Does anyone know how much VC firms contributes to wealth inequality? | Hacker News Reader

Does anyone know how much VC firms contributes to wealth inequality?

8 pointsuser9013131316 comments

With their detailled filters and so on. any research you read before?

From my European perspective, VC capital increases social mobility for the "engineering class" and the builders of society. Those who have talent but no access to capital. The alternative is, that there is no VC capital and only people who are already wealthy are allowed to undertake entrepreneurial ventures. Is that somehow better?

So I think VC firms reduce wealth inequality over all.

Yes this makes sense. VC has created more billionaires which isn't bad: I'd swap an Elon or a Bezos for 200 billionaires with different viewpoints.

Same with mortgages: they unfortunately push up house prices, but more ordinary people end up owning their home. They also allow capital to build new homes (modulo planning laws)

It kinda really upsets me that you believe a strain of liberal-democratic sociopolitics is capable of hosting technological and scientific innovation. A bunch of arrogant, proud, or overconfident nerds are not actually destined knights of capital. Why should a bunch of mediocre dweebs matter and get affirmative action and its access to upward capital mobility?

Instead, people should have to prove themselves. They should prove that they are worthy of the resources needed to perform great technological and economic deeds. A monarchical family dynasty is one of the best natural selection aligned filters for that decision making job. Not populist crypto-socialist Marxism (which is what Silicon Valley's pseudo-meritocratic venture capital investment funding ends up looking like).

So, there should be a return to an endorsing of royal families as part of a clear indication of ability and responsibility. If modern society is collapsing right now, then it's surely because civilization incorrectly selected the wrong ethnicities and races to lead society. So, a great reset is in order to correct a huge bio-cultural mistake that was made. Part of the mistake and strategic lesson to learn from was that recent history decided to force mediocre and stagnating genetic bloodlines to the top positions of industry and management. That's especially fatal when efficiency maximizing Malthusian conditions are being approached in the area of responsible leadership for hard, large scale problems like distributed systems engineering and operation.

Queen Elizabeth the Second of England, someone who is supposed to be ordained by God to lord over countries and empires, died while having done nothing sitting on her dysgenic fat arse. She didn't contribute to the development of a new and robust software development framework. Therefore, evolutionary Darwinism strikes back in a sneaky, subtle form; God brings down a matriarchal wrath upon misbehaving human bosses like in Christianity's eschatological mythology. That picture is easy to understand, yes?

Yes, but sadly only 8 or 9% of people in tech companies in the UK are from a lower socio-economic background, so you're really just making some middle class people richer.

A lot of comments focus on examining who gets their startups funded, so looking at founders or maybe the lucky few early staff who get super rich from an IPO.

I’m thinking about the effect on smoothing the other end of the wealth curve, pulling people out of poverty or near-poverty into the middle class and upper middle class.

I’m a complete nobody, didn’t go to a notable school, have zero family connections, and I’ve been grazing at the VC trough by working for startups the majority of my career. Without a startup ecosystem, I would probably be hanging Wi-Fi access points or building PCs at Best Buy. There are thousands like me.

I think without the VC idea, a few rich people would still start new companies, but they’d be less fit due to so much less competition. Neat prototypes of ideas like we see all the time on HN wouldn’t usually be able to get big enough to threaten the incumbents unless they were lucky enough to be dreamed up by a nepo baby.

Well, let's figure out such an experiment.

Compare areas with VC funding and areas without VC funding. The bigger the barrier, the better the data. I think it doesn't do to compare American cities as the barrier is so low. It would probably have to be culturally and economically similar countries, one with lots of VC funding, another without.

I would count the number of unicorns. Do unicorns remove or add inequality? I don't know, but whatever it is, it's the multiplier. Unicorns tend to pay in the top 5-20% of salaries for engineers, and still the top 50% or so for ops and gig workers. There's also a lot of businesses created to handle infra, whether it's logistics or software.

Gini data seems to be highly lacking. Ideally, you'd measure around the VC-sponsored areas and compare it to non-VC covered areas. But this is also difficult because companies like Stripe affect things far beyond their HQ. That said, country Gini data is often missing, and city data even rarer.

Wealth inequality is not an important thing to worry about by itself. The Gini coefficient undergoes a U-shape growth curve in economies as they move from under-developed, to developing, to developed. A better thing to worry about is wage growth and wealth growth among the bottom 50% of the population. Correlating that metric to the Gini coefficient seems like an exercise for an ideologue not a rigorous thinker.

Speaking to your point about VCs. They represent a minuscule amount of capital investment in the US economy. Of course, on this website, they predominate thought and discussion. However, the simple fact is that VC money is a rounding error in overall capital investment.

VCs more often than not just pick who they want to run a company in some vertical. So like, an AI company for lawyers, they just go find some Harvard guy and fund him. It increases wealth inequality, bc they choose who to write the check to. Hard charging entrepreneurs from underdog backgrounds do get funded, but its way harder for them, many hurdles to clear.

Only inadequate taxation rules and state failure to enforce such rules (corruption) contribute to wealth inequality.

As much as possible, right? The whole point is to increase the wealth of their investors...

It is equally important to learn how much VC firms contribute to improving quality of life, creating jobs etc.

It's a lot. Think about it this way with taxis. That was an economy that prior to ride-sharing stayed entirely within the local economy. Now there is a giant funnel the takes most of that money and funnels it to Silicon Valley and investors. That money exits the local economy for the most part now. And take this and apply it to everything tech.

So we get a better service and give it to wealth inequality. It's like how they built US cities for cars. Ways change but formula is simple?

Food delivery is an other great example. Companies extract huge cut, people doing the hardest work are not significantly rewarded. And in the end whole thing have at least some if not significant challenges in sustaining itself.

I hated taxis lol. I don't like ridesharing companies either, but taxi companies where I lived were a cartel. Taxi groups would camp at train stations and greatly overprice beyond what was legal. I believe even in the US, there were things like taxi medallions and a whole economy around medallion loans which really don't sound like they contribute to equality.

I was also a big fan of Uber in its time, and drivers would tell me stories of how they quit a job at the factory so they could be better paid driving Uber. One guy even quit his bank manager job because it paid that well, but sadly he is now a victim of enshittification.

Gig work also resulted in gentrification of large areas, because work was actually there. It was something to do after hours. Crime dropped in some places because it was easier than robbing someone.

I'm not entirely optimistic this is how it will be; centralized power is dangerous and AI will mess things up badly. But for recent data, I feel like it's helped inequality a lot.

How do you mean?

The moment the Soviet Union crashed, capitalists had no reason to sit on the table and negotiate salary increases, welfare, etc. That's what effectively drove inequality up.

The biggest problem with tech companies and wealth inequality is tax evasion. Big Tech, Big Pharma, Big-anything in the west pays no taxes.

Assuming that (a) taxation is progressive and (b) everyone pays their share, VCs are a net positive because the _move_ money from those who have it to those who don't, giving them chance. Even if the startup fails, the overall result has a net positive effect on the economy and society on multiple levels.

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