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The Refragmentation

paulgraham.com

91–100 of 461 posts

Re: The Refragmentation

#91
post #34

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…

I don't know. After 9/11 you probably could have convinced Americans to invade anybody.

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.

https://en.wikipedia.org/wiki/Project_for_the_New_American_C...

Re: The Refragmentation

#92
"A physicist who chose physics over Wall Street in 1990 was making a sacrifice that a physicist in 1960 wasn't."

The trouble is the proportion of those who have the highest technological leverage and are engaged in rent-seeking rather than wealth creation. The 1960s physicist was creating wealth they couldn't capture, while the 1990s physicist was capturing wealth they didn't create. If physicists (and other Ivey grads) all only chose wealth-creation, we'd see far less inequality (at least outside the Bay Area). The trouble is the pull of the largely zero-sum (or negative-sum) world of finance, which more than startups has increased the pressure to "make your fortune". Inequality begets more inequality, because when half my cohort is suddenly making 10x more than me, there are real consequences to my own social, personal, and civic life.

This is all on top of the relatively novel wealth imperative introduced by the progress of biotech. It used to be that, beyond a certain point, money only really conferred social status (and even then, only within a certain peer group): if I don't care about status within that particular group, then why should I care about making more than (say) $200k/year? Except now, with the rapid development of fancy unaffordable therapies and med-tech devices, having an extra 10 million $ lying around can have a much larger impact on quality of life than it did even a couple decades ago. And then there's the significant (if small) possibility that, if Kurzweil + co. end up being right, a bit more wealth might mean being able to "live long enough to live forever".

Current tax policy is heavily skewed in favor of the already wealthy, and wealth inequality is currently orders of magnitude worse than income inequality. So rather than just asking everyone to get comfortable with it, why not do something to actually address it? We need to make significant adjustments to (a) strongly discourage rent-seeking, (b) encourage those with the highest technological leverage to make the most of their talents, knowledge, and access, and (c) greatly increase everyone's ability to create, capture, and save wealth.

Re: The Refragmentation

#93

Earlier quoted context omitted.

That seems to be just small businesseses, not startups. Startups either go Facebook or go bust, they're not created to stay stable at small scale.

> 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 com…

Amen, brother.

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.

Re: The Refragmentation

#94
post #3

"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 l…

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:

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-...

Re: The Refragmentation

#95
post #59

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…

Opportunity has increased massively. 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.

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.

Re: The Refragmentation

#96

Earlier quoted context omitted.

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.

Here's the specific part in question: " 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."

Hmm so explain Fairchild and Intel and all the spin out companies in SV.

Re: The Refragmentation

#97
post #3

"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 l…

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: 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…

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.

Re: The Refragmentation

#98
post #32

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. http…

Which is something that George Osbourne a Conservative has said in the UK.

Re: The Refragmentation

#99
post #49

Earlier quoted context omitted.

But welfare payments are paid according to need. 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…

> 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 ri…

> 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.

Re: The Refragmentation

#100
Great article, but it misses two triggers:

1. Globalization. A lot of manual labour was tied to USA, not so ago to local labour. In last 20-30 years a lot of things get imported from China or outsourced to India.

2. Software (briefly mentioned in original article). Previous technology advancement can give someone leverage, but software got probably the largest leverage in humankind history. Single program can automate what used to do an army of employees. Natural monopolies are common thanks to network effect, economy of scale or technological advances.

Winner takes all market (e.g. Apple has almost all profits in smartphone market, Android got some market share, alternatives are niches).

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