Some unusual forces caused a temporary change in the US during the 20th century that pushed us towards equality and conformity, but these forces have largely eroded and we can expect greater fragmentation moving forward.
WWII had a cohesive effect on the American society and economy that lasted approximately until the 1980s. The results were more equality and less fragmentation during that period.
Since the 1980s technological progress and also social factors brought an ever increasing re-fragmentation, which, if not properly addressed, might lead to problems soon.
Acknowledging these problems is remarkable -- I think it's the first time pg did that.
pg provided his own tldr; in the first paragraph of the essay:
"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."
In general he tries to look for a net positive outcome resulting from these changes, but is not confident there will be one.
An old man wants the time of his youth to return, and he sees the increasing individualism as an erosion of our culture. The world has changed and he wants the old one back because he understands it.
"Obviously the spread of computing power was a precondition for the rise of startups."
If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.[1]
One thing I think you will notice is the manufacturers plaques attached to every little piece of equipment in the submarine ... every one of them the plaque of some tiny little supplier that you have never heard of. Some little Detroit Turbine Supply Company or American Radio Corporation of Maryland ...
Seriously - every single component has a label on it from a firm you have never, ever heard of.
I guess I don't have a deep knowledge of military procurement and supply circa 1942 (or whenever) but it sure looks like startups to me ...
This concept of small manufacturers that excel in their niche has been the oldest business model in history.
Especially in Japan and Germany many companies have existed for over a millenium like that, and even today half of the made profits are by small, (50 people or less) companies that are hidden champions.
You probably never heard of http://www.walterwerk.com/en/, but they’re the world’s leader in machines that produce ice cream cones.
As you said, it’s not just since computers that these companies existed – they’ve existed for centuries.
But what is different this time is that for the first time investors are trying to invest in these small businesses, and try to make a huge profit out of them.
Good observation. Paul's definition of "startup" seems to be "company that grows explosively to a massive size/valuation in a short number of years". The sort of businesses you cite seem to fall under the "small business" moniker, and would probably be one of the mouse-sized companies he referenced in the essay as one that tried to avoid trampling by the elephants of BigCo.
" People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."
I don't know what you're talking about. I didn't write the article. I just quoted the guy where he laid out the definition or his understanding of the term of « startup » which IMO is in line with the current common and broad idea of startups in that they're a special breed in the small businesses category that possess specific qualities that make them rather distinct from other business ventures and establishments.
That part is a bit questionable. Educated people starting small companies that grew big is not something new in American business. Not even educated people starting small technology companies that grew big. It's possible there has been a quantitative change, with it being more common now (I'd need to see numbers to be convinced of that, but it's possible). But "practically zero concept" prior to the 1980s?
Actually, the rate of new business creation has been falling ever since the 80's. According to [0], “Unfortunately, new firm formation has waned since the 1980s, and the recession accelerated the decline."
>Starting one's own business meant starting a business that would start small and stay small.
And what's wrong with that?
Besides it being false of course.
If anything it's more sustainable and more productive (as these business MAKE something, don't just eat VC dollars or at best sell ads) than today's "startups" model, which is based mostly on a speculative bubble + ad money.
All the thousands of major companies, from IBM to Bell and from HP to Apple, Boeing, McDonalds and Kodak, and countless others in all lines of business started as small and grew from there.
It's a perversion (and counters the rest of PGs rhetoric) to narrow startups to "companies funded with VC money for a few years to get enough users/eyeballs in the hope that they can be sold for a few billions" which is more or less the modern kind.
Or start small, grow to a modest, profitable size, and be sold. A friend of mine recently retired (in his 40s or 50s) after selling his high-end catering business for a few megabucks.
I think pg would likely answer "Nothing". Whenever he brings up that sort of entrepreneurship, it's generally to showcase the rarity and timescale with which these small businesses (IBM, Boeing, GE) got huge in a time before the internet.
I'd agree that the Internet hasn't made big businesses get any more substantive, but it has allowed them to get bigger faster.
You can extend this point to the first wide-ranging standardization efforts. Those plaques and part numbers were mandated to facilitate not openness, but interoperability.
> Startups either go Facebook or go bust, they're not created to stay stable at small scale.
Nonsense. Plenty of companies start out as small companies and suddenly find themselves on the upwards slope of a hockey stick, others start out as aiming for that hockey stick and end up being 'just' sustainable businesses.
This whole start-up naming thing denies 125 years of objective reality. You can't start a scalable company deliberately any more than you can reliable write an evergreen book. Time will tell what you've got, not your label of it.
It's odd to me that people assume that just because you've got a small business you won't jump at a market opportunity that could lead to something bigger...even Apple at one point was just a few folks selling stuffed PCBs and doing drugs.
But wait, some people start a pizza place or a grocery store or something similar. Those kinds of businesses are definitely new businesses, and people who start these kinds of businesses is what was traditionally meant by the word "entrepreneur".
But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast.
Call them startups or not, but we definitely need a term for the kind of company that behave in this "go big or go home" fashion, and startup is the generally recognized term for it.
Sure, but a start-up is more of a determination after the fact than something you decide to build. The only reason it works out for YC is because they start so many companies that a few of them due to the expected distribution end up being home runs. They still influence things as much as they can in that direction but there are absolutely no guarantees and quite a few of the go-big-or-go-home companies end up going neither big nor home, they end up being normal companies.
So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB.
> But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast.
No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups.
Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it.
The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow?
And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example.
If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.
The Steve Blank definition of a start-up is "a startup is a temporary organization used to search for a repeatable and scalable business model."
It's possible to form other successful businesses of course. But I like the way this definition calls out the scalability as an important factor. It doesn't make you point about betting against it working any less valid though.
Another angle is that the label "startup" is being applied retoractively to companies that, at their beginnings, were in no way similar to contemporary startups. I can't picture the founders of Google, Apple or Microsoft frequenting "startup events" of their time, spending time on figuring out valuations, or "growth hacking" strategies, or drinking beer together and dreaming out loud of the world domination they're going to achieve. From what I remember reading, the founders of those companies simply did the work and were focused on it. They didn't dream of taking the world until they already found themselves in the groove, being half-way into orbit and already after first stage separation.
Contrast that with what we call startups today - companies that deliberately attempt to be that "evergreen book", trying out every trick in the book to force themselves onto growth path. They live within an ecosystem, a big part of which is a mutual adoration society, with additional large layers of parasitic actors trying to suck out some money and status by just hanging around. And surely a good strategy was found - hence contemporary standard business plan of bullshiting customers with half-made shell of a product to quickly reach the point of getting acquired. It seems to work better than "just" starting a company, at least for the founders. Not necessarily for the world at large.
In a way, I think that early Apple and Google had more in common with a pizza place than with a contemporary Instagram clone.
I agree with a lot of what you wrote, but I do disagree quite strongly on your first (main?) point, as I understood it.
You wrote: "[...] a start-up is more of a determination after the fact than something you decide to build."
I totally agree with your point about companies normally not being able to "grow fast", and I agree with you that luck is a major factor. However, I think you're wrong in saying that people don't try to deliberately build "grow-big" companies.
Believe me, I'm a proponent of building small-growth "bootstrapped" companies, and I've had many conversations with founders about going that route. The vast majority, who had it in their heads that they wanted to be a startup, were deliberate in pursuing "grow-big" strategies. As one easy example, almost every company that raises VC money is either implicitly or, often, explicitly, chasing a grow-big strategy.
I completely agree that the vast majority of companies end up not being able to grow big, and have to decide between becoming a small company and "milking the cow" as you put it, or closing the company. This doesn't mean that they didn't set out, in the first place, to build a "grow big" company! In fact, you can see that this is true in the way that so many of these companies choose not to continue the small business, which could be profitable, but instead choose to fold the company instead.
In fact, reading the writings of YC, or talking with most honest VCs, will easily prove my point - they constantly tell you they are aiming to fund companies striving for $1b+ valuations, and they're fine with 99% of the startups they fund not getting there as long as 1% succeed. They are quite explicitly optimizing for "grow big" strategies.
Btw, I'd like to point out nl's comment below about Steve Blank's definition of a startup, which I always thought was the absolute best definition. A startup is an organization in search of a business model. When someone opens a pizzeria or a software consultancy, say, they're not searching for a business model - they're just executing one. But VC-backed "grow big" startups are very explicitly trying something new.
EDIT: Just to make sure we're not arguing over definitions - I'm claiming two things:
1. That what people, especially on HN, mean when they startup is a company pursuing a "grow big" strategy, and deliberately so vs. a non "grow big" strategy.
2. Regardless of 1, I also think that the majority of modern-day companies (let's say founded in the last 20 years?) that have grown big were deliberately started with the intention of growing big, ala Amazon, as opposed to say FB or Google, which wouldn't fall into this category. I'm less sure about this point, but it is a factual question that we should probably be able to answer.
I was thinking exactly this. How many articles are we reading about extreme VC preferred stock, raising such high valuations that the only option is to go public after the first months. Raising so much money on terms that you require a big exit.
"But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast"
Usually a startup is understood to be any venture in search of a sustainable businessmodel.
To grow very large, very fast requires only lots of capital. A lot of companies have confused a large capital investment with a sustainable businessmodel and gone bust soon.
He's not debating the merit of fast growth vs taking it slow, he's just pointing out terminology.
pg's 2012 essay http://paulgraham.com/growth.html suggested using the term "startup" for hypergrowth-oriented company, and the term "small business" for slow-and-steady approach.
Both types exist, deserve to exist, and are nown to end up at a different place than the original goal they had in mind. But using suggested terminology saves us from the replay of the same argument over and over.
Seems like it might be a kind of survivorship bias. A hundred years from now, will people look at our era as one with a rich ecosystem of startups, or as one dominated by a half-dozen Facebooks and Twitters?
How many startups from 1995-2001 are still around that took seed-money and a few rounds and then stagnated (newer took off) since 2001? How many small companies (self funded) survived from the same timeframe? Startups have usually a goal IPO or get bought or the disolve themself after some time - right?
The point is that Bob's Bearing and Brass Knob Corporation, even though they did contribute some parts to the submarine (a) probably failed shortly thereafter and (b) probably wholeheartedly intended to become the next General Electric.
No, I've worked for several small businesses over my 35 years after college, and none of them aspired to meteoric growth. I think they're the lions share of new businesses, but consistently overlooked because the media is interested only in businesses with meteoric growth or products that become the next new new thing.
I think the willful blinkering of business interests toward only the .001 percent business that's exploding RIGHT NOW is a greater contributor to the fragmentation of business today than the fading priorities of WWII ever was. The idolization of the Gambler on Wall Street (or in SV) has misdirected our priorities away from respecting those who seek to build a sustainable business where normal people want to make a sustainable living. Now the prevalence of jobs at yet another ephemeral startup or large corporation awaiting it's next merger/buyout has greatly destabilized the workplace, much less made the job of corporate leader/ visionary/ innovator next to impossible. Instead of creative invention, corporate CEOs now focus instead on cost cutting destruction, and Wall Street applauds.
I wouldn't call that fragmentation so much as disintegration.
There used to be many thousands of such manufacturing-based small businesses in America. They tended to stay focused on their competency or branch out tentatively into related products, flexibly grow and shrink to meet demand, or sometimes get acquired. But I don't think many of them planned to become the next General Electric.
Facebook or bust. If this is the definition that we're expected to accept, I will say that as a consumer and human being, I prefer interacting with and being a part of small businesses more than startups.
It would seem this definition paints a startup as a proto-bigcorp. If the prevalence of big corporations is not a cycle we want to repeat, would we not favor businesses that do not intend to become big corporations?
For employees: salary/responsibility growth, bigger impact more quickly
You might be right about the customer side, that non-"startups" are more likely to be around in 5-10 years, which makes a difference when investing in a new, mission-critical area of your business (e.g. replacing email server)
Oh, but most startups are not trying to become big corporations. They're trying to be bought by one. This is the "get rich" part of the startup get-rich-quick scheme. Which is even worse for customers, because you can at least somewhat trust that a successful wannabe-big-corp will at least try to still sell/maintain their original product for a while.
I strongly disagree. As an entrepreneur and a mentor, to me a startup is just a new business that is pioneering something new.
Most new businesses are replicating an existing business model. E.g., if you open a new corner store, it's probably going to end up being like every other corner store. If you're starting a games company, you're probably going to end up like a bunch of other games companies.
Startups, on the other hand, are tackling something deeply innovative. That means early on you have to optimize for learning: understanding customers, iterating on product, seeking product-market fit. It's a very different set of behaviors for the entrepreneurs than the normal new business.
I think you're thinking of venture-backed startups, which require a large enough amount of high-risk capital that nobody will fund them unless they expect to be worth $100m+. But there are plenty of smaller startups that are self-funded or bootstrapped. They can be perfectly stable at small scale, although many of them do choose to grow substantially.
'Startup' has come to mean too many different conflicting things.
You're describing what I would call a "VC backed startup", where you'll either get big or wither away.
The other end of the spectrum (for people here) would be something like a Bootstrapped Technical Startup. Where you're trying to build a cashflow positive business leveraging technology in some way.
The definition of a startup is a reoccurring theme here and I'd really wish pg would reference it every time he uses the term. For him, a startup = growth [0], and as you can tell by this quora answer[1], not everyone agrees with that.
"Obviously the spread of computing power was a precondition for the rise of startups."
seems closely related to the concept behind the book "Design Rules" (2000, isbn 978-0262024662). Here's a summary from the book flap:
"[The computing industry] has experienced previously unimaginable levels of innovation and growth because it embraced the concept of _modularity_, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established _design rules_. Drawing on the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy."
Multiple studies have shown that startups are dying in the USA. The great era of startups in the USA was in the mid 20th Century. At least since the 1970s, new business formation has been dying:
"Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation. But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in
high-tech."
And here is the start of the first:
"The pace of business dynamism in the U.S. has declined over recent decades. The decline in business dynamism is evident in a pronounced declining trend in the pace of both gross job creation and gross job destruction. An important component of these declining trends has been the decline in the firm startup rate. The decline in the startup rate has yielded a significant decline in the share of employment accounted for by young firms – this share has declined by almost 30 percent over the last 30 years. "
And please, please, please note that a country can have an incredibly dynamic, innovative industry, but that nation can still be in long-term decline. See here for details:
Are those studies equating "starting a small business" with "startup"? Paul Graham only uses "startup" to refer to business that start small but grow large is a short time, as he says in the OP article itself (and elsewhere). If you equate those two ideas, you won't be able to talk clear about this topic.
When he refers to "the spread of computing power" he seems to be talking about software startups in particular. But when he says "The ultimate way to get market price is to work for yourself, by starting your own company" he is either talking about every imaginable form of business, or he is talking complete gibberish. If everyone goes into one sector, the economy would soon suffer an abundance in that sector, and a relative lack in other sectors. So his point is either true of any business that one might start, or he has no point at all.
There are "tech startups" that serve lots of "non-tech" sectors of the economy. One of the major beliefs in SV is that this is going to happen more and more, with companies making tech that augments or replaces entire sectors of human work. There's obviously a ways to go before this will be possible with some areas.
It's not unreasonable for everyone to go into one sector, and then for that sector to eat the entire rest of the economy (a la a16z's "software is eating the world" investment thesis). Imagine that software is an innovation akin to assembly lines. If you started a company in 1840 that used assembly lines, you were going into a very specific industry: textiles. If you started a company in 1890 that used assembly lines, it could be one of dozens of industries: textiles, steel, oil, tobacco, meatpacking, etc. If you started a company in 1930 that didn't use assembly lines, you were insane and destined for failure.
What's happened, historically, is that as a technology diffuses into new ways of doing things, old industries simply die out, and then the new industry differentiates into replacements for it. Specialized production in the middle ages was divided into guilds (many of which are family names now): you had smiths, cobblers, bakers, butchers, weavers, etc. When the industrial revolution happened, there was simply "industry"; it was only later that this differentiated into the steel industry to replace smiths, the meatpacking industry to replace butchers, the textile industry to replace weavers, etc.
Similarly, when software got started in the 50s, there was only the "software industry". Now, 60 years later, it's differentiating into search, social, messaging, e-commerce, developer tools, homesharing, adtech, fintech, ridesharing, delivery, etc. And it's likely there's more to come: if I had to locate us in the history of the industrial revolution, I'd say we're around 1890 or 1900. At that point, the great industries of the mechanical age (mass-produced automobiles, airlines, plastics, radio, television, recorded music) had yet to be invented.
Interesting. That reminds me of the fact that, after WWII, US domestic producers, to a far greater extent than today, satisfied the US domestic market for all kinds of products. (I think this was largely due to the literally bombed-out industrial base of some US competitors.)
And that amounted to a large number of jobs which are no longer available to US workers.
He takes the easy way out on the war theory: It would be awful, of course, so let's not think about it.
But think about it. Would historical WWII be possible in today's United States? Introduce the draft and send current US population off to die in Europe? I think you'd see intense levels of political resistance, draft dodging and desertion in the field. Fragmentation means you probably can't unite the whole country to die for... whatever anymore.
Historically, prior to pearl harbor you also would not get the United States population to back you for a war. The political resistance would have likely been armed revolt, the general population was strongly against war.
However, after pearl harbor, the average citizen took a blow and was more than willing to fight. They wanted to protect their homes, and they felt if they didn't the Japanese would bring the fight to them.
If we generalize to say that foreign threats can be used to create massive economic, policy, and social change through government fiat, then this is absolutely possible. We're still living with the Patriot act after all.
Also recall that prior to WWII there were "intense levels of political resistance" but as soon as our territory was directly attacked that changed. (It took 4 days from Pearl Harbor to our declaration of war)
A full scale war today, excluding skirmishes, between two large conventional armies would be nuclear. It would be over very fast. Perhaps there is little to nothing to compare with WWII. A war in Europe could happen again but it would be quite different.
The use of militarism and nationalism does not require a full scale global war. Certainly it is being used right now in several nations under structural duress. The enemy may be real or imagined, and if you oppose or speak out against the changes you may be the enemy too.
> A full scale war today, excluding skirmishes, between two large conventional armies would be nuclear. It would be over very fast.
The problem with this line of thinking is you assume that the enemy doesn't care if there's a world left for them to have greater power/influence/wealth/whatever in. Nobody really wins a nuclear war, some people just lose a little less.
..that's how the world works already. Nobody needs a second house or car or whatever as much as some other people need food, clothes, medicine and/or shelter. Does this make the world a shitty place? IMHO yes, and the people who "win" don't really win, not in my books, because they are damaged in wholly other ways I'm not jealous of at all. But here we are, and I think you're imputing pure rationality where there is a lot of narcissism, greed and other defects mixed in. And nuclear war already nearly happened by accident, right? Also, having full control of a small pie which then grows bigger is preferable than being a part of a big pie that's growing where there are competing actors, if you're serious about power. For organizations and their zealots, that can be enough.
Scenario A:
you have 10000 points, the others have 5000 points
Scenario B:
You have one point, the others have 0 points
One way to look at it, is to say you have 10000 times less points, or 9999 points less, in scenario B over scenario A. (I submit the more intelligent way to look at it is that there are 15000 times less points in the world, or 14999 less, but that is besides the point).
But the other way to look at it is to say you have infinitely more points than anyone else, and are now God for eternity, for all practical purposes. That this seems silly or sick to you, that you would rather be a normal person in a decent world, than a ruler with an iron fist in a hellish world, doesn't make it less appealing for those who are already chin deep into things we would also find abhorrent. Never say "nobody" easily, unless it's about something that doesn't really matter.
If the planet is no longer capable of sustaining life after the nuclear war is over -- and I would argue that once you launch a couple of missiles you might as well launch them all, just to be safe -- then yes nobody wins. Your country/continent might die out more slowly than the other ones, but nuclear winter will kill everyone.
Now if you have 1000 years of rations saved up sure you might win. You might be the only person left on earth. But is that winning? Maybe somebody thinks so, I guess.
A war in Europe could definitely happen, the outward unity belies the inner rivalries. There is also the option of civil war. Breakaway provinces wanna be nations, religious factions, old hatchets barely buried. The potential for war has never gone away.
As a European, I doubt that unless you are thinking balkan scale wars on the edges of Europe in countries that are not normally considered Europe as the term in commonly used or possibly Turkey actually get of its ass and do something about ISIS.
It is true that there are a lot of rivalries, but nobody wants another world war. We are all fat, rich (relatively compared to 1939) and entertained, but more importantly there would be nothing to win and a lot to lose. The same goes for civil war - Scotland isn't going to war, nor is Catalonia. Northern Ireland is more peaceful than it has been in decades and no country is seriously oppressing any other country.
Even Putin isn't stupid enough to go into a NATO country, at least not the way he did in Ukraine.
On what time-scale are you looking? A decade out? Two? Three? Europe is in flux in a way that it hasn't been in a long time. And I mean that in a downward way, until the mid 00's we were converging, since then we have been diverging with the '08 crisis as one catalyst and the whole nationalist resurgence as another. Add a couple of million refugees as a convenient scapegoat and the stage is set. Between Le Pen, Wilders and a bunch of other Euro-sceptic parties as well as a widespread fear of everything that isn't lily white you'd have to be a tremendous optimist to think that Western Europe has somehow become immune against war. I hope you're right but the signs are definitely not 'all good' and it would need some serious good news (such as the populists being voted out to the point of insignificance) before I'd be ready to believe it.
Mind you, I'm not pessimistic, I think we'd largely survive such an ordeal, it will never be on the scale of WWII (at least, that is something you'd hope) but it might take more than just a skirmish before the lessons of old would be re-learned. One of the reasons the anti-war sentiment in Europe was so strong in the 1970's and early 1980's is that we were under no illusion what would be the battle field, today the fact that we have the illusion that the battlefield would be anywhere but here is what endangers us more than anything. Two days driving separates the Russian border from Amsterdam, add another one and you've gone from Amsterdam to Bulgaria. Conflicts could easily spill over from one region to another. The first world war arguably started with a single shot, the second followed from that first. I have no idea what Europe would feel important enough to go to war over but it could just as easily be something insignificant as something big.
The most important thing (apologies to Spain, Italy, Romania and Poland) would seem to me to be that Germany, the UK and France keep seeing eye-to-eye. If those ever find themselves on opposite sides of some kind of confrontation all bets are off.
And it's not like the existence of the UN means much (2003 Iraq invasion) when a certain western superpower can bend, break and bulldozer members' arms to get their votes.:
"The Institute for Policy Studies published a report[10] analyzing what it called the "arm-twisting offensive" by the United States government to get nations to support it. Although President Bush described nations supporting him as the "coalition of the willing", the report concluded that it was more accurately described as a "coalition of the coerced." According to the report, most nations supporting Bush "were recruited through coercion, bullying, and bribery."" – https://en.wikipedia.org/wiki/United_Nations_Security_Counci...
The EU might seem fragile, but that is because the NATO and the EU expanded to fast. Remember some 20 years ago there was a wall through Berlin, now nearly everybody behind that wall has joined. Russia destabilized Ukraine to stop this movement.
Still the EU welcomed Croatia in 2013 and the Eurozone Estonia in 2011, so it is growing.
North-Western Europe already has a large coalition of countries that want and think the same things and have an excellent standard of living. The East will catch up economically and the South will get back on its feet. It will take some time, but I think they will join the group.
Some countries like the UK want their special treatment once in a while, but everybody knows, that London has to play along to some degree if it wants to stay the financial center of Europe.
Nobody wanted a world war in 1914 either. History is littered with the outcomes of unforeseen nonlinearities.
Northern Ireland is more peaceful than it has been in decades
It is now, but why do you assume that that is a one-way street? Northern Ireland was also relatively peaceful from 1922 to 1968, when Catholics became more aggressive about their demands for civil rights and violent conflict broke out and then escalated rapidly.
Across Europe as a whole (and also the US and other places), look at the rise of populist/ideological politicians. A few decades ago they would have been too marginal to succeed in many elections, but the internet has proved a great organizing tool even for people who want to reduce the scope of civil liberties, just as weapon technology doesn't discriminate based on the morality of who is deploying it against whom. Hardcore ideological politicians are unmoved by or even hostile to arguments about the greater good.
Nobody wanted a world war, but lots of people wanted a war between Germany and Russia, which would drag France into it. They just assumed it could be over quickly and they would be the victors (and it came very close to being true for the Germans. Had the Miracle on the Marn not happened or had Russia mobilized slower the Germans might really have out flanked the French army).
Hitler assumed he would be able to get away with taking Poland, as he had gotten away with taking pretty much anything up to that point and the Germans were extremely pissed over the Versey treaty, so much so that they were willing to go along with it.
Today we know what happens if we go to war with each other, and if anybody in Germany doubts it, they can go see the huge hill outside Berlin (or inside it) were they dumped all the broken bricks that couldn't be reused when the war ended and they had to rebuild the city.
So yeah, that is why I don't believe there will be another war in Europe proper again at least for the next 100 years.
They did. Iraq had nothing to do with 9/11, but got invaded because the cabal behind the U.S. President had declared they wanted to invade Iraq already during the Clinton administration.
There's a huge difference between maintaining public support to send a voluntarily conscripted army somewhere, and actually instituting a draft and wartime command economy. Do you think your early 2000's out-of-touch war cheerleader would have been so zealous if their family were forced into the army, or if fuel rationing meant they could only drive one of their SUVs? It is all too easy to be pro-war when its only effect is a new genre of reality TV.
I don't disagree. Which is why I am against professional armed forces and am a proponent of only conscript armies. Sadly enough most (all?) European countries abandoned conscription in the last decade (those that still had it).
Any US politician who votes to reinstitute the draft will automatically activate a huge portion of the young people who normally don't vote as well as the soccer moms (as you pointed out). Those millions of new voters will be be single issue voters and will automatically vote against the politicans who voted for the draft - which the politicians know, and which their opponents knows and will use.
As a European, who have the remains of a nazi bunker not half a mile from my apartment, I am extraordinarily happy that we can't unite a huge portion of a country to go die anymore.
You can't just assume a system that makes everyone better off despite increasing differences, or that everybody is happy about it, or that there's a peaceful system for sorting out conflicts amid increasing differences.
Of course it always ends in violence. Refragmentation == reemergence of extremism. People asserting stronger identities while technology shrinks the world and brings them into closer economic and information loops is a recipe for conflict.
In the old days you could have crazy ideas and no one on the other side of the world gave a hoot. Today you get <pick your favorite 'other'> storming Inland Regional Centers, Federal lands, or malls.
This essay is excellent, but I wonder a bit about the fact that it focused on the US only. On a global scale I think that experiences are continuing to compress and will continue to do so for at least a few generations.
If this is true, does it invalidate pg's overall thesis? I'm not sure. Interesting to think about though.
> I wonder a bit about the fact that it focused on the US only. On a global scale I think that experiences are continuing to compress and will continue to do so for at least a few generations.
There's actually a little allusion to this in footnote 21:
>
[21] Globally the trend has been in the other direction. While the US is becoming more fragmented, the world as a whole is becoming less fragmented, and mostly in good ways.
He didn't elaborate, but I suppose the essay was already pretty hefty.
Low growth causes more income to come from capital, which causes more inequality due to inheritance and the rich getting richer. The solution is a global progressive tax on capital.
After reading the first paragraphs in pg's essay I immediately went CMD + F Piketty and was somehow disappointed that he didn't choose to cite him since that's the crux of C21C. But, glad to see that others on HN resonated with the same ideas.
Generally Piketty is dealing with inequality produced by differences in income from capital, not labour. His reason for focusing on capital income is explained in depth, especially in chapter 7. In short, the distribution of capital ownership is always more concentrated than the distribution of income from labor, so we should be worrying about wealth inequality and inheritance. This is why Piketty proposes a wealth tax, not an income tax of the kind that pg says will 'be fighting a losing battle against increasing variation in productivity.'
> The creative class flocks to a handful of happy cities, abandoning the rest
At least this trend is one that individual programmers can choose to resist, assuming we don't have to move to Silicon Valley or Seattle to get good jobs. I, for one, don't have any desire to leave my home town of Wichita, Kansas.
Very interesting, particularly the idea that the rise in inequality is a ntural consequence of fairness. I wonder, then, if those opposing the rise in inequality aren't like King Canute ordering the tide to recede.
> the rise in inequality is a ntural [sic] consequence of fairness. I wonder, then, if those opposing the rise in inequality aren't like King Canute ordering the tide to recede.
The subset of people complaining about inequality that I actually take seriously[1] are concerned with its effects (for example, on the health of the economy[2]), not what the cause of the rise was relative to the previous era.
Another factor in the (reasonable) complaints has to do with the perception that income inequality is driven by (and driving) inequality of _opportunity_. Basically, the rising inequality is seen as an unfortunate side effect of a positive thing (the aforementioned "fairness"), and the good (IMO) proposed solutions involve increasing said fairness, instead of just rolling back to what we had earlier (warts and all).
[1] i.e., excluding the people who dislike it without any understanding of what its potential causes or implications might be (IME these people exist for every single possible POV). Included in this are people who think that we can magically re-create the economic environment of the 50s (wherein half the world had blown itself to pieces and the other half was emerging from under the heel of colonialism or being smushed by the heel of Communism).
It seems to me that much of the fragmentation that the post discusses is just economic specialization, which we should encourage (see Adam Smith). I do think it is reasonable that one limits the 'fragmentation', i.e. that one puts negative feedback in the economic loop in the form of a progressive tax. Negative feedback is used everywhere in electronics and even sometimes by the Fed to control interest rates. Even so, many economists [1] throw up their hand and say macro economics is too tough and we just can't predict how it will work. This seems like nonsense to my engineer brain; I think that a sharply progressive tax with an accompanying universal basic income is the right way to encourage economic diversity.
[1] I get my impression of economists from EconTalk by Russ Roberts.
As an engineer, you should be familiar with chaotic systems, which produce vastly different trajectories based on small changes in initial conditions. Very simple mechanical systems[1] exhibit chaotic tendencies. Control of such systems is possible on the small scale, but large scale chaotic systems may become uncontrollable.
Now imagine an economy made of millions of people who all have different needs, desires, abilities, environments, intelligence, etc. How accurately can you predict how a single policy decision will shape the trajectory of such a collection of people? Now the State pushes thousands of policy changes per year into the system without ever really monitoring the response to a single change.
> many economists throw up their hand and say macro economics is too tough and we just can't predict how it will work
The smart ones do, but the mainstream Keynesian school have the hubris to think they can predict the responses of millions. Most Western leaders have been advised by Keynesian economists for much of the 20th century, and the decisions of those leaders have caused vast displacement, pain, and suffering in the form of economic turmoil and war.
Remember, the State is also an economic actor, and it derives its income by coercive force. Progressive taxes simply point a bigger gun at the heads of those who perform better in the economy.
I'm all for reducing the size and complexity of govt, including the frequency of policy changes. A progressive tax can be a small-govt solution.
> ... Progressive taxes simply point a bigger gun at the heads of those who perform better in the economy.
A progressive tax certainly takes more from those who have performed better in the past. I'm concerned about creating jobs and encouraging situations where people can succeed in the future. The people who will create the jobs of tomorrow are not the ones who created past jobs. It's small companies who create jobs, so don't tax them as much; it's the struggling entrepreneur who will create jobs, so don't tax them as much. Instead, tax those who have already succeeded and who are not creating as much relative economic output.
There are some bold claims here that you don't even make an attempt to back up with evidence.
On chaos, you seem to be arguing that a few select simple systems are chaotic, therefore a much larger system must also be chaotic. This doesn't make any sense, complexity != chaos. Think of something like an ant colony, millions of ants in an incredibly complex system, but the system as a whole tends toward very consistent behavior. Killing some of the ants or cutting off on supply of food makes no difference.
It's also incredibly vague to talk about this when there are billions or more inputs to a system like the US economy. Some variables might exhibit chaotic behavior, but that doesn't mean anything you do to the system has a completely unpredictable outcome.
> Now the State pushes thousands of policy changes per year into the system without ever really monitoring the response to a single change.
What? They monitor changes all the time. For instance, the white house is happy to tell you exactly how many more people have health insurance now thanks to obamacare. Many (maybe most?) of the policy changes are close to independent and effect only a small subset of people. And it is usually possible to statistically account for other factors that might be interfering with what you're trying to measure.
> have caused vast displacement, pain, and suffering in the form of economic turmoil and war.
Yet somehow we're living in the safest time in human history [1]
I think that the field in US in urgent need of refragmentation is the political systems. The two parties are oligopol that don't care about their customers and they don't deliver enough political product to the people. We need more smaller parties that could represent the increasing diversity of opinions.
Agreed, and some system of voting that allows people to express near-substitutes, to avoid a Gore-Nader situation. I don't know the name of it off-hand, but there was a system proposed where you could assign up to 10 points for candidate, so if I happened to like Nader, but also Gore slightly less, I could give Nader 10 points, Gore 9, and Bush 1, rather than give my one vote to Nader with the knowledge that I was probably helping Bush win.
Not only that but actual diversity of issues - if let's say I am pro/anti gun control right now - I also (involuntarily) make statement on access to abortion (which is topic that I just don't care about at all)
Look into instant-runoff ballots, where you simply rank your candidates in order of preference. If your first choice does not reach 50% of the vote, your ballot is reverted to your second choice. This allows you to vote for a candidate who most accurately reflects your views with a second-choice of the next-most-accurate, etc.
Unlike Paul's other essays, this one did not offer me any insight. WWII bringing the country together, America becoming less culturally conformative since WWII, etc... these are obvious trends that most everyone is aware of, and which people talk about quite often.
What I thought was useful/interesting was the idea that it doesn't make sense to try and fight the fragmentation, and that it makes sense instead to focus on how to live well with it.
That's one of the reasons I like it. It's too controversial and complex a topic to be prescriptive about it, but it's such an important topic that it deserves to be laid out clearly and plainly. That's what PG is so good at, regardless of whether you agree with his conclusions. I feel like I could share this with anyone I know and they would get value out of it, and further, it would help us get on the same page when discussing our feelings about what to do (if anything) about it.
> His startup essays tended to be bit artificial, as if he had to force himself to write them.
He was basically doing content marketing for YCombinator, which is understandable and probably served him/them well. But this is probably the sort of thing he's actually more interested in writing.
I read the comments on HN looking for the dissenting view as that's where I often appreciate the most value. I'd love to see you expand upon your reason for both disappointment and then provide some concrete counter examples that highlight Paul's lack of historical rigor.
Which of my comments do you prefer? (Note: I prefer the latter. Since you're the only dissenting view I've seen so far, I'm asking you to expound if you would, please.)
Great essay. I would quibble with the following though:
> [Technology] means the variation in the amount of wealth people can create has not only been increasing, but accelerating.
The problem with this is that success = ability * motivation * opportunity. There's no question that technology is increasing ability. But it's less clear what's happening with opportunity.
Networks tend to be winner-take-all, which means that technology actually depletes opportunity at the same time as it increase ability. Which I think means that we're actually going toward integration, not fragmentation. Only this time we don't need another WWII to integrate society because it's already happening, it's just less visible.
E.g. the vast majority of the traditional media is controlled by the same six corporations. And to quote Fred Wilson's 2015 wrap up, "10 of the top 12 mobile apps are owned by Apple, Facebook, and Google."
There's no question that individuals are way more free than they were in 1950 or whatever. But I think it's more analogous to free-as-in-beer, as opposed to free-as-in-speech.
When I was a lad I got my hand on a great prize: a copy of Delphi 3 (already obsolete by then), which got me started coding. Today anybody can download much better tools (Visual studio, IntelliJ, etc for free). Any question you have can be searched on the internet, etc. Opportunity has increased _massively_ the last 20 years.
Seconded. I learned assembly code on a DOS 2.0 machine by disassembling tons of random bytes and making a hex->assembly lexicon that I could use to write programs in hex. Not because I was trying to be hardcore, but because I was in an information, and software, and hardware desert. My kid, on the other hand, has a 24-hour, 50 gigabit connection to any information he wants, a computer made in 2015, and his choice of nearly any IDE and any programming language he could possibly want.
> Opportunity has increased _massively_ the last 20 years.
The only problem is that it's increased for everyone else, too. Used to be you were a king if you had a board with a nail in it. Now everyone's packing Uzis.
And a significant joy of those 'desert' years was the need for and rise of the hacker community which brought learners and tech fans together socially and educationally. That sharing of common experiences and cool hacks is gone now, replaced with near infinite code repositories that send a clear message to neophytes, "There be no dragons ahead, only well trod pavement".
That's ability, not opportunity. (Ability is what you can do, whereas opportunity relates to markets, regulation, social capital, etc.)
My argument is that everyone has the same 15 or 20 basic human needs, and increasingly each of those needs is being met by two or three global corporations, as opposed to two or three local or national companies. Which means that even if you as the individual are more talented or whatever, there is actually less opportunity to use those talents to fulfill human needs at scale in a profitable way. That's why such a large percentage of employees today work low wage jobs in the service industry, as opposed to physical/digital manufacturing.
And network effects are only one way in which technology has decreased opportunity. Another is environmental degradation. E.g. 300 years ago anyone in manhattan could feed themselves just being sticking their arm in the Hudson river. But now all 100% of those (edible) fish are gone, and all the profits that were made from dumping industrial chemicals into the river have been privatized by the wealthy.
A third way is legal regulation. Every time a new technology comes onto the market the government has to regulate, which often shuts out everyone except the super wealthy from competing. (Want to start a cell phone company? Good luck with that.)
There are more one-in-a-million lottery ticket opportunities than ever before. But for the average person, there is actually much less opportunity for them to be successful. And not just less wealthy relative to the rich because the rich can gather sticks faster or whatever, but less wealthy on an absolute scale because there are no sticks left to gather.
It's nice to talk about making furniture and fixing up cars or whatever, but I think the number of fortunes that have actually been created by making wealth without externalizing massive costs onto the poor and middle class are probably few and far between.
When I made a shareware game using Delphi in the 90s distributed via BBS, tens of thousands of people downloaded it. Now there is so much "stuff" that I have to pay or beg for downloads.
There is no guaranteed formula for success, it is heavily luck dependent. Those who think otherwise are suffering from survivor-ship bias and/or the just world fallacy.
The opportunity is the luck though, since its out of your control, if you take it that the constituent parts of personal behavior that present you with opportunities come from your own motivation.
Luck is far more than just opportunity though; luck is also all the things that didn't happen that could have, things that caused others who followed the exact same path to fail. Sudden disease, unexpected deaths and disasters, all of which are invisible luck for those who haven't been affected by them.
Regarding income inequality, I recommend listening to some of the speeches/debates with Bernie Sanders.
E.g. he argues that the greatest receiver of welfare in the US is the wal-Mart family, because they get even richer paying their workers so little that the workers have to live on welfare. (In other words the welfare is "paying" the workers so that Wal-Mart don't have to.) He proposes to rise the minimum wage.
My understanding on Sanders' statement is that it could be paraphrased: "If walmart employes didn't get state welfare, waltons wouldn't be as rich, because they would have to pay more (employees who can't afford food and shelter can't work for you) ... ergo, walmart employees are, at the moment, practically, a conduit of welfare from the state to the waltons".
(That is how I understand his statement -- I don't agree or disagree, I don't know the details well enough to do either)
It's not clear to me that they would have to pay more. In previous generations people leaved in much worse poverty and still managed to show up to their various jobs.
In the case of minimum wage, they would indeed be forced to pay more, rendering the need for welfare to those same people unnecessary, thus shifting the cost from the state/government to the employer.
That is in effect wealth distribution, which again closes the big income inequality. (That's the intended effect anyway.)
beagle3 argued that in a world without welfare, Wal-Mart would have to pay more or their employees would be unable to work due to lack of basic necessities. I was only arguing against that assertion.
I was merely paraphrasing my understanding of sanders' argument.
But the argument has merit if the wage is not livable. The two issues the make this an issue (or a nonissue) is what is a minimum livable wage, and whether or not it is the governments role to enforce that or not. (No idea about the first, I think Yes about the second)
Ya, I get that you were paraphrasing. And you did a fine job in my opinion, so my refutation was more aimed at Bernie than you.
With regards to enforcement of a minimum wage I would say that if we, as a society, want to enforce minimum living standards that is a burden that should fall on all of us and not just companies that employ low skilled labor.
If the employer responds by increasing the prices of the goods/services they sell, then yes. However, in the market the consumers have a choice, so they can choose to not buy something, or buy somewhere else, and the market thus regulates itself. Don't want to pay taxes? Not much choice there. So I think having the market regulate itself is better than enforcing the cost of labor through taxes. (Who knows, maybe the employers would be forced to cut their margins even.)
> ergo, walmart employees are, at the moment, practically, a conduit of welfare from the state to the waltons
This doesn't make any sense (though you have paraphrased Sanders accurately). While technically true for some definition of "conduit of welfare", the same is true of almost everybody in society. Welfare recipients are integrated into the economy enough that "if X didn't get welfare, person Y wouldn't be as rich" is true for many, many, many values of Y (neighborhood stores in poor areas, people benefiting from reduced crime ("stealing bread to feed your family" used to be more than a trope), etc). To give an example in microcosm: if you buy a used car on Craigslist from someone, the fact that the seller is a welfare recipient doesn't mean that you're a beneficiary of welfare because you're not paying him enough to live off of.
To the extent that society is responsible for helping the poor (FTR, I personally believe in this responsibility), it makes absolutely no sense to claim that employers (as opposed to the welfare system) are responsible for filling the gap between "market value of a person's labor" and "how much income he needs to reasonably survive".
This particular claim of Sanders is absolutely idiotic: people are blindly pattern-matching it to support for the poor when in reality he's arguing for shifting the burden of subsidies from all of society to arbitrary consumers/business owners/employees affected by artificial wage floors.
> To give an example in microcosm: if you buy a used car on Craigslist from someone, the fact that the seller is a welfare recipient doesn't mean that you're a beneficiary of welfare because you're not paying him enough to live off of.
I think the difference here is that it's not a matter of a single transaction, it's an employment, so what the employer is basically paying for is the employees time (and time is finite). So a better example would be that you pay someone on craigslist for a service, e.g. paint your house. If the painter works full time painting houses and still needs welfare, then the taxpayers are basically subsidizing house painting ("conduit of welfare" as it was phrased). Why can't those that need their house painted pay what it actually costs to get the job done? Because if the full time painter needs welfare, they're in reality paying him too little.
> I think the difference here is that it's not a matter of a single transaction, it's an employment, so what the employer is basically paying for is the employees time (and time is finite).
I think the distinction you're making here is more than trivial, and considered mentioning it but decided that it's still not relevant. My point was that Sanders definition (esp as paraphrased by you) is silly to the point of being meaningless, since it consisted of "X isn't paying enough for Y to get off welfare, thus X is receiving welfare". This applies to my example writ small. Your painter example isn't much difficult from the Craigslist example: the person spends his time doing multiple things that add up to less than enough salary to live off of. That doesn't make any of the purchaser's of his services responsible for the shortfall. To the extent that anyone else is responsible, it's all of society.
> Why can't those that need their house painted pay what it actually costs to get the job done? Because if the full time painter needs welfare, they're in reality paying him too little.
You're defining "what it costs to get the job done" very bizarrely here. If the painter takes odd jobs but his wife is employed too such that the two of them are somewhat comfortable (at least above the poverty/welfare line), by your definition it would suddenly "cost less to get the job done" (since the shortfall to a reasonable income has now diminished/disappeared)? This is of course an absurdity.
The problem again is that you're picking a way to place responsibility for subsidies that makes no sense from either an efficiency or an ethical standpoint. Assuming a need to take care of the poor, we all share that responsibility. The only reason we've "decided" that the burden should fall on arbitrary industries and their employees/customers/owners[1] is because that way we can pretend that we don't believe in taking care of the poor and the robust welfare system that it would entail. All we're doing is creating a shitty, roundabout version of welfare.
Note that I have a tendency to consider complete systems when it comes to policy. In the current political climate, it's no doubt more feasible to implementing higher minimum wages than, say, a basic income. So despite thinking that minimum wages are a terrible idea in a well-functioning system, I wouldn't necessarily vote against them in our less-than-optimal system. I just don't think there's any reason to delude ourselves into thinking that they're good policy per se.
[1] And in a weaker effect, that their effects should fall on arbitrary
In a market economy, people are paid just enough so they don't leave. Salary depends more on the typical economic situation of an employee than their ability.
Walmart employees are not compelled to work for Walmart; the employment contract is agreed upon voluntarily by both parties. The employees know how much they will be paid and agree to accept the terms.
Walmart is operating within the legal employment framework set up by the government, including the welfare state and the minimum wage. That will not change by raising the minimum wage. Rather, Walmart will simply add automation and reduce its employment.
Minimum wage is arguably the worst idea when it comes to improving the lot of the poor. If someone cannot command more than the minimum wage when it comes to productivity, intelligence, etc, then raising that wage means that person will be unemployable. That is, their skills are not worth the minimum amount an employer is allowed to pay, so they will not be able to find a job. Ever. That person will be a permanent liability of the State.
I must commend you - I have never seen the main detrimental effect of the minimum wage explained so succinctly. Not in Friedman, not in Hayek, not anywhere.
The problem with this analysis is it assumes that the power to negotiate a wage is equal between the parties. The second is wages are set at the margins. This means it takes very little excess labour supply to drive wages to subsistence levels.
> Walmart employees are not compelled to work for Walmart
Yes they are, poor people are compelled by lack of opportunity to take whatever they can find even if it sucks. Pretending they have the option of just saying no to a low salary is a bit of willful misunderstanding of the reality of their situations.
> Minimum wage is arguably the worst idea when it comes to improving the lot of the poor.
No it isn't.
> If someone cannot command more than the minimum wage when it comes to productivity, intelligence, etc, then raising that wage means that person will be unemployable. That person will be a permanent liability of the State.
That is the point, a minimum wage allows people the opportunity to get into welfare because minimum wage is part of the welfare system, it sets the low bar. It's better to not have a job and qualify for benefits than it is to have a job that pays so little it's not worth having. The minimum wage forces society to deal with the problem of people who lack the skills to make a market wage, and that's a good thing.
tl;dr: Raise the minimum wage so that employees don't need to live off of welfare. People lose their job? Good riddance, seriously. People don't lose their job? Called their bluff.
> Walmart employees are not compelled to work for Walmart; the employment contract is agreed upon voluntarily by both parties. The employees know how much they will be paid and agree to accept the terms. Walmart is operating within the legal employment framework set up by the government, including the welfare state and the minimum wage.
Yes. And if you think everything is fine the way they are now, then don't change a thing.
> That will not change by raising the minimum wage. Rather, Walmart will simply add automation and reduce its employment.
Sounds great to me. You're basically arguing that not having minimum wage is actually holding back progress.
> That is, their skills are not worth the minimum amount an employer is allowed to pay, so they will not be able to find a job. Ever. That person will be a permanent liability of the State.
If an economy can produce the same amount of wealth with much less workforce/work hours than today, then why shouldn't it? Sounds great if you ask me. (And if that's not possible, just hire more people, it's apparently worth it, problem solved.)
"Minimum amount" is in this case "amount needed to reasonably survive", ie. not need extra welfare. If you can't produce enough value that you can't even justify being paid to "reasonably survive" then yes you need help.
Okay, so I'm no economist, but it sounds like you're arguing that not having minimum wage is in itself a socialist measure. In other words, paying people something, anything, is better for the poor than paying them nothing. The only reason to pay the employees anything at all is to "help the poor", because their work is not really needed anyway (their work is worth that little).
To follow that line of reasoning, from a capitalistic viewpoint, it would thus be wise to raise the minimum wage. If people are being paid to do work that's not actually worth it (ie. subsidized via welfare), then don't. I seriously don't understand why capitalistic Americans defend that point of view. Why should the state/government subsidize effectively worthless labor?
What I'm doing is "calling the bluff". People won't get hired? That's fine, the work they were doing is practically worthless anyway, and I'm certainly not for subsidizing that. However, I think people actually will be hired anyway. Because their work is not worthless. I think the only reason people are being paid so little is not because of the "worth" of the work they're doing, but because the market allows it.
I don't know how that happened, perhaps because the big cooperations have too much power, perhaps it's just inevitable in a free market. But I do not support subsidizing labor, and I don't buy the argument that you have to. The money is there, the value of their work is there, there's no problem paying people more, they just don't want to, and luckily for them they don't need to either. And as long as everyone plays along, that's how it's going to stay.
Sometime in the future I'm sure we'll be able to produce enormous amounts of wealth with minimum man power (re: automation). What will everyone do then? That's up for debate, but it looks like the best bet is putting everyone on universal basic income. And that's not a problem, because the wealth is there, the "problem" is that no one needs to do anything to produce it. I'm sure our future selves will find a fix. (If not, then that sounds like a base line for a revolution. Let's hope that's not needed.)
In the meantime, redistribute some of the wealth by raising the minimum wage. Wal-Mart don't need employees? Fantastic, the future is already here.
Either you're trolling, or you completely misunderstand my position.
Thought experiment: Let's make the minimum wage $1000 per hour. I'd like you to think through the ramifications. What would happen?
> Sometime in the future I'm sure we'll be able to produce enormous amounts of wealth with minimum man power
We already do! The amount of productivity possible by a single worker today was completely unheard of 50 years ago, let alone 100 or 200.
> What will everyone do then?
What do we do now? We continue to work, even though we're far past satisfying all of our material needs. Why didn't everyone just stop working more hours than it takes to eat and stay warm?
Come up with answers to those few questions and you'll be well on your way to being an economist ;-)
> Thought experiment: Let's make the minimum wage $1000 per hour. I'd like you to think through the ramifications. What would happen?
I'm assuming prices through the roof, companies forced to sack their workers, unemployment rate through the roof, companies go bankrupt, economy collapses.
I believe Sanders is suggesting $10/hour (and that it's around $7 now). That's just a number, but I'm assuming it's the threshold between "needing welfare" and not. So my argument is that if you're paying an adult less than that then that's less than the cost of that person to "reasonably survive", thus artificially low. (In other words, companies are paying less for labor than the actual cost of labor.)
So now instead they're getting $7 from their employer, and in practice $3 in welfare. That's the difference with your example: People are already earning $10/hour, they're just not getting it from their employer. So raising the minimum wage is not raising the cost of labor, it's simply placing the entire burden on the employer instead of subsidizing it. There might even be room for a tax break there once people start number crunching. (Although in Sanders case I'm guessing he has other things to spend that money on, but I digress.)
If raising the minimum wage to the real cost of labor is a problem, then I just don't understand why. The money is there, it's just "stuck" at the top, and minimum wage is one way to help distribute some of the wealth (which really should benefit the economy as a whole, since the incredibly rich can't possibly spend all their money like millions of middle class families would).
> What do we do now? We continue to work, even though we're far past satisfying all of our material needs. Why didn't everyone just stop working more hours than it takes to eat and stay warm?
I guess it's partly because we live in a material world (where having a nice house, car, pretty clothes etc. is rewarding in its own right), and partly because money brings possibilities, and thus freedom: Freedom to travel, to not work, to do whatever one pleases. So money ultimately brings pleasure, and what else is life than seeking pleasure? ;-)
> Walmart employees are not compelled to work for Walmart; the employment contract is agreed upon voluntarily by both parties. The employees know how much they will be paid and agree to accept the terms.
While technically true, you're ignoring a ton of other factors such as the lack of any other alternative employment or the lack of financial capability to move to an area where more employment exists.
When the only jobs available are McJobs, then that is what you are compelled to do, to support yourself and your family - regardless of your intelligence or qualifications because someone else is ready to take your place if you don't accept the job. You have no power to negotiate a higher salary regardless of whether or not you deserve it.
It is a very hard rut to pull yourself out of and stay free from. Companies like Walmart exploit this as much as they can, and have no reason to change their behaviour unless forced to do so.
Sanders also, least in my mind, poses the question to us, is this morally just? We have a large group of people who are born and cannot afford to go to college, are strapped with debt to go to college, or simply can't make it in college. Do we allow an economic natural selection to weed these people out and suffer or do we as a society take a road based on moral principles to help each other by all of us paying in. Something interesting that I've been thinking about. I also wonder how much it hurts us in expansion of ideas. We have all this engineering talent focused on how to get people to click on ads, optimize e-commerce sales, and much more. What more could be done? Also when food chains break down and fully automate drive thru restaurants.. we'll there go lots of labor jobs... random thoughts feel free to ignore me.
> Version 1 of the national economy consisted of a few big blocks whose relationships were negotiated in back rooms by a handful of executives, politicians, regulators, and labor leaders. Version 2 was higher resolution: there were more companies, of more different sizes, making more different things, and their relationships changed faster. In this world there were still plenty of back room negotiations, but more was left to market forces. Which further accelerated the fragmentation.
I find this curiously close to a description given by a late-soviet economist who was working on economic reforms in the 80s: he described soviet economy as a bunch of heavy hard rocks, incredibly powerful, but without any flexibility and connection to each other, and small new cooperative movement as a sand that should've taken all the space in between.
I think this is one of the most interesting essays he's written in a while, and it echoes many of my own thoughts better than I could express them.
PG seems to argue that the fragmentation of society is a question of efficiency. A natural effect of this is that the world will become more cut-throat. Efficient systems turn hyper-competitive, as seen in university admissions, startups, financial markets. It seems to me that too much "liquidity" mostly causes burnout, depression, dumb risk-taking, and a few really successful winners. Tech is really guilty of this phenomenon by tending to produce one winner for every thousand losers.
In many ways the 20th century was an anomaly -- the wars were more violent, the rate of growth was faster, the cultural shifts were huge and multifaceted -- but we still use tend to see it as a normal state of things. A hundred years into the future we'll be looking at an entirely different world and consider it normal.
PG's perspective is quite US-centric. The aftermath effects of WWII in Europe or Asia was rather different. Among most nations' peoples there's long been little cohesion due to the lack of unifying forces like media or of ethnic homogeneity.
I agree that the economic dynamics of 20th century America won't repeat. But I'm not sure most countries will enjoy a stable predictable trajectory this century. Asia and China are far from being mature ecosystems (economically or politically), and the likely loss of jobs due to further globalization and automation, just as the promise of US-style consumerism is arising portends a bumpy ride, especially for totalitarian-ish societies like China, Saudi Arabia, and even Turkey.
I think this essay ignores the impact of the Civil Rights Movement and feminism in undermining the 1950s. The world of the 1950's wasn't one where women could work, despite that having been the case since the 1920's. It was also the world in which Brown v. Board of Ed. lead to federal troops being deployed in the south to safeguard the rights of citizens, and ultimately lead to the Freedom Summer which radicalized a lot of New Leftists. So perhaps the 1950's was a world based on certain kinds of exclusions, that once removed, broke down.
There's no real reason/mechanism for the exclusions to have made anything work better. Compared to the US being the Arsenal of Democracy, the economic effect of liberalization was very small, ignoring long-term government debt.
The New Left in the 1960s mostly just failed outright. Any change then was due to judicial or executive action.
Exclusions certainly make things work better from the point of view of the excluders.
Slavery, for example, worked wonderfully for the slavers. When we abolished slavery but kept former slaves from full participation in society, they mostly ended up as underpaid servants and laborers. Women restricted from earning a living on their own still had to survive somehow. Which in the 50s often meant attaching themselves to men and providing them with a lot of unpaid support.
Nope. The economy is bigger than you are, and it's keenly in your enlightened self-interest to have each other person in your economy producing at maximum.
The "excluders" in the antebellum South lived under a rather delusional post-hoc rationalization of slavery. John C. Clahoun wrote of this belief system at length. This was minimally modified in the Reconstruction South and after.
My maternal grandmother raised 9 kids during the Depression without the assistance of any men after divorcing her husband. She worked very hard; so did the kids.
In a broad, idealistic sense, yes, I would like each person in the economy producing at maximum. (Assuming we could agree on an ideal value metric, which I'm not sure we can.) There we agree.
But if I am narrowly self-interested (which many humans are), and if I value positional success over absolute wealth (which many do), then I am better off participating in a system of oppression where the value of other people's production is diverted into my pockets. Which is why the great bulk of human history takes place in those sorts of conditions.
> My maternal grandmother raised 9 kids during the Depression without the assistance of any men after divorcing her husband. She worked very hard; so did the kids.
Good for her, and I mean that sincerely. But it's not proof of anything. The question to ask isn't, "Can you name an outlier?" Instead try asking, "What was the average condition of women during the Depression." Or, "Would your family have been better off if women's labor hadn't been systematically devalued for centuries?"
It's quite clear that the cognitive dissonance necessary to buy into membership in a truly* privileged class is very costly. You can't value positional success at the expense of the success of the others in your economy without incurring greater cost.
*the present-day use of the word seems incoherent at best - so let's stick to easier-to-see versions for now.
Narrow self-interest appears to be completely at odds with enlightened self-interest. This isn't some ascetic protestation of moral superiority; it's a purely practical mechanism for personally having things that work.
I'm not sure how an average is better (or worse) than an outlier; I meant simply to show what was possible. She was able to use institutions other than marriage for support.
Partially devil's advocate: Women not working en masse means single-income households as a norm, which means all the real economic value of someone staying at home to take care of home issues and a general supply-and-demand situation where workers needed to be paid enough to make things work on a single income. Flood the market with twice as many workers, wages go down and the expectation becomes two-incomes, and thus people end up working harder (there's still work at home to do), but they aren't richer for it.
IMO, this was principally expressed in raised real estate price/value.
Some of this is hedonic in nature; if you watch "Fargo" second season, you see in pretty good detail how people lived 35 years ago. I'm pretty sure this would be considered something much more like poverty now. Of course, I'd be ignoring any inflation in price of the homes shown, by design.
Interesting piece. It will take some time to digest.
I wonder about the arrow of causation for conformity back in the 40's. This essay describes WWII as a spark of a generation of conformity (preceded by the New Deal for some). But it's really hard to imagine modern society signing on to a world war. What's to stop parents afraid of vaccinations from taking their draft-age children to New Zealand?
Was there something else that was already more conformist? Or was there another proximate cause, maybe even one as simple as a perceived global threat (communism, fascism) combined with a lack of individual physical mobility?
The essay is good and makes a strong point in and of itself, but I wonder if there's other variables it (and I) are missing.
If pg is reading, one piece of concrete feedback:
> the LBO wave?
LBO wasn't defined in the text previously and I had to google it (it's leveraged buy-out).
> What's to stop parents afraid of vaccinations from taking their draft-age children to New Zealand?
This reminds me of something a friend of mine told me over Christmas: Her 65-year-old uncle is not currently allowed to travel abroad from Ukraine because 25 years ago he was an Army officer and anyone with military experience is being held in reserve. So the answer to your question is simply "police at the borders".
really hard to imagine modern society signing on to a world war
Military service used to be seen as an obligation and an honorable thing to do, and wars were seen as being a necessary part of defending one's country and way of life or eradicating great evil.
That fell apart after Korea and especially Vietnam, which were perhaps unnecessary and certainly bungled by politicians. This forever changed the trust and confidence of the public in politicians who send young people into battle.
On the one side we have very huge corporations that have a (near) monopoly on a sector (big, small or niche). On the other side we have many small players "fighting" [not the best word] for the remaining niches ...the rest. And they dream to be the next big player by betting on a raising sector (new technology) and sometimes disrupt old players that are too slow to adapt. Or they fix it with cash. Absolute monopoly is often bad (for everyone except a few (shareholders)), so anything else (fragmention) is better.
Interesting to see that PG agrees with something I've been saying here for a long time, about the role of globalization in economic inequality [1] [2] [3].
Of course I grew up in the Rust Belt, where the average person used to be able to make a good living with a high school education in the steel or automotive industry, but now most of the factories are idle, rusting eye-sores, most of the ambitious, talented kids want to go somewhere else -- anywhere else -- and the closest thing to a growth industry is health care for the folks who earned a good retirement during the glory days and are starting to get old.
I read a comment once that the steel industry collapsed in the US because they failed to innovate or continuously improve (much like the Big 3 automotive companies).
Do you know of any concrete examples of this? or books about how US Steel lost?
I don't know about steel, but Rother's Toyota Kata makes this case for cars. There's one graph in particular that shows carmaker productivity per worker over several decades.
Toyota, working in a Japan decimated by war, definitely came from behind when competing with Detroit's big 3. Toyota starts lower than the other 3, and all of them improve gradually together. But at some point US carmakers plateau. Toyota just keeps on climbing for decades more as the big 3 stagnate.
Eventually, US automakers try to copy the Toyota approach, and Toyota works hard to teach them. But they never quite get it, because US automakers basically miss the point, copying visible behaviors rather than the deeper structures that really make the difference.
Those curious but not wanting to read a whole book should start with the This American Life episode NUMMI:
It tells the story of a joint Toyota-GM plant in California. Basically Toyota takes one of GM's worst plants and makes it one of the best. But GM is never able to adopt the differences, or even to really understand them. The worker-level stories are particularly powerful.
Helping a competitor may cost them in the future, but I am guessing they got paid enough money in the present for the consultation to be worrh the risk.
I cant speak for Toyota, but they probably also would feel their own future would look bleak if their competitors died off - a good healthy level of competition is good for all players in the market, and it drives up innovation and drives costs down for consumers. In a very direct way, having able competitors ensures Toyota stays strong and doesnt stagnate.
See my comment above, but it is important to remember that Toyota did not have any production facilities in the USA at this time; they were not sure (purportedly lazy) American workers could or would conform to the Toyota Production System.
Also, at that time GM had more cash than Toyota's Market Cap. [citation needed] [1]
1. I wish I had better source for this, but Roger B Smith spent 80 billion on automation in the 80's, and Toyota's Market cap was 31-45 billion in 1992.
At that point in time, Toyota still did not have manufacturing in the USA. Honda did, but Toyota did not; they were still not sure how to do it.
Additionally, and more relevant - American suppliers could not make parts to Toyota's quality specifications.
One of the craziest parts of this story is that GM simply did not believe the stories that were coming out of NUMMI - for instance, NUMMI could change press dies (for stamping sheet metal) in under a 30 minutes where other plants took several hours.
It is crazy to think about, but GM at that point in history had enough cash to simply buy Toyota; being the biggest dog in town leads to self-satisfaction and complacency.
GM and the big three at that time had an inspect and reject batch lot production system. Each stage of production would make a bunch of parts that would later be used downstream, possibly a few days or a week later. These parts would be inspected for defects before being used, but by then there may be a buffer of several thousand parts - that may all need to be scrapped. Toyota ran on a lean system, which meant that upstream production could cause severe downtime if those upstream suppliers or plant operations failed. This caused 2 things - emphasis on more robust operations and less waste due to scrap.
The whole time period is fascinating no matter what business you are in.
Disclosure / disclaimer - I work for GM, but did not during this time period - I've just read a lot about it.
Thanks for that. I've read several books about this era in automotive, I liked Paul Ingrassia's ironically titled "Comeback" (in which the comeback is largely due to currency shifts). I'll check Toyota Kata as well.
Small observation: why title the file re.html? Why not just spell fragmentation? Is there a reason to do it this way? Why .html? Doesn't that make it hard to update all the pages at once such as menus and footers? The design is very minimalist, but it's effective.
We're definitely in a winner-take-all economy, whether it's real estate, stocks, the dominance of companies like Google, amazon, and amazon, or web 2.0 valuations.
PG used the system behind yahoo stores (which he wrote) to make the not-a-blog. It may serve HTML, it may very well generate it statically, but I am almost certain that he does not edit the layout by hand.
PG's urls are simple and memorable enough that you can type them into a text message. I direct people to paulgraham.com/wealth.html, paulgraham.com/love.html, paulgraham.com/hs.html and paulgraham.com/essay.html all the time, from memory. It's useful!
> Globally the trend has been in the other direction.
I think that this is misleading. Every global culture is fragmenting, but the biggest fragments within countries tend to get along much better then they used to. There is a "global culture" now that contains a bigger share of humanity then ever before, but inside each nation it still looks like fragmentation.
The thing to me is Silicon Valley is the place in the US that still looks like that post WWII America. Large monopolies like Google, Apple and FB utilizing fantastic profits and paying amazing perks to employees. Everyone working in and on the same mission acting as a social fabric tying people together. Glass Door and the Internet in general replacing trade unions by helping balance a knowledge imbalance so that workers can maximize their benefits.
The irony of regularly lecturing the rest of the country and world about what the future holds from the position as a final bastion on unassailable US hegemony of last century (2nd only to Hollywood?) perplexes me.
Agreed 100%, that was one of my take aways from the article as well. I suspect that this dominance is next to fall, and I feel that SV has already passed its zenith, perhaps some time ago, and that locals and those intimately tied to its fabric like PG will not be the first to notice. I think the talk of the last few years about a "bubble" may have been noticing symptoms of this rather than a true "tech bubble". There was a WP article the other day about how people are priced out of homes in SV, with the median home price at nearly a million dollars. We are in the early, possibly mid crisis of student debt, and despite a certain lauding of the dropout culture in the tech industry, this debt has fueled its rise over the last 40 years. It is unsustainable.
It's certainly true that SV's days as a big tech hardware manufacturer are past.
I am not at all certain, but I have to wonder if something magically keeps SV software innovators glued to SV. This is something I've never understood. But there must be SOME reason why software innovation/work didn't completely disperse from SV ten years ago.
One very simple answer is VC money. They want you local and their talent network (of people for your growing startup) is local. Who knows how different Boston would be if Facebook stayed there? (Just one small example)
People overestimate how quickly unacceptable conditions arise. The Bay Area can get even more congested and expensive than it is today, and most people will make do. Cambridge and some surrounding areas have San Francisco pricing now. It won't so much be a "dispersal" but a hunt for talent, which is why you get Uber and other SV companies in Pittsburgh, where you can live in a steel magnate's castle for the price of a condo in Palo Alto.
But that only happens because automation and globalization are barely harming the US. And its not like the oligopoly is not trying - why are there so many appeals for more H1Bs?
If you need skilled workers and the varying skill of a worker produces magnitudes of difference in wealth created of course you need to both be huge enough to afford them and centralized enough to take advantage of them.
The article itself seems like a blinders on interpretation of the US tech industry. Corporate consolidation is at all time highs in areas like food processing, farming, finance, raw materials, and industry. Mom and pop shops the world over are bellying up for Walmart and Starbucks. Startups and creative culture in the tech bubble are against the general grain. Its why money in politics is being considered such a larger problem now than twenty years ago - as dozens of economic effects interact, from people having less spending money to companies consolidating and having guaranteed revenues to regulatory meddling in their favor.
Fundamentally I think that newer generations growing up on the Internet are turning out much more hive minded than their grandparents, because there are just more of them as a fraction of the population. The perfect white nuclear family of 1970 still only accounted for a stark minority of the American public - it is just strange that a disproportionate number of people on HN ended up coming from that class. There was still extreme social unrest throughout the century - prison camps for the Japanese, the KKK, segregation, and the banning of many chemicals due to being "foreign" like opium and marijuana. Just because one microcosm of the American economy that produced most of us was homogenistic doesn't mean the era was exclusively defined by it.
How do you know the race and sex distribution of hacker news users? Or are you just assuming they are like you? (or unlike you? I have no way of knowing what group you might identify with)
You are only mentioning the tech industry in Silicon Valley, which I admit is pretty utopian. This description excludes everyone else in Silicon Valley. You can't talk about income inequality while only looking at those with high income (everyone in the tech industry), and forgetting about those with lower income is a huge reason why income inequality is problematic.
That's very true. And quite frankly, the housing rents, the overstuffed infrastructure, the student suicide rate in Palo Alto, and so forth make SV look pretty dystopian, even for most tech industry workers. The only thing tech has is what Michael O. Church so eloquently said: "Software engineers aren't a privileged set. They're just less fucked than the rest of the U.S. Former Middle Class."
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[ 3.8 ms ] story [ 300 ms ] thread"By no coincidence it was in the early 1980s that the term "yuppie" was coined."
... and then read the remaining 15 or so paragraphs - that gets you the whole gist.
Since the 1980s technological progress and also social factors brought an ever increasing re-fragmentation, which, if not properly addressed, might lead to problems soon.
Acknowledging these problems is remarkable -- I think it's the first time pg did that.
The conditions have disappeared, so the economic and social order is unraveling.
Let’s acknowledge the issue and let that acknowledgment guide our policy decisions. We want this golden age back(?).
"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."
In general he tries to look for a net positive outcome resulting from these changes, but is not confident there will be one.
If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.[1]
One thing I think you will notice is the manufacturers plaques attached to every little piece of equipment in the submarine ... every one of them the plaque of some tiny little supplier that you have never heard of. Some little Detroit Turbine Supply Company or American Radio Corporation of Maryland ...
Seriously - every single component has a label on it from a firm you have never, ever heard of.
I guess I don't have a deep knowledge of military procurement and supply circa 1942 (or whenever) but it sure looks like startups to me ...
[1] http://www.maritime.org/tour/index.php
This concept of small manufacturers that excel in their niche has been the oldest business model in history.
Especially in Japan and Germany many companies have existed for over a millenium like that, and even today half of the made profits are by small, (50 people or less) companies that are hidden champions.
You probably never heard of http://www.walterwerk.com/en/, but they’re the world’s leader in machines that produce ice cream cones.
As you said, it’s not just since computers that these companies existed – they’ve existed for centuries.
But what is different this time is that for the first time investors are trying to invest in these small businesses, and try to make a huge profit out of them.
" People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."
[0] https://www.washingtonpost.com/blogs/on-small-business/post/...
And what's wrong with that?
Besides it being false of course.
If anything it's more sustainable and more productive (as these business MAKE something, don't just eat VC dollars or at best sell ads) than today's "startups" model, which is based mostly on a speculative bubble + ad money.
All the thousands of major companies, from IBM to Bell and from HP to Apple, Boeing, McDonalds and Kodak, and countless others in all lines of business started as small and grew from there.
It's a perversion (and counters the rest of PGs rhetoric) to narrow startups to "companies funded with VC money for a few years to get enough users/eyeballs in the hope that they can be sold for a few billions" which is more or less the modern kind.
I think pg would likely answer "Nothing". Whenever he brings up that sort of entrepreneurship, it's generally to showcase the rarity and timescale with which these small businesses (IBM, Boeing, GE) got huge in a time before the internet.
I'd agree that the Internet hasn't made big businesses get any more substantive, but it has allowed them to get bigger faster.
I guess a difference would be that now you don't need employees.
https://en.wikipedia.org/wiki/United_States_Military_Standar...
Nonsense. Plenty of companies start out as small companies and suddenly find themselves on the upwards slope of a hockey stick, others start out as aiming for that hockey stick and end up being 'just' sustainable businesses.
This whole start-up naming thing denies 125 years of objective reality. You can't start a scalable company deliberately any more than you can reliable write an evergreen book. Time will tell what you've got, not your label of it.
It's odd to me that people assume that just because you've got a small business you won't jump at a market opportunity that could lead to something bigger...even Apple at one point was just a few folks selling stuffed PCBs and doing drugs.
But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast.
Call them startups or not, but we definitely need a term for the kind of company that behave in this "go big or go home" fashion, and startup is the generally recognized term for it.
So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB.
> But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast.
No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups.
Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it.
The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow?
And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example.
If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.
It's possible to form other successful businesses of course. But I like the way this definition calls out the scalability as an important factor. It doesn't make you point about betting against it working any less valid though.
Contrast that with what we call startups today - companies that deliberately attempt to be that "evergreen book", trying out every trick in the book to force themselves onto growth path. They live within an ecosystem, a big part of which is a mutual adoration society, with additional large layers of parasitic actors trying to suck out some money and status by just hanging around. And surely a good strategy was found - hence contemporary standard business plan of bullshiting customers with half-made shell of a product to quickly reach the point of getting acquired. It seems to work better than "just" starting a company, at least for the founders. Not necessarily for the world at large.
In a way, I think that early Apple and Google had more in common with a pizza place than with a contemporary Instagram clone.
You wrote: "[...] a start-up is more of a determination after the fact than something you decide to build."
I totally agree with your point about companies normally not being able to "grow fast", and I agree with you that luck is a major factor. However, I think you're wrong in saying that people don't try to deliberately build "grow-big" companies.
Believe me, I'm a proponent of building small-growth "bootstrapped" companies, and I've had many conversations with founders about going that route. The vast majority, who had it in their heads that they wanted to be a startup, were deliberate in pursuing "grow-big" strategies. As one easy example, almost every company that raises VC money is either implicitly or, often, explicitly, chasing a grow-big strategy.
I completely agree that the vast majority of companies end up not being able to grow big, and have to decide between becoming a small company and "milking the cow" as you put it, or closing the company. This doesn't mean that they didn't set out, in the first place, to build a "grow big" company! In fact, you can see that this is true in the way that so many of these companies choose not to continue the small business, which could be profitable, but instead choose to fold the company instead.
In fact, reading the writings of YC, or talking with most honest VCs, will easily prove my point - they constantly tell you they are aiming to fund companies striving for $1b+ valuations, and they're fine with 99% of the startups they fund not getting there as long as 1% succeed. They are quite explicitly optimizing for "grow big" strategies.
Btw, I'd like to point out nl's comment below about Steve Blank's definition of a startup, which I always thought was the absolute best definition. A startup is an organization in search of a business model. When someone opens a pizzeria or a software consultancy, say, they're not searching for a business model - they're just executing one. But VC-backed "grow big" startups are very explicitly trying something new.
EDIT: Just to make sure we're not arguing over definitions - I'm claiming two things:
1. That what people, especially on HN, mean when they startup is a company pursuing a "grow big" strategy, and deliberately so vs. a non "grow big" strategy.
2. Regardless of 1, I also think that the majority of modern-day companies (let's say founded in the last 20 years?) that have grown big were deliberately started with the intention of growing big, ala Amazon, as opposed to say FB or Google, which wouldn't fall into this category. I'm less sure about this point, but it is a factual question that we should probably be able to answer.
Usually a startup is understood to be any venture in search of a sustainable businessmodel.
To grow very large, very fast requires only lots of capital. A lot of companies have confused a large capital investment with a sustainable businessmodel and gone bust soon.
pg's 2012 essay http://paulgraham.com/growth.html suggested using the term "startup" for hypergrowth-oriented company, and the term "small business" for slow-and-steady approach.
Both types exist, deserve to exist, and are nown to end up at a different place than the original goal they had in mind. But using suggested terminology saves us from the replay of the same argument over and over.
I think the willful blinkering of business interests toward only the .001 percent business that's exploding RIGHT NOW is a greater contributor to the fragmentation of business today than the fading priorities of WWII ever was. The idolization of the Gambler on Wall Street (or in SV) has misdirected our priorities away from respecting those who seek to build a sustainable business where normal people want to make a sustainable living. Now the prevalence of jobs at yet another ephemeral startup or large corporation awaiting it's next merger/buyout has greatly destabilized the workplace, much less made the job of corporate leader/ visionary/ innovator next to impossible. Instead of creative invention, corporate CEOs now focus instead on cost cutting destruction, and Wall Street applauds.
I wouldn't call that fragmentation so much as disintegration.
There used to be many thousands of such manufacturing-based small businesses in America. They tended to stay focused on their competency or branch out tentatively into related products, flexibly grow and shrink to meet demand, or sometimes get acquired. But I don't think many of them planned to become the next General Electric.
It would seem this definition paints a startup as a proto-bigcorp. If the prevalence of big corporations is not a cycle we want to repeat, would we not favor businesses that do not intend to become big corporations?
You might be right about the customer side, that non-"startups" are more likely to be around in 5-10 years, which makes a difference when investing in a new, mission-critical area of your business (e.g. replacing email server)
Most new businesses are replicating an existing business model. E.g., if you open a new corner store, it's probably going to end up being like every other corner store. If you're starting a games company, you're probably going to end up like a bunch of other games companies.
Startups, on the other hand, are tackling something deeply innovative. That means early on you have to optimize for learning: understanding customers, iterating on product, seeking product-market fit. It's a very different set of behaviors for the entrepreneurs than the normal new business.
I think you're thinking of venture-backed startups, which require a large enough amount of high-risk capital that nobody will fund them unless they expect to be worth $100m+. But there are plenty of smaller startups that are self-funded or bootstrapped. They can be perfectly stable at small scale, although many of them do choose to grow substantially.
You're describing what I would call a "VC backed startup", where you'll either get big or wither away.
The other end of the spectrum (for people here) would be something like a Bootstrapped Technical Startup. Where you're trying to build a cashflow positive business leveraging technology in some way.
[0] - http://www.paulgraham.com/growth.html
[1] - https://www.quora.com/What-is-the-proper-definition-of-a-sta...
I started rsync.net with the intention of staying stable at small scale.
It's worked out so far.
"Startups" in this context exist to get VC's an acceptable exit.
"Obviously the spread of computing power was a precondition for the rise of startups."
seems closely related to the concept behind the book "Design Rules" (2000, isbn 978-0262024662). Here's a summary from the book flap:
"[The computing industry] has experienced previously unimaginable levels of innovation and growth because it embraced the concept of _modularity_, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established _design rules_. Drawing on the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy."
https://scholar.google.com/scholar?q=related:L9DylaW-KYkJ:sc...
http://econweb.umd.edu/~haltiwan/dhjm_jep_5_17_2013.pdf
http://www.brookings.edu/~/media/research/files/papers/2014/...
Here is the abstract of that last study:
"Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation. But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech."
And here is the start of the first:
"The pace of business dynamism in the U.S. has declined over recent decades. The decline in business dynamism is evident in a pronounced declining trend in the pace of both gross job creation and gross job destruction. An important component of these declining trends has been the decline in the firm startup rate. The decline in the startup rate has yielded a significant decline in the share of employment accounted for by young firms – this share has declined by almost 30 percent over the last 30 years. "
And please, please, please note that a country can have an incredibly dynamic, innovative industry, but that nation can still be in long-term decline. See here for details:
http://www.smashcompany.com/business/if-the-usa-is-the-most-...
What's happened, historically, is that as a technology diffuses into new ways of doing things, old industries simply die out, and then the new industry differentiates into replacements for it. Specialized production in the middle ages was divided into guilds (many of which are family names now): you had smiths, cobblers, bakers, butchers, weavers, etc. When the industrial revolution happened, there was simply "industry"; it was only later that this differentiated into the steel industry to replace smiths, the meatpacking industry to replace butchers, the textile industry to replace weavers, etc.
Similarly, when software got started in the 50s, there was only the "software industry". Now, 60 years later, it's differentiating into search, social, messaging, e-commerce, developer tools, homesharing, adtech, fintech, ridesharing, delivery, etc. And it's likely there's more to come: if I had to locate us in the history of the industrial revolution, I'd say we're around 1890 or 1900. At that point, the great industries of the mechanical age (mass-produced automobiles, airlines, plastics, radio, television, recorded music) had yet to be invented.
And that amounted to a large number of jobs which are no longer available to US workers.
But think about it. Would historical WWII be possible in today's United States? Introduce the draft and send current US population off to die in Europe? I think you'd see intense levels of political resistance, draft dodging and desertion in the field. Fragmentation means you probably can't unite the whole country to die for... whatever anymore.
However, after pearl harbor, the average citizen took a blow and was more than willing to fight. They wanted to protect their homes, and they felt if they didn't the Japanese would bring the fight to them.
Also recall that prior to WWII there were "intense levels of political resistance" but as soon as our territory was directly attacked that changed. (It took 4 days from Pearl Harbor to our declaration of war)
The use of militarism and nationalism does not require a full scale global war. Certainly it is being used right now in several nations under structural duress. The enemy may be real or imagined, and if you oppose or speak out against the changes you may be the enemy too.
The problem with this line of thinking is you assume that the enemy doesn't care if there's a world left for them to have greater power/influence/wealth/whatever in. Nobody really wins a nuclear war, some people just lose a little less.
..that's how the world works already. Nobody needs a second house or car or whatever as much as some other people need food, clothes, medicine and/or shelter. Does this make the world a shitty place? IMHO yes, and the people who "win" don't really win, not in my books, because they are damaged in wholly other ways I'm not jealous of at all. But here we are, and I think you're imputing pure rationality where there is a lot of narcissism, greed and other defects mixed in. And nuclear war already nearly happened by accident, right? Also, having full control of a small pie which then grows bigger is preferable than being a part of a big pie that's growing where there are competing actors, if you're serious about power. For organizations and their zealots, that can be enough.
One way to look at it, is to say you have 10000 times less points, or 9999 points less, in scenario B over scenario A. (I submit the more intelligent way to look at it is that there are 15000 times less points in the world, or 14999 less, but that is besides the point).But the other way to look at it is to say you have infinitely more points than anyone else, and are now God for eternity, for all practical purposes. That this seems silly or sick to you, that you would rather be a normal person in a decent world, than a ruler with an iron fist in a hellish world, doesn't make it less appealing for those who are already chin deep into things we would also find abhorrent. Never say "nobody" easily, unless it's about something that doesn't really matter.
Now if you have 1000 years of rations saved up sure you might win. You might be the only person left on earth. But is that winning? Maybe somebody thinks so, I guess.
It is true that there are a lot of rivalries, but nobody wants another world war. We are all fat, rich (relatively compared to 1939) and entertained, but more importantly there would be nothing to win and a lot to lose. The same goes for civil war - Scotland isn't going to war, nor is Catalonia. Northern Ireland is more peaceful than it has been in decades and no country is seriously oppressing any other country.
Even Putin isn't stupid enough to go into a NATO country, at least not the way he did in Ukraine.
Mind you, I'm not pessimistic, I think we'd largely survive such an ordeal, it will never be on the scale of WWII (at least, that is something you'd hope) but it might take more than just a skirmish before the lessons of old would be re-learned. One of the reasons the anti-war sentiment in Europe was so strong in the 1970's and early 1980's is that we were under no illusion what would be the battle field, today the fact that we have the illusion that the battlefield would be anywhere but here is what endangers us more than anything. Two days driving separates the Russian border from Amsterdam, add another one and you've gone from Amsterdam to Bulgaria. Conflicts could easily spill over from one region to another. The first world war arguably started with a single shot, the second followed from that first. I have no idea what Europe would feel important enough to go to war over but it could just as easily be something insignificant as something big.
The most important thing (apologies to Spain, Italy, Romania and Poland) would seem to me to be that Germany, the UK and France keep seeing eye-to-eye. If those ever find themselves on opposite sides of some kind of confrontation all bets are off.
"The Institute for Policy Studies published a report[10] analyzing what it called the "arm-twisting offensive" by the United States government to get nations to support it. Although President Bush described nations supporting him as the "coalition of the willing", the report concluded that it was more accurately described as a "coalition of the coerced." According to the report, most nations supporting Bush "were recruited through coercion, bullying, and bribery."" – https://en.wikipedia.org/wiki/United_Nations_Security_Counci...
The EU might seem fragile, but that is because the NATO and the EU expanded to fast. Remember some 20 years ago there was a wall through Berlin, now nearly everybody behind that wall has joined. Russia destabilized Ukraine to stop this movement.
Still the EU welcomed Croatia in 2013 and the Eurozone Estonia in 2011, so it is growing.
North-Western Europe already has a large coalition of countries that want and think the same things and have an excellent standard of living. The East will catch up economically and the South will get back on its feet. It will take some time, but I think they will join the group.
Some countries like the UK want their special treatment once in a while, but everybody knows, that London has to play along to some degree if it wants to stay the financial center of Europe.
... and quite a few folks in front of it, too, which is a significant aspect of the internal tensions that arose as the EU evolved out of the EEC.
Northern Ireland is more peaceful than it has been in decades
It is now, but why do you assume that that is a one-way street? Northern Ireland was also relatively peaceful from 1922 to 1968, when Catholics became more aggressive about their demands for civil rights and violent conflict broke out and then escalated rapidly.
Across Europe as a whole (and also the US and other places), look at the rise of populist/ideological politicians. A few decades ago they would have been too marginal to succeed in many elections, but the internet has proved a great organizing tool even for people who want to reduce the scope of civil liberties, just as weapon technology doesn't discriminate based on the morality of who is deploying it against whom. Hardcore ideological politicians are unmoved by or even hostile to arguments about the greater good.
Hitler assumed he would be able to get away with taking Poland, as he had gotten away with taking pretty much anything up to that point and the Germans were extremely pissed over the Versey treaty, so much so that they were willing to go along with it.
Today we know what happens if we go to war with each other, and if anybody in Germany doubts it, they can go see the huge hill outside Berlin (or inside it) were they dumped all the broken bricks that couldn't be reused when the war ended and they had to rebuild the city.
So yeah, that is why I don't believe there will be another war in Europe proper again at least for the next 100 years.
https://en.wikipedia.org/wiki/Project_for_the_New_American_C...
This should be framed somewhere.
The congressional voting turnout was 41.9% in 2014 (https://www.census.gov/newsroom/press-releases/2015/cb15-122...), which means that even if the politician who proposes this is polling at 100%, they could still be beaten.
As a European, who have the remains of a nazi bunker not half a mile from my apartment, I am extraordinarily happy that we can't unite a huge portion of a country to go die anymore.
Also even the military doesn't support a draft.
Of course it always ends in violence. Refragmentation == reemergence of extremism. People asserting stronger identities while technology shrinks the world and brings them into closer economic and information loops is a recipe for conflict.
In the old days you could have crazy ideas and no one on the other side of the world gave a hoot. Today you get <pick your favorite 'other'> storming Inland Regional Centers, Federal lands, or malls.
If this is true, does it invalidate pg's overall thesis? I'm not sure. Interesting to think about though.
There's actually a little allusion to this in footnote 21:
> [21] Globally the trend has been in the other direction. While the US is becoming more fragmented, the world as a whole is becoming less fragmented, and mostly in good ways.
He didn't elaborate, but I suppose the essay was already pretty hefty.
As Graham's piece concludes; if we don't do something, we'll get into trouble.
- « Terrific work causes us to think of additional questions. »
http://www.economist.com/blogs/economist-explains/2014/05/ec...
Low growth causes more income to come from capital, which causes more inequality due to inheritance and the rich getting richer. The solution is a global progressive tax on capital.
After reading the first paragraphs in pg's essay I immediately went CMD + F Piketty and was somehow disappointed that he didn't choose to cite him since that's the crux of C21C. But, glad to see that others on HN resonated with the same ideas.
http://meaningness.com/meaningness-history
That's the intro for a series of posts listed at the bottom.
Here's a "gigantic chart that explains everything": http://meaningness.com/modes-chart
Here's "systems of meaning all in flames": http://meaningness.com/systems-crisis-breakdown
At least this trend is one that individual programmers can choose to resist, assuming we don't have to move to Silicon Valley or Seattle to get good jobs. I, for one, don't have any desire to leave my home town of Wichita, Kansas.
The subset of people complaining about inequality that I actually take seriously[1] are concerned with its effects (for example, on the health of the economy[2]), not what the cause of the rise was relative to the previous era.
Another factor in the (reasonable) complaints has to do with the perception that income inequality is driven by (and driving) inequality of _opportunity_. Basically, the rising inequality is seen as an unfortunate side effect of a positive thing (the aforementioned "fairness"), and the good (IMO) proposed solutions involve increasing said fairness, instead of just rolling back to what we had earlier (warts and all).
[1] i.e., excluding the people who dislike it without any understanding of what its potential causes or implications might be (IME these people exist for every single possible POV). Included in this are people who think that we can magically re-create the economic environment of the 50s (wherein half the world had blown itself to pieces and the other half was emerging from under the heel of colonialism or being smushed by the heel of Communism).
[2] http://uk.reuters.com/article/uk-imf-inequality-idUKBREA1P1P...
[1] I get my impression of economists from EconTalk by Russ Roberts.
Now imagine an economy made of millions of people who all have different needs, desires, abilities, environments, intelligence, etc. How accurately can you predict how a single policy decision will shape the trajectory of such a collection of people? Now the State pushes thousands of policy changes per year into the system without ever really monitoring the response to a single change.
> many economists throw up their hand and say macro economics is too tough and we just can't predict how it will work
The smart ones do, but the mainstream Keynesian school have the hubris to think they can predict the responses of millions. Most Western leaders have been advised by Keynesian economists for much of the 20th century, and the decisions of those leaders have caused vast displacement, pain, and suffering in the form of economic turmoil and war.
Remember, the State is also an economic actor, and it derives its income by coercive force. Progressive taxes simply point a bigger gun at the heads of those who perform better in the economy.
[1] https://en.wikipedia.org/wiki/Double_pendulum
I'm all for reducing the size and complexity of govt, including the frequency of policy changes. A progressive tax can be a small-govt solution.
> ... Progressive taxes simply point a bigger gun at the heads of those who perform better in the economy.
A progressive tax certainly takes more from those who have performed better in the past. I'm concerned about creating jobs and encouraging situations where people can succeed in the future. The people who will create the jobs of tomorrow are not the ones who created past jobs. It's small companies who create jobs, so don't tax them as much; it's the struggling entrepreneur who will create jobs, so don't tax them as much. Instead, tax those who have already succeeded and who are not creating as much relative economic output.
On chaos, you seem to be arguing that a few select simple systems are chaotic, therefore a much larger system must also be chaotic. This doesn't make any sense, complexity != chaos. Think of something like an ant colony, millions of ants in an incredibly complex system, but the system as a whole tends toward very consistent behavior. Killing some of the ants or cutting off on supply of food makes no difference.
It's also incredibly vague to talk about this when there are billions or more inputs to a system like the US economy. Some variables might exhibit chaotic behavior, but that doesn't mean anything you do to the system has a completely unpredictable outcome.
> Now the State pushes thousands of policy changes per year into the system without ever really monitoring the response to a single change.
What? They monitor changes all the time. For instance, the white house is happy to tell you exactly how many more people have health insurance now thanks to obamacare. Many (maybe most?) of the policy changes are close to independent and effect only a small subset of people. And it is usually possible to statistically account for other factors that might be interfering with what you're trying to measure.
> have caused vast displacement, pain, and suffering in the form of economic turmoil and war.
Yet somehow we're living in the safest time in human history [1]
[1] https://www.ted.com/talks/steven_pinker_on_the_myth_of_viole...
https://en.wikipedia.org/wiki/Instant-runoff_voting
I was glad to see some of the old pg back. His startup essays tended to be bit artificial, as if he had to force himself to write them.
He was basically doing content marketing for YCombinator, which is understandable and probably served him/them well. But this is probably the sort of thing he's actually more interested in writing.
vs.
I read the comments on HN looking for the dissenting view as that's where I often appreciate the most value. I'd love to see you expand upon your reason for both disappointment and then provide some concrete counter examples that highlight Paul's lack of historical rigor.
Which of my comments do you prefer? (Note: I prefer the latter. Since you're the only dissenting view I've seen so far, I'm asking you to expound if you would, please.)
> [Technology] means the variation in the amount of wealth people can create has not only been increasing, but accelerating.
The problem with this is that success = ability * motivation * opportunity. There's no question that technology is increasing ability. But it's less clear what's happening with opportunity.
Networks tend to be winner-take-all, which means that technology actually depletes opportunity at the same time as it increase ability. Which I think means that we're actually going toward integration, not fragmentation. Only this time we don't need another WWII to integrate society because it's already happening, it's just less visible.
E.g. the vast majority of the traditional media is controlled by the same six corporations. And to quote Fred Wilson's 2015 wrap up, "10 of the top 12 mobile apps are owned by Apple, Facebook, and Google."
There's no question that individuals are way more free than they were in 1950 or whatever. But I think it's more analogous to free-as-in-beer, as opposed to free-as-in-speech.
When I was a lad I got my hand on a great prize: a copy of Delphi 3 (already obsolete by then), which got me started coding. Today anybody can download much better tools (Visual studio, IntelliJ, etc for free). Any question you have can be searched on the internet, etc. Opportunity has increased _massively_ the last 20 years.
> Opportunity has increased _massively_ the last 20 years.
The only problem is that it's increased for everyone else, too. Used to be you were a king if you had a board with a nail in it. Now everyone's packing Uzis.
My argument is that everyone has the same 15 or 20 basic human needs, and increasingly each of those needs is being met by two or three global corporations, as opposed to two or three local or national companies. Which means that even if you as the individual are more talented or whatever, there is actually less opportunity to use those talents to fulfill human needs at scale in a profitable way. That's why such a large percentage of employees today work low wage jobs in the service industry, as opposed to physical/digital manufacturing.
And network effects are only one way in which technology has decreased opportunity. Another is environmental degradation. E.g. 300 years ago anyone in manhattan could feed themselves just being sticking their arm in the Hudson river. But now all 100% of those (edible) fish are gone, and all the profits that were made from dumping industrial chemicals into the river have been privatized by the wealthy.
A third way is legal regulation. Every time a new technology comes onto the market the government has to regulate, which often shuts out everyone except the super wealthy from competing. (Want to start a cell phone company? Good luck with that.)
There are more one-in-a-million lottery ticket opportunities than ever before. But for the average person, there is actually much less opportunity for them to be successful. And not just less wealthy relative to the rich because the rich can gather sticks faster or whatever, but less wealthy on an absolute scale because there are no sticks left to gather.
It's nice to talk about making furniture and fixing up cars or whatever, but I think the number of fortunes that have actually been created by making wealth without externalizing massive costs onto the poor and middle class are probably few and far between.
success = (ability * motivation * opportunity)^hugeDoseOfLuck
There is no guaranteed formula for success, it is heavily luck dependent. Those who think otherwise are suffering from survivor-ship bias and/or the just world fallacy.
E.g. he argues that the greatest receiver of welfare in the US is the wal-Mart family, because they get even richer paying their workers so little that the workers have to live on welfare. (In other words the welfare is "paying" the workers so that Wal-Mart don't have to.) He proposes to rise the minimum wage.
https://www.youtube.com/watch?v=eYFueqv0iIQ
My understanding on Sanders' statement is that it could be paraphrased: "If walmart employes didn't get state welfare, waltons wouldn't be as rich, because they would have to pay more (employees who can't afford food and shelter can't work for you) ... ergo, walmart employees are, at the moment, practically, a conduit of welfare from the state to the waltons".
(That is how I understand his statement -- I don't agree or disagree, I don't know the details well enough to do either)
That is in effect wealth distribution, which again closes the big income inequality. (That's the intended effect anyway.)
But the argument has merit if the wage is not livable. The two issues the make this an issue (or a nonissue) is what is a minimum livable wage, and whether or not it is the governments role to enforce that or not. (No idea about the first, I think Yes about the second)
With regards to enforcement of a minimum wage I would say that if we, as a society, want to enforce minimum living standards that is a burden that should fall on all of us and not just companies that employ low skilled labor.
This would simply shift the cost from the state/government (read taxpayer) to end consumers (read taxpayer).
This doesn't make any sense (though you have paraphrased Sanders accurately). While technically true for some definition of "conduit of welfare", the same is true of almost everybody in society. Welfare recipients are integrated into the economy enough that "if X didn't get welfare, person Y wouldn't be as rich" is true for many, many, many values of Y (neighborhood stores in poor areas, people benefiting from reduced crime ("stealing bread to feed your family" used to be more than a trope), etc). To give an example in microcosm: if you buy a used car on Craigslist from someone, the fact that the seller is a welfare recipient doesn't mean that you're a beneficiary of welfare because you're not paying him enough to live off of.
To the extent that society is responsible for helping the poor (FTR, I personally believe in this responsibility), it makes absolutely no sense to claim that employers (as opposed to the welfare system) are responsible for filling the gap between "market value of a person's labor" and "how much income he needs to reasonably survive".
This particular claim of Sanders is absolutely idiotic: people are blindly pattern-matching it to support for the poor when in reality he's arguing for shifting the burden of subsidies from all of society to arbitrary consumers/business owners/employees affected by artificial wage floors.
I think the difference here is that it's not a matter of a single transaction, it's an employment, so what the employer is basically paying for is the employees time (and time is finite). So a better example would be that you pay someone on craigslist for a service, e.g. paint your house. If the painter works full time painting houses and still needs welfare, then the taxpayers are basically subsidizing house painting ("conduit of welfare" as it was phrased). Why can't those that need their house painted pay what it actually costs to get the job done? Because if the full time painter needs welfare, they're in reality paying him too little.
I think the distinction you're making here is more than trivial, and considered mentioning it but decided that it's still not relevant. My point was that Sanders definition (esp as paraphrased by you) is silly to the point of being meaningless, since it consisted of "X isn't paying enough for Y to get off welfare, thus X is receiving welfare". This applies to my example writ small. Your painter example isn't much difficult from the Craigslist example: the person spends his time doing multiple things that add up to less than enough salary to live off of. That doesn't make any of the purchaser's of his services responsible for the shortfall. To the extent that anyone else is responsible, it's all of society.
> Why can't those that need their house painted pay what it actually costs to get the job done? Because if the full time painter needs welfare, they're in reality paying him too little.
You're defining "what it costs to get the job done" very bizarrely here. If the painter takes odd jobs but his wife is employed too such that the two of them are somewhat comfortable (at least above the poverty/welfare line), by your definition it would suddenly "cost less to get the job done" (since the shortfall to a reasonable income has now diminished/disappeared)? This is of course an absurdity.
The problem again is that you're picking a way to place responsibility for subsidies that makes no sense from either an efficiency or an ethical standpoint. Assuming a need to take care of the poor, we all share that responsibility. The only reason we've "decided" that the burden should fall on arbitrary industries and their employees/customers/owners[1] is because that way we can pretend that we don't believe in taking care of the poor and the robust welfare system that it would entail. All we're doing is creating a shitty, roundabout version of welfare.
Note that I have a tendency to consider complete systems when it comes to policy. In the current political climate, it's no doubt more feasible to implementing higher minimum wages than, say, a basic income. So despite thinking that minimum wages are a terrible idea in a well-functioning system, I wouldn't necessarily vote against them in our less-than-optimal system. I just don't think there's any reason to delude ourselves into thinking that they're good policy per se.
[1] And in a weaker effect, that their effects should fall on arbitrary
Walmart is operating within the legal employment framework set up by the government, including the welfare state and the minimum wage. That will not change by raising the minimum wage. Rather, Walmart will simply add automation and reduce its employment.
Minimum wage is arguably the worst idea when it comes to improving the lot of the poor. If someone cannot command more than the minimum wage when it comes to productivity, intelligence, etc, then raising that wage means that person will be unemployable. That is, their skills are not worth the minimum amount an employer is allowed to pay, so they will not be able to find a job. Ever. That person will be a permanent liability of the State.
Yes they are, poor people are compelled by lack of opportunity to take whatever they can find even if it sucks. Pretending they have the option of just saying no to a low salary is a bit of willful misunderstanding of the reality of their situations.
> Minimum wage is arguably the worst idea when it comes to improving the lot of the poor.
No it isn't.
> If someone cannot command more than the minimum wage when it comes to productivity, intelligence, etc, then raising that wage means that person will be unemployable. That person will be a permanent liability of the State.
That is the point, a minimum wage allows people the opportunity to get into welfare because minimum wage is part of the welfare system, it sets the low bar. It's better to not have a job and qualify for benefits than it is to have a job that pays so little it's not worth having. The minimum wage forces society to deal with the problem of people who lack the skills to make a market wage, and that's a good thing.
> Walmart employees are not compelled to work for Walmart; the employment contract is agreed upon voluntarily by both parties. The employees know how much they will be paid and agree to accept the terms. Walmart is operating within the legal employment framework set up by the government, including the welfare state and the minimum wage.
Yes. And if you think everything is fine the way they are now, then don't change a thing.
> That will not change by raising the minimum wage. Rather, Walmart will simply add automation and reduce its employment.
Sounds great to me. You're basically arguing that not having minimum wage is actually holding back progress.
> That is, their skills are not worth the minimum amount an employer is allowed to pay, so they will not be able to find a job. Ever. That person will be a permanent liability of the State.
If an economy can produce the same amount of wealth with much less workforce/work hours than today, then why shouldn't it? Sounds great if you ask me. (And if that's not possible, just hire more people, it's apparently worth it, problem solved.)
"Minimum amount" is in this case "amount needed to reasonably survive", ie. not need extra welfare. If you can't produce enough value that you can't even justify being paid to "reasonably survive" then yes you need help.
Okay, so I'm no economist, but it sounds like you're arguing that not having minimum wage is in itself a socialist measure. In other words, paying people something, anything, is better for the poor than paying them nothing. The only reason to pay the employees anything at all is to "help the poor", because their work is not really needed anyway (their work is worth that little).
To follow that line of reasoning, from a capitalistic viewpoint, it would thus be wise to raise the minimum wage. If people are being paid to do work that's not actually worth it (ie. subsidized via welfare), then don't. I seriously don't understand why capitalistic Americans defend that point of view. Why should the state/government subsidize effectively worthless labor?
What I'm doing is "calling the bluff". People won't get hired? That's fine, the work they were doing is practically worthless anyway, and I'm certainly not for subsidizing that. However, I think people actually will be hired anyway. Because their work is not worthless. I think the only reason people are being paid so little is not because of the "worth" of the work they're doing, but because the market allows it.
I don't know how that happened, perhaps because the big cooperations have too much power, perhaps it's just inevitable in a free market. But I do not support subsidizing labor, and I don't buy the argument that you have to. The money is there, the value of their work is there, there's no problem paying people more, they just don't want to, and luckily for them they don't need to either. And as long as everyone plays along, that's how it's going to stay.
Sometime in the future I'm sure we'll be able to produce enormous amounts of wealth with minimum man power (re: automation). What will everyone do then? That's up for debate, but it looks like the best bet is putting everyone on universal basic income. And that's not a problem, because the wealth is there, the "problem" is that no one needs to do anything to produce it. I'm sure our future selves will find a fix. (If not, then that sounds like a base line for a revolution. Let's hope that's not needed.)
In the meantime, redistribute some of the wealth by raising the minimum wage. Wal-Mart don't need employees? Fantastic, the future is already here.
Thought experiment: Let's make the minimum wage $1000 per hour. I'd like you to think through the ramifications. What would happen?
> Sometime in the future I'm sure we'll be able to produce enormous amounts of wealth with minimum man power
We already do! The amount of productivity possible by a single worker today was completely unheard of 50 years ago, let alone 100 or 200.
> What will everyone do then?
What do we do now? We continue to work, even though we're far past satisfying all of our material needs. Why didn't everyone just stop working more hours than it takes to eat and stay warm?
Come up with answers to those few questions and you'll be well on your way to being an economist ;-)
I'm assuming prices through the roof, companies forced to sack their workers, unemployment rate through the roof, companies go bankrupt, economy collapses.
I believe Sanders is suggesting $10/hour (and that it's around $7 now). That's just a number, but I'm assuming it's the threshold between "needing welfare" and not. So my argument is that if you're paying an adult less than that then that's less than the cost of that person to "reasonably survive", thus artificially low. (In other words, companies are paying less for labor than the actual cost of labor.)
So now instead they're getting $7 from their employer, and in practice $3 in welfare. That's the difference with your example: People are already earning $10/hour, they're just not getting it from their employer. So raising the minimum wage is not raising the cost of labor, it's simply placing the entire burden on the employer instead of subsidizing it. There might even be room for a tax break there once people start number crunching. (Although in Sanders case I'm guessing he has other things to spend that money on, but I digress.)
If raising the minimum wage to the real cost of labor is a problem, then I just don't understand why. The money is there, it's just "stuck" at the top, and minimum wage is one way to help distribute some of the wealth (which really should benefit the economy as a whole, since the incredibly rich can't possibly spend all their money like millions of middle class families would).
> What do we do now? We continue to work, even though we're far past satisfying all of our material needs. Why didn't everyone just stop working more hours than it takes to eat and stay warm?
I guess it's partly because we live in a material world (where having a nice house, car, pretty clothes etc. is rewarding in its own right), and partly because money brings possibilities, and thus freedom: Freedom to travel, to not work, to do whatever one pleases. So money ultimately brings pleasure, and what else is life than seeking pleasure? ;-)
While technically true, you're ignoring a ton of other factors such as the lack of any other alternative employment or the lack of financial capability to move to an area where more employment exists.
When the only jobs available are McJobs, then that is what you are compelled to do, to support yourself and your family - regardless of your intelligence or qualifications because someone else is ready to take your place if you don't accept the job. You have no power to negotiate a higher salary regardless of whether or not you deserve it.
It is a very hard rut to pull yourself out of and stay free from. Companies like Walmart exploit this as much as they can, and have no reason to change their behaviour unless forced to do so.
I find this curiously close to a description given by a late-soviet economist who was working on economic reforms in the 80s: he described soviet economy as a bunch of heavy hard rocks, incredibly powerful, but without any flexibility and connection to each other, and small new cooperative movement as a sand that should've taken all the space in between.
PG seems to argue that the fragmentation of society is a question of efficiency. A natural effect of this is that the world will become more cut-throat. Efficient systems turn hyper-competitive, as seen in university admissions, startups, financial markets. It seems to me that too much "liquidity" mostly causes burnout, depression, dumb risk-taking, and a few really successful winners. Tech is really guilty of this phenomenon by tending to produce one winner for every thousand losers.
In many ways the 20th century was an anomaly -- the wars were more violent, the rate of growth was faster, the cultural shifts were huge and multifaceted -- but we still use tend to see it as a normal state of things. A hundred years into the future we'll be looking at an entirely different world and consider it normal.
I agree that the economic dynamics of 20th century America won't repeat. But I'm not sure most countries will enjoy a stable predictable trajectory this century. Asia and China are far from being mature ecosystems (economically or politically), and the likely loss of jobs due to further globalization and automation, just as the promise of US-style consumerism is arising portends a bumpy ride, especially for totalitarian-ish societies like China, Saudi Arabia, and even Turkey.
The New Left in the 1960s mostly just failed outright. Any change then was due to judicial or executive action.
Slavery, for example, worked wonderfully for the slavers. When we abolished slavery but kept former slaves from full participation in society, they mostly ended up as underpaid servants and laborers. Women restricted from earning a living on their own still had to survive somehow. Which in the 50s often meant attaching themselves to men and providing them with a lot of unpaid support.
The "excluders" in the antebellum South lived under a rather delusional post-hoc rationalization of slavery. John C. Clahoun wrote of this belief system at length. This was minimally modified in the Reconstruction South and after.
My maternal grandmother raised 9 kids during the Depression without the assistance of any men after divorcing her husband. She worked very hard; so did the kids.
In a broad, idealistic sense, yes, I would like each person in the economy producing at maximum. (Assuming we could agree on an ideal value metric, which I'm not sure we can.) There we agree.
But if I am narrowly self-interested (which many humans are), and if I value positional success over absolute wealth (which many do), then I am better off participating in a system of oppression where the value of other people's production is diverted into my pockets. Which is why the great bulk of human history takes place in those sorts of conditions.
> My maternal grandmother raised 9 kids during the Depression without the assistance of any men after divorcing her husband. She worked very hard; so did the kids.
Good for her, and I mean that sincerely. But it's not proof of anything. The question to ask isn't, "Can you name an outlier?" Instead try asking, "What was the average condition of women during the Depression." Or, "Would your family have been better off if women's labor hadn't been systematically devalued for centuries?"
*the present-day use of the word seems incoherent at best - so let's stick to easier-to-see versions for now.
Narrow self-interest appears to be completely at odds with enlightened self-interest. This isn't some ascetic protestation of moral superiority; it's a purely practical mechanism for personally having things that work.
I'm not sure how an average is better (or worse) than an outlier; I meant simply to show what was possible. She was able to use institutions other than marriage for support.
Some of this is hedonic in nature; if you watch "Fargo" second season, you see in pretty good detail how people lived 35 years ago. I'm pretty sure this would be considered something much more like poverty now. Of course, I'd be ignoring any inflation in price of the homes shown, by design.
I wonder about the arrow of causation for conformity back in the 40's. This essay describes WWII as a spark of a generation of conformity (preceded by the New Deal for some). But it's really hard to imagine modern society signing on to a world war. What's to stop parents afraid of vaccinations from taking their draft-age children to New Zealand?
Was there something else that was already more conformist? Or was there another proximate cause, maybe even one as simple as a perceived global threat (communism, fascism) combined with a lack of individual physical mobility?
The essay is good and makes a strong point in and of itself, but I wonder if there's other variables it (and I) are missing.
If pg is reading, one piece of concrete feedback:
> the LBO wave?
LBO wasn't defined in the text previously and I had to google it (it's leveraged buy-out).
This reminds me of something a friend of mine told me over Christmas: Her 65-year-old uncle is not currently allowed to travel abroad from Ukraine because 25 years ago he was an Army officer and anyone with military experience is being held in reserve. So the answer to your question is simply "police at the borders".
Military service used to be seen as an obligation and an honorable thing to do, and wars were seen as being a necessary part of defending one's country and way of life or eradicating great evil.
That fell apart after Korea and especially Vietnam, which were perhaps unnecessary and certainly bungled by politicians. This forever changed the trust and confidence of the public in politicians who send young people into battle.
Of course I grew up in the Rust Belt, where the average person used to be able to make a good living with a high school education in the steel or automotive industry, but now most of the factories are idle, rusting eye-sores, most of the ambitious, talented kids want to go somewhere else -- anywhere else -- and the closest thing to a growth industry is health care for the folks who earned a good retirement during the glory days and are starting to get old.
[1] https://news.ycombinator.com/item?id=9868017
[2] https://news.ycombinator.com/item?id=9560872
[3] https://news.ycombinator.com/item?id=7152378
Do you know of any concrete examples of this? or books about how US Steel lost?
Toyota, working in a Japan decimated by war, definitely came from behind when competing with Detroit's big 3. Toyota starts lower than the other 3, and all of them improve gradually together. But at some point US carmakers plateau. Toyota just keeps on climbing for decades more as the big 3 stagnate.
Eventually, US automakers try to copy the Toyota approach, and Toyota works hard to teach them. But they never quite get it, because US automakers basically miss the point, copying visible behaviors rather than the deeper structures that really make the difference.
Those curious but not wanting to read a whole book should start with the This American Life episode NUMMI:
http://www.thisamericanlife.org/radio-archives/episode/403/N...
It tells the story of a joint Toyota-GM plant in California. Basically Toyota takes one of GM's worst plants and makes it one of the best. But GM is never able to adopt the differences, or even to really understand them. The worker-level stories are particularly powerful.
Why did Toyota did that ?
I cant speak for Toyota, but they probably also would feel their own future would look bleak if their competitors died off - a good healthy level of competition is good for all players in the market, and it drives up innovation and drives costs down for consumers. In a very direct way, having able competitors ensures Toyota stays strong and doesnt stagnate.
See my comment above, but it is important to remember that Toyota did not have any production facilities in the USA at this time; they were not sure (purportedly lazy) American workers could or would conform to the Toyota Production System.
Also, at that time GM had more cash than Toyota's Market Cap. [citation needed] [1]
1. I wish I had better source for this, but Roger B Smith spent 80 billion on automation in the 80's, and Toyota's Market cap was 31-45 billion in 1992.
http://www.businessweek.com/bwdaily/dnflash/content/jan2009/...
http://www.wolframalpha.com/input/?i=toyota+historical+marke...
Additionally, and more relevant - American suppliers could not make parts to Toyota's quality specifications.
One of the craziest parts of this story is that GM simply did not believe the stories that were coming out of NUMMI - for instance, NUMMI could change press dies (for stamping sheet metal) in under a 30 minutes where other plants took several hours.
It is crazy to think about, but GM at that point in history had enough cash to simply buy Toyota; being the biggest dog in town leads to self-satisfaction and complacency.
GM and the big three at that time had an inspect and reject batch lot production system. Each stage of production would make a bunch of parts that would later be used downstream, possibly a few days or a week later. These parts would be inspected for defects before being used, but by then there may be a buffer of several thousand parts - that may all need to be scrapped. Toyota ran on a lean system, which meant that upstream production could cause severe downtime if those upstream suppliers or plant operations failed. This caused 2 things - emphasis on more robust operations and less waste due to scrap.
The whole time period is fascinating no matter what business you are in.
Disclosure / disclaimer - I work for GM, but did not during this time period - I've just read a lot about it.
We're definitely in a winner-take-all economy, whether it's real estate, stocks, the dominance of companies like Google, amazon, and amazon, or web 2.0 valuations.
I think that this is misleading. Every global culture is fragmenting, but the biggest fragments within countries tend to get along much better then they used to. There is a "global culture" now that contains a bigger share of humanity then ever before, but inside each nation it still looks like fragmentation.
The irony of regularly lecturing the rest of the country and world about what the future holds from the position as a final bastion on unassailable US hegemony of last century (2nd only to Hollywood?) perplexes me.
I am not at all certain, but I have to wonder if something magically keeps SV software innovators glued to SV. This is something I've never understood. But there must be SOME reason why software innovation/work didn't completely disperse from SV ten years ago.
(I'm also not sure if Google or Facebook are either, but at least in those cases it's obvious what you mean)
If you need skilled workers and the varying skill of a worker produces magnitudes of difference in wealth created of course you need to both be huge enough to afford them and centralized enough to take advantage of them.
The article itself seems like a blinders on interpretation of the US tech industry. Corporate consolidation is at all time highs in areas like food processing, farming, finance, raw materials, and industry. Mom and pop shops the world over are bellying up for Walmart and Starbucks. Startups and creative culture in the tech bubble are against the general grain. Its why money in politics is being considered such a larger problem now than twenty years ago - as dozens of economic effects interact, from people having less spending money to companies consolidating and having guaranteed revenues to regulatory meddling in their favor.
Fundamentally I think that newer generations growing up on the Internet are turning out much more hive minded than their grandparents, because there are just more of them as a fraction of the population. The perfect white nuclear family of 1970 still only accounted for a stark minority of the American public - it is just strange that a disproportionate number of people on HN ended up coming from that class. There was still extreme social unrest throughout the century - prison camps for the Japanese, the KKK, segregation, and the banning of many chemicals due to being "foreign" like opium and marijuana. Just because one microcosm of the American economy that produced most of us was homogenistic doesn't mean the era was exclusively defined by it.
https://www.quora.com/Why-do-software-engineers-make-so-much...