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Silicon Valley elites on inequality

Stashed in: Silicon Valley!, Peter Thiel, Winner take all., Awesome, @paulg, @msuster, economics, Rich people get richer.

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Does Stanford teach any sort of historical research methods, like how to do a Google search and read a graph?!?! US GDP growth since 1970 has only been below 4% for 8 years -- 7 of them since 2000! -- and yet household income inequality and wealth inequality grew substantially in that time. If you graph household income inequality against GDP, it tends to go DOWN during recessions as capital gains are reduced.

Paul Graham didn't go to Stanford. His BA in philosophy is from Cornell and also he has a PhD in comp sci from Harvard. 

But I get your point. It's not the school he went to, it's the attitude he learned there. 

Paul Graham admitted that he was personally (and unabashedly) responsible for rising inequality.

"I've become an expert on how to increase economic inequality, and I've spent the past decade working hard to do it," Graham wrote. "Eliminating great variations in wealth would mean eliminating startups."

In response, friends carefully avoided denouncing Graham or his core beliefs, but disagreed with his approach.

"Yes, income inequality exists and yes it’s a natural consequence of capitalism and other forms of government are decidedly worse than capitalism because they inefficiently create and allocate resources," wrote fellow investor Mark Suster. "But the celebratory nature of today’s conversation felt tone deaf."

No, my point is that the quote I am referencing from the article came from Peter Thiel who DID go to Stanford.

Oh, I see. I wonder if he really believes it or if it's just something he says. 

It’s little surprise that a group of people who grew wealthy building successful businesses have a positive view of the economic system that made that success possible. And they see more growth as the solution to broader social problems.

"If we have 4 percent a year of GDP growth, all these problems would get solved," PayPal billionaire Peter Thiel told me when I quizzed him about inequality.

A plurality of founders agree: Among 33 founders I surveyed, 48 percent said that mediocre growth was more problematic than financial inequality, while 42 percent believed the opposite. Among the general population (as represented by 595 people polled on SurveyMonkey), 59 percent of people believe inequality is more important.

Silicon Valley is an optimistic crowd. In my survey, 80 percent of the 129 startup founders I surveyed told me that "almost all change is good over the long run," compared with just 48 percent of the general public.

Also the classic formula is: GDP growth rate = population growth rate + GDP growth rate per capita. Or in other words GDP can't grow unless (working) POPULATION and/or PRODUCTIVITY also grow... which makes sense, right?

Unfortunately almost all of the fundamentals are working against us at this point. In terms of population, the retirement of Baby Boomers and the curiously low workforce participation of certain sectors, combined with reduced immigration and lower birthrates, are a drag on growth. Also, to be frank, what population growth we still have tends to be disproportionately clustered in lower-education households (e.g. teenage and immigrant mothers) that may not be able to produce highly educated children regardless of cash transfer or social policy.

The news on the productivity side is no more optimistic. As everyone knows, service jobs just don't have a tremendous amount of headroom in productivity -- no matter how well trained and equipped they are, there are pretty hard limits to how many sick elderly people a nurse can see in a day or how many children a pre-school teacher can effectively care for at one time.

The secret weapon of productivity that people like Thiel are counting on is technology... but again, I'm a little bit skeptical of huge gains at this point. I could believe that on-demand ridesharing and meal-delivery services can make highly compensated knowledge workers more productive... or they could be simply cannibalizing market share from public transit and restaurants. Perhaps 3D printing will obviate the need for factories and warehouses... at the cost of many manufacturing and logistics jobs. Perhaps robots will become caregivers for the elderly and educators for the children... but so far the elites of our society don't seem to be volunteering for the wonderful productivity gains to be enjoyed this way.

Finally, this is all leaving aside how much any economy can grow if it becomes anti-Fordist -- in other words if the masses can no longer afford to buy much of anything because they aren't making a stable income.

So the idea that the tide of growth could come roaring back somehow and lift all boats... I mean, HOW? What would the engine of that kind of growth be? Seems like Thiel personally is quite interested in gains to the lifespan, wealth management, and off-world domiciling of the extremely wealthy -- which is his prerogative as an extremely wealthy investor, but I fail to see how those investments are going to result in increased GDP for enough people to make a big difference, and they will almost certainly increase rather than decrease inequality.

I'm pretty sure Peter Thiel doesn't care about equality. 

He wants longevity and more wealth for himself. 

"Founders believe that equality of opportunity is crucial to a fair and healthy economy, while equality of outcome is economically paralyzing" - that's the crux.

Humans are competitive animals. Some rack up points on scoreboards, others in $$. 

Kelly Slater has earned his rank as amazing surfer. Lebron earned his basketball cred. Steph Curry has shown that the little guy can change the game. Why should the super wealthy be any different??

Those people bust ass to earn that money. We all know people who came from humble beginnings and made huge leaps forward. Some people don't take advantage of that opportunity ( I didn't take advantage of the basketball courts and am zero threat with hoops ). 

Money is a single variable and frankly a pretty poor one. 

How about we use a complex issue like "happy with life" and see how that breaks down instead?? Then dunking ability, wealth, or resting pulse gets to be a small piece in a much larger puzzle. 

Economics left to its own devices is winner take all.

That's bad because it restricts the opportunities of a lot of others going forward. 

Adam, where do we have a winner-take-all?

Yeah Google is big - but so was Yahoo!, GM, IBM, Xerox, Motorola, Knight-Ridder, The East India Trading Company, etc. 

Over the course of history we've had a lot of momentary financial behemoths - and then they tripped, crashed, and are largely historical footnotes. 

We always have opportunity for better mousetraps. 

Anyone with imagination can challenge the incumbents. 

In theory you're right. In practice no one challenges Google, Facebook, or any other winners. 

Tech companies might destroy themselves eventually but no one else can amass the capital needed to compete with them:

I bet someone said the same thing about Ford, Toyota, General Electric, MySpace, and Yahoo! 

By there very nature, leviathans become the victims of their own inertia. 

Someone will rise up to slay the giants as it has happened since empires began :-)

The someone who rises will be like Elon Musk or Mark Zuckerberg: someone raised well, someone who is well educated.

That's not an opportunity available to all. It's an opportunity available to people who are raised well and well educated.

That's what Paul Graham and Peter Thiel are saying, too. It's an unequal playing field.

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