The Refragmentation

One thing I would like to discuss though is this line:

The creative class flocks to a handful of happy cities, abandoning the rest.

This suggests that there are entire cities, even states, lacking in creative people. Now I'm sure PG was consciously generalizing, or else referring to the extraordinarily creative entrepreneurs like Musk, Dorsey etc. (creative in the business sense), so I don't want to nitpick.

But what do people think about this? Everywhere I've gone in life I've found creative, dynamic people somewhere in my midst. I know a frequent complaint from the Left is the slightly galling idea that if the capitalists abandoned us, society wouldn't be able to fill the ranks of the managerial positions and keep things going. What do other people think? Have you lived in (developed world) cities which felt entirely stultified and lacking the human capital to make things better?

Perhaps a ycombinator readership can appreciate a telling example of the problems is in Graham's account of IBM's decision not to exclusively license PC-DOS. Per Graham, this "must have seemed a safe move at the time. No other computer manufacturer had ever been able to outsell them. What difference did it make if other manufacturers could offer DOS too? The result of that miscalculation was an explosion of inexpensive PC clones. Microsoft now owned the PC standard, and the customer. And the microcomputer business ended up being Apple vs Microsoft."

OK, first, every indication is that IBM sought to deliberately create an explosion of inexpensive PC clones -- and that they were better off for it.

Briefly, IBM made a strategic decision that their position would be better if personal computers were a commodity with competitive suppliers rather than an artificial monopoly like Apple products. IBM achieved this aim. Competition meant that PC hardware margins were low, therefore IBM was ultimately better off letting other people make sell them. For years, this was a harsh blow to Apple which thrashed badly after the PC took off.

Second, it is misleading to say that "Microsoft now owned the PC standard, and the customer."

Microsoft has heavyweight influence but does not quite own "the PC standard". More to the point, figurative "ownership" of that standard is not a particularly valuable asset. The "standard" is the definition of a competitive commodity. Competition is hot. Therefore nobody "owns" the standard enough to exclude competing manufacturers in any significant way. Nobody "owns" the standard enough to extract significant rent on it.

Microsoft did gain a monopoly on DOS (then Windows) rents in the deal but (a) There does not seem to be any way IBM itself could have kept those rents while still making the PC a commodity; (b) Microsoft's rents on DOS and its control of what is in DOS have never once hurt IBM. (c) Microsoft's creation of a vast market of developers targeting DOS then Windows platforms has only helped IBM.

In short, Graham's snapshot of that bit of history is just plain counter-factual. I hope careful readers will look pretty skeptically on his accounts of "socialism", economic management during WWII (which was widely understood at the time to be fascist, not socialist), the typical experience of 20th century employment (not nearly as described), his armchair sociology....

It just suggests a migration. Smart/educated/creative people often head to opportunity when they can. Go to any small town and many of the best/brightest have left. Go to Greece and you'll find the same thing. Certainly some folks stay out of necessity (family ties, poverty, and other reasons) or by choice (a love for the place).

If people want food, and nobody is growing it, but you have a surplus of welders and nobody wanting steelwork done, of course the farmer is going to make more money. Farming is more valuable than welding, regardless of training.

The training itself is not a cost center. It is a barrier to entry to providing goods and services in the exact same way possession of seeds and land to plant them in is a barrier to farming. If there is not enough market demand for welders to make people train to be welders over farmers that is not a tragedy, it is an optimization of the economy.

The economy is the will of all the money in the system. Albeit its not the will of the people, but thats because people are not equal in wealth. But its a strong reflection of what is worth being done, because money would not trend towards something that is not beneficial.

And sane progressive taxes wouldn't be disicentivizing welding over farming - if people stopped training to weld because of reduced profit potential because of taxation, the demand for welders will go up to compensate. Not all of it, but your losses are counterbalanced by any sticky demand.

Additionally, almost anyone arguing for taxation today better be doing it as an equalizer of people. If you are being taxed as a welder it means you have a baseline to fall back on in case of a dramatic oversupply of your skills, so rather than being destitute and homeless you just have to downsize your standard of living. And anyone proposing progressive income taxes better not start advocating taxation until at least the happiness threshold of income, or I'd laugh them out of the discussion. A conversation about taxation should be about excess, not what constitutes a successful life.