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> Why do they have to "contribute to society"?

This gets to the core of the question! How did a rich startup person get wealthy anyway? They built something that people wanted. People said: "hey, that thing you built, I value it at $20 and you're giving it away at $10, so I'm happy to buy it!" Anyone who made money from business has already created wealth and contributed to society, via the market.

To the people who would disagree with me-- Look at your surroundings. Do you feel oppressed by the manufacturers of your laptop? Do you feel like you have no other option but to buy a $5 latte at the coffeeshop you're at? Are you being held at gunpoint by your new-used car? Do you wish the refrigeration oligarchs never existed? No! You are getting _insane_ value out of these relatively cheap items. Your $5 latte couldn't even exist a century ago. So it's okay that all the people who worked 40 hours a week to bring you your gadgets get a cut.

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> Anyone who made money from business has already created wealth and contributed to society, via the market.

Let's not get carried away. This is how the market is supposed to work, and often it does work this way, but there are plenty of businesses built on exploiting information asymmetry, bad regulation (often lobbied for by the businesses themselves), etc. Yes, markets are generally good, but there looks to be plenty of room for improvement in our implementation.

They built something that people wanted.

Most startups today aren't really creating brand-new "value" (which is a horribly nebulous term, hence I'll leave it in quotes), but rather taking part in a shifting of existing "value" from place to place, and the VCs who fund them glean some profit out of the process.

And some of the most controversial startups are doing this not by offering genuinely better products or services; they're doing it by offering a similar-quality product or service, but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by.

>but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by.

You're right, in a lot of cases (Taxis vs Uber comes to mind) the government has created these sub-optimal local maximums with its unnecessary regulations and industry protectionism. Technology is the big energy input needed to break free and move to a new maximum.

When I use Uber, I get much more value than I ever did with a taxi. Not only does it cost me less, but it's faster, the experience of ordering is painless, the cars are nicer, the drivers are honest, and there's accountability for bad drivers. Uber is most definitely creating value.

More generally, new ways of doing things displace old ways of doing things. If you're a company doing things the old way, adapt or die. That's progress. In capitalism, the destruction of old business models is as essential as the construction of new ones. They are two sides of the same coin.

Addressing your argument again, lots of the businesses being displaced were basically profiting from regulations that kept out competition. He who lives by the sword dies by the sword.

As for your general point that the valley isn't really creating much value, remember that all of those wild valuations are just risky speculation by a small few, given that there's no open market for buying and selling shares in these companies. Risky speculation is a valid investment strategy for a portion of your wealth. Beyond all of the hard-to-believe valuations, there's also thousands of small technology companies making small profits and providing real value, but not getting any media attention.

It certainly is possible to recognize that disruptive startup businesses provide value and quality over preexisting services, and criticize them for flouting laws that are supposed to protect their workers, and/or customers.

It also is certainly possible to recognize that government overregulation has enabled rent-seekers to do great harm in staunching competition and establishing a low level of quality for consumers, but also that government has the power to protect the customer and the worker from exploitative businesses.

A thing can do both good and bad. We must all recognize that.

"The majority of drivers are classified as independent contractors, are not protected by core employment and labor laws, and often work under arduous and unsafe conditions."

Yeap, Uber is awful. Oh, wait, this is actually a report from 2007 describing the Taxi industry: http://www.nelp.org/content/uploads/2015/03/Unregulated_Work...

There's a lot of propaganda about how Uber is reducing the welfare of drivers, but it all seems based on some ideal of the taxi industry that isn't actually true.

We know that Uber is awful and managed by sociopaths in absolute terms. It does not need comparison to any kind of old taxi industry ideals. Plethora of reports we had for the last few years show this clearly. And old "taxi mafia" was at least subject to some improvements - each taxi company was local and had to listen to authorities, which in turn could be influenced by citizens. Uber? They don't give a flying fuck about the law, and they're too big for any single city to pressure them into anything. It's like trying to replace a bunch of crooked mayors with a warlord hell-bent on total domination in the region.

I don't like Uber either; I just dislike dishonest propaganda, even if targeted at a bad actor.

> They don't give a flying fuck about the law, and they're too big for any single city to pressure them into anything.

I think that's a little overblown. Uber has been forced to leave many cities (Paris, Frankfurt, Hamburg, Madrid, etc) and parts of cities (e.g. Calgary Airport).

Uber may be willing to bend the law, but the cities can literally call their cars and ticket them (or even impound them), it's not like it's an underground operation, and not even Uber can sustain that, as we've seen.

Fair enough. I know about Germany, but I missed Paris and Madrid - thanks for the info. Though how much % of the total operations is that?

But it's not bending it, it's disregarding and breaking it. Bending was what Uber-like services have been doing in Europe for past 10+ years, and in time they managed to integrate themselves with the infrastructure nicely.

In my city the IRS tries to randomly call and then fine the living crap out of Uber drivers, but it doesn't seem to be effective. Frankly, if Uber teaches people anything it's how slow and inefficient local governments have become. Which is both good and bad to know. On the other hand, local startup community figured out that they're obliged to help Uber win, so they promote them and jobhunt for them and if our startup community is good at anything, it's good at promoting and finding people.

Why would the IRS be fining Uber drivers? Uber is legal under federal law. And the IRS doesn't really care that much about how you got your money, as long as you pay taxes on it. Do you have a source for that or just anecdote? Maybe it was the state-level tax authority.

I don't think TeMPOraL lives in the US; for us foreigners when speaking in English, it's common to use the American term to refer to the local equivalent.

Like you said, I meant the local equivalent to the American IRS. I actually picked up this way of writing here on HN :).

Uber is still available in Paris. Only UberPop has stopped. They still have UberX and UberBlack which are legal according to French law since they rely on licensed drivers.

I prefer the accountability of the market, over taxi cartel boards.

Fine, but it doesn't work when one side plays by different rules than everyone else.

I agree. Abolish the medallion systems and other industry protectionist laws. Then cabs will just become a federated competitor to Uber and prices will fall to the same level, if not lower. I guarantee that the taxi lobby will not approve of that. They want government protection to revive their dead monopoly. There's nothing morally wrong with that; they're just looking out for their own interests. It's on the rest of us to see that for what it is.

Yes, that's true and it wasn't my intention to say otherwise. The rule of law is a very good thing and flouting the laws is ipso facto a bad thing because it damages the rule of law. I happen to disagree with a lot of those laws, on both the grounds of individual freedom and their own stated goals (i.e. I think that a lot of worker's rights and consumer protection laws are actually bad for workers and consumers). And flouting bad laws can bring good results. Especially laws that have only civil penalties, when people accept the risk of those penalties. It's a delicate issue that should probably be evaluated case-by-case.

Ah yes, the evil gubmint did it.

Well, you have fun with that.

I'm addressing your specific argument here:

>but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by.

    This gets to the core of the question!
    How did a rich startup person get
    wealthy anyway? They built something
    that people wanted.

And were lucky enough to live in a society sufficiently functional to let them build that thing others wanted. You don't see a lot of millionaires or billionaires coming out of failed states.

> Anyone who made money from business has already created wealth and contributed to society, via the market.

What in your opinion would be the contribution of a high frequency trader to a society or an individual ? Getting markets to be arbitrage less at sub-mili-second time scales was a pressing problem for no one.

For some of the other industries, if you price the externalities, it is far from clear if they are providing a benefit.

It's not a large problem and that's exactly why the high frequency trading industry is tiny. You only think it's big because it gets disproportionate attention in the media.

I guess it depends on how you bracket the problem and how you define "large". According to http://www.marketswiki.com/mwiki/High-frequency_trading,

"It was estimated that as of 2010, high-frequency trading accounted for an estimated 50 to 70 percent of trading."

Yes, that's absolutely natural. That's like saying 50 to 70 of Internet traffic went through an ISP.

I suppose. I mean, I get the difference between quality and quantity, but if we're talking about the gravity of the problem, the knowledge that 50-70% of trades are HFT/automated tells us something about the nature of our securities, commodities, etc. markets. Doesn't it?

But why does that astound you or strike you as a problem? Look at any mature market and you'll find middlemen buffering supply and demand. Imagine:

50-70% of auto transactions are between dealers who don't even drive their cars and only own them for weeks!

50-70% of bread transactions are between distributors and supermarkets who don't even eat bread and want to sell it in days or even hours!

That's a good point. I suppose I assumed that the 50-70% figure referred to front-side securities, futures, or commodity transactions (the equivalent of an end-customer buying a finished product in a retail transaction), rather than amongst various intermediate levels in a complex supply chain.

>Its not a large problem

is a very charitable way of putting it.

No, they didn't get wealthy merely by building something that people wanted - if you just do that, other companies will offer the same thing and the market will drive down the price to just above the cost of production. This is how the free market is meant to work and it's what makes it (in theory) an efficient way of allocating resources. In order to get truly wealthy you need to find some barrier to entry, some way of ensuring that you can avoid the free market and its drive for efficiency. It could be network effects, which ensure that competitors to sites like Facebook and eBay won't succeed because they're useless unless everyone's already using them. It could be software lock-in and patents of the kind that drove Apple to be one of the richest companies in the world. It could be information asymmetry that causes people to choose your well-known brand over cheaper but better products because it's too expensive for them to assess the actual quality of what they're buying. But there has to be some barrier, some way of defeating the free market.

Thank you for articulating this. It's an interesting perspective I hadn't seen before and will have to ponder over the degree to which it manifests itself..

Selling something that people want isn't equal to providing value. Let me be pessimistic: coffee doesn't provide a positive value, because it's a drug that get's people addicted however little and subliminal. Maybe that is a value to society in general, but it isn't to the individual. The car definitely is an economic nessecity in some parts. I don't know what refridgerator oligarchy you are refering to and it specifically doesn't matter. I'm sure the term oligarchy relates negatively to democratic societies.

I love coffee. It is one of the great pleasures of life, like chocolate and strawberries. It provides positive value to me.

Hedonism is your ultimate phylosophical truth, is it? Strawberries are hardly as heavily industrialised as coffee, calling your relationship with a hot bevarage a romantic one is doubtful. I am as pessimistic as your logic is flawed. There are few things in live the brain is prewired to feel a need for. Coffee supplis the illusion of fullfilling two or three enssential ones of these, hunger and thirst and sleep, but it doesn't actually provide the associated value.

Hedonism is as true as any other. Plenty of people, even if they are not familiar with philosophical terms and wouldn't self describe as such, are living according to hedonistic values. Plenty of people are living according to all sorts of different codes. Any system that defines value in a way that doesn't allow for these people, for example by saying that coffee doesn't have value, is a faulty one.

Economically, if a person is willing to spend $5 on coffee then coffee is worth $5 to them. Trying to attach solid philosophical reasoning behind that may be a fun thought experiment but it's hardly the solved one your responses seem to imply that you think it is.

No, hedonism is not true. It's a deceptive misconception of what values are a good guideline for a sustainable life. I was getting at the common notion that hedonists don't want to work, because it's no fun, which is obviously incompatible.

>any system that defines value in a way that doesn't allow for these people

wat

Hedonism defines pleasure as the primary and most intrinsic good so any system allowing it is just hedonism. WTF? How would any system acommodate competing theories? Fun thought experiment, sure.

>Economically

Usually it would go the other way, if coffee is worth something to me, I will be willing to pay that. You mess up simple logic, get your head straight.

I hate to continue on a tangent, but coffee is delicious and smells amazing and you'd have to be The Grinch to not enjoy the atmosphere in a good cafe. If you want some tangible benefits just throw in some sugar and cream.

It's disgustingly bitter, so much most can only bare it with milk and sugar.

Your subjective evidence is not convincing, even less as I was implying coffee had an addictive and hence behavioral conditioning effect, part of which comes from advertisement like yours, so stop it, will ya.

> disgustingly bitter

I take mine black. I admit it is an acquired taste, but oh what a glorious taste it is! Maybe you just had some bad coffee.

Coffee supplis the illusion of fullfilling two or three enssential ones of these, hunger and thirst and sleep, but it doesn't actually provide the associated value.

You know, for many, that's a completely irrelevant factor in their appreciation for coffee.

And by the way, I'm pretty sure it does quench thirst, seeing as it's 99% water.

No, I don't know.

If 99% water solution just has to satisfy thirst, then a 1% zyankali solution doesn't kill, is it? It's a bad comparison, because I really don't know what else coffee brew consists of exactly, but you probably don't either, so ... that pretty much wraps it up.

>"Selling something that people want isn't equal to providing value. Let me be pessimistic: coffee doesn't provide a positive value, because it's a drug that get's people addicted however little and subliminal. Maybe that is a value to society in general, but it isn't to the individual."

If you don't think someone selling you coffee that you want is providing value, then perhaps you should try make your own. Once you have to "spend" time to physically make/get yourself the good/product that you wanted, you'll quickly learn what "value" a seller provides. Technically, not the seller as much as the actual producer, but the seller provides value as well. And in most examples represents the entire supply chain.

That's just sad how much you are missing my point, all the while defending the coffee that your text kind of reads like you had too much before reading.

>"Selling something that people want isn't equal to providing value."

This is the point I was addressing.

>"Let me be pessimistic: coffee doesn't provide a positive value, because it's a drug that get's people addicted however little and subliminal."

Oh, so now it's "positive value". This is something you are imposing on the person based on your own personal opinion about value and coffee.

>"Maybe that is a value to society in general, but it isn't to the individual."

No, it's a value to the individual that chose it. You, being external to the hypothetical individual we are discussing, don't get to make decisions for said individual.

>"That's just sad how much you are missing my point, all the while defending the coffee that your text kind of reads like you had too much before reading."

My comment had nothing to do with advocating coffee.

>My comment had nothing to do with advocating coffee

My comment did. You can't just reply to the whole comment without considering that part.

No, your comment had to do with redefining value based on whether you think something is good for someone. Like coffee.

I was trying to tell you that there is a difference between what someone thinks about something's value and the actual value of that thing. It's called subjectivity and objectivity and I feel like your first comment in this thread sounds like you imply that there was no objectivity. The absolut is a special case of relativity: coffee is absolutely disgusting, even if it subjectively seems to taste relatively fine to some, they all agree that it was disgusting at first, hence it's called an aquired taste.

> They built something that people wanted.

What about people that produce heroine? Run casinos? Magic weight loss pills? Free-to-play games?

The people producing heroine are mostly poor farmers, not rich startup guys. And magic weight loss pills are simply fraudsters, nobody defends those.

As for casinos and F2P games, what about them? Certainly some people get hooked, but 95% of casino players don't[1], yet they still enjoy it. What's wrong with that?

[1] http://www.pbs.org/wgbh/pages/frontline/shows/gamble/etc/fac...

I couldn't agree more. Capitalist wealth comes from repeated consensual and mutually beneficial transactions.

If you want to get rich, create value for people. It really is a wonderful system.

Poe's law invoked.

It's depressing that the idea at the core of our prosperity is dismissed by some as an extreme view indistinguishable from parody. Thankfully, people like Friedman and Hayek have laid down a rock-solid intellectual defense of capitalism. We ignore their wisdom at our own peril.

That's because the laissez-faire market forces you invoke are not the core of our prosperity, just one of the factors leading to it, so your comment did sound as an extreme parody of a right wing position (which may be more or less reasonable depending on how strongly you support it).

Friedman and Hayek wrote their work before we had a thorough understanding of how complex systems are optimized. Thanks to more powerful computers, we now know that search guided by purely local improvements gets stuck in local minimum (in Economics, those are the Pareto points). Those local minima can be incredibly far away from a true global optimum, but can't be improved by "consensual and mutually beneficial transactions".

Sometimes you do need to take actions that temporarily inconvenience one actor to achieve a point that will benefit all them in the long term; see the prisoner's dilemma for a simple example. The GP post mentioned 40-hours work weeks; those weren't brought by laissez-faire economics nor individual negotiation either, 60 or 80 hours a week were the norm before socialism.

Capitalism tends to create immense concentrations of power without checks and balances on the hands of tycoons, of the kind that should make any true libertarian be very afraid of those holding it. The system that really works best is one where wealth is created for a few years through capitalism, and then that wealth is redistributed by government's welfare politics to the wider population. This is what has been going on in Western countries in the last century, bringing us stability and avoiding the frequent revolutions that plagued Europe and the Americas in all its previous history.

Interestingly, Friedman, and I think Hayek as well, supported a universal basic income. Friedman called it a negative income tax, but its the same premise. I think a lot of laissez-faire capitalists would get behind that idea, if it was coupled by the permanent abolition of all other welfare programs and most labor regulations. It's definitely an idea I can get behind.

It would require some constitutional amendment for both sides to trust each other enough.

One reason why many such characters would support basic income is that it would ostensibly remove the provision of benefits from the overview of the bureaucracy. That's the same reason that many others would not support it.

I'm very tempted to throw in with the former, except that I worry about the follow-on effects of basic income. Would a basic income just be a windfall for landlords, as they all increased rents by some large percentage of the average basic income? Or would the formerly-urban formerly-poor head for the hills, now that they could budget over the long term without relying on urban amenities? This would be a windfall for a different set of landlords and real estate investors, but it would drastically change the nature of 80% of the communities in the nation. That's not even to consider the wealth effects on markets more elastic than housing. It would be a grand experiment, but somebody would start crying.

I think a gradual phase-in of the basic income, and a corresponding phase-out of existing programs, would avoid the pains of a sudden change.

Great string of comments, interesting that Friedman supports basic income. If anyone wants to read my comment far down below and answer any points you disagree with that'd be super welcome! (it starts with "With this comment I'm answering both PG's post and an answer to his post that can be read here: http://cryoshon.co/2016/01/02/a-response-to-paul-grahams-art...)

>Capitalist wealth comes from repeated consensual and mutually beneficial transactions.

Tech hiring collusion, 2008 financial crisis, environment degradation and global warming, slavery-like conditions at suppliers of multinational corporations, medical bankruptcies in US and lack of guaranteed holidays, ghettos, plundering of natural resources, monopolies everywhere (as prescribed by Thiel btw).

Such a wonderful, mutually beneficial, ethical system with so many positive externalities! /s

You may claim that capitalism is the "best" system at this point, but to state that's wonderful is indeed indistinguishable from parody.

The free-marketeer response is that many of those problems have actually been caused by a lack of adherence to capitalist/free-market principles - eg. a policy of bailing out banks since Continental Illinois, preventing market discipline and leading to riskier behavior; heavy involvement of public policy distorting markets (both through laws pushing cheap housing mortgages, and through government-sponsored institution like Fannie Mae); land expropriations in China that force people to accept those slavery-like jobs (obviously not in accordance to strong property rights as defended by free-marketers); government-granted monopolies (including patents), and many more.

rock-solid my ass. The situation is less about ignoring Friedman and Hayek as about ignoring their critics (which is obviously what you're doing or you wouldn't have made the absurd "rock-solid" claim)

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