been fragmenting, with no consensus anywhere, because we can’t agree on anything. Self-interest dictates the news agenda entirely. Trust is being dismantled. We are becoming less cooperative not more.
cf. Mariana Mazzucato's The Entrepreneurial State
viz. CivTech!

He doesn't address how gross income inequality results in money being taken off the table and out of the system... capital itself escapes relatively unnoticed and without substantial demands.

just put up a FPP about this! but i'd also add that you can see this in a dearth of investment and the wedge between deposits and lending (not to mention the drop in monetary velocity ;)
posted by kliuless at 5:16 AM on January 4, 2016 [21 favorites]


I just don't get how he figures that determination and grit are the primary reasons startups succeed, when 80-90% of them fail. Were those people just not gritty enough? Or is it possible that VCs don't really do that well at picking winners, and the ones that do win (your AirBnBs, Ubers) are cherry picked examples from a field of ravaged ideas that failed?
posted by turntraitor at 6:54 AM on January 4, 2016 [7 favorites]


Most people who get rich tend to be fairly driven. Whatever their other flaws, laziness is usually not one of them.

And by implication, poor people are lazy. How Victorian.


No, from the statement that rich people work hard, it doesn't follow that poor people don't work hard. And you're taking his statement out of context; he's merely talking about how public policy affects the behavior of rich people:
Most people who get rich tend to be fairly driven. Whatever their other flaws, laziness is usually not one of them. Suppose new policies make it hard to make a fortune in finance. Does it seem plausible that the people who currently go into finance to make their fortunes will continue to do so but be content to work for ordinary salaries? The reason they go into finance is not because they love finance but because they want to get rich. If the only way left to get rich is to start startups, they'll start startups. They'll do well at it too, because determination is the main factor in the success of a startup. [3] And while it would probably be a good thing for the world if people who wanted to get rich switched from playing zero-sum games to creating wealth, that would not only not eliminate economic inequality, but might even make it worse.
posted by John Cohen at 7:01 AM on January 4, 2016 [2 favorites]


Google Uber AirBnB Amazon and even Apple are noise on the real money flows impoverishing the poor and enriching the rich.

https://research.stlouisfed.org/fred2/graph/?g=321A

shows how the real per-capita cost of living (health care + housing expense) has increased 4X since 1960, from $4000 to $16,000 (2015 dollars)
posted by Heywood Mogroot III at 7:02 AM on January 4, 2016 [8 favorites]


I think PG has a much higher opinion of his argument than is merited.

That's a pretty classic result of someone who thinks his understanding of an issue is a lot better than it is.

Graham's argument is no different than the one your average cranky relative was making over Thanksgiving, just with more words. As someone else said, I get that Graham is trying to be a "thought leader," but his arguments are so ridiculously tailored to the specific audience of Silicon Valley true-believers. But I think that as far as he is concerned, that's the audience who "counts" when it comes to being a thought leader.
posted by deanc at 7:08 AM on January 4, 2016 [1 favorite]


I'm fine with start ups, new business structures, etc., even when they put many people out of work.

It's false however that merely "some of the growth in economic inequality we've seen since then has been due to bad behavior of various kinds" or that start ups represent a really significant increase in inequality. Almost all the technical inequality comes from derivatives which dwarf the world GDP.

There are huge problems with lauding the "creation of wealth" too since all the rent-seekers, zero-sum gamers, and fraudsters do that too. In fact, corporate valuations arise not from them possessing assets, but from their investors desire to invest. It follows that start ups create "inspired wealth" as opposed to "zero-sum wealth", "rent-seeking wealth", etc., which he dislikes, but also unlike "earned/labor wealth", which his usage of creation seeks to confuse. Arguably derivatives are "inspired wealth" too, but we can presumably distinguish them as inspired purely by wealth vs inspired by a mix of wealth and real product.

In any case, there are already better economic metrics like the velocity of money and the numerous flavors of efficiency, but economists tend to discover correlations between these an economic inequality. And those research results are largely the real reason we talk about economic inequality, rather than just poverty.
posted by jeffburdges at 7:31 AM on January 4, 2016 [5 favorites]


The point is that wealth is not a zero-sum game/not necessarily gained at the expense of others.

It's something of a strawman, or rather a response to a worldview that is rather out of the mainstream these days.


It doesn't seem like a straw man at all. Perhaps this world view is out of the mainstream, but it seems wildly popular, even here.

I don't find a lot of terribly objectionable things about Graham's essay. At least not like I'd find many other places, including here. I think there's a tendency to focus on Silicon Valley as a source of economic woe (or prosperity) which I think is unwarranted, even if it makes an attractive symbol of a source of economic woe. What makes Graham post worthy here, even if what he writes isn't particularly novel or insightful, is that he appears to be completely unrepentant about his role in the machine. That's the MetaFilter bait, the reason the post generates more than two responses at all.
posted by 2N2222 at 7:37 AM on January 4, 2016 [3 favorites]


There is a much shorter argument that goes : If we take money from the rich, then the effects depend upon the individual, their business, etc. and can be unpredictable. If otoh we give money to the poor, or equally to everyone via basic income, then we've solid economic research showing that society improves in a number of critical ways.

Ain't actually clear if that first statement holds really, certainly we've had high individual income taxes in the past, and one could target corporate incomes rather than individual incomes.
posted by jeffburdges at 7:40 AM on January 4, 2016 [2 favorites]


MetaFilter: The argument your average cranky relative was making over Thanksgiving, just with more words.
posted by Going To Maine at 8:04 AM on January 4, 2016 [5 favorites]


The problem is that the first place winner gets the vacation to Hawaii and the jet ski, and the #2 gets the home edition board game. #3 gets to keep his pancreas and most of his teeth.

This hits the nail on the head. The problem isn't that the person who launches a successful start-up makes a billion dollars. Not really. The problem is that the person who doesn't launch a successful start-up gets laid off, goes bankrupt because he has no "skills" and therefore can't get another job, and dies in poverty.

Also: considering the extent to which they are lauded - even outside the Valley - how much do Silicon Valley start-ups really matter? Many of the most successful ones essentially boil down to "tools that reduce minor inconveniences, mostly for upper-middle-class people." I'm sure there are exceptions to this, but a startling number of the start-ups you hear about - AirBnB, Uber, Seamless, Venmo - fall into this category, more or less.
posted by breakin' the law at 8:32 AM on January 4, 2016 [8 favorites]


"tools that reduce minor inconveniences, mostly for upper-middle-class people." I'm sure there are exceptions to this, but a startling number of the start-ups you hear about - AirBnB, Uber, Seamless, Venmo - fall into this category, more or less.

I'm not sure that ride-sharing services fall quite as much into that category, actually; I recall seeing a few articles about how quite a few folks are using Uber to get to & from jobs that have hard start-and-stop times. (Citations needed, I know.) Transit is essential for everyone, not just the upper-middle-class, and while there are many problematic aspects of Uber et al., something that increases the accessibility of the city to everybody isn't all bad.
posted by Going To Maine at 8:59 AM on January 4, 2016 [2 favorites]


I'm not sure that ride-sharing services fall quite as much into that category, actually; I recall seeing a few articles about how quite a few folks are using Uber to get to & from jobs that have hard start-and-stop times. (Citations needed, I know.) Transit is essential for everyone, not just the upper-middle-class, and while there are many problematic aspects of Uber et al., something that increases the accessibility of the city to everybody isn't all bad.

I'd be curious to see those articles - how many of those people were low-wage workers? I'm a bit skeptical that it's very many, simply because Uber works like a car service, and car services are expensive. I can envision this occurring on a very small scale, but I have a hard time imagining significant numbers of low-wage workers riding Ubers to and from the night shift across town.

I could be wrong about this, surely, and I agree with your point about increasing accessibility to the city. Uber isn't all bad. But, even setting aside Uber's problematic aspects, I think it still fits the mold of what I'll call "convenience start-ups," which don't really do anything new but just make it slightly easier to do stuff you already did (at least if you're middle-class). Like, Seamless is nice, but calling to order take-out was really not that difficult and comparing the likes of Seamless, Venmo, et. al. to companies that actually make stuff (or even companies that do really new stuff) strikes me as one of the most ridiculous aspects of Silicon Valley.
posted by breakin' the law at 9:18 AM on January 4, 2016 [1 favorite]


I'd also add to my comment above that there is, of course, no clear bright line between "doing/making new stuff" and, well, not. But, I'd still question the overall utility of most start-ups. People in Silicon Valley, and often elsewhere, tend to talk about start-ups as though they are a good in and of themselves. They are not.

To paraphrase the worst U.S. President of the past fifty years: rarely is the question asked, is our start-ups doing stuff?
posted by breakin' the law at 9:30 AM on January 4, 2016 [1 favorite]


It's just a bit quixotic that the same people who were drawn by the liberal open environment of creativity, now espouse politics more suited to Wall Street and Ayn Rand.

There's a long history of this.
posted by zabuni at 10:27 AM on January 4, 2016


AirBnB, Uber, Seamless, Venmo - fall into this category, more or less.

My only experience with Venmo has been this odd one; it's the only way I can pay my rent without a fee. My landlords will not accept personal checks or cash; money orders have a fee. Venmo has a fee also if you use a credit card.

So in order not to give it access to my main bank account, I had to open up a separate one just for rent and pay from there.

I wouldn't exactly call it convenient for me, but I guess it might be for my landlords.
posted by emjaybee at 10:55 AM on January 4, 2016 [1 favorite]


there is very little practical difference between a tiny Gosplan group planning your economy and a tiny group of billionaires doing so

more on BigCorps...
The Managerial Revolution - "James Burnham reveals how our oligarchy rules."[1,2,3]
In FDR’s era, as now, there was a paradox: America was a capitalist country, yet capitalism under the New Deal no longer resembled what it had been in the 19th century. And socialism in the Soviet Union looked nothing at all like the dictatorship of the proletariat: just “dictatorship” would be closer to the mark. (If not quite a bull’s-eye, in Burnham’s view.)

Real power in America did not rest with the great capitalists of old, just as real power in the USSR did not lie with the workers. Burnham analyzed this reality, as well as the fascist system of Nazi Germany, and devised a theory of what he called the “managerial revolution.” Economic control, thus inevitably political control, in all these states lay in the hands of a new class of professional managers in business and government alike—engineers, technocrats, and planners rather than workers or owners.

The Managerial Revolution, the 1941 book in which Burnham laid out his theory, was a bestseller and critical success. It strongly influenced George Orwell, who adapted several of its ideas for his own even more famous work, 1984. Burnham described World War II as the first in a series of conflicts between managerial powers for control over three great industrial regions of the world—North America, Europe, and East Asia. The geographic scheme and condition of perpetual war are reflected in Orwell’s novel by the ceaseless struggles between Oceania (America with its Atlantic and Pacific outposts), Eurasia (Russian-dominated Europe), and Eastasia (the Orient). The Managerial Revolution itself appears in 1984 as Emmanuel Goldstein’s forbidden book The Theory and Practice of Oligarchical Collectivism.

[...]

After all, the managerial Soviet Union is gone, and the capitalist U.S. has not only survived but thrived for decades in what is now a globalized free-market system. While the political theory of The Machiavellians doesn’t depend on The Managerial Revolution—it’s surprising, in fact, how little connected the two books are—his reputation must surely suffer for getting such a basic question wrong.

Only he didn’t get it wrong—for what is the political and economic system of China if not what Burnham described in The Managerial Revolution? Engineers, industrial planners, and managers have led China for decades, with unarguable results. Indeed, several East Asian economies, including those of American allies Taiwan, South Korea, and Japan, are managerialist. As Burnham predicted, these economies have been highly successful at controlling unemployment and raising standards of living.

The American ruling class, by contrast, has pursued a largely anti-managerial policy, ridding the country of much strategic manufacturing. Such industry—including shipbuilding and semiconductor fabrication—is now overwhelmingly based in Asia. The U.S. hybrid system, transitioning from capitalism to managerialism, outperformed the Soviet Union. Whether it can outperform the next wave of managerial revolution is very much uncertain.
posted by kliuless at 11:19 AM on January 4, 2016 [9 favorites]


I'm a bit skeptical that it's very many, simply because Uber works like a car service, and car services are expensive.

Uber is cheap for a car service - this is presumably to a large extent at the expense of the workers, so you've got something of a Walmart effect. You certainly don't have to have that much money to find it useful to get home at odd hours etc. - you do have to have a credit or debit card - but I don't know one way or another about people taking it to work every day.
posted by atoxyl at 11:41 AM on January 4, 2016


I know plenty of people with lower-end wages who make use of Uber as a supplement to public transport. The most recent one we talked to about it isn't making minimum wage but she's a baker in Georgetown; not the path to a house in Great Falls. Uber isn't cheap but compared to the cost of her family purchasing a second car and the cost of parking it in Georgetown it's a bargain. If WMATA ran the metro and the bus lines she needs with the necessary frequency I'm sure she would be happier with that, but those early morning service jobs sometimes require starting when they're just running the first metro train.
posted by phearlez at 12:40 PM on January 4, 2016 [2 favorites]


We've justly hammered his economic inequality apologetics pretty good, but actually his refragmentation article makes pretty good sense. I'm not sure if it's true or even passes the "not even wrong" test, but I buy the overall conclusion that failure awaits aping the socialist successes of the 20th century too naively.

In fact, I'd claim that's an important distinction between the false leftists like the Democrats in the U.S. or Labor in the U.K. and the various flavors of progressives, especially the Green parties, the new progressive center right, and the Pirate parties in Europe.

Democrats and Labor say "look we know what we're doing", which is true if you compare them with say the Republicans. Yet, they are not even repairing bridges, much less trying for meaningful reforms, like abolishing copyright, enacting greater transparency, dealing with carbon emissions, etc. It's precisely that these real reforms do not fit with their parties' ideological narratives birthed in the mid 20th century.

Around this, I'd suggest that attempting to create income equality through income tax actually does look suboptimal today, not sure if that's what Paul Graham wants to sell or not. Instead, we should attempt to equalize companies by making corporate income tax and/or the VAT extremely progressive in corporations' net income.

If you buy from Walmart or Amazon itself, then much much more of your purchase should be going to the IRS than if you buy from say a random ebay seller. If you advertise with Google, then much more of your ad spend should be gong to the IRS than if you advertise with smaller outfits.

As currently corporate income tax and VATs are aggressively regressive, with large corporations paying nothing, fixing this might go a very long way.

posted by jeffburdges at 1:28 PM on January 4, 2016


Do I remember PG as planning a YCombinator for social good, or is that wishful thinking?

Correct me if I"m wrong, but I think he's saying that a growing inequality is unavoidable, if we don't want to be left behind as a country, and that fixing the problems of poverty, low social mobility, etc, can better be achieved if we don't view inequality per se as our root problem.

(Though it may be that the influence of politics, and of money on politics, makes his argument moot, from a practical perspective - as they will, if it takes a ton of money that the rich don't want spent. I don't know. I'd like to see some empowered policy wonks take a crack at it though.)

Is anyone compiling the best non-ad-hom arguments against his thesis?
posted by Baeria at 1:43 PM on January 4, 2016


It's not really his thesis, because what it is is a standard, technocratic argument that tries to paint a pseudo-logical relationship between technology (always oversimplified as a neutral, non-meta process—because any model more complex would screw up the argument) and social injustice (always reduced via individualist, Economic Man ideology into "economic inequality").

This is a classic case of "public intellectuals" (more accurately, biased consultants with a public communications platform) needing to shut up more, when their ideas are just really bad memes.
posted by polymodus at 2:23 PM on January 4, 2016 [2 favorites]


lol this is the same guy who posted this deep thought:
Any industry that still has unions has potential energy that could be released by startups.
posted by Rustic Etruscan at 3:24 PM on January 4, 2016 [4 favorites]


lol this is the same guy who posted this deep thought:
Any industry that still has unions has potential energy that could be released by startups.


Diagnosis - extraordinarily inflated sense of own importance. Stick to Lisp, Paul, I like Lisp.
posted by atoxyl at 4:29 PM on January 4, 2016


It's so adorable when engineers think that social problems are best solved by engineers. (Note: I'm an engineer.)

Essays like this are infuriating partly because of the whole "Look at us! Look at all the innovation coming from The Valley!" blather which, from where I sit, looks absurdly short sighted. SV-style venture funding only funds a tiny variety of startup types. You've got to have a business that 1) takes minimal startup capital 2) will grow like crazy for a few years before 3) implementing some sort of exit strategy. And recently, it has to solve a problem that appears to primarily exist among 20 somethings working 80 hours a week at OTHER startups, like taking out your own damn trash. THAT'S IT. That's a recipe for making an iPhone app to let you real-time auction your downtown SF parking space, not for solving the genuine big problems in society.
posted by LastOfHisKind at 5:27 PM on January 4, 2016 [4 favorites]


One of the bigger problems here is Graham's assumption that inequality is not, in itself, a bad thing. But there is a lot of evidence that societies, rich and poor, that are more unequal suffer from worse crime, health, social mobility, among other outcomes.
posted by AceRock at 6:52 PM on January 4, 2016 [3 favorites]


Graham just posted a simplified version of the inequality article, in case you are too dumb to understand the original argument.
posted by Phssthpok at 8:41 PM on January 4, 2016




What needs fixing is Paul Graham's intellectual blinders. The real cause of inequity is people like him. People, not startups, not technology.
posted by polymodus at 1:25 AM on January 5, 2016 [3 favorites]




Paul Krugman responds. And so does Seahawks lineman Russell Okung.
posted by Apocryphon at 11:53 AM on January 15, 2016 [1 favorite]


"What Paul Graham Is Missing About Inequality" by Tim O'Reilly
posted by Apocryphon at 1:52 PM on January 25, 2016 [3 favorites]


from o'reilly's wtf: "as Nick Hanauer points out, in general we have forgotten the hard fought lessons of the 20th century, that workers are also customers, and that unless they receive a fair share of the proceeds, they will one day be unable to afford our products..."

sounded familiar and, i was like, didn't he write that awesome article on redefining prosperity? glad to put the two together :P thanks!
posted by kliuless at 12:12 PM on January 26, 2016 [1 favorite]


An Income For Basics
A cheap way to read the startup incubator Y Combinator’s announcement of funding for a researcher to conduct a “a study on basic income—i.e., giving people enough money to live on with no strings attached” is to note that it is coming from a firm in the business of accelerating the creation and growth of the kinds of companies that will potentially put large numbers of people out of work, permanently, through automation, like anyone who drives any vehicle for a living.
fucking awl, mark your hyperlinks.
posted by the man of twists and turns at 3:49 PM on January 27, 2016


Maximum Wage - "Is technological progress dependent on extreme inequality?"
posted by the man of twists and turns at 8:50 PM on January 31, 2016


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