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I think it's useful to draw a bright line around the 'value creation' that PG is referring to, also. It's not just creating chairs, it's aggregating great weal

I think it's useful to draw a bright line around the 'value creation' that PG is referring to, also. It's not just creating chairs, it's aggregating great wealth by 'disrupting' traditional industries. Those traditional industries have workers and shareholders who lose out. What makes successful startups so profitable is they displace a large and less-efficient system with a small, efficient one. Efficient in terms of human capital, oftentimes: look how few people AirBNB employs directly, yet have a market cap larger than Marriott. The returns on capital its investors have seen is a result of the substitution of capital for labor (in part). Of course, to the extent that the creation of a marketplace unlocks value, it can create value de novo, rather than shifting wealth from one sector/company to another. But with 'smart' startup founders seeking monopoly rents (cf. Peter Thiel, writing/speaking virtually anywhere), those returns are also concentrated, and will not trickle down to the larger population. Furthermore, the wealth inequality cryoshon is writing about is not driven by startups, it's driven by a general breakdown in the implicit social contract between capital and labor. As OP notes, Piketty goes into great detail about the historical causes and likely effects, but the tl;dr (and his book is _very_ tl) break down to: when returns on capital are higher than overall economic growth, wealth will tend to aggregate. As fans of numbers and algorithms, I hope HN readers can appreciate the simple beauty of that formulation. Piketty's suggested policy response is simple: high taxes on aggregated wealth. Which, after reading (~80%, honestly) of his book, I have to agree with.

cryoshon 11y ago
>Furthermore, the wealth inequality cryoshon is writing about is not driven by startups, it's driven by a general breakdown in the implicit social contract between capital and labor. As OP notes, Piketty goes into great detail about the historical causes and likely effects, but the tl;dr (and his book is _very_ tl) break down to: when returns on capital are higher than overall economic growth, wealth will tend to aggregate. Yes, this is exactly it. I also agree re: Piketty being quite verbose... many of the same old points rehashed again and again.
gaius 11y ago
Disruption is merely skirting the law and pocketing what you would have spent on compliance as profit. AirBnB cleverly disguises its actual employees - the people cleaning its hotel rooms - as independent contractors. They are employees in every sense apart from having rights. And the genius of it is, they do it to themselves! This is not "creating value", it is destroying it.
- cbeach 11y ago
  It is creating value. Every new cleaning job means a cleaner gets another job to choose between. So his/her salary will be better, and ditto for working conditions.
jessriedel 11y ago
Peter Thiel encourages founders to seek (legal) monopoly rents, but he acknowledges that they don't last forever, nor can extract 100% of the value created. I don't know why you think the public doesn't capture a good chunk, or even most, of that value.
roymurdock 11y ago
> Piketty's suggested policy response is simple: high taxes on aggregated wealth. You need to go one step further and outline where and how the federal government should put this new tax revenue to work. How much should we raise taxes? Which brackets? What form of wealth do we tax? Why taxation rather than issuing bonds? What percent of gov revenue should we allocate to the DoD? How much to Social Security and Medicare? How much to public schools? Do we continue to subsidize higher education? Will this leave us weak to the threat of foreign attack? Will we have enough left to pay for the increasing number of elderly and obese? A bad government with no plan, no cohesion, and no foresight will destroy value as the increased tax pool is simply drained out by cronyism, bureaucracy, lobbying, and dead-end projects. The money might be better left to a benevolent dictator, or to the private sector in the hopes of it "trickling down". It's easy to say "raise taxes". It's hard to say where the new revenue should be invested, by whom, and how.
- ubernostrum 11y ago
  It's easy to say "raise taxes". It's hard to say where the new revenue should be invested, by whom, and how. It's also easy, when someone proposes solving one problem, to say "well, you're not allowed to solve that one until you've solved every other problem in the world first". It's hard to say "OK, you seem to be prioritizing this problem, let's both make our arguments and because we live in a democracy whoever sways the most people to their side will win".
  - roymurdock 11y ago
    I'm not saying OP should not be allowed to think about or solve this problem - rather, I am pushing him to think harder and deeper about his solution and its possible consequences. It's easy to provide a possible step 1 of the solution to a complex problem. Brilliance and wisdom lies in explaining why your proposed step 1 is the best way to get to steps 2,3, and 4.
    - ryandamm 11y ago
      Don't push _me_. Read Piketty; the explicit goal (and solutions) are aimed at leveling wealth inequality. Yes, good governance is better than bad governance. But problems of inequality -- and reduced social mobility, and the role of human labor vs capital -- are real, and require real solutions. That said, Piketty's proposed solutions aren't currently practical. Did you see the recent estimate that 8% of global wealth is parked in tax havens? http://www.nybooks.com/articles/2016/01/14/parking-the-big-money/ http://www.nybooks.com/articles/2016/01/14/parking-the-big-m... Yes, the problem is large, and does involve good governance. I was only sharing one proposed solution. The sad fact is, the best solution looks intractable. I'm open to suggestions.
eli_gottlieb 11y ago
> Efficient in terms of human capital, oftentimes: look how few people AirBNB employs directly, yet have a market cap larger than Marriott. Of course, the "directly" there is quite a nasty word, as AirBNB arguably makes quite a lot of money off shadow-work[0]. [0] -- https://en.wikipedia.org/wiki/Shadow_work https://en.wikipedia.org/wiki/Shadow_work

cryoshon 11y ago

>Furthermore, the wealth inequality cryoshon is writing about is not driven by startups, it's driven by a general breakdown in the implicit social contract between capital and labor. As OP notes, Piketty goes into great detail about the historical causes and likely effects, but the tl;dr (and his book is _very_ tl) break down to: when returns on capital are higher than overall economic growth, wealth will tend to aggregate. Yes, this is exactly it. I also agree re: Piketty being quite verbose... many of the same old points rehashed again and again.

gaius 11y ago

Disruption is merely skirting the law and pocketing what you would have spent on compliance as profit. AirBnB cleverly disguises its actual employees - the people cleaning its hotel rooms - as independent contractors. They are employees in every sense apart from having rights. And the genius of it is, they do it to themselves! This is not "creating value", it is destroying it.

cbeach 11y ago
It is creating value. Every new cleaning job means a cleaner gets another job to choose between. So his/her salary will be better, and ditto for working conditions.

jessriedel 11y ago

Peter Thiel encourages founders to seek (legal) monopoly rents, but he acknowledges that they don't last forever, nor can extract 100% of the value created. I don't know why you think the public doesn't capture a good chunk, or even most, of that value.

roymurdock 11y ago

> Piketty's suggested policy response is simple: high taxes on aggregated wealth. You need to go one step further and outline where and how the federal government should put this new tax revenue to work. How much should we raise taxes? Which brackets? What form of wealth do we tax? Why taxation rather than issuing bonds? What percent of gov revenue should we allocate to the DoD? How much to Social Security and Medicare? How much to public schools? Do we continue to subsidize higher education? Will this leave us weak to the threat of foreign attack? Will we have enough left to pay for the increasing number of elderly and obese? A bad government with no plan, no cohesion, and no foresight will destroy value as the increased tax pool is simply drained out by cronyism, bureaucracy, lobbying, and dead-end projects. The money might be better left to a benevolent dictator, or to the private sector in the hopes of it "trickling down". It's easy to say "raise taxes". It's hard to say where the new revenue should be invested, by whom, and how.

ubernostrum 11y ago
It's easy to say "raise taxes". It's hard to say where the new revenue should be invested, by whom, and how. It's also easy, when someone proposes solving one problem, to say "well, you're not allowed to solve that one until you've solved every other problem in the world first". It's hard to say "OK, you seem to be prioritizing this problem, let's both make our arguments and because we live in a democracy whoever sways the most people to their side will win".
- roymurdock 11y ago
  I'm not saying OP should not be allowed to think about or solve this problem - rather, I am pushing him to think harder and deeper about his solution and its possible consequences. It's easy to provide a possible step 1 of the solution to a complex problem. Brilliance and wisdom lies in explaining why your proposed step 1 is the best way to get to steps 2,3, and 4.
  - ryandamm 11y ago
    Don't push _me_. Read Piketty; the explicit goal (and solutions) are aimed at leveling wealth inequality. Yes, good governance is better than bad governance. But problems of inequality -- and reduced social mobility, and the role of human labor vs capital -- are real, and require real solutions. That said, Piketty's proposed solutions aren't currently practical. Did you see the recent estimate that 8% of global wealth is parked in tax havens? http://www.nybooks.com/articles/2016/01/14/parking-the-big-money/ http://www.nybooks.com/articles/2016/01/14/parking-the-big-m... Yes, the problem is large, and does involve good governance. I was only sharing one proposed solution. The sad fact is, the best solution looks intractable. I'm open to suggestions.

eli_gottlieb 11y ago

> Efficient in terms of human capital, oftentimes: look how few people AirBNB employs directly, yet have a market cap larger than Marriott. Of course, the "directly" there is quite a nasty word, as AirBNB arguably makes quite a lot of money off shadow-work[0]. [0] -- https://en.wikipedia.org/wiki/Shadow_work https://en.wikipedia.org/wiki/Shadow_work