Why Silicon Valley is not the second coming of the Gilded Age
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But this is just wrong. There are lots of one-percenters who vote Democratic. They just mostly feel more strongly about cultural-liberalism issues than they do about economic ones. But when it comes to economic issues, these folks still tend to lean rightward; they overestimate the degree of social mobility the economy makes possible today, they support "ownership society" initiatives like 401(K)s and health vouchers over social insurance programs, and so forth. These folks aren't found just in tech, they're also quite common in the entertainment industry and other "new economy"/"information economy" sectors. (The derogatory term for them used to be "limousine liberals"; rich people who were totally down with helping the poor, as long as doing so didn't cut into their personal bottom line.)
So you have billionaires on both sides. American politics, in fact, has mostly become a battle between billionaires. On one side you have billionaires who care about social liberalism, on the other you have billionaires who care about economic liberalism. But they're all billionaires, so issues that don't affect billionaires personally (like the minimum wage, or how to pay for retirement, or the unemployment rate, or affordable housing) just don't get included in the debate. As far as the political system is concerned, they're non-issues. They don't exist.
There used to be institutions that brought these issues into the discussion anyway, like political parties and labor unions. But those have mostly atrophied over the last 50 years, so we have a system where whether the capital gains tax rate is low enough (a question that billionaires of all stripes care deeply about) is continuously and loudly debated, while whether the minimum wage is high enough is hardly ever discussed.
What? Much of the article is devoted to making the opposite point: that the SV elite overwhelmingly support the Democrats.
1984: http://books.google.com/books?id=phQo8JYcjw8C&pg=PA62...
1988: http://www.time.com/time/magazine/article/0,9171,147885,00.h...
2000: http://archives.cnn.com/2000/ALLPOLITICS/stories/10/18/flash...
2004: http://usatoday30.usatoday.com/news/politicselections/nation...
As the old joke goes, "I can't vote Democratic because I want to be able to spend my money, and I can't vote Republican because of what I want to spend my money on!"
Right wing economic policies. Left wing social policies.
So relatively low taxes, less bureaucracy, balance the budget, etc. But also gay marriage, equal rights for a variety of groups, and science based environmental policies.
Does left wing social policy include e.g. universal welfare, health care and access to education though? Or are you thinking mainly of "liberal" rather than "left wing"?
Part of the problem is that left wing social policies cost money and have to be administered, conflicting with low taxes and less bureaucracy.... :(
That said, we did find broad agreement on many things that are completely off the political map in the USA. For example we could reduce the size of our military, liberalize drugs, get rid of the DEA, and reduce prison populations. All of that saves money. We also agreed that none of us actually expect Social Security to still exist when we need it, and so we'd prefer it replaced in the long run by something out of the hands of the politicians. Something along the lines of Australia's Superannuation would make sense. (But it wouldn't be fair to do it like Bush suggested - where it is privatized but with cutoffs that massively reduce what people can expect to get.)
Absolutely none of that is in the public discourse. But it would have been more popular in that office than anything being offered by the political parties.
In other conversations we also agreed that in general it is better to make rules simple and clear with the right incentives, rather than trying to add rules and counter rules that are guaranteed to give perverse incentives and a field day for lobbyists. For example we have laws mandating fuel efficiency standards, with complex exceptions saying that different types of vehicles get different treatment. I can't say anything about the net result other than that I'm sure that it lets politicians say that they solved the problem, while giving established Detroit companies some benefit. (The most obvious candidate for a benefit is that the regulatory mess is a barrier to entry for competitors.) But if you simply tax carbon fuels steeply enough, then incentives will be right. And then if you redistribute those taxes back to people in direct payments, then people can afford the taxes, and are left pushed to choose efficient vehicles for economic reasons.
Some might disagree with that reasoning but it's really missing the mark to consider rich democrats as some sort of 'self hating rich' or 'culture voters ignoring economic policy'.
The fundamental thing that this piece fails to discuss is that just because you support the Democrats doesn't mean that you're a stereotypical liberal Democrat.
In other words -- Jamie Dimon is a Democrat. Robert Rubin is a Democrat. Larry Summers is a Democrat. These are the voices that shape Democratic economic policy, and they are not exactly a group of fiery progressives. They are the evidence of how narrow the difference between the parties is on the issues that the 1% care most about. The issues the parties fight over are by definition issues that guys like these just don't care about. If they cared about them, they would drag the parties kicking and screaming to a consensus just like they have on economic policy.
This is no different than how it was in the first Gilded Age; most of the most notorious political figures from that era were Republicans -- James G. Blaine (http://en.wikipedia.org/wiki/James_G._Blaine) and Roscoe Conkling (http://en.wikipedia.org/wiki/Roscoe_Conkling) come to mind -- but there were plenty of Democrats too, like Boss Tweed (http://en.wikipedia.org/wiki/Boss_Tweed). And all leaders in both parties overwhelmingly hewed to an ideology that business interests were more important than any others.
I recently came across this fascinating statistical study[1] of U.S. Senators responsiveness to the political positions of their constituents, which found that both Republicans and (to a slightly lesser extent) Democrats were overwhelmingly responsive to the positions of the wealthiest 1/3 of their constituents, and entirely unresponsive to the positions of the lowest 1/3. Well worth a read.
How does being a part of the evil "one percent" make you any less qualified to have or hold a variety of political views? If anything, I've found that having more money makes me more aware of issues like unemployment, health care, etc because many of my friends and family are not as well off, and now I'm in a position where I feel obligated to do something about it.
Overall, I find the whole left/right political divide to be frustratingly counter-productive. Both sides are wrong, and we waste much time and energy arguing about which side is more wrong.
I don't think this is what he's saying. It's that one percenters have an inherently greater voice on political issues (if they so choose) and that as a result, the national debate has been warped to focus on the issues and perspectives they consider important.
The greatest trick the Devil ever pulled off was convincing Americans that anyone to the left of Attila the Hun was a Communist...
What I find odd is that the article equates libertarianism with Rand and the Koch brothers, as if no other type exists. There's also a hint of conflating liberalism and libertarianism.
The broader point is that politics is multidimensional. It's not just one axis. The history of tech policy votes in Congress is a good example that's close to HN home.
Depends. Germansy is rather social democratic, but to a German government subsidised housing (via Fannie Mae and Freddie Mac) and universal minumum wage sound vaguely socialist.
Also, a simpler explanation for the large support for the Democrats would be that SV consists of intelligent, highly educated and well-informed people that wouldn't dream of supporting the extremist, anti-intellectual and downright insane collection of circus freaks the Republican party has become.
Just based on the purely anecdotal evidence of online and personal encounters with SV-dwellers, I would consider most of them to be "open minded conservatives".
The other foundation is the way companies in SV are organized and equity dived compared to traditional companies. This could simply be explained as "pragmatic", which is how most companies view it themselves.
It seems to me the author is trying to project his own ideas on SV.
Anecdotally, my personal network in tech seems to side with Democrats for reason like environmental protection, global warming, gay marriage, abortion, and olive branch foreign policy; not because of economic reasons like union support, wealth redistribution, or strengthened regulators.
GWB backed one of the biggest expansions of entitlement programs since LBJ (Medicare Part-D).
Obama seems to have no problem ignoring the international community when it comes to using US force globally.
The only thing that separates the two parties (when in office) are the issues that can keep them in office (e.g. the issue of abortion and guns is pretty evenly split in the US)
More supporting evidence that democracies tend to work in favor of the largest voting blocs rather than some abstract "public interest".
It seems accurate to say that Medicare is as you describe -- we've more or less been socializing the costs of insuring the elderly, privatizing the risks/benefits of insuring the employable, and letting everybody else fend for themselves for a few decades.
But it seems pretty tenuous specifically in the context of the recent PP/ACA legislation. The only arguable point is that by requiring people to join a risk pool, we're forcing them to subsidize the elderly... which we were already doing via a tax-supported medicare program.
> The program pays for the old and sick on the back of the comparatively more healthy and less wealthy younger workers.
Sure, in the same sense that any insurance program is. That is, there is no insurance program of any kind that isn't a "wealth transfer" to those who suffer from the insured-against event from those who don't.
Though when talking about "young" and "old" in the context of a stable policy, this may not be a particularly important point. Most people are going to get a chance to be part of both.
More recently the Democrats have been about "ending welfare as we know it" as "the era of big government is over". Words said by a Democratic president, not a Republican. Obama has been the same, and the examples of this are too numerous to mention completely - support of school privatization and charters while attacking teacher's unions, or the more recent nomination of Penny Pritzker as Secretary of Commerce.
This essay has some Orwellian doublespeak sentences which are real howlers - 'The movement towards these more egalitarian corporate structures goes by many names: stakeholder or partner or even conscious capitalism.' Barf! Fantastic, I'll be real glad to be part of a stakeholder corporate structure - YOU own the shares, but I get to be a "stakeholder". Terrific. "Egalitarian corporate structure". There's a contradiction. A corporate structure means one thing - control by the majority shareholders, with the purpose to maximize profit to them. Period. This fact is written into the legal code and court decisions ad nauseum.
If anyone is buying into this idea that today's college educated professional in the US is better off than the college educated professional of the 1950s and 1960s, I suggest you read Barbara Ehrenreich's "Fear of Falling" where she shows a mountain of evidence of why this is not the case.
If these startups are so great for everyone, where are the older people? Where do they go, since they don't seem to be around, other than a small percentage, at anywhere from a small startup to somewhere like Google. Did professionals have to work as many hours as they do nowadays? Oncall all the time, e-mails and phone calls at home? And so on.
The system doesn't even work for us, the educated elite doing the wealth and creating the wealth. It works even less for the rest of the world.
In my experience, the number one most common quality that distinguishes the rare Bay Area young Republican is a love for sustainable budgets and a belief in the immorality of a government knowingly running an unsustainable deficit. Those monsters.
The idea that the Republican party is a collection of "circus freaks" is a myth largely sustained by the liberal echosphere.
[1] http://blogs.the-american-interest.com/wrm/2012/11/09/blue-s...
I love arguments that invite you to interpret statistics based on your biases.
No analysis given to the fact that one of the most conservative states (Wyoming) has one of the highest pension liabilities per capita or that one controlled by Democrats (West Virginia) has one of the lowest.
It's hypocritical but easy for a child to complain about the financial irresponsibility of the very parents who subsidize him.
I wonder if Silicon Valley isn't reaching some sort of gradual saturation. The number of people who pretend to be upbeat and curious versus the number who actually are is disturbing to me.
(EDIT: To be fair, this may well be because I'm on the wrong side of the filtering membrane.)
1. Small groups of dedicated technologists create a large step forward in technology. Generally becoming wealthy.
2. People following money all pile in. Pretenders abound; both founders and investors.
3. It becomes impossible to separate the wheat from the chaff. How do you tell the difference between someone who is legitimately experienced and someone who's skill is putting on appearances?
4. Big crash as the pretenders fail to produce similar results. All the crazy money leaves the technology sector. "Who needs an online pet store anyway?"
5. The only people who are left are small groups of people dedicated to technology regardless of the headlines. (return to step one)
Those who have legitimate experience can detect their peers. Unfortunately, this is highly contextual. You can be a competent Ruby on Rails guy, but still suffer from Dunning-Krueger when trying to evaluate an iOS developer.
You can also go back to first principles. Do people live their lives and engage in conversations in a way that indicates they understand the epistemological stance of scientists? I have a super power in this regard. I exude a field that makes undesirable people prejudge me, to the point where they make factual mistakes.
A big problem is that innovators lacking business experience are easy prey for self-promoting douchenozzles who pretend to be able to "accelerate" them. In reality they don't know what they're doing, don't have the connections they claim to have, and just want to entangle themselves with something in the off chance it might turn out to be big.
I'd describe it more as snobbishness and cliqueyness, but same basic idea. Silicon Valley is great if you're working on something trendy, but it can be surprisingly unfriendly if you're just trying to make cool stuff.
And for me, the most amazing part, is that since it looks externally 'easy', success results in a rush of folks who want to do that too.
When people ask my advice about interviewing at a place like Google I tell them, "Don't interview at Google just because you want to work at Google, interview there because there is something you want to accomplish that you can do more easily at Google than anywhere else." Or people asking for advice on creating a startup, where one of the questions is "What should I build?"
Here is a news alert :-) If you don't already feel passionately about building something you don't want to be the person starting the startup. Work at one or two and figure out what it takes to build a company, what works and what doesn't, and be thinking about how your talents might solve a problem in a way that would be useful. Until then, don't quit your day job.
But I did send this as a letter to the editor, since it concerns a pet peeve that I constantly see in the media:
George Packer's essay on Silicon Valley's politics makes several references to housing prices, including that "the past two years have seen a twenty-per-cent rise in homelessness, largely because of the soaring cost of housing." But he doesn't mention how supply and demand affect pricing, as Matt Yglesias does in The Rent is Too Damn High or Edward Glaeser does in The Triumph of the City. Both writers have correctly observed that many urban jurisdictions prevent housing from being built to accommodate growing demand; as a result, prices rise. It's not primarily tech companies or their employees who have driven housing prices in Silicon Valley: it's residents themselves, and the courts that have given residents and politicians extraordinary powers to block development—which is why "San Francisco is becoming a city without a middle class."
Wall street has been distributing most of it's profits to employees in the form of bonuses for decades. Though unlike SV, it get criticised heavily (a lot unfairly IMHO) for it. Having worked in both, I feel they are full of the same 'type' of people.
This is anecdotal, but the i-bankers I have worked with and met generally have a limited skillset which boils down to Excel spreadsheet manipulation, 10K reading, and Powerpoint presentations.
The skillset of Silicon Valley employees crosses a wider intellectual range (CS, statistics, math, art+design, EE, other hard sciences). Their knowledge is also deeper in a wider breadth of fields and can put their knowledge to work.
However while the typical wall steeter used to be a liberal arts major, it has heavily shifted toward STEM. At most i-banks, something like a third of headcount are tech. Even many of the front office are engineers, though again moreso in trading/asset management. Nowadays a large part of the competitive advantage comes from better software - a classic example of 'software eating the world'.
Anecdotally some of the brightest people I've known were at BGI (now Blackrock), and they all had deep knowledge in finance, math, stats, tech and old school boys club company politics. [my old boss read math cambridge with stephen hawking and created the first and now biggest by AUM electronic portfolio management system for index funds, grinold & kahn literately [1] wrote the book on active portfolio management, etc]
[1] http://www.amazon.com/Active-Portfolio-Management-Quantitati...
These companies also tend to have much flatter structures than Silicon Valley tech companies. The greenest associate at a big NYC law or consulting firm probably has just a few levels above him to the managing partner or CEO. The structure is instead broad and flat, with potentially hundreds of partners or managing directors leading their teams with high levels of autonomy.
Pay spreads are also narrower. I don't have numbers for consulting, but many NYC law firms are 5:1 or less top to bottom for partners, and around 30:1 for highest earning partner down to greenest associate (and many of these scales are lock-step, meaning everyone at the same level of seniority is paid the same). Finance is of course broader (thanks to huge bonuses for traders), and my impression is that consulting and accounting are narrower. The pay spread at Yahoo between Marissa Mayer and the most junior programmer is more like 250:1, and even within the ranks of executives the spread is probably more like 50:1.
The deep irony of these professions is that while they are a major part of the capitalist system, they are personally mostly free from that system. It takes very little capital to run a services businesses like these, which means there is no need to bring in shareholders, which means that the money of the business stays with the workers rather than being diverted to investors.
Lawyers and bankers actually have a sharkish will to negotiate for themselves. They're good at what they do, they're powerful allies and formidable enemies, and they know it. People don't often try to take advantage of them, even when one is senior and the other's a greenhorn. They know better. In 7 years, that junior you tweaked is going to be partner-level somewhere and might end up surprising you how well he does.
Most programmers work for old-style Theory-X companies where you have to be a manager to get a fair shake-- because we, as a group, suck at advocating for ourselves and get taken advantage of in a way that just wouldn't happen to most lawyers or bankers.
The same is true of most of these Silicon Valley "startups". You gotta differentiate between companies that are small because they're elite niche operations (which are some of the best places to work) and companies that are small because they're shitty. Many of these "startups" are the latter.
It would be extraordinarily profitable to build commercial buildings with dense lofted apartments in many areas of the peninsula, however they are simply prohibited by local governments. That's neither libertarian nor egalitarian.
Judging from comments on HN the valley does sound quite libertarian but not the kind that register and vote Republican. It seems more intellectual and based in logic while Republicans are more about dogma and scoring political points.
I think deciding half the nation eschews logic and intellect in favor of dogma and 'political points' is an extremely unfortunate move. People are not the pastiches you see on TV and HuffPo.
(I vote Democrat.)
I think a good number of small-l libertarians would consider voting Republican if they were a reasonable alternative and if Obama was actually the socialist he's made out to be. But the fact is, they're not and he isn't. Half of the political system is in fact impervious to reason.
Exactly. And a lot of libertarians (like me) are to busy making stuff to vote. Plus, we don't want that 'lessor of two evils' guilt hanging over our heads.
But attempting to have a nuanced discussion of politics in this country is as pointless as it is impossible.
It gets even more complicated when you look inside the party. On one hand you have the "Tea Party" Representatives and Senators elected in the last couple of election cycles. Most of them swing towards little "l" libertarianism (at least fiscally if not socially). Recently, the Republican leadership in the House "fired" most of them from their committee assignments because they won't hold "the party line". The current Republican leadership talks a small government game, but isn't very interested in it. It is rhetoric and not action.
If the scale tips into the "Tea Party" favor (lot of interesting primary action), then I can see actual libertarianism (more fiscal than social) having a home, otherwise I expect the 2016 Presidential primary and convention to be epically nasty. The 2012 convention was a screw the local folks type of affair, but I get the feeling the local folks are gearing for 2016.
> But attempting to have a nuanced discussion of politics in this country is as pointless as it is impossible.
My only comfort in this area is that at least some of things that were said by candidates about other candidates in the election of 1800 cannot be said now.
On the other hand, punditry (by both sides) is just as profitable as it ever was as a spectator sport.
note: For those interested in a deeper look at such things. Look at the build up to the 2014 South Dakota Senatorial race. The amount of non-local manipulation reminds me more of national party bosses than a normal primary season. It might be a bit of an indicator of what is to come for both parties.
My take on it is that SV is 'liberaltarian', in that they prefer small, efficient, decentralized organizational structures, but that they also recognize the need for social welfare as a stabilizing force. Additionally, I would guess most of them are turned off by the conservatism side of the Republican party (pro-religion, pro-drug controls, etc), and as such tend to vote for democrats based on the 'lesser of two evils' decision making process. This pretty much describes my views, and I would imagine a lot of others in SV.
The author seems to use this fact to negate the idea that many in SV lean libertarian:
If libertarianism is so rampant in Silicon Valley, why are they voting for higher taxes and funding a big government liberal by such overwhelming numbers?
The premise that voting for the Democratic Party is the opposite of a "Gilded Age" is confusing to me though - it seems too reductive to assume that every person who voted for a Democrat is an ardent redistributionist who wants to see the welfare state expanded. I agree with your take on the politics of the region though.
Also, I wish that the title "Learning from Los Gatos" was explained in any way - what is the "Los Gatos" in reference to?
Presumably the town of Los Gatos (a relatively wealthy suburb of San Jose). Why Los Gatos in particular? I have no idea.
That's how I see it as well.
The fact is, that there is a strong demand for social insurance/welfare services (e.g. health insurance, unemployment stipends, retirement pensions, etc), and the supply of those services can either come mostly from the government (as it tends to in Western Europe) or mostly from employers (as it tends to in the US).
"Liberaltarians," I think, believe that we're better off letting the government provide the social insurance services to everyone, so that citizens' access to them is no longer dependent on employment, which will increase liquidity in the labor market and take some of the risk out of entrepreneurship. Then employers also won't have to be burdened with providing and administrating these expensive "benefits." Win-win.
Meanwhile, people that live in sparsely-populated rural areas believe that they have less demand for social services, and that their tax dollars are paying for the social services that are only consumed by low-income city-dwellers. I've read studies that show this is false, and most rural counties consume more tax dollars than they contribute, mostly due to farm subsidies. Regardless, that seems to be the main economic concern of rural Republican voters.
Also, employer-funded health insurance is a drag on US companies that must compete with foreign companies that can rely on government health insurance/services.
Of course, we might not have to pay higher taxes at all if we didn't have all these private health insurance companies skimming the pot.
From 2008:
http://news.cnet.com/8301-13578_3-10079225-38.html Calling venture capitalist Tim Draper an ardent Republican is something of an understatement. In 1999, he was enough of a fan of then-candidate George W. Bush that he chaired three fundraisers over a year before the actual election. Salon once dubbed him "George W.'s point man in Silicon Valley." The Draper, Fisher Jurvetson managing partner is a longtime proponent of limited government, free markets, and libertarian concepts like school vouchers, making him a natural fit for a political party whose platform lauds "lower taxes, reasonable regulation, and smaller, smarter government." This year, though, something odd happened. Draper gave $2,300--the legal maximum--to Barack Obama and zero to John McCain. Draper also did something that would have been unthinkable in the days when Bush was touting laissez-faire principles: he disclosed publicly that he will vote for a Democrat. [...]
I don't feel like that defines a libertarian at all.
When I hear the word, I think of someone who believes they (and everyone) should have the right to do whatever they like - so long as it does not infringe on anyone else's freedoms or rights.
I've always hated this definition, because it's so empty. The whole debate of politics is what happens when the freedoms and rights of different people come into conflict. Different groups define these freedoms and rights differently, and think different responses are appropriate when there is conflict.
The difference between a libertarian and say a conservative is not that one believes people should be free to do what they want and the other does not. It's that one defines "freedom" narrowly and the other defines it more broadly.
Take something like prostitution. A libertarian would say you have the freedom to sell your body or to buy sex for money. A conservative might believe that people should have the freedom to create cohesive communities based on traditional values, and having your kids see prostitutes on the side of the road undermines that. Similarly, the two react differently when coercion in prostitution brings the prostitutes' rights in conflict with her pimp's. A libertarian might say that we have other laws to deal with abuse and coercion and that banning prostitution is unnecessary. A conservative might note that such abuse is endemic to prostitution and that banning prostitution could prevent the burgeoning of an extremely abusive and coercive business. A liberal might swoop in and say we should legalize prostitution, but regulate it to prevent the downsides.
Or consider something like workers rights. A libertarian would say that people get paid what they deserve when everyone can freely bargain. A liberal might point out that employers have vastly superior bargaining positions. Interestingly, what liberals say about employees and bargaining is not dissimilar to what conservatives say about prostitutes: when you look at the circumstances most prostitutes find themselves in, how "voluntary" are their actions really? Libertarians perceive "voluntary action" to be extremely well defined: basically, if you did it, it must have been the product of your totally free exercise of will. Both liberals and conservatives take more nuanced views (though in different contexts).
Well yes. Libertarianism is davka the project of destroying politics by rendering all available decisions a matter of either private fiat by a property-owner or property-ownership disputes through the court system. The whole idea is that the elected government should have nearly zero power to actually gather or direct collective, social effort.
* "Liberaltarian" (http://www.cato.org/publications/commentary/liberaltarians). Generally libertarian views (support for free markets, drug de-criminalization, gay rights, right to bear arms, open borders, etc...) but where views on social issues (namely basic civil liberties, gay rights, drug de-criminalization, open borders) trump (by far) the economic issues.
Most of these folks also don't subscribe to Randian/Nietzschean "virtue of selfishness" so given a candidate whose economic policies might benefit them but who opposes gay rights and immigration, they'll vote for his opponents even if they happen to be straight and native-born.
* Conventional style liberalism, but with heavier focus on civil liberties and technology. Zoe Logfren is probably great example of candidate that appeals heavily to this group.
* Bloomberg-style centrism: some degree of social liberalism (particularly in regards to gay rights, abortion), moderate-to-center-right economic views (mainly dictated by self-interest), but strong opposition to personal liberty-issues that are perceived to have social costs (e.g., drug de-criminalization, right to bear arms).
This is generally common with older folks, likely the ones that supported Reagan and Nixon earlier. Generally these are also the view of many California republicans (e.g., Meg Whitman) but also a significant chunk of Democrats. Given national republican party has now deviated from significantly from this view (with big factions now being religious right, Tea Party, and some libertarian-leaning folks), again there's a tendency to vote democratic on national level.
* Actual libertarians tends to be somewhat more common than in the rest of the country, but again there's a tendency for people to come to libertarian views from a more academic point of view (study of economics, philosophy, etc...) as opposed to from reading Atlas Shrugged.
So yes, if you define libertarian as Objectivist (a view that goes far beyond libertarianism -- the idea that poor deserve to be poor and do not deserve even voluntary charity, as opposed to the idea that economic planning hurts the poor more than it helps), then there's only few libertarians in Silicon Valley. If you use a more open-minded definition (opposition to economic planning and support for personal liberties) the picture changes a bit.
Detroit once had the highest average income in the United States. Cars are still as popular as ever, but the auto industry eventually shifted and diversified and broadened and left Detroit mostly behind.
Question: human capital is disproportionately more important to building value in the tech sector than it is in the broader economy (think mines, manufacturing etc). Isn't it more likely that a more equitable equity split is a pre-requisite for success in SV as opposed to being a consequence of it?
I'd love to know more about this growing body of research.
A basic Google search yields the ten most profitable firms: Gazprom, Exxon Mobil, Industrial & Commercial Bank of China, Royal Dutch Shell, Chevron, China Construction Bank, Apple, BP, BHP Billiton and Microsoft[1].
I don't get the sense that oil companies and big banks are egalitarian in their approach to employee equity. What am I missing?
[1] http://money.cnn.com/magazines/fortune/global500/2012/perfor...
It's the roughnecks, construction crews, and bank tellers that don't make big money. Of course, those tend to be the numerical majority of employees because they're relatively cheap.
It's the same thing at Google - engineers can get paid $250K/year, but book scanners get paid $10/hour.
I'm pretty sure that's just a form of socialism.
> There’s a real estate crisis in Silicon Valley because the companies in the region are much more generous in the way they share the wealth, not less.
Don't forget the fact that no town/city wants to build (or make it easier for developers to build) high density housing despite that it is desperately needed to keep up with housing demand.
Quiet you, we're trying to Talk Like Very Serious People ;-)!
I don't think this guy really understands libertarianism. Libertarian principles don't say anything about how private actors choose to distribute ownership. Most libertarians are only "repulsed" if government forces private actors to distribute ownership in a particular way. If spreading out equity more evenly among employees makes a particular firm more competitive, then awesome, that's how the market works.
This sounds to me like a fundamental misunderstanding of the dynamics of a startup vs big company.
In a startup, every employee has an important bearing on the success or failure of the company. Getting the right people on the team is priority number one for a budding startup, and to get the best people you have to promise them a piece of the spoils.
In a typical big company, only a handful of people have enough authority to steer the ship. For everyone else, their roles usually aren't mission-critical, or they're relatively easy to replace. You therefore don't need to pay them as well.
This isn't about "being fair and equitable" or "sharing our wealth" for its own sake, this is still just about economics. More people are getting stock at tech companies because those people's skills and contributions are more directly linked to the success of those companies. It just doesn't make sense to be giving stock to pilots, pharmacists, and factory workers - if they're amazing at their jobs, it has at most a marginal affect on the company as a whole, and if they quit, the show will go on.
Don't get me wrong, I'm completely in support of giving junior people meaningful equity, for a number of reasons. But it still needs to make sense. There are good reasons why we don't see it in other industries.
http://www.economist.com/blogs/graphicdetail/2013/05/daily-c...
Wait, what part did the government play in how tech-companies compensate their employees fairly? Or does he mean the government should be applying to same structure by force on companies in other industries (to share equity with employees)?
Does the author not understand the difference between startup culture vs big business?
Actually, the government plays a small part already in how high-tech companies share equity with employees, through preferential tax treatment for Incentive Stock Options. You could imagine many such nudges that could be employed to expand capital ownership short of distributing equity to employees "by force".
Remember in general that the limited-liability corporation as an institutional type is itself a creation of government - the notion of a business as a separate entity with distributed owners such that the business can go bankrupt without allowing creditors to go after the non-business assets of the stockholders is an artificial and relatively modern invention with a large and complicated legal structure buttressing it. C Corporations, LLCs, LLPs, PCs and the like are all creations of government and the way they operate in practice is non-trivially shaped by the ways those laws are structured. Is it so outlandish to imagine an alternative form with a deliberately egalitarian bias (an "E Corp"?). It only takes one state experimenting to make it a reality!
The state forcing corporations to distribute their earnings or equity a certain way is a massively more intrusive structure.
If that was done, it would likely be single handily the greatest manipulation of markets and private assets ever done by a government in modern history.
If an egalitarian equity structure legitimately benefits the companies, they will adopt that structure. If they don't then their competitors would do it as a competitive advantage. Unless it really doesn't benefit the companies and therefore requires the state to involuntary make them do it?
Interestingly wrong. The problem here is the definition of "benefits the company". The interest of the company is defined as the interest of its shareholders, with the interest of different shareholders counting in proportion to their ownership stake.
The equity structure is itself the terminal teleological value of the company, and consumer markets make zero evaluation of that structure except in very specialized sub-cases (like when I deliberately purchase King Arthur Flour for being a worker cooperative, for instance). This is one of those "companies do not evolve" things; state action is the only thing that will ever change company structures away from what the incumbent shareholders want, and even a fresh-founded start-up has incumbent owners in the form of its founders and seed investors.
While me may already be better than the rest of the country in this regard, we can definitely do a lot better than we do today. I'd be preaching to the choir so I'll refrain from elaborating on the equity compensation of single digit employees, but there must be a way to share the success more equally than we do today.
http://www.aynrand.org/site/PageServer?pagename=ar_libertari...
There is also some curious use of evidence: Obama won Santa Clara by 42% implies "the most dynamic sector .. is now decisively in the camp of the Democrats", but it was only 30 years ago that Reagan won the same county by >10%. The data seems to imply that the county could swing back next election, but the author doesn't seem to appreciate that idea. Why does the author have a hunch that while they temporarily voted Republican, they're truly Democrats at heart?
Keep in mind that Reagan won the nationwide popular vote by 18%, so winning by 10% in his home state doesn't indicate a strong Republican following there. It just indicates a very one-sided race.
Speaking as someone who lives on the SF peninsula, I think it's fair to say there's near-uniformity of views on gay marriage (though drive an hour east and that will flip). Climate change, on the other hand, is an area where reasonable people even in this area are more likely to disagree.
That's disingenuous. 0.02% of something that a CEO thinks (based on nothing but his own ego) is worth $10 billion is not meaningful equity.
The proper way to model this is that equity compensation tends to be about 1/3 of what the person is giving up in salary, career advancement, etc. If you're paying $30,000 to work there, you'll typically get $10,000 per year in equity, or $40,000 over 4 years. That'll be 0.4% if the current valuation is $10 million.
Now, let's say a clueless schmuck puts his whole life savings (or, more accurately, what he'll be getting in lieu of savings over the next 4 years) in some extremely volatile (100-500%) penny stock, because that's actually what's happening (with that penny stock being in one's employer, i.e. controlled by someone who can fire you for "performance" Pincus-style). Some of those people are going to end up modestly wealthy (no employee gets rich) and most are going to be hosed.
To say that employee equity in typical startups (there is "meaningful" is a huge stretch. You'd have the same results asking people to pump their savings into penny stocks. A few would get very rich (from modest starting points) and most would wipe out.