What Paul Graham Is Missing About Inequality – Tim O'Reilly • Hacker News Board

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#11

Post by flubert » Mon, Jan 25, 2016, 10:32 PM UTC

bobby_9x wrote: post #5

One of the big reason we have an increase in wealth inequality is globalization. Before 2000, you were only competing with another American at the same wage. Now, you need to compete with workers in India, China, and Mexico. If not in those countries, big companies like Facebook will just bring them over on an H1B visa at a similarly competitive wage. It's the same phenomenon that happened when technology uprooted th…

>Before 2000

...What??? If google was as good as some people claim, we should be able to look up something like U.S. automobile imports from 1950 through 2015. Also, NAFTA became law in 1994, and I'd argue that this is a lagging indicator more than a leading one. The culture at large (or at least the politically influential part) had to accept this first, before it became law.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#12

Post by UK-AL » Mon, Jan 25, 2016, 10:34 PM UTC

Apocryphon wrote: post #9

Very curious to see what people think about O'Reilly's supposition that many, if not most, startups are just another financial instrument that don't actually create wealth: "When a startup doesn’t have an underlying business model that will eventually produce real revenues and profits, and the only way for its founders to get rich is to sell to another company or to investors, you have to ask yourself whether that st…

If someone buys a start-up, obviously it has value to them.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#13

Post by bcheung » Mon, Jan 25, 2016, 10:37 PM UTC

"I agree with him that technology can make us all richer, but I disagree that it necessarily creates greater inequality, even if some startup founders become very rich. It only does that if companies don’t create real value in return for that wealth."

Tim provides no justification or evidence for this argument. This makes no sense to me. While there is certainly a difference between making money from rent-seeking vs rendering real value, the statement that lots of wealth can only come from not creating real value seems absurd to me. If providing some value results in some wealth, why wouldn't providing lots of value result in lots of wealth? It is true that some of the highest money makers are from rent seeking activities (banking and finance sectors especially) but to say that lots of wealth can ONLY come from not providing value is absurd.

Technology, education, and access to capital all create inequality because they all create leverage. Those who use leverage will always get further ahead than those who don't use leverage. Getting rid of leverage is not the answer though because leverage is the basis for creating more physical wealth in the world and for doing it with less resources.

We should ask ourselves, how can this leverage be democratized?

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#14

Post by UK-AL » Mon, Jan 25, 2016, 10:39 PM UTC

nkurz wrote: post #8

Paul writes: The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor. ... I think because we grow up in a world where the pie fallacy is actually true. To kids, wealth is a fixed pie that’s shared out, and if one person gets more it’s at the expense of another. Tim amends: But in formerly rich countries, many people who used to be paid well for their w…

What is it that you don't understand.

Somebody owns some land, perhaps it was auctioned off by government. They plant trees(Adds value to the land). Lumber jacks pay to cut down the trees, and prepare the wood for woodwork(adds value to wood). They sell the wood to a woodworker, who crafts it into a chair(adds value to the wood). Who then sells it. The owner of the land may plant more trees and the cycle starts again.

At each step more value has been added(using labour and skill), which people are willing to pay more for.

Money is injected into the economy via banks and government to represent the value of products and services in the economy. If you create too much money, for the amount of value created you get inflation. To little and you get deflation. Obviously this is overly simplified. You also have stuff like velocity of money.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#15

Post by theoh » Mon, Jan 25, 2016, 10:40 PM UTC

nkurz wrote: post #8

Paul writes: The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor. ... I think because we grow up in a world where the pie fallacy is actually true. To kids, wealth is a fixed pie that’s shared out, and if one person gets more it’s at the expense of another. Tim amends: But in formerly rich countries, many people who used to be paid well for their w…

A better example than the woodworker is an artist. His or her materials may cost almost nothing, but, if the artist is highly regarded, they can transform the materials into something considered valuable. If you want to call it "wealth", go ahead. Does the artist have to sell their work to realize its value, or to gain personal wealth? In strictly financial terms, yes, but their art could be enriching their own life even if they never sold anything. Both value and wealth are subjective.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#16

Post by llamataboot » Mon, Jan 25, 2016, 10:45 PM UTC

nkurz wrote: post #8

Paul writes: The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor. ... I think because we grow up in a world where the pie fallacy is actually true. To kids, wealth is a fixed pie that’s shared out, and if one person gets more it’s at the expense of another. Tim amends: But in formerly rich countries, many people who used to be paid well for their w…

Not sure why you are being downvoted here. It's a perfectly reasonable question, asked reasonably. Even anarcho-capitalists admit that externalities exist.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#17

Post by thelock85 » Mon, Jan 25, 2016, 10:52 PM UTC

bcheung wrote: post #13

"I agree with him that technology can make us all richer, but I disagree that it necessarily creates greater inequality, even if some startup founders become very rich. It only does that if companies don’t create real value in return for that wealth." Tim provides no justification or evidence for this argument. This makes no sense to me. While there is certainly a difference between making money from rent-seeking vs…

>> We should ask ourselves, how can this leverage be democratized?

Isn't that a bit tautological? Economic outcomes in the U.S. have depended on one or more groups lacking technology, education and access to capital at all times since the nation's founding. I don't disagree with your question/suggestion but in the unicorn scenario where those with powerful technical and economic assets de-leverage themselves or accept social/political forces demanding a democratization of leverage, it seems that 1) leverage as an economic concept would cease to be a major factor in wealth creation or 2) the pendulum swings in the other direction as previously oppressed peoples refuse to democratize their newfound power.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#18

Post by UK-AL » Mon, Jan 25, 2016, 10:55 PM UTC

delish wrote: post #3

hackuser wrote: post #2

It would be much more interesting to hear economists, who have expertise in this domain, discuss this issue and hear people who happen to be in our industry talk about what they know (IT).

I agree. Paul Graham's essays on income inequality expressed my views on income inequality more clearly than even I was thinking them. I appreciate this, but now I need to hear a critique by someone who understands the issue how I understand it and disagrees with me. I've been looking, but I've found ad hominem attacks.

The problem is that for every economist who disagree's, you'll probably find another one who agrees.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#19

Post by Apocryphon » Mon, Jan 25, 2016, 11:18 PM UTC

UK-AL wrote: post #12

Apocryphon wrote: post #9

Very curious to see what people think about O'Reilly's supposition that many, if not most, startups are just another financial instrument that don't actually create wealth: "When a startup doesn’t have an underlying business model that will eventually produce real revenues and profits, and the only way for its founders to get rich is to sell to another company or to investors, you have to ask yourself whether that st…

If someone buys a start-up, obviously it has value to them.

The question is if that value is at the right valuation.

Re: What Paul Graham Is Missing About Inequality – Tim O'Reilly

#20

Post by nickpsecurity » Mon, Jan 25, 2016, 11:19 PM UTC

Apocryphon wrote: post #9

Very curious to see what people think about O'Reilly's supposition that many, if not most, startups are just another financial instrument that don't actually create wealth: "When a startup doesn’t have an underlying business model that will eventually produce real revenues and profits, and the only way for its founders to get rich is to sell to another company or to investors, you have to ask yourself whether that st…

I found it to be an interesting claim. We'd have to look at what one buys when they get a startup. Focusing on tech, they typically get the team behind it, the tech itself, the userbase, the patents, and then anything else created. I think the team, users, and I.P. are most valuable components. Then, they tend to fold that into their other offerings or sometimes shelve it if it was for anti-competitive reasons.

So, it seems to me it's not a financial instrument. I mean, my understanding of finance is pretty basic. There could be instruments that represent what I'm describing. What I'm seeing, though, is that they're buying a market (users) w/ cross-selling opportunities, reduced liabilities if patents, and proven tech if they want it. It's more like investing in themselves through a third party they're bringing in for the enhancements they'll provide.