9 ms·

> Why do they have to "contribute to society"? This gets to the core of the question! How did a rich startup person get wealthy anyway? They built something

> Why do they have to "contribute to society"? This gets to the core of the question! How did a rich startup person get wealthy anyway? They built something that people wanted. People said: "hey, that thing you built, I value it at $20 and you're giving it away at $10, so I'm happy to buy it!" Anyone who made money from business has already created wealth and contributed to society, via the market. To the people who would disagree with me-- Look at your surroundings. Do you feel oppressed by the manufacturers of your laptop? Do you feel like you have no other option but to buy a $5 latte at the coffeeshop you're at? Are you being held at gunpoint by your new-used car? Do you wish the refrigeration oligarchs never existed? No! You are getting _insane_ value out of these relatively cheap items. Your $5 latte couldn't even exist a century ago. So it's okay that all the people who worked 40 hours a week to bring you your gadgets get a cut.

marcoperaza 11y ago
I couldn't agree more. Capitalist wealth comes from repeated consensual and mutually beneficial transactions. If you want to get rich, create value for people. It really is a wonderful system.
- vdaniuk 11y ago
  Poe's law invoked.
  - marcoperaza 11y ago
    It's depressing that the idea at the core of our prosperity is dismissed by some as an extreme view indistinguishable from parody. Thankfully, people like Friedman and Hayek have laid down a rock-solid intellectual defense of capitalism. We ignore their wisdom at our own peril.
    - quadrangle 11y ago
      rock-solid my ass. The situation is less about ignoring Friedman and Hayek as about ignoring their critics (which is obviously what you're doing or you wouldn't have made the absurd "rock-solid" claim)
    - TuringTest 11y ago
      That's because the laissez-faire market forces you invoke are not the core of our prosperity, just one of the factors leading to it, so your comment did sound as an extreme parody of a right wing position (which may be more or less reasonable depending on how strongly you support it). Friedman and Hayek wrote their work before we had a thorough understanding of how complex systems are optimized. Thanks to more powerful computers, we now know that search guided by purely local improvements gets stuck in local minimum (in Economics, those are the Pareto points). Those local minima can be incredibly far away from a true global optimum, but can't be improved by "consensual and mutually beneficial transactions". Sometimes you do need to take actions that temporarily inconvenience one actor to achieve a point that will benefit all them in the long term; see the prisoner's dilemma for a simple example. The GP post mentioned 40-hours work weeks; those weren't brought by laissez-faire economics nor individual negotiation either, 60 or 80 hours a week were the norm before socialism. Capitalism tends to create immense concentrations of power without checks and balances on the hands of tycoons, of the kind that should make any true libertarian be very afraid of those holding it. The system that really works best is one where wealth is created for a few years through capitalism, and then that wealth is redistributed by government's welfare politics to the wider population. This is what has been going on in Western countries in the last century, bringing us stability and avoiding the frequent revolutions that plagued Europe and the Americas in all its previous history.
      - marcoperaza 11y ago
        Interestingly, Friedman, and I think Hayek as well, supported a universal basic income. Friedman called it a negative income tax, but its the same premise. I think a lot of laissez-faire capitalists would get behind that idea, if it was coupled by the permanent abolition of all other welfare programs and most labor regulations. It's definitely an idea I can get behind. It would require some constitutional amendment for both sides to trust each other enough.
        jessaustin 11y ago
        One reason why many such characters would support basic income is that it would ostensibly remove the provision of benefits from the overview of the bureaucracy. That's the same reason that many others would not support it. I'm very tempted to throw in with the former, except that I worry about the follow-on effects of basic income. Would a basic income just be a windfall for landlords, as they all increased rents by some large percentage of the average basic income? Or would the formerly-urban formerly-poor head for the hills, now that they could budget over the long term without relying on urban amenities? This would be a windfall for a different set of landlords and real estate investors, but it would drastically change the nature of 80% of the communities in the nation. That's not even to consider the wealth effects on markets more elastic than housing. It would be a grand experiment, but somebody would start crying.
    - vdaniuk 11y ago
      >Capitalist wealth comes from repeated consensual and mutually beneficial transactions. Tech hiring collusion, 2008 financial crisis, environment degradation and global warming, slavery-like conditions at suppliers of multinational corporations, medical bankruptcies in US and lack of guaranteed holidays, ghettos, plundering of natural resources, monopolies everywhere (as prescribed by Thiel btw). Such a wonderful, mutually beneficial, ethical system with so many positive externalities! /s You may claim that capitalism is the "best" system at this point, but to state that's wonderful is indeed indistinguishable from parody.
      - icebraining 11y ago
        The free-marketeer response is that many of those problems have actually been caused by a lack of adherence to capitalist/free-market principles - eg. a policy of bailing out banks since Continental Illinois, preventing market discipline and leading to riskier behavior; heavy involvement of public policy distorting markets (both through laws pushing cheap housing mortgages, and through government-sponsored institution like Fannie Mae); land expropriations in China that force people to accept those slavery-like jobs (obviously not in accordance to strong property rights as defended by free-marketers); government-granted monopolies (including patents), and many more.
shasta 11y ago
> Anyone who made money from business has already created wealth and contributed to society, via the market. Let's not get carried away. This is how the market is supposed to work, and often it does work this way, but there are plenty of businesses built on exploiting information asymmetry, bad regulation (often lobbied for by the businesses themselves), etc. Yes, markets are generally good, but there looks to be plenty of room for improvement in our implementation.
ubernostrum 11y ago
They built something that people wanted. Most startups today aren't really creating brand-new "value" (which is a horribly nebulous term, hence I'll leave it in quotes), but rather taking part in a shifting of existing "value" from place to place, and the VCs who fund them glean some profit out of the process. And some of the most controversial startups are doing this not by offering genuinely better products or services; they're doing it by offering a similar-quality product or service, but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by.
- marcoperaza 11y ago
  >but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by. You're right, in a lot of cases (Taxis vs Uber comes to mind) the government has created these sub-optimal local maximums with its unnecessary regulations and industry protectionism. Technology is the big energy input needed to break free and move to a new maximum. When I use Uber, I get much more value than I ever did with a taxi. Not only does it cost me less, but it's faster, the experience of ordering is painless, the cars are nicer, the drivers are honest, and there's accountability for bad drivers. Uber is most definitely creating value. More generally, new ways of doing things displace old ways of doing things. If you're a company doing things the old way, adapt or die. That's progress. In capitalism, the destruction of old business models is as essential as the construction of new ones. They are two sides of the same coin. Addressing your argument again, lots of the businesses being displaced were basically profiting from regulations that kept out competition. He who lives by the sword dies by the sword. As for your general point that the valley isn't really creating much value, remember that all of those wild valuations are just risky speculation by a small few, given that there's no open market for buying and selling shares in these companies. Risky speculation is a valid investment strategy for a portion of your wealth. Beyond all of the hard-to-believe valuations, there's also thousands of small technology companies making small profits and providing real value, but not getting any media attention.
  - ubernostrum 11y ago
    Ah yes, the evil gubmint did it. Well, you have fun with that.
throwupper247 11y ago
Selling something that people want isn't equal to providing value. Let me be pessimistic: coffee doesn't provide a positive value, because it's a drug that get's people addicted however little and subliminal. Maybe that is a value to society in general, but it isn't to the individual. The car definitely is an economic nessecity in some parts. I don't know what refridgerator oligarchy you are refering to and it specifically doesn't matter. I'm sure the term oligarchy relates negatively to democratic societies.
- WalterBright 11y ago
  I love coffee. It is one of the great pleasures of life, like chocolate and strawberries. It provides positive value to me.
  - throwupper247 11y ago
    Hedonism is your ultimate phylosophical truth, is it? Strawberries are hardly as heavily industrialised as coffee, calling your relationship with a hot bevarage a romantic one is doubtful. I am as pessimistic as your logic is flawed. There are few things in live the brain is prewired to feel a need for. Coffee supplis the illusion of fullfilling two or three enssential ones of these, hunger and thirst and sleep, but it doesn't actually provide the associated value.
    - deleted 11y ago
      [deleted]
    - icebraining 11y ago
      Coffee supplis the illusion of fullfilling two or three enssential ones of these, hunger and thirst and sleep, but it doesn't actually provide the associated value. You know, for many, that's a completely irrelevant factor in their appreciation for coffee. And by the way, I'm pretty sure it does quench thirst, seeing as it's 99% water.
      - throwupper247 11y ago
srean 11y ago
> Anyone who made money from business has already created wealth and contributed to society, via the market. What in your opinion would be the contribution of a high frequency trader to a society or an individual ? Getting markets to be arbitrage less at sub-mili-second time scales was a pressing problem for no one. For some of the other industries, if you price the externalities, it is far from clear if they are providing a benefit.
- murbard2 11y ago
  It's not a large problem and that's exactly why the high frequency trading industry is tiny. You only think it's big because it gets disproportionate attention in the media.
  - abalashov 11y ago
    I guess it depends on how you bracket the problem and how you define "large". According to http://www.marketswiki.com/mwiki/High-frequency_trading http://www.marketswiki.com/mwiki/High-frequency_trading, "It was estimated that as of 2010, high-frequency trading accounted for an estimated 50 to 70 percent of trading."
    - murbard2 11y ago
      Yes, that's absolutely natural. That's like saying 50 to 70 of Internet traffic went through an ISP.
      - abalashov 11y ago
        I suppose. I mean, I get the difference between quality and quantity, but if we're talking about the gravity of the problem, the knowledge that 50-70% of trades are HFT/automated tells us something about the nature of our securities, commodities, etc. markets. Doesn't it?
        mrchicity 11y ago
aaronbrethorst 11y ago
This gets to the core of the question! How did a rich startup person get wealthy anyway? They built something that people wanted. And were lucky enough to live in a society sufficiently functional to let them build that thing others wanted. You don't see a lot of millionaires or billionaires coming out of failed states.
Aleman360 11y ago
> They built something that people wanted. What about people that produce heroine? Run casinos? Magic weight loss pills? Free-to-play games?
- icebraining 11y ago
  The people producing heroine are mostly poor farmers, not rich startup guys. And magic weight loss pills are simply fraudsters, nobody defends those. As for casinos and F2P games, what about them? Certainly some people get hooked, but 95% of casino players don't[1], yet they still enjoy it. What's wrong with that? [1] http://www.pbs.org/wgbh/pages/frontline/shows/gamble/etc/facts.html http://www.pbs.org/wgbh/pages/frontline/shows/gamble/etc/fac...
makomk 11y ago
No, they didn't get wealthy merely by building something that people wanted - if you just do that, other companies will offer the same thing and the market will drive down the price to just above the cost of production. This is how the free market is meant to work and it's what makes it (in theory) an efficient way of allocating resources. In order to get truly wealthy you need to find some barrier to entry, some way of ensuring that you can avoid the free market and its drive for efficiency. It could be network effects, which ensure that competitors to sites like Facebook and eBay won't succeed because they're useless unless everyone's already using them. It could be software lock-in and patents of the kind that drove Apple to be one of the richest companies in the world. It could be information asymmetry that causes people to choose your well-known brand over cheaper but better products because it's too expensive for them to assess the actual quality of what they're buying. But there has to be some barrier, some way of defeating the free market.
- abhishekkr 11y ago
  Thank you for articulating this. It's an interesting perspective I hadn't seen before and will have to ponder over the degree to which it manifests itself..

marcoperaza 11y ago

I couldn't agree more. Capitalist wealth comes from repeated consensual and mutually beneficial transactions. If you want to get rich, create value for people. It really is a wonderful system.

vdaniuk 11y ago
Poe's law invoked.
- marcoperaza 11y ago
  It's depressing that the idea at the core of our prosperity is dismissed by some as an extreme view indistinguishable from parody. Thankfully, people like Friedman and Hayek have laid down a rock-solid intellectual defense of capitalism. We ignore their wisdom at our own peril.
  - quadrangle 11y ago
    rock-solid my ass. The situation is less about ignoring Friedman and Hayek as about ignoring their critics (which is obviously what you're doing or you wouldn't have made the absurd "rock-solid" claim)
  - TuringTest 11y ago
    That's because the laissez-faire market forces you invoke are not the core of our prosperity, just one of the factors leading to it, so your comment did sound as an extreme parody of a right wing position (which may be more or less reasonable depending on how strongly you support it). Friedman and Hayek wrote their work before we had a thorough understanding of how complex systems are optimized. Thanks to more powerful computers, we now know that search guided by purely local improvements gets stuck in local minimum (in Economics, those are the Pareto points). Those local minima can be incredibly far away from a true global optimum, but can't be improved by "consensual and mutually beneficial transactions". Sometimes you do need to take actions that temporarily inconvenience one actor to achieve a point that will benefit all them in the long term; see the prisoner's dilemma for a simple example. The GP post mentioned 40-hours work weeks; those weren't brought by laissez-faire economics nor individual negotiation either, 60 or 80 hours a week were the norm before socialism. Capitalism tends to create immense concentrations of power without checks and balances on the hands of tycoons, of the kind that should make any true libertarian be very afraid of those holding it. The system that really works best is one where wealth is created for a few years through capitalism, and then that wealth is redistributed by government's welfare politics to the wider population. This is what has been going on in Western countries in the last century, bringing us stability and avoiding the frequent revolutions that plagued Europe and the Americas in all its previous history.
    - marcoperaza 11y ago
      Interestingly, Friedman, and I think Hayek as well, supported a universal basic income. Friedman called it a negative income tax, but its the same premise. I think a lot of laissez-faire capitalists would get behind that idea, if it was coupled by the permanent abolition of all other welfare programs and most labor regulations. It's definitely an idea I can get behind. It would require some constitutional amendment for both sides to trust each other enough.
      - jessaustin 11y ago
        One reason why many such characters would support basic income is that it would ostensibly remove the provision of benefits from the overview of the bureaucracy. That's the same reason that many others would not support it. I'm very tempted to throw in with the former, except that I worry about the follow-on effects of basic income. Would a basic income just be a windfall for landlords, as they all increased rents by some large percentage of the average basic income? Or would the formerly-urban formerly-poor head for the hills, now that they could budget over the long term without relying on urban amenities? This would be a windfall for a different set of landlords and real estate investors, but it would drastically change the nature of 80% of the communities in the nation. That's not even to consider the wealth effects on markets more elastic than housing. It would be a grand experiment, but somebody would start crying.
  - vdaniuk 11y ago
    >Capitalist wealth comes from repeated consensual and mutually beneficial transactions. Tech hiring collusion, 2008 financial crisis, environment degradation and global warming, slavery-like conditions at suppliers of multinational corporations, medical bankruptcies in US and lack of guaranteed holidays, ghettos, plundering of natural resources, monopolies everywhere (as prescribed by Thiel btw). Such a wonderful, mutually beneficial, ethical system with so many positive externalities! /s You may claim that capitalism is the "best" system at this point, but to state that's wonderful is indeed indistinguishable from parody.
    - icebraining 11y ago
      The free-marketeer response is that many of those problems have actually been caused by a lack of adherence to capitalist/free-market principles - eg. a policy of bailing out banks since Continental Illinois, preventing market discipline and leading to riskier behavior; heavy involvement of public policy distorting markets (both through laws pushing cheap housing mortgages, and through government-sponsored institution like Fannie Mae); land expropriations in China that force people to accept those slavery-like jobs (obviously not in accordance to strong property rights as defended by free-marketers); government-granted monopolies (including patents), and many more.

shasta 11y ago

> Anyone who made money from business has already created wealth and contributed to society, via the market. Let's not get carried away. This is how the market is supposed to work, and often it does work this way, but there are plenty of businesses built on exploiting information asymmetry, bad regulation (often lobbied for by the businesses themselves), etc. Yes, markets are generally good, but there looks to be plenty of room for improvement in our implementation.

ubernostrum 11y ago

They built something that people wanted. Most startups today aren't really creating brand-new "value" (which is a horribly nebulous term, hence I'll leave it in quotes), but rather taking part in a shifting of existing "value" from place to place, and the VCs who fund them glean some profit out of the process. And some of the most controversial startups are doing this not by offering genuinely better products or services; they're doing it by offering a similar-quality product or service, but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by.

marcoperaza 11y ago
>but bringing the price down by simply ignoring laws and regulations their competitors are required to abide by. You're right, in a lot of cases (Taxis vs Uber comes to mind) the government has created these sub-optimal local maximums with its unnecessary regulations and industry protectionism. Technology is the big energy input needed to break free and move to a new maximum. When I use Uber, I get much more value than I ever did with a taxi. Not only does it cost me less, but it's faster, the experience of ordering is painless, the cars are nicer, the drivers are honest, and there's accountability for bad drivers. Uber is most definitely creating value. More generally, new ways of doing things displace old ways of doing things. If you're a company doing things the old way, adapt or die. That's progress. In capitalism, the destruction of old business models is as essential as the construction of new ones. They are two sides of the same coin. Addressing your argument again, lots of the businesses being displaced were basically profiting from regulations that kept out competition. He who lives by the sword dies by the sword. As for your general point that the valley isn't really creating much value, remember that all of those wild valuations are just risky speculation by a small few, given that there's no open market for buying and selling shares in these companies. Risky speculation is a valid investment strategy for a portion of your wealth. Beyond all of the hard-to-believe valuations, there's also thousands of small technology companies making small profits and providing real value, but not getting any media attention.
- ubernostrum 11y ago
  Ah yes, the evil gubmint did it. Well, you have fun with that.

throwupper247 11y ago

Selling something that people want isn't equal to providing value. Let me be pessimistic: coffee doesn't provide a positive value, because it's a drug that get's people addicted however little and subliminal. Maybe that is a value to society in general, but it isn't to the individual. The car definitely is an economic nessecity in some parts. I don't know what refridgerator oligarchy you are refering to and it specifically doesn't matter. I'm sure the term oligarchy relates negatively to democratic societies.

WalterBright 11y ago
I love coffee. It is one of the great pleasures of life, like chocolate and strawberries. It provides positive value to me.
- throwupper247 11y ago
  Hedonism is your ultimate phylosophical truth, is it? Strawberries are hardly as heavily industrialised as coffee, calling your relationship with a hot bevarage a romantic one is doubtful. I am as pessimistic as your logic is flawed. There are few things in live the brain is prewired to feel a need for. Coffee supplis the illusion of fullfilling two or three enssential ones of these, hunger and thirst and sleep, but it doesn't actually provide the associated value.
  - deleted 11y ago
    [deleted]
  - icebraining 11y ago
    Coffee supplis the illusion of fullfilling two or three enssential ones of these, hunger and thirst and sleep, but it doesn't actually provide the associated value. You know, for many, that's a completely irrelevant factor in their appreciation for coffee. And by the way, I'm pretty sure it does quench thirst, seeing as it's 99% water.
    - throwupper247 11y ago

srean 11y ago

> Anyone who made money from business has already created wealth and contributed to society, via the market. What in your opinion would be the contribution of a high frequency trader to a society or an individual ? Getting markets to be arbitrage less at sub-mili-second time scales was a pressing problem for no one. For some of the other industries, if you price the externalities, it is far from clear if they are providing a benefit.

murbard2 11y ago
It's not a large problem and that's exactly why the high frequency trading industry is tiny. You only think it's big because it gets disproportionate attention in the media.
- abalashov 11y ago
  I guess it depends on how you bracket the problem and how you define "large". According to http://www.marketswiki.com/mwiki/High-frequency_trading http://www.marketswiki.com/mwiki/High-frequency_trading, "It was estimated that as of 2010, high-frequency trading accounted for an estimated 50 to 70 percent of trading."
  - murbard2 11y ago
    Yes, that's absolutely natural. That's like saying 50 to 70 of Internet traffic went through an ISP.
    - abalashov 11y ago
      I suppose. I mean, I get the difference between quality and quantity, but if we're talking about the gravity of the problem, the knowledge that 50-70% of trades are HFT/automated tells us something about the nature of our securities, commodities, etc. markets. Doesn't it?
      - mrchicity 11y ago

aaronbrethorst 11y ago

This gets to the core of the question! How did a rich startup person get wealthy anyway? They built something that people wanted. And were lucky enough to live in a society sufficiently functional to let them build that thing others wanted. You don't see a lot of millionaires or billionaires coming out of failed states.

Aleman360 11y ago

> They built something that people wanted. What about people that produce heroine? Run casinos? Magic weight loss pills? Free-to-play games?

icebraining 11y ago
The people producing heroine are mostly poor farmers, not rich startup guys. And magic weight loss pills are simply fraudsters, nobody defends those. As for casinos and F2P games, what about them? Certainly some people get hooked, but 95% of casino players don't[1], yet they still enjoy it. What's wrong with that? [1] http://www.pbs.org/wgbh/pages/frontline/shows/gamble/etc/facts.html http://www.pbs.org/wgbh/pages/frontline/shows/gamble/etc/fac...

makomk 11y ago

No, they didn't get wealthy merely by building something that people wanted - if you just do that, other companies will offer the same thing and the market will drive down the price to just above the cost of production. This is how the free market is meant to work and it's what makes it (in theory) an efficient way of allocating resources. In order to get truly wealthy you need to find some barrier to entry, some way of ensuring that you can avoid the free market and its drive for efficiency. It could be network effects, which ensure that competitors to sites like Facebook and eBay won't succeed because they're useless unless everyone's already using them. It could be software lock-in and patents of the kind that drove Apple to be one of the richest companies in the world. It could be information asymmetry that causes people to choose your well-known brand over cheaper but better products because it's too expensive for them to assess the actual quality of what they're buying. But there has to be some barrier, some way of defeating the free market.

abhishekkr 11y ago
Thank you for articulating this. It's an interesting perspective I hadn't seen before and will have to ponder over the degree to which it manifests itself..