Billionaires Build
paulgraham.com
paulgraham.com
I think the "principle of charity" or "steel-man" criticism of billionaires isn't that every single billionaire is directly exploiting people. It would be closer to something like this:
The problem is that our society has feedback loops that make it hard to escape poverty, and feedback loops that let the wealthy amass more wealth and power. It doesn't have to be this way, it's a product of our laws and can be changed.
Warren Buffet doesn't directly exploit anyone. However he does pay less taxes than his secretary. To the extent that Uber drivers and Amazon warehouse workers are exploited, it's because our society has millions of desperate people struggling to get by. What's the point of being the wealthiest nation ever on paper, if there's terrible schools, high infant mortality, and lead in the drinking pipes?
I used to live in an upper middle class area, and a worrying number of the people were very polished thieves. They spent an unholy amount of time fighting over inheritances with other family members and over property boundaries with neighbours. When they worked - inevitably as land owners, landlords, upmarket real estate agents, investment advisors, lawyers, company directors, horse breeders, and so on - they'd always pad their bills and expenses, inflate their prices, and cheat on their taxes.
Were they "successful" - in the sense of being very comfortably off? Of course they were.
Did they try to marry their own? Naturally - out of snobbery and opportunism if for no other reason.
Were they admirable human beings or truly productive members of society? Not noticeably. Between the drink and drug problems, the predictable infidelities and ensuing dramas, and the polished and educated facade hiding feral greed and entitlement, they looked good from the outside - not so much from the inside.
If you don't own shares/stocks to any significant extent your labour goes to supporting these people. They make a lot of money from "investments" and pretend this is a glorious, noble, and risky social service. In fact they're simply skimming money from the top of the economy into their own pockets - effectively wasting it when it could be put to work doing something innovative for future generations.
I think it was in The Meritocracy Trap that spoke to how this is a relatively recent phenomenon that is exacerbates wealth inequality. Previously it appears to have intermarriage between social classes
I don't see a feedback loop that makes it hard to escape poverty. Why did the high school dropouts drop out in the first place, and why does that make their kid more likely to drop out? Ideally their kid should still have access to public school education, with all the tools needed to go on to become successful themselves.
To be clear I'm not saying there is no poverty feedback loop, just that even taking what you've said about fundamental human preferences at face value it is not inevitable that it stay this way. We can improve our systems to make it easier for people to escape poverty. But this doesn't really have anything to do with billionaires. Many of the issues in these systems are not even for lack of funding, but inefficiently spent funding or other poorly designed incentives or bureaucratic rules that make things more difficult for poor people.
Here's a slightly different take on this idea:
The only way to become a billionaire is to use leverage.
I think this is a much more defensible argument. You can't become a billionaire by yourself. You have to have some mechanism of leverage to magnify your impact. Hiring employees is a form of leverage. Using a computer is a form of leverage. Putting your software on a large number of cloud computers is yet an additional form of leverage. The question of whether one is exploiting their employees is a worthwhile question to ask, but it is a completely separate (and much more polarizing) question. I think that leverage is the core kernel of truth lurking within this question.
Oil and Gas billionaires leverage the fact that society hasn't figured out how to factor in negative environmental externalities. Consumer Staples billionaires leverage their supply chain monopolies and labor monopolies.
The original tech billionaires leveraged their early knowledge of computers/internet. Web 2.0/3.0 billionaires leverage the fact that society hasn't figured out how to appropriately regulate stuff that's similar but slightly different from their old school regulated counterparts (i.e. Uber, Airbnb).
In general, leveraging technology capabilities seems less exploitive than leveraging human/environmental resources/lack of regulation.
I have no idea what "leverage" means in this text. From context I can tell it's something bad.
I understand "leverage" in mechanics. I also understand that in "corporate-talk" it's just a synonym to "use".
I like this idea, because it focuses the ethical/moral/policy question on something that seems to me to be much more tractable: what kinds of leverage should society allow you to use, and to what extent?
One route to becoming a billionaire seems to go like this: you persuade a group of investors to make a pile of money that's so big that you can corner a market. Which is often true. But is it fair to the people already in this market? And is it fair that it makes you a billionaire?
It is true that there are other, more reasonable beliefs.
But what it is is that it’s basically impossible to accumulate that amount of wealth through work. Instead, you have to be able to capture the difference between the value of someone else’s work and what you pay them to do it. And you have to do that at scale. So Jeff Bezos has figured out how to pay people $X and make $X $Y off their labor, pocket a significant portion of that $Y and do it for the hundreds of thousands of people that work for Amazon. Nowhere in this argument is anyone saying that this practice should not be allowed or that he’s done something wrong. But what people are saying is that the narrative that billionaires built their wealth themselves is false and that they should be taxed heavily in recognition of the fact that they built their wealth off of the work of others.
The billionaires Paul identifies and helps create are no different, other than the possible exception that they rely on market’s expectation of future exploitation of workers’ value rather than having actually done it already. Paul would never fund a founder who wanted to divide all profits among employees. Therefore, based on that single fact alone, he is identifying future billionaires based on their willingness to exploit their workers...to pay them less than the value of their work.
You needn't use your real name, of course, but for HN to be a community, users need some identity for other users to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
Jeff Bezos shouldn't be making 12-figure gains while his warehouse workers are on welfare. Those warehouse workers shouldn't be paying a higher tax rate than he does on their income.
That IS an unquestionably exploitive relationship between a CEO and his employees, even if he isn't personally being an exploitive monster he isn't doing anything about the systemic exploitation he lead the way in creating.
This is pretty much true of any billionaire, regardless of their personality or views.
The existence of billionaires is a economic luxury that should only be afforded once society as a whole has taken care of its people. The co-existence of billionaires and homelessness is an economic failure, especially when some billionaires possess more capital individually than the entire homeless population of this country.
I mean, as an example, billionaires have access to top notch lawyers that lower their tax bill, look at Trump’s recent tax filings for example. Can you reasonably argue that they are not unfairly taking advantage of society, and by extension its people?
What about government lobbying etc. I mean the list goes on.
Personally I think PG just attacks the weakest form of the argument against his view. He obviously benefits from billionaires being created as he is an investor. Getting a large payout is literally the purpose of his job.
PG's statement:
> The second is about something politicians sometimes say — that the only way to become a billionaire is by exploiting people — and why this is mistaken.
He is framing it so he is debunking an absurd claim: that the only way (no other ways are possible) to become a billionaire is by exploiting people.
This is distinctly different from whether "exploiting people" (opinions vary on what this means) is the most common way it is actually done.
It's a shame we don't have a political party that would end this rhetorical he said / she said approach we take to this topic, and instead adapt a thorough data focused approach to this problem, accurately illustrating the situation in a way that the common man could understand. It would be nice to know with some level of accuracy how "bad" the problem really is, as it is we have little to go on other than our intuitions and propaganda from both sides.
No, he does not. He claims he paid $1,850,000 in federal taxes in 2015, do you think his secretary earned that much, let alone paid that much in taxes?
In addition:
“In 2019, Berkshire sent $3.6 billion to the U.S. Treasury to pay its current income tax,” Buffett said in his annual letter to shareholders. “The U.S. government collected $243 billion from corporate income tax payments during the same period. From these statistics, you can take pride that your company delivered 1.5% of the federal income taxes paid by all of corporate America.”
>> What's the point of being the wealthiest nation ever on paper, if there's terrible schools, high infant mortality, and lead in the drinking pipes?
A higher percentage of people graduate from college today than graduated from high school a hundred years ago, infant mortality is 6 per 1000 today vs. 100 per 1000 a hundred years ago, and blood lead levels in children have been reduced so much that it is claimed to be largely responsible for the drop in crime rates since the 1980s.
The point of getting wealthy is that it gives you resources to deal with your problems.
> No, he does not. He claims he paid $1,850,000 in federal taxes in 2015, do you think his secretary earned that much, let alone paid that much in taxes?
I think it was clear that they meant as a fraction of income, not as an absolute value.
A quick googling suggest that he pays a lower tax rate than his secretary.
IME (including writing the actual SQL queries against a corporate billing system that calculated ideal writeoff amounts every year), corporations evade so many taxes that this amounts to an empty boast. 1.5% of bupkis is bupkis. Supporting the state through income taxes is inherently foolish, and moreover we do it in the most foolish way one could imagine.
I don't if it is the only way to become a billionaire. But the bigger problem is every billionaire is exploiting people.
Imagine you are one of the wealthiest guys in the world. You can either:
- Hire the best financial guys to take care of your equities (although they are the best they look cheap to you).
- Hold a share of the equity of every business you can find in the world.
Either way, if the world is growing, you earn money by lying on the bed all day long. And then you can use the money exchange a large amount of people's labor for your own pleasure, instead of building costly infrastructures for your country for very small returns.
Even if the world is going through a recession, other people would more desperate than you - you would lose part of your money, but people's life would crash, small companies would go broke, most of the entities have to do sub-optimal choices, and you don't have to. Then you can do the purchase and hold even more equities of the world.
In a word, holding extreme large number of equities is exploiting people because they can barely do nothing and enjoy people's labor without any risks.
People oppose billionaires paying low taxes, and the related lack of public investment in bedrock services and infrastructure they need. When a rural area has no hospital, or a city has crumbling roads and transit, yes, people resent enormously wealthy people for whom those are not concerns. People do not, however, oppose their success at building companies that make money.
PG is picking a fight with the least sophisticated form of the anti-billionaire argument (i.e. "billionaires suck"), which is beneath him. I get that it's easier to do that than than argue over how the structural issues that allow massive wealth accumulation also undermine the foundations that markets and societies are built on, but it's really beneath PG to choose such a trite argument to oppose.
> if we just tax Jeff Bezos more then the Water Authority in Flint, MI will somehow become more competent.
That, however, is a strawman. Nobody suggests that at all. People who support more progressive taxation point to things like the New Deal and the strong progressive taxation coupled with public investment in infrastructure and education that propelled the United States forward.
Isn’t that what we want?
Just a week ago or so on Reddit someone posted imagining how much good Elon could do with his Billions. I replied that yes, maybe he could devote those resources to push forward electrification of transport to mitigate global warming, invest heavily is solar power technology and devote resources to trying to create a future for humanity in space.
Well, of course, that’s exactly what he’s doing. All those billions aren’t stacked in a mountain of dollar notes in his basement, it’s embodied in the jobs, infrastructure, technology and products of his companies. This basic, fundamental ignorance of even the simplest economic concepts is incredibly common. I see it all the time, here as well.
It's usually much easier to make money in unnecessary bullshit, and via rent-like activities, than in socially valuable activities. So that's what most rich people choose to do.
FWIW He has a significant stake in a company (Berkshire Hathaway) that does own a series of companies that engage in questionable practices. And he is uniquely in a position to stop that practice and chooses not to.
https://publicintegrity.org/business/warren-buffetts-mobile-...
https://markets.businessinsider.com/news/stocks/aoc-accuses-...
To become a billionaire, one must be able to amass 10 thousand times more wealth than the median household in the US. To reach the lofty heights of Bill Gates et al. one must amass ~ 1 million times more wealth than the median US household.
The reason why some believe that to be a billionaire is exploitative is that they believe this 4-6 order of magnitude disparity in wealth is inherently exploitative. You could always imagine a society where the warehouse workers were paid double ( or even quadruple ) for the effort they perform and a 100 billionaire would simply be a 100 millionaire.
Regardless of where you draw the line for the discrepancy to be considered exploitative. The line exists somewhere for everyone. Tsar Nicholas had the equivalent of ~1.3 trillion in today's dollars in wealth prior to the revolution, and I can't imagine the US supporting anyone with amassing more than 10-20 trillion dollars in wealth.
Carnegie et. al. each managed to earn up to ~300 billion in today's dollars prior to the anti-trust act.
The Doordash people don’t want to steal tips, but the law doesn’t punish them for doing so, and the people getting exploited are drinking lead water anyway.
There might be something to discuss there: https://publicintegrity.org/inequality-poverty-opportunity/w...
Disclaimer/source: I worked for D. E. Shaw & Co and have close friends who work at RenTech. My personal experiences were amazingly positive and friends at RenTech say similar things.
https://money.cnn.com/2013/03/04/news/economy/buffett-secret...
Which explicitly excludes dictators and royal families
It's super easy to defend the actions of "industrious" businessmen if you're even a little bit to the right
Is it so easy to defend dictators who are even richer?
No, he absolutely does not. He pays a lower effective tax rate but vastly more in actual money than his secretary. His effective rate is 17 something percent because the capital gains tax rate is 15%, not because he’s rich. https://www.fool.com/taxes/2020/09/25/why-does-billionaire-w...
We could certainly increase cap gains rate to regular income, but that would fuck a huge portion of the middle class depending on gains in 401ks for retirement.
I don't think any of your three statements are true, based on my (limited) knowledge of history. Far as I know, the only way to break the feedback loop is to restart it - a revolution or the like - and build something in its place that maximizes the time until the loop has to be broken again.
If anything, I'd guess that it's human nature to try and amass power/money/influence/cows, and the more you have the easier it is to get more. That's not a fault with our laws, it's what people do - on average, in aggregate.
People do those things because the pressure to avoid doing those things is far too weak, and the pressure to be a good person is one of the things that society should provide.
Those feedback loops are directly created by wealthy people for wealthy people, because politicians like money like just everyone else its easy to manipulate them into creating feedback loops that help those wealthy folks amaze even more wealth. The more corruptible the politicians are the more the wealth gap increases, from there is easy to conclude why millions are struggling to get by even in the wealthiest nation on paper.
I think it's a little more complicated than that. I think "virtual goods" make it hard to figure out exactly where we stand these days in terms of economic health, a la this past comment of mine:
If his secretary paid more than $1.8 million in taxes, they have extremely high income and they shouldn't be used in a comparison of "desperate people struggling to get by" like Uber drivers.
It would be great if Y Combinator filters well to emphasize non-exploiting billionaires, but that’s certainly less that all billionaires.
How does this affect me as a wealthy person?
It's not a strawman, people repeat this as fact in any far left leaning forum. To socialists all work in a capitalist system is exploitation.
The exploitation is a side effect.
Old soviet joke:
Under capitalism, man exploits man. Under communism, it's the other way around!
His secretary can buy Berkshire Hathaway stock at any time and pay a lower tax rate than Buffet, while growing wealth at the same rate as Buffet.
And you better not get too ambitious and pursue a degree that's too difficult, or you won't be able to complete your degree and you'll have all the debt but none of the credentials.
And how do you recommend pursuing this skilled career when you don’t even have enough money for food, clothes and shelter?
I mean that’s pretty much a working definition of poverty and I’m really curious how easy you think it is to do when you’re hungry, dirty and tired.
and
https://en.wikipedia.org/wiki/Economic_mobility != https://en.wikipedia.org/wiki/Social_mobility
Of course millionaires and billionaires can still _work_ themselves in the sense given above, i.e. in a way that creates value. And one could argue that one can be a self-made (no exploitation of others) millionaire. But it becomes farcical to claim that a person can become a billionaire without exploiting people. Any person on Earth would need much more than one lifetime to create a Billion USD worth of value _through their own labor alone_.
It is farcical to a Marxist maybe, with infinite patience for labor theory of value despite century worth of contradictory evidence.
https://www.visualcapitalist.com/ranked-the-social-mobility-...
Secondly, in the same vein, the kind of (aspiring) billionaires YC meets are, by definition, builders, because they're self-sorted fledging entrepreneurs. Paul somehow uses this as an argument when he should notice that this means he has a bias.
Nobody called Zuckerberg or Bezos exploitative when they were coding in dorm rooms and folding boxes on Ikea tables, and that's the kind of people Paul thinks off when he thinks of billionaires in his job. But that's a different story from the conglomerates they run 20 year later when the majority of their employees are warehouse workers and content moderators with mental issues
Reason for not recognizing this is obviously that PG mistakes Silicon valley startup culture for the entire world, which I wouldn't have blamed him for 20 years ago, but what is odd is that it seems to have gotten worse even though he moved away from it.
Actually lots of us called them exploitive. It might not change anything, but it's worth noting that a lot of us knew that facebook would grow into the great evil that it is today. It was also obvious that Amazon would eat all retail stores, and it pretty much has.
Retail margins: 20-80%
Amazon is directly helping poor people by cutting out the greedy middlemen between them and essentials.
If Jeff Bezos were in front of a YC interview there is no chance they ask him whether his stock workers will get healthcare or if they'll get pushed so hard that they have to piss in bottles to keep their jobs.
You mean when he was coding the site to rate which of his classmates were hottest? Yeah, cool cool.
Again, Airbnb is probably the best example: users who book stays and users who rent out rooms/homes may love the service, but other people who live in those neighborhoods or buildings may not. Airbnb overrides those objections by exploiting a few issues: ambiguities in local laws; inadequate enforcement agencies who cannot handle the number of listings in their area; the inability of local residents to sufficiently organize and force their local governments to prioritize enforcement, etc...
What PG doesn't address (which isn't his goal, so no dig intended) is a bigger issue than the immortal souls of founders and billionaires: Bad things happen just as often as a result of good people with good intentions as they do from the diabolical acts of sociopaths. That truth is equally under-appreciated by both American progressives and the well-meaning people who help create big problems even as they create joy for billions.
Basically, the "work" has to come from somewhere. The reason FB is rich is because 2+B people choose to work for free. The reason Google is rich is because they do not have to create the content (in fact, "content creators" are pushed to the back seat). The reason Amazon is rich is because you can use cheap labor and sprinkle tech-efficiency on it. The reason all gig-companies are rich is because they can circumvent many "worker-rights". The reason Microsoft is rich is because they give a damn about compatibility and competition (the will extinguish probably even the classic "open source", given enough time).
Some hedge funds are rich, because they buy the order-flow data of poor people playing with their money - maybe they use it against them, maybe not.
I cannot see non-exploitation in any of these. Another grandiosely self-serving essay by a rich man, who thinks he has figured out how the world works.
If he really had, he would probably want to change it. For the better - which is probably much harder then just doing more of the same.
Edit: I sometimes think people who write these things are painfully aware of the kind of illusion they create and choose to create it nevertheless. Mundus vult decipi.
Hedge funds do not pay retail brokerages for order flow. The vast majority of trading activity from retail investors is motivated by public information, so it offers basically no insight worth paying for.
This is the exact reason why market makers do pay for order flow. They can safely execute a huge number of these trades with very little risk and collectively make a hefty profit from the small spread.
Yes. If this is all you need to calm others and your own mind, I would probably do it, too.
I mean, of course. Y Combinator is looking first and foremost for people who will make them billions in the aggregate. Most of those people who pass the interview will personally fail to join the billionaire club.
Also, its not like "building" and "exploiting" are mutually exclusive.
Since the only way this happens is by funding founders who go on to build big successes, you're confirming what pg said.
He seems to be trying to make a general statement about billionaires or becoming a billionaire, but he's really only talking about a certain kind of potential billionaire that's suitable input for the VC business. His working definition of exploitation also seems to be far more limited in scope than the one the "mistaken" "politicians" use. Even someone who's kind and considerate to everyone around them can build system that exploits people.
Most startups fail, though.
And YC will not make much money from those people. They will lose money on a lot of them.
Facebook, Amazon, Apple and others didn't start out exploiting people, but they sure as hell do exploit at at least some group of people now. Content moderators, warehouse workers, assembly line workers. It's not a neat and clean picture, a lot of those people would themselves say it's a job they decide to do-- and their agency shouldn't be diminished-- but the exploitation does exist and it is real. You at some point just have to listen to people, and enough people in this country are saying its systems are exploiting them.
Simply put: It would be nice to see Paul write an essay about how Facebook should treat their contracted content moderators better, rather than expend his mental energy retorting to a few progressive politicians. I too wish that those politicians understood tech a bit more, but there's lots of people who I wish understood lots of things better. This essay is mostly quite wise and thought-provoking, too bad his grievances color it.
The founders I see in recent YC batches don't seem so different in this respect—but perhaps I'm out of touch with out-of-touchness.
Personally, I've watched YC grow from something that I thought was an obviously good idea but nobody else agreed with me about (I applied to the first SFP in 2005, as a college student), to something mainstream that lots of people aspired to (~2010), to being something at best ho-hum and at worst actively bad for the world (today). Getting rich is just not desirable anymore; technology is only desirable insofar as it helps solve pressing problems for the world as a whole.
In 2010 I was the one who would go to parties and young people would be like "Oh, you work for Google, that's so cool!". In 2014, it was "Oh, you're founding a startup to fix unemployment, that's so cool!". Now when my wife (who works as a professional impact investor) goes to a party with young people, it's "Oh, you're solving climate change and funding reproductive healthcare and working for racial justice, that's so cool!" Meanwhile, I say "I work in software" neutrally and omit that it's for Google.
Startups like Airbnb and Lyft likewise have built amazing things, and would easily make their founders 100' millionaires, but there is a point where to reach a certain level you need to leverage some flawed, unjust legal system at scale (stupid regulations around housing/hospitality/and taxis, in these examples).
None of these founders created these legal systems, but their rapid success and scale I can't see happening without those dumb legal environments they found when they started.
Now, maybe the best method to fix unjust laws is exactly this: when you see a stupid legal system, found a company to exploit it, become a billionaire and then finally society will take notice that the legal system is stupid and will fix it.
So I could see an argument that maybe not only should we not penalize billionaires who built their wealth from scratch, but we should thank them, like we thank white-hats, for identifying inequitable laws that they were able to leverage at scale.
Bill Gates didn't write Windows 95. Steve Ballmer didn't write Microsoft Office. But they owned stock in a company that employed people that did (and all the various other labor that goes into building software products). Why did they make so much more money from it than the people who were more directly involved?
This dynamic is reducible. If Person A starts a software company, Person B, C and D build the product, and then Person A gets $10,000 while Person B, C and D each get $1, something is off there.
The capitalist defense of this is more or less, "B/C/D agreed to those terms", but this ignores the context. If every B/C/D wanted to be As, there would be no B/C/Ds to build things. And it's not always possible to choose to be an A--it usually requires a fair amount of privilege to start a business. But nonetheless, their work is equally important, and even if it isn't, it's certainly not the case that A's work is 100,000x more important.
We need to recognize this kind of bonkers concentration of wealth is a huge problem, and fix it with profit sharing and taxation.
* Tesla
* Twilio
* Stripe
Would you help me see how those 3 leveraged unjust laws? As a software developer, I feel Stripe and Twilio have added a lot of value to me, to small businesses, and the world.
Any pointers or books to read about this topic? Admittedly I haven't looked too hard.
In a way all the YC interview prep stuff is written for the wrong people (for YC, and this is obviously a little wrong) but also the right people (who will chase prestige to read the article about interviewing at YC).
Marc Andreesen published an essay "It's Time to Build" [0]. He claims that ostensibly, COVID-19 inflicted acute trauma on the U.S. economy. But it merely excaberated the symptoms of a deeper dysfuntion. The root problem is the cultural decay of "a will to build". The solution is to rekindle this norm.
Several have published their own takes [1]. pg must have figured "What you can Learn from How to Ace a YC Interview" conveniently dovetails into the larger debate. Had he written the essay in a vacuum, I suspect he'd have emphasized "sell users what they want". Rather than the grand narrative "civilization is built by founders" which might increase exposure but possibly dilute the original intent.
[0] https://a16z.com/2020/04/18/its-time-to-build/
[1] https://scholars-stage.blogspot.com/2020/06/on-cultures-that...
People who have become billionaires from the companies YC has helped launch have that in common.
Zuckerberg went to a high school, current tuition cost of which is over $57000 a year.
Warren Buffett's father was a congressman, his grandparents owned a retail business. Buffet was sent to an Ivy League school.
Beyond this, Kleiner Perkins did not give Jeff Bezos millions in VC back in 1996 because they liked him. He was around then, but they were too. As well as the employees shipping out books then. As well as the employees shipping books out now. Kleiner Perkins gave money then, anticipating the exploitation of Amazon factory (and non-factory) workers now. The company was not built with Bezos as some Atlas figure. It was built by millions from Kleiner Perkins in 1996, and by the exploited people doing the work there every day.
Bezos was given billions for successfully doing this. It does not waive away the expropriation of surplus labor time of those who work there.
It's like looking at an Olympic gold medal winner and saying "Oh yeah, well of course they broke the world record in the 100-meter dash. They were born with genetic predisposition for the sport and they had the best coaches and their parents got up at 4am to drive them to practice and..." Well, yeah. But a lot of people might have those advantages and not achieve anything with them.
Sure, Zuckerberg went to some fancy prep school. So did all of his classmates. None of them started Facebook. There's lots of other Congressmen who have kids. None of them are Warren Buffet.
But claiming that being "self-made" is something that doesn't exist because the extremest outliers had unusual circumstances (this is surprising for some reason?) ignores all the people who make more modest success largely by their hard work and ingenuity.
My second thought is that it wasn't a mistake.
It's a poor way of organizing a functioning and well integrated society. One that is only maintained by the continued purchasing of political power. It's an anti-democratic system where the primary distribution of power is determined by birth lottery.
We're in an era of our species and collective intelligence where we can imagine much better ways than this, but for many with that power their primary objective is keeping it.
If your model of big business is that it's a tool for exploiting workers, you'd expect the opposite of this dynamic. Instead the economics is pretty clear that most large firms create synergies that empower individual workers to produce much more than they'd be capable of individually or in small, informal organizations. As a bonus, the sizable bulk of this productivity surplus accumulates in the form of higher wages to the workers themselves.
Big business accomplishes this by consistently applying the best practices in organizational management[2]. In contrast small business tends to be much more sloppily managed with a lot more decisions made haphazardly, with many more decisions being made for individual gain rather than the good of the organization as a whole.
If anything the balance of the evidence would make a much stronger case that small business is really more exploitative than big business.
[1] https://www.jstor.org/stable/117089?seq=1 [2] https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.24.1.203
Does rent seeking count as productivity?
This is how it works with idealized new products. With highly competitive fields it is more zero sum, in that you take some pie from your competitors. But that's still good overall as it's adding value and making the market more efficient.
The only true zero sum game is the market for attention and why I despise social media companies. Everybody has a fixed amount of time, you can only grow that pie by adding more people.
If I provide enough value to buy a thousand lifetimes worth of food and sit in my castle with it while people outside my moat starve - am I not selfishly hoarding that food?
These things aren't necessarily as contradictory as they may seem on the surface. The full life cycle of many successful tech startups is to make something people want, attract a large user base, have an IPO and become billionaires, and then (when it comes time to generate the revenue that the investors were expecting when they invested in the first place) throw the users under the bus in favor of the real customers, whoever they are. Often marketers.
The early phase, where the company is simply providing users with the best product they can make and seems to be making the world a better place is often a mirage that disappears as soon as they switch to a revenue-maximization mode of existence.
I don't think it has to be this way; probably plenty of people have become billionaires and treated their customers well at the same time. It's just a common thread with many of the very high-profile tech company "successes".
Paul Graham deals with founders at the very beginning of their endeavors when idealism is high and strongly correlated with success. At that time it isn't exactly clear where their companies will be in twenty or thirty years.
I think that you may be able to become a billionaire without exploiting people, but it's like playing on the high-difficulty mode. In other words, it's easier to be "successful" (from a monetary point of view) when you don't care about others. It's also easier to be successful coming from a privileged background. What's more, there can be a correlation between only knowing privilege and not caring about others, which perhaps leads to the number of billionaires who exploit people (double-advantage).
But it's all very complicated. Sometimes a modest background is an advantage in that you have less to lose, and can provide unique insight in connecting with people. Or a modest background can lead to a survival-of-the-fittest or harsh-world mentality, which leads to the exact opposite, which can also be an advantage.
At any rate, I've chosen to play on high-difficulty mode, for better or worse.
My early life, I grew up and had middle to upper middle class all around me. In my late teens and early twenties, there were times I had to scrounge my cushions and rummage through my car to find enough change to eat a meal.
We live in a society where everyone has access to a computer—personal or local library. We have all the information we need to bring (the majority, but not all) ourselves up from poverty to lower middle class or even middle class.
It’s my belief that it boils down to a few things: - self learning - dedication
Self Learning: if you must, pirate the crap out of all knowledge you need to get your family in a stable place. You need a textbook, you can find an older version; need a research report, find it online; you need.... just go find it and get it. If you don’t know how to find it, learn how to find it. If you don’t know where to start, ask someone. Just do...
Dedication: it’s so much easier to just come home do what you need to do with the family and then sit down and watch tv or do something that’s not going to progress you. It’s not fun and your mind will fight you every step of the way, but what’s more important to you? The show that’s on in an hour or the stability of your mind and family? Don’t look for those immediate returns, yet rather look for those returns that pay off in a year or two or 5. As i said, it sucks, but what’s more important?
One thing I’ve noticed over and over again is the difference between being raised in middle class or upper middle class vs poverty is the view of the work place—I’m not saying this is true for everyone, but just what I’ve observed over time. - Middle class and up: not as scared to talk back, speak your mind, or challenge their opinion to your bosses or colleagues. - Poverty: fearful of doing the aforementioned
I, for some reason see this as one of the largest issues with advancement as it propagates to not just the work life, but also the personal life too and thus creates a fear of challenge—it’s better to go with the status quo than to break out.
How can this change? Learn learn learn and then go find a place where you can apply your new skills and then just keep learning instead of doing the easy thing...
Thoughts?
But if you don't, well, what are you supposed to do? Your relationship to work is what it is because you can't afford to lose your job, and you were raised in an environment where others feel that way. Your ability to come home and learn things, rather than "sit down and watch tv or do something that's not going to progress you" is severely impacted if your mental health is already suffering. Your ability to even imagine what you can accomplish is affected by having no examples that you've witnessed in real life.
You can, of course, chalk all of this up to personal responsibility. But the alternative view, backed by science, is that being raised poor impacts all of these things and more, and that's a matter of how the human brain works. In the aggregate, it's not a matter of personal responsibility.
When you live in poverty, there is no such thing as peace or thinking about the future. You are trying to cope minute-by-minute with hunger, abuse, fear, and limitless insecurity. You know someone who is in jail, someone who has been shot/stabbed/murdered, and plenty of people who did all the right things and still failed to make it out. In a nutshell, there's no such thing as tomorrow when you hope to die in your sleep.
Self-fulfillment is at the top of Maslow's hierarchy. Until society provides for all the needs beneath it, having access to the internet isn't going to make a damn bit of difference.
And luck especially with respect to your health and the health of those around you. It's harder to invest in yourself when you are a primary caregiver to a relative.
It's this argument that makes me wonder how anybody can be opposed to some form of universal health care. I heard somebody ask this question once and it's stuck with me: how would you organize society if you knew you would be reborn but have no idea into what situation.
There's 'ugh' field, procrastination, fear, mental health problems, and so forth that impedes folks.
Growing, however, is all about academics, with a side dish PE. Nobody taught anybody how to deal with procrastination, how to deal with emotional problems, and so on. Or how to ask for help. Or how to deal with paying bills and taking responsibility.
Once we are in the real world, you either learn the rules of society or you don't. You sink and swim on your own 'merit', and that's not including the general lack of support society has for you.
Really, how do society expects people to function with no instruction manual? Or worse, that we are all making up shit as we went along with our lives?
Opportunity is the biggest differentiator among the rich and poor.
Intelligence is fairly evenly distributed in our society, being poor doesn't mean you are dumb and lazy it means that you haven't had all the opportunities that a rich person has.
These opportunities are from simple things like individual tutoring, vacations and time to relax, to being able to fly across country to take an unpaid/underpaid internship, to having mentors. It also means more complex opportunities like living in better areas with a greater chance to meet like minded people and having better/more dumb luck.
Opportunities among the poor aren't equal either. A rural poor kid has less access to things than the equally poor kid that lives in the big city. These things include industry outreach, better libraries, museums, concerts, better schools, all around greater access.
Rather focusing solely on educating and motivating a populous, we should also be figuring out how to provide better opportunities for our citizens. Instead of H1-B's we might be better off forcing companies to hire kids that didn't go to a small select number of schools, or to hire people from middle America, or just incentivize them to hire and train Americans.
Further we could expand our broadband infrastructure, provide a computer and internet to every person in America who doesn't have access to neither.
Then yes, these habits about how to treat the work place get passed onto kids. And it takes a lot of mental work to relearn things deeply ingrained in you from childhood. This is the second issue, where it would take generations for the bad effects to actually disappear. There are no quick fixes to systemic issues.
This is almost impossible to do if you were raised in a household of abuse or food scarcity, or where your network doesn't contain any well educated individuals. Basically it works for...middle class people.
In short: trickle down economics is being pissed on and calling it rain, and "just work harder" blames people for their station and expects them to be extraordinary just to have a reasonable life. It's essentially blaming the poor, the easiest way out possible, with nice gloss on top, and it's total and utter bullshit that papers over the systemic forces acting against all workers - let alone those just scraping by.
This requires some threshold level of intelligence.
It requires knowing that it's possible and not making stupid decisions along the way that inhibit it. You're less likely to be exposed to knowledge of how or where to start when no one inside your network is successful.
There are some issues with learned behavior (children from poverty that eat one marshmallow in the test because they've learned adults are unreliable and one now is better than the promise of two later). People from poverty tend to spend money quickly when they get it because having it is scarce/rare and there's learned behavior to use it right away.
I think a lot of the arguments from the left that "it can't be done", "social mobility doesn't exist", etc. are both wrong and really harmful because it confuses people into thinking they can't improve their situation when they can. It takes away agency.
I think the truth is messier though and not everyone has the capacity to do this and our society is definitely skewed for intelligence, but arguably so is any society with living things that need to adapt to their environment.
The solution is probably some sort of complex policy and iterating on it to try and make things better and protect the lower bound of society, but that's boring pragmatic neoliberalism and doesn't really rally the troops. People prefer to argue the extremes.
I think the key is you can protect the lower bound of society without taking from the rich or disincentivizing wealth creation and growth, but I also think wealth inequality in a society when it comes from wealth creation and growth is not that big of a deal and we want to reward this kind of thing (less true when it comes from other places like inheritance). Basically protect the lower bound, don't worry about capping the upper bound. Worry about inheritance and leveraging wealth into political power.
Tyler Cowen's book makes a pretty good case for growth in this kind of way being the best way to help the most people the fastest: https://press.stripe.com/#stubborn-attachments
I think that gets less attention though because it's easier to 'hate the rich' than it is to focus on policy issues that affect the lower bound.
I want society to take care of the weakest. I don't want anyone to ever end up without a basic roof over their head and food on their plate, regardless how bag their decisions are. I want children to have the opportunity to advice greatness, even if they come from poverty, or worse, their parents suck.
At the same time, fort myself, I don't want to ever have to use any services offered to people in need. I want to give know to society than I give.
I think it's necessary for us to have this split view for a healthy society.
Further, personal push for success relies on grit and smarts. Also luck, but it only makes sense to think about that to the extent you can influence it.
Public policy on three other hand is about statistics and we cannot ask for better people.
Back then tech was exciting and new. We were changing the world.
Now we have changed the world. Mobile is king, web is emperor. We’ve won.
Tech is to 2020 what finance was to 1980. And VCs are seen as the big baddies.
People don’t join this industry for the love of nerdy tech anymore. They come because it’s where ambitious people go.
Now we have changed the world. Mobile is king, web is emperor. We’ve won."
You must be young.
The difference between 1999 and 2009 was an order of magnitude greater than 2009 to 2019.
This is your personal growth journey, not really an objective thing.
That tweet is actually pretty amazing though: pg discovering practices 37Signals has been using for a decade.
Anyone screenshotting being blocked by anyone is definitely trading in fashion.
Make something people want that can evolve into a commodity, ensure only the inventor can profit (e.g. with IP protections), and architect your business such that returns scale independently of operation costs.
I doubt people have built successful companies, and become 'billionaires' by building something people do not want.
A company that exploits its users won't generally do well, but that doesn't mean that it doesn't exploit its workers, which is generally what politicians mean here (see Amazon, for instance. Or, since Facebook was brought up in the article, their content moderation team)
I accept the fact that the market and law allow for this to happen, but I don't have to respect billionaires for it.
As PG is likely on the cusp of "billionairehood" this essay follows his typically cathartic & open writing style - one part personal reconciliation, one part insight
After selling viaweb in 1998 PG's options probably looked like ->
-=> Option 1 "Hit the beach"
-=> Option 2 "How far can we take this"
-=> Option 3 "What can we give back"
Very early stage investment is an exercise in patience.
The genesis of YC (after giving a "free" talk at Harvard around startups) says PG first chose to keep going and combined it with a desire to be helpful to other entrepreneurs
YC has had huge wins before, PG is a very wealthy man.
But nothing on the scale of what YC will collect from AirBNB and Stripe in the near future
In 2020 these essays being seasoned with a "billionaire" flavoring is not disconnected from that coming windfall and PG's need to reconcile
I for one am looking forward to watching PG navigate his continued transition
I would be personally surprised if along the way he didn't launch an improved and more actionable "Giving Pledge" like organization for his final act
Extracting value sort of works to some degree in some situations, such as mining (at least until you have ruined the environment and your unsustainable practices are coming back to bite you). But whether you are a "self made billionaire" or inherited it, you have to fundamentally be a good steward of value to at least some degree or things soon look like the dystopian outcome in the movie The Lion King after the hyenas ally with the bad guy lion.
Billionaires can only exist as long as billionaires create more pie than they keep -- though certainly it is reasonable to be concerned about exactly where that dividing line should be such that their customers/users/whatever phrase you desire to use here get sufficient value that they don't feel taken advantage of and screwed over. It gets easy for wealthy people to demand more without really intending to be assholes and get it because they haven't really figured out that the aggressive tactics that worked to make them rich are no longer appropriate now that they are rich because of the power differential that was created in the course of getting wealthy (money being rooted in power, not the other way around).
If you want "evidence" that billionaires fundamentally must provide some degree of real value, I am happy to point you to Theranos and Elizabeth Holmes. Theranos was valued at $10 Billion and went to zero valuation overnight after it was discovered the entire thing was a con job.
Counterexample, the children of billionaires provide no degree of real value.
AirBnB is of course a total homerun, but surely there are other companies like Stripe, Cruise, DoorDash, Dropbox, Gitlab etc... that have equivalently good reference points for how founders should think. I'm curious if there is something that sets the ABNB folks that much apart in that sense.
For many, this is a hard pill to swallow. Here's one way to judge it more objectively. Replace "billionaire", with something more neutral: "pro basketball player", "amazing musician", "prolific writer".
The arguments tend to make a lot of sense in other categories, but our natural inclination rebels on Billionaire. This is a great sign that something is off
But the children of billionaires are (almost) all obscenely wealthy.
Consider - the children of musical prodigies are likely to be more musical then average. The children of billionaires are likely to be more entrepreneurial than average - both are likely to be wealthy - neither are likely to be as prolific — I.e a child making an even more successful business, or being a better musician - over a few generations, both are likely to revert to the mean. In some countries this is not true of the wealthy, but in America this is particularly true
One defining quality is that billionaires need to scale work that often involves management. In this case consider prolific basketball coaches, or generals in war.
The reason I shy away from including politicians, is because their m.o is starkly different: it’s all about status.
And founders are not?
Some founders are at that level, and frankly, more important to society than most athletes or musicians.
MLB pitchers make $10's of millions of dollars a year, far more than most of our top talent.
I don't think Zuckerberg, or Bezos are necessarily bad people, but they are the beneficiaries of a bad system, which squeezes work and wealth from poorer people and sucks it to the top.
Some of Amazon's warehouse employees have to pee in bottles to save time. You dont think that is bad and Bezos should do something to stop that?
It's not that people set out to exploit people and as a result they become billionares. It's that their focus on their goal allows exploitation to happen as a by product. It's not that Uber set out to exploit drivers, it's just that get their business to scale they had to lure drivers in with big incentives, and then in order to make their business viable they had to then force their costs down to the point where drivers are paid less than the cost of vehicle maintenance.
It's just a bizarre primary school understanding or morality where there's a group of "Good" people and "Bad" people.
I've come to the conclusion that to be a CEO you have to wear these blinders and have faith that overall your company is a positive good for the world. That means that when you have a low performing employee you have to fire him even though you know that it may cause terrible consequences for him and his family.
Why is it frustrating? PG discussed an important topic I found to be very relevant in the business world to this day. Being exploitive is praised in most if not all business schools! Cut throat, shark, shrewd, it’s even depicted in movies Wolf of Wall Street, the Founder (McDonald’s), greed is good...
No self made billionaire, at least in the last 100 years, was ever portrayed fairly in movies or history books!
Even Carnegie Mellon!!
I think it's even more simple than that. It's a failure to realize that everyone is the plucky hero doing things with good intentions in their story about themselves, and that others don't see him as he sees himself.
So despite there being a world where the society is becoming increasingly unequal, where the average American struggles to feel financial security and those born without access to education or the right geography (or, perhaps, who just aren't as bright or ambitious) are merciless casualties of a "meritocracy" that excludes them, PG feels like he can't be the bad guy because he can't pinpoint any specific situation where he did something "wrong".
His only fault, perhaps, is being a massive beneficiary of a system that is profoundly and deeply unfair and getting more that way every day, and he's not able to see that as something he's at fault for.
So I have some sense of empathy and understanding for his perspective. But I think he would benefit greatly from really trying to dig into understanding what it might be like not to share his perspective and vantage point, as well as to do a better job understanding how different the world is for people now than it was in the early 1980's when he began his professional life.
In this case, being a good CEO means making decisions that are worse for your workers over time. The world is set up in such a way to bias you towards that conclusion unless you work against it.
Does that mean you’re evil if you don’t? Or if you minimize your responsibility? Perhaps. But it’s still complicated. Thinking of the world as a massive weighted graph of wants, needs, and goals can be a helpful model.
What you're talking is a much more interesting conversation to be having. How can we tweak the rules to avoid misaligned incentives? And would it actually be better to end the so-called "exploitation" if it would mean killing most of these jobs altogether, when the allegedly exploited people actually have an ok quality of life and are doing this work because they like it better than their alternatives?
Whether existing billionaires exploit is a separate point.
A couple of thoughts...
New, billion-dollar business are, many times, transformational. Amazon, Uber, AirBnb, DropBox and Stripe all transformed the market they profit from. For sure, it is difficult if not impossible to foresee how the business activities will impact the general population et al. Without foreseeing that impact, it's also difficult to mitigate the impact that the billionaire may genuinely have a moral reaction to. Is it not the nature of the beast to grow as fast as possible, damn all torpedoes, while investors and boards of directors push the business leadership forward? Running at an all out sprint means you have no opportunity to identify these moral slights, let alone address them. Perhaps the boards of directors needs a 'Moral Consequence Committee' to keep an eye on it on behalf of the CEO. I am not asking that rhetorically, by the way. Give it some thought.
The second thought is that in order for the business to prevail, it must provide real value to many, many customers and make their world a better place. Uber transformed the taxi experience and yes, may have wound up in the 'vehicular maintenance arbitrage' business for a while, but anyone with faith in market capitalism should believe that this will eventually balance out and Uber and its drivers will reach a mutually acceptable compensation level.
Taxi drivers have always been undocumented and much poorer than the people they were driving. Uber didn’t change that, and nobody needs permission to boss a poor person around - go to a restaurant, send your kids to school, shop, you will be bossing poor people around. The remedy is immigration and labor law reform, that is something Uber actively worked against - and won! They care because the economic gain they are concentrating comes from people driving below minimum wage because they lack documents or work authorization.
It had nothing to do with lures or whatever, everyone knows what the deal was. Cars could require no maintenance and people would still be screwed. Uber shut down its self driving car unit and none of that shit mattered. Nobody is out there designing cars that are cheaper, we already have $1,000 used cars, in fact all the effort pours into cars that are way more expensive. Uber blew a lot of money on incentives as long as Lyft does and vice versa, and people just drive for both and none of that shit mattered.
The difference I’m trying to illuminate here is, a permanent subclass of undocumented worker is enshrined in the law. The difference between a W2 and 1099 employee is enshrined in the law. Uber spent a fortune maintaining the status quo, not creating a new one, they did not write those laws.
Personally, I believe, like those guys in the 2006 Borat movie who wish they owned slaves, that people like this status quo, and that Uber could have spent 1/10th the money campaigning for Prop 22 and it still would have passed. People like cheap shit. They enshrine the divide in the law. Bernie Sanders was assailed by the NYTimes for his most divisive opinion, that if people are willing to work below minimum wage they will get the job, and that the government has enshrined that arrangement through immigration law - you’re just not seeing how deeply vested the average person is, not just Travis Kalanick is, in an exploitative status quo.
Meanwhile we type this all out on iPhones. Would you rather they cost 5x as much? I don’t know, if phones cost so much more, if you could ban the exploitation of Chinese labor for real, 50% of the ultra high paying jobs of HN readers would cease to exist overnight. It would be like a pandemic hit software, instead of just Main Street.
This shit is complicated, you can certainly point out that billionaires are bad people, but we all benefit from exploiting someone somewhere, and the road to justice will often visit the people who promote it. And maybe that’s why you and I aren’t out there protesting but those other people are.
If the other comments put you off, read it anyway and skip the billionaire bits.
I think what underlies the outrage in this and similar threads is simple: people expect everything anybody says about "billionaires" to be bad. If someone breaks the rule, it doesn't matter what they say; the response will be just this outrage. And if they're a billionaire themselves (or classified by the audience thereas), woe betide. This is not complex conversation—it's ritual behavior.
I'm not arguing against wealth redistribution, siding with billionaires, lacking empathy for what people are living through, or anything of the sort—quite the contrary. I'm just observing that the conversation manifesting in threads like this has a distinctive quality: it is basically our version of feces-hurling in primates, and I'm curious about how weird that is and how weird it is that its weirdness goes unnoticed.
Namely, that individuals will decline to participate in exchanges where they would benefit, if another individual would benefit inequitably. I think you sell short the systemic advantages by framing it as "Feces-hurling"; namely that it may serve as an important societal and evolutionary pressure, for instance, as [1] suggests improved social cooperation.
Some of the comments on this thread even touch on this, although I'd frame it a bit differently, with comments such as "many people find the existence of a billionaire implicitly unfair." Namely, judgements of morality, economics, society aside, one has to be rather stoic to feel _no_ envy when comparing ones own lot to the life and resources being a billionaire enables, so that it would trigger a "lizard brain" instinct seems entirely natural. (and again, similar to you, trying to keep this argument-free WRT the contention around that and making a meta-observation, one may disagree as to how justified or sensitive one should be to this feeling, I'm just pointing out "I can understand it on a very pragmatic level.")
We may be agreeing loudly here, my response is primarily to addressing your stated surprise, as well as try and paint the cause and effect in a more... detached? perspective, to better contemplate its nature and incentives.
[0] https://journals.plos.org/plosone/article?id=10.1371/journal... [1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4451566/
He doesn't believe "the only way to become a billionaire is by exploiting people", and his argument is persuasive. I tend to agree! All those characteristics he's interviewing for are positive, and I think he's a great billionaire scout. Most of the rich people I know got there in ways that don't seem exploitative.
But, he does believe "people who make a lot of money have a moral obligation to use it for the common good", and... isn't that a contradiction? If someone makes their first ten million, and keeps earning more with no clear plans to allocate it to the public good -- are they ignoring their moral obligation? Maybe not yet. What about a multi-billionaire who, years down the road, still hasn't signed on to something like the Giving Pledge? How can we defend the morality of that person?
This does not follow. You could just as easily argue that this means you are bad at predicting billionaires. YC is 8 for 1000 in the billionaire prediction game. Maybe that is good enough to claim expertise, but I think you have to actually make that argument and not assume it.
If the key to becoming a billionaire — the defining feature of billionaires — was to exploit people, then I, as a professional billionaire scout, would surely realize this.
This does not follow. First, "if this was true, I would know" is not an argument. Second, if exploitation is necessary, but not sufficient, it might be essentially useless as a predictor while still being universal among billionaires.
Billionaires are keeping the society this way.
I would say yes, and I think many (perhaps not here, given the type of person who frequents this board) would agree. They would observe that while Jeff had some ideas and provided some direction, that the vast majority of the work was done by others far more talented than he in their specific role. That he happens to live in a society that routinely grants the spoils disproportionately to the organizers and not those performing the actual labor is the central critique of capitalism highlighted by Marx and to which I think pg is actually alluding, even if he doesn't realize it. This "profit" is not a surplus, and the difference between the price charged for a commodity or service and that paid in labor (less any costs in materials) is seen as inherently exploitative. I think people can reasonably disagree about the degree, there is of course value in the organization of labor and materials to provide a product or service, but wage disparities of 100 times? 1000 times? I find this to be indefensible.
That isn't obvious considering the concorde failed.
But its quite possible that they could get something certified and theoretically sellable but not have something that the economics make any sense for airlines to actually purchase, much less such a clear case that international airlines are generally compelled to do so.
> The ones who become really rich are the ones who keep working. And what makes them keep working is not just money. What keeps them working is the same thing that keeps anyone else working when they could stop if they wanted to: that there's nothing else they'd rather do.
Here he completely misses the point, which is that exploitation has very little to do with an individual's intention and everything to do with systemic dynamics and incentives in the way these companies operate. It was probably not Travis Kalanick's intention to exploit drivers, but Uber's business model incentivizes the company to pay drivers as little as possible, which they do. A similar dynamic plays out with nearly all capitalist enterprise, which makes the intentions of founders mostly irrelevant.
"Their exploitation usually begins with their own cofounders, which is disastrous, since the cofounders' relationship is the foundation of the company. Then it moves on to the user..."
At no point in this entire post does PG address what "exploitation" really means in the Marxist sense — Marxist economics being at the heart of most of discussions about wealth accumulation — which focuses on the exploitation of labor and the ways in which technology can enable or accelerate capital accumulation to the detriment of regular workers.
What's so startling about PG's posts on these subjects is how unseriously he takes the opposing view. He clearly hasn't done any work to understand people's concerns about income and wealth inequality (which is not just coming from "politicians" as he characterizes it). There are probably better arguments in favor of billionaires, but Graham doesn't know enough about the ideas he's arguing against to imagine them.
If this is the level of intellectual rigor governing Silicon Valley today, it's no wonder we keep seeing boondoggles like WeWork and Theranos propped up by silly investments. Disgraceful.
I guess DoorDash and Instacart are accused of participating in the exploitative gig economy. Airbnb is accused of circumventing hotel laws (is that exploitation?)
The other 7 on my list are pretty okay though, right?
But if you actually scroll through the list of them, https://www.ycombinator.com/topcompanies/, most seem beneficial to society
Reddit's incentives are aligned towards a similar addictive loop as Facebook.
Stripe, Cruise, Dropbox, Gusto, and Gitlab are pretty unassaible IMO, though.
It's as important to have thought about where you need to focus and and the consequences of not addressing it, as knowing what the potential upside is for the idea.
This is one of the sentences in the essay that most reveals Graham's reductionism. A person can become a billionaire without any desire to exploit someone and still the conditions resulting from the success of their organization can, and often do, result in exploitation. Even a brief study of organizational behavior reveals that all organizations do damage, some more than others. We don't need to keep defending organizations. They can handle their own defense. Individuals, on the other hand, are far more vulnerable.
I wouldn't be too kind to the less-than-ethical techniques that AirBnB did use to capture the initial users. [0].
... AirBnB also used a (admittedly suspect) email campaign to inform posters of vacation rentals on Craigslist how easy it was to post on AirBnB too.
[0]: http://fullstack.it/blog/growth/airbnb-craigslist-growth-hac...
> Which means the conversation during your YC interview will have to be about something new: either a new need, or a new way to satisfy one.
I'm fairly sure they also look for a moat don't they?
And what people want is ways and means to satisfy one of the ‘seven sins’ : “Pride. Greed. Lust. Envy. Gluttony. Wrath. Sloth.”
Facebook satisfies all the seven urges to sin.
https://youtu.be/1e8VZlPBx_0?t=2814
There are universal human traits that have negative impacts on people over the long-term but are craved during the short-term. These are like legal drugs. If you can use a few of these traits and tie them to an addictive feedback loop, then you probably have a product that's successful (and totally evil). It's concerning that some of the bestselling books in the startup bubble are about how to create these addictions in people.
It would be nice if there were more tools and systems companies for helping humanity grow. I guess most modern day big companies are like a mix of the two. For every major social network there are usually some awesome engineering tools that get open sourced. It's harder to create a tools only or systems only kind of company but they're definitely nice since they expand the way we all think.
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It’s crazy that so many of these companies with billionaire founders have thousands of employees who are not billionaires, nor have a meaningful stake in the decisions the company makes. Wonder what that’s about.
Just because these companies have built amazing products that people want doesn't mean they still don't actively take advantage of their own employees. It isn't black and white.
If I dump all my time and savings into founding a company and it fails, will my employees bail me out and help me get back on my feet?
Would it be increasingly easy to convince yourself that it was actually all just you? Not the employees, not the hand full of high producing employees, certainly not the infrastructure provided by the government and society that enables wealth collection.
No, it was all the efforts of the Billionaire. I mean, you do have a billion dollars to prove it...
Full disclosure: Not a billionaire
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If billionaires build, they have to build something. That something should have value. Throwing money at creative destruction à la WeWork isn't building value but Adam Neumann sure made out well as did BenchMark.
> the only way to become a billionaire is by exploiting people
needs to be revised to a keener straw-man in your very next paragraph:
> the key to becoming a billionaire — the defining feature of billionaires — was to exploit people
Here he's swapping necessary-but-not-sufficient for definitionally-equal-to.
If you sell stuff or services to people, you have to pay for that stuff or services, unless you create them yourself out of thin air.
If you pay some people for stuff or services and then resell them to other people, you could:
* sell them for less than you paid
* sell them for whatever you paid
* sell them for more than you paid
* you bought in bulk but will sell small
* you did a bunch of work to make the stuff/services available
* you did a bunch of work to find customers
* you did a bunch of work transforming the inputs
In the case of anyone who makes US$1B or more by selling stuff/services that other people produce, I think it's fairly clear most of the time that they have exploited those other people: that is, their profit (vastly) exceeds the value of the work they themselves did.
A better first-order approximation to reality, is "Billionaires Exploit".
A second order approximation is that Billionaires exploit a) the political system by funding politicians indirectly so they will implement policies that enhance profits, b) poor employees by paying them a wage they cannot live on without government subsidies while keeping them in precarious arrangements to avoid union benefits and c) natural resources by avoiding costs which should be inherent [ eg. defer cost of redressing carbon pollution and recycling ].
Paul meets the best kind of proto-billionaire - innovators who aspire to _make_ something useful, or at least something that people want - and perhaps doesn't get to interview the appalling idle-rich dynasty billionaires who inherit obscene wealth, and cannot spend money faster than it grows.
We should not be congratulating Gates on investing money in Vaccines - we should have taxed him properly and used that money to fund vaccines/healthcare and climate initiatives. Then perhaps the 15 copies of windows 'tax' - which I paid for but never used because I installed linux - would be distributed democratically.
Look around.. what part of the world is not on fire ? Startups are not the solution to our current evils. I would suggest that we have abandoned the fair rules that governed our economy, and our democracies, weakening our systems and institutions - and this has put us in peril.
Covid is merely a kick-the-tyres test before the real game of climate change, and we have failed that test. The pandemic has exposed dire systemic weaknesses. If one 9/11 per day of aunties dying is not enough to wake us up, will the permanent melting of the ice caps even be noticed ?
Printing digital cash to prop up stock prices is a great way to get us through a pandemic induced economic shock, but we need to learn from this quickly, and rebuild our institutions - a free market works only if people can trust that the rules of the market are fair. We must rapidly align the engine of enterprise to our global survival : tax the uber-rich brutally, spend it wisely in the war on climate change.
I take issue with this. I'm quite certain of the things I work on, but have not been able to execute due to lack of funds.
This lack of execution means no revenue.
No revenue means I'm struggling to fund things myself because I know how valuable the equity I'd have to give away would be worth.
The best, and most confident founders aren't going to be in a rush to trade equity for ANYTHING, EVEN if the revenue isn't there yet.
Airbnb spamming forums early on, sketchy marketing techniques, avoiding commercial regulations that hotel has to go through for good reasons and displacing genuine local rent seekers is not exploitative then maybe the bar is high enough for YC.
Should the founder have to think about whether the idea could potentially be exploitative or he just needs to think about what is good for the users aka not exploiting the tourists?
I'm so glad someone finally said this, I wasn't sure if I was the only one with the same theory about inequality and it is articulated well here. It's "cultural inequality", inequality of cultural capital.
Glossing over important aspects to either feel good about themselves or to project as do-gooders is not going unnoticed.
All the above is very loose of what he said and I honestly stopped paying attention to his posts and barely remember the details now. Someone else likely can make many corrections to what I wrote above. But honestly the plight of the billionaire gets even less empathy from me right now given what people are living through in 2020.
Any statement that has the word "only" in it is guaranteed to be wrong. I wonder if PG worded it this way intentionally (straw man fallacy).
Most people agree early employees should get more equity. This doesn't address whether startup founders are hoarding equity for themselves and their investors instead of fairly rewarding early employees.
This is something I woulda liked to read but I felt it took a weird direction.
I would like to make a minor note: the thing that politicians sometimes say is, "that the only way to become a billionaire is by exploiting people". Not "setting out to exploit people", not by trying to be Snidely Whiplash the professional mustache twirler. The statement is about effects, not intentions.
Henry Ford started out building cars, not controlling people's lives. But that's kind of what he ended up doing (https://jalopnik.com/when-henry-fords-benevolent-secret-poli...). Andrew Carnegie wanted to make steel but also got the Homestead Strike (https://en.wikipedia.org/wiki/Homestead_strike) (involving the Pinkerton Agency mentioned the other day).
But look at some of the names mentioned in the article:
* Apple started to make computers and related gear, and did so very successfully. On the other hand, it might be reasonable to see Steve Wozniak as exploited, not to mention the other early employees. And then there was that Foxconn thing....
* Mark Zuckerberg did indeed want to "engage online with his college friends". He did not start out wanting to dick around with democracy as we know it.
* Larry and Sergey certainly wanted to search the Internet. But then they bought DoubleClick, one of the most loathed companies on said Internet, and turned it into one of the world's largest cash cows, primarily using their ability to collect information on everyone, everywhere.
* AirBnB absolutely, positively did not set out to violate hospitality laws and do weird things to real estate worldwide.
* Paul Graham, of course, got started by selling Viaweb for $49 million of Yahoo stock. Viaweb had 21 employees at that time (https://www.nytimes.com/1998/06/09/business/company-news-yah... anyone know how the other 18 people made out? And that leads me to YC itself, which gives money to start-ups in exchange for...something, and which helps introduce start-ups to other investors. Which has never, ever, in the history of the world resulted in exploitative relationships. (I'm being sarcastic. It's not hard to find companies whose founders have been forced out by investors, much less other kinds of interference.)
Which is why Paul's argument about billionaires is a strawman. I firmly believe him when he writes, "[Working because there's nothing else they'd rather do], not exploiting people, is the defining quality of people who become billionaires from starting companies." And I believe that "Y Combinator certainly sees founders whose m.o. is to exploit people." They exist, and I believe YC rejects them. But none of that has anything to do with the path from there to billionaire-hood. There is a billion decisions between founding and billionaire-osity, and some of them, historically, involve stepping on someone.
Because Paul doesn't seem to want to acknowledge that, I get worried when he writes about "I think they start from the feeling that it's wrong that one person could have so much more money than another. It's understandable where that feeling comes from. ... The mistake they make is to jump from feeling bad that some people are much richer than others to the conclusion that there's no legitimate way to make a very large amount of money." Money is power, but I suspect Paul would be less happy (publicly) making that statement with the substitution. (And of course there's legitimate ways to make large amounts of money; the powerful define what is legitimate.)
This is getting too long, so I'll just end it with some snark:
Here is a very American statement: "There are certainly some people who become rich by doing bad things. But there are also plenty of people who behave badly and don't make that much from it. There is no correlation — in fact, probably an inverse correlation — between how badly you behave and how much money you make." Yes, right up there with "I'm a temporarily distressed billionaire myself": money is correlated with morality.
"Can you imagine a better way to destroy social mobility than by telling poor kids that the way to get rich is by exploiting people, while the rich kids know, from having watched the preceding generation do it, how it's really done?" -- I'd imagine poor kids already know about exploiting people. They just don't have the contacts to do it correctly.
You don’t. Owning a large company in a capitalist system is inherently exploitative. Simply owning a large company and taking surplus value from a large number of people is exploitation.
I have little money but I write an amazing book and it sells to millions. Each books takes, say, $5 to print, and yet I sell it for $15. Therefore I end up wealthy from this endeavor.
Did I exploit the people who chose to buy my book? The people who printed it?
Who are these large number of people? Customers or suppliers? In socialism, customers are usually held captive because of limited suppliers. In capitalism, suppliers are usually held captive because of fierce competition to get customers. Neither sounds inherent exploitation by the entrepreneur.
Raising billion dollar funds and living off of the carry while you pump and dump the next monopoly is a much better life than "building".
Even the "builders" like Google and Apple are moving away from building and are starting to embrace rent seeking.
YC looks for founders who understand users and can make what they want.
Understanding users is hard. That is why Facebook and google data collect.
Making what they want is technically challenging. That is why intelligence is required.
His problem was being a horny brat. I am pretty confident Hot or Not would not have passed muster with Jessica Livingston.
Also even if he had shown Paul Graham the earliest Facebook numbers, the partner panel could very well just say those numbers were faked, which the Friendster people purely out of spite would say, and what would they do, call a college freshman about how much she uses Facebook?
These are terrible examples in the context of the article.
Apple's computers, originally, led them to the brink of bankruptcy, and it wasn't until 20 years later when they started selling consumer electronics that they blew up, and Wozniak had little to do with it at that point.
The other two don't actually make money from the products mentioned, but by flat out exploiting people's ignorance regarding online tracking and advertising.
Woz's designs were very much a huge part of that.
Should "exist" be replaced with "exists" in this sentence? If you wanted to use "exist" I think you'd have to use a helper verb like "should [exist]". Is there a name for the grammatical feature where someone omits the "should" and uses the conjugation that would go with it?
I get the retro-appeal this has, but user-friendly it is not.
Indian IT industry is an exemplar;
TCS/Infosys/Wipro/HCL make money by selling software engineers, not software to clients in US/EU;
https://archive.vn/ecCtN Rishi Sunak's wife is richer than the Queen
They're running https://en.wikipedia.org/wiki/Pyramid_scheme with tacit support from Law makers :(
Look, not even 'prole defenders' agree with this. You don't have to be exploitative to be a billionaire, it's simply a byproduct. There are only several thousand billionaires on earth and you'd be hard pressed to find any one of them without some sort of scandal involving their workers or consumers.
Pinpointing what is 'objectively' wrong with a subjective essay is hard, which is why most people are attacking the subjectivity itself, and I think that's healthy to do.
Usually, HN is the space where his essays are most heavily defended.
But is it even worth parsing this out? Income inequality is real, capitalism is fundamentally exploitative at its core, end of argument. YC's interview process is... not at all relevant.
> I'll tell you how it's really done, so you can at least tell your own kids the truth. It's all about users. The most reliable way to become a billionaire is to start a company that grows fast, and the way to grow fast is to make what users want.
There's a second part, and it's "hoard the profit by under paying the workers who built your company." Sometimes there's a third part, and it's "corrupt your government and lobby against tax rates that threaten your wealth."
Billionaires build, let's stipulate. They also hoard money for themselves while others desperately need it. It's not any more complicated than that.
In many ways that could be seen as how you can exploit people
It's a completely different morally.
I mean, you can't hold airbnb responsible for either the housing crunch or any part of the homelessness crisis. They just created a system that allows landlords to cash in on high-return short term rentals. The negative externalities created by the mass adoption of their platform cannot be landed on their moral accounting. It's totally obvious.
Making snap judgments about people seems to be one of his major personality flaws. Steve Jobs had the same flaw, so it's clearly not professionally debilitating, but it is reprehensible nonetheless.
2. YC could make the process less fickle and far more objective by having each startup get interviewed for 10 minutes by each partner, rather than in a high pressure groupthink session. It would cost no more of their time.
And of course, they could also just increase the time and interview just as many startups as they want. YC partners could treat it like a real job with hard work, rather than act like lazy VCs.
Anyone who has interviewed people knows that first impressions are often wrong, and yet YC bases their decisions entirely on first impressions, which is both funny and sad.
3. It's likely that YC's success is based on their much-more objective application process, and the interview is random noise in the process. It is probably even worse than random noise and YC might be 2-10x more successful just by eliminating the interview stage.
4. PG has no true idea how other YC partners make their decisions, it's likely to be very far from his own process, making his advice inaccurate and harmful to founders.