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With this comment I'm answering both PG's post and an answer to his post that can be read here: http://cryoshon.co/2016/01/02/a-response-to-paul-grahams-article

by mike429 11y ago

With this comment I'm answering both PG's post and an answer to his post that can be read here: http://cryoshon.co/2016/01/02/a-response-to-paul-grahams-article-on-income-inequality/ http://cryoshon.co/2016/01/02/a-response-to-paul-grahams-art... What really matters is that * being taxed doesn't remove the incentive to start startups or innovate in general . Because Sweden. Because Denmark, because Norway, and because basically every european country plus Canada and Australia, etc etc etc. That's all. Debate closed for me. Sure startups, and innovation in general, is what made people better off since prehistory and we want to keep that exponential trend going. But is it true that people need to starve and be in debt so we can have startups? People need to get screwed over? No, on the contrary! GET TO THE GIST OF THE ISSUE! People arguing that we need a lot of inequality to have innovation and startups are misinformed, and/or brainwashed by the media. One fun fact: there's more poor* smart kids than rich smart kids, in raw numbers (despite kids from rich households being more likely to be smart, on average). Allowing these poor smart kids to waste less time at small jobs and spend more time in school and on startups is what we want. So actually it might even help innovation to have less poors. Other fun fact: the computer, the internet, the web, GPS, touch screens, modern encryption, and most things we rely on today aren't coming from startups (see TED talk on that issue). Most tech innovations were done by regular employees with no financial stakes, working for a country's government or a university. And there's more ... I wouldn't count an employee innovating at Google, IBM or Facebook in the "startup" category. Artificial intelligence at Google or IBM or Facebook happens mostly because people are smart and passionate. These people are often knowledgeable academics, often coming from other countries where education and health care is free. Startups are the tip of the iceberg for innovation. People don't usually innovate just to get rich. They did it because they are smart, it was their job, and they got lucky to combine two old ideas together -- they were at the right place at the right time with the right knowledge. Other fun fact: a strong middle class is necessary for innovation. Otherwise no one will buy smartphones and use the apps. (see excellent "banned TED talk" by venture capitalist Hanauer) It's not looking good for the neo conservative ideology, the "we need inequality" and no tax for the rich idea. How can people still be convinced that we need higher inequality to have a healthy economy and get innovation? The only reason it's still widespread is because of American media owners. What this means for anyone with half a brain is that socialism works, when done right, done smart, ... No offense to PG, who is otherwise a smart dude, but he didn't completely nail it in this article, on this specific issue. He is trying hard though and that's admirable. He is a brainwashed neo-conservative, to some extend, trying to make sense of things. It's admirable that he is trying really hard to make sense. Some of what he says almost makes sense. We can feel the neo con ideology from the early 2000s Bush Jr era still running in his neurons and preventing a fair appraisal of the problem, but he is trying. Also, he is inherently in conflict of interest, one should point out here. It's ok PG, neo cons do seem to have a lot of strong points, mostly that the USSR and China failed with communism. Economic freedom also seemed to make sense. And it's on TV. And most people agree. And it does feel kind of uncool to tax companies and successful people. But with a bit of reasoning and at this point in history, we can say for sure that "a lot of inequality isn't necessary for startups". Just a bit is sufficient. Taxing companies and personal income is fine, it's done in most successful countries. The current state of technology (affordable smartphones and laptops, programming languages that are easy and affordable, and more people than ever in history with some free time and extra money on their hands, etc) is what's allowing the startup phenomenon, today in history. It wasn't superhuman levels of effort, that could only be triggered in an individual by the promise of millions. Kids innovate by having fun and having free time and no debt -- so peace of mind. High inequality (and the neo con ideology that promotes it) isn't necessary for startups and is even detrimental. Having lobbyists influence the government isn't necessary for startups. Dumb, bro-ish and psychopathic wall street practices and (lack of) laws aren't necessary for startups. Taxing the rich less than the poor isn't necessary for startups. Spending most of the budget on wars isn't necessary for startups. Not having free health care isn't necessary for startups. Having a bunch of psychopaths screw people over isn't necessary for startups. On the contrary. Guaranteed basic income has been tested and empirically didn't remove incentive for people to work (see TED talks on basic income). Do things smart for God's sake. The variability in innovation rates and GDP per inhabitant between countries IS NOT DUE TO SOCIALISM (contrarily to what the economic freedom index people would want you to believe). Russia is still a shithole for the most part after 25 years of capitalism, maybe even more, and it always has been and shithole anyway. It's probable Canada or France would have fared just as fine in GDP with more or less socialism -- they'd just have more poors and more stress, and less kids in school given less socialism. Nordic countries are killing it in innovation despite their small size and "despite" being very socialist. But then you have examples like West vs East Germany which do seem to indicate that socialism (or communism) can be bad for the economy in some cases. Success for a country is complicated, isn't just defined by whether it's socialist. Important to point out that there's smart socialist policies and dumb socialist policies. Look at empirical evidence. Free school and free health care happen to work if done right, and exist in countries that have a lot of startups per capita. You can verify that in countries that tried it. The bottom line is, we want innovation, and we want less inequality. We can have both. Why are we even debating this? Because people are dumb and the neo con ideology is spread far and wide by the American media, and some of its arguments can seem to make sense (the "lazy communist worker" argument and the "economic freedom index" argument are two). People have very little time and cognitive resources to spend on this issue and are easily manipulated. Recently Hillary was declared winner of the democrat debate in the news, when every online poll indicated that Sanders won. Talk about corrupted, communist-style use of the media -- media owners trying to influence the issue of elections, straight up. People better wake up. Hopefully the internet is making things better and making people more informed over time, and avoiding the biased news. Brain time is a scarce ressource. Now some more thoughts. Most current jobs will likely be automated in the next 20 years, including lawyers and truck drivers. Now that's inequality right there! But is stopping exponential innovation the solution? Of course not. We want to speed it up, but benefit from it. How? Spread the risk. Like capitalists in Holland did in the 1600s investing on ships to India that had a high risk of not coming back. Like YCombinator does. This form of spreading the risk basically amounts to taxing the successful ones. Countries can invest by spreading the risk or tax successful companies on behalf of their citizens and then provide guaranteed basic income. I know it doesn't feel cool to tax successful people. But that's what we gotta do to deal with the concentration of wealth inherent to capitalism (see TED talk on capitalism and the concentration of wealth). SUMMARY: - startups and innovation happen just as much with socialism - startups and innovation might happen more with socialism - to keep the historical trend of exponential innovation going, we need to maximize quality brain time spend on startups and other intellectually challenging ventures - this can be achieved with socialism (free school for selected kids, free health care, basic income, wall street regulation, less money spent on war, no subsidies to oil companies, etc) - to benefit from the exponential tech evolution trend, we need anyway to tax companies that succeed, otherwise they will concentrate all the wealth by automating most current jobs existing today …. we're insanely lucky to have some billionaires give their fortunes to charity, in smart ways currently, but people can't just count on that in the future to have jobs and an income when everything is automated. If anyone disagrees with these, please tell me why, I'm ready to change my mind! I hope you have good points.

prostoalex 11y ago
If the premise is correct, the countries with high levels of income equality (I sorted this table by CIA GINI, as it seemed to have most data points https://en.wikipedia.org/wiki/List_of_countries_by_income_equality https://en.wikipedia.org/wiki/List_of_countries_by_income_eq..., and it came up with Slovenia, Hungary, Denmark and Czech Republic) would overtake countries with low income equality levels (and that obviously happened when you look at the bottom of the table with Lesotho, Botswana and Sierra Leone, but it's still lacking dominance over US or Canada or China startup scene). Things that come to my mind on why it's not happening * social expectations change, as more people are simply looking to fit into the societal demands in brave-new-worldy kind of way, there are fewer "rags-to-riches" stories and less media attention paid to entrepreneurs * financial reasons - countries at the top of equality list don't seem to have a lot of free capital floating around looking for high risk. No venture capital volume to speak of, so the few options left are either through academic or government grants (Germany's Fraunhofer Institute is a good model here) or some foreign entities with bundles of cash looking for higher ROI. * taxation reasons - under US tax code investing in startups from a taxable account is interesting (as an asset class) mainly because it's taxed as long-term capital gain, and the shareholder can choose the timing of the tax event (it's only taxable when sale of securities happened). With taxation rules changed, investors will re-crunch the numbers to judge the potential ROI as compared to risk, and perhaps some other asset classes (commodities, real estate, emerging market bonds, energy) will look more attractive. As a side note, when people mean "income inequality" they typically imply better and more universal access to things like food, housing, health care and education. Perhaps the focus should be on making those cheaper and accessible, making the income portion irrelevant. I.e., if someone suddenly had that extra income, what would they spend it on, and why can't we make that cheaper?
- mike429 11y ago
  Are you really surprised that countries with high levels of inequality (Lesotho, Botswana and Sierra Leone) aren't doing that well in innovation compared to the ones with low inequality (Slovenia, Hungary, Denmark and Czech Republic) ... ? That map of inequality around the world is very interesting, thanks for posting, it totally confirms my point. For me the conclusion looking at it is straightforward, countries that have high inequality are overwhelmingly shitholes, sorry to say, and high innovation rates per capita are not coming out of them. On the other hand countries that have low inequality seem to me to be the ones that on average have high rates of innovation per capita. At worst the data is inconclusive and low/high inequality doesn't have an effect on innovation (which means we can go ahead and be socialist if we want, it won't hurt!) -- and at best it indicates that low inequality and a healthy middle class generally favors innovation (which means we should be socialist to stimulate progress!). Anyone disagrees with this? For the idea that "free capital floating around looking for high risk isn't available in low inequality countries" .... I would say, well give incentives to high-risk investors, and/or spread the risk more. This is what the state/government is good at, spreading risk on lot of people, taking on risky business, big challenges, borrowing money, etc. As you pointed out, there is already such an incentive in place in the US. Btw, isn't that technically speaking a form of "socialism" and "government interventionism"? That's good, there's nothing wrong with doing that if it works. I'm not sure this is a big problem, worth voting neo con for. I think socialism might even deal well with that problem. I'm not sure socialist countries have problems with investing in startups. More data welcome. The idea with socialism and interventionism is to tweak the current system, capitalism, to make it work better. Capitalism was already in the first place an idea to make everyone's life better through cheaper products. It's pretty clear that there is an evolution of political systems throughout history and as someone has pointed out earlier in the comments, taxation in the 20th century was an improvement on capitalism that helped create more wealth for everyone, while keeping innovation going at an increased rate, and avoided revolts and revolutions that were common in previous centuries at the same time. An interesting metaphor: I think it's a good metaphor to say that exponential tech progress is the result of the interaction between 1) smart people that invent and discover, 2) investors excited by profit 3) middle class buyers ... If this is correct, increasing any of these 3 things will improve the output, i.e. more innovation. According to neo cons, the bottleneck to improve in priority is 2) investors excited by profit. Which is important indeed, but I don't think it's the bottleneck currently. It might be the least urgent of the three. It might be that the 3) middle class and 1) more smart scientists and engineers are more the bottlenecks currently. It's possible also that no matter what we do at this point the exponential curve will continue unaffected. What controls that curve exactly? One thing Ray Kurzweil notes about all the exponential tech trends is that they are very steady, continue unaffected during periods of war or peace, growth or recession. So could it be that those 3 "ingredients" that generate "tech progress" don't matter that much? I.e. that we already have enough of the 3 and there is no bottleneck? Kurzweil states that more existing technology leads to more possible combinations, thus more possible innovations (which I think is in rough terms the "law of accelerating returns" if I'm not mistaken). It's possible that law alone is sufficient to generate the exponential curve, and that we are not even near a bottleneck on any of the three factors mentioned. So in the end, it might be that there is a bottleneck in one or more of the 3 ingredients, or that we are not even close to a bottleneck on any of those 3 ingredients, and in that case, we do what we want. We can be socialist or not, and the tech trend might still continue unabated. In any case, I think 1) more engineers and 2) more middle class are the things we should focus on, if there's a bottleneck. That's my impression. I think it's our best bet. Happy to hear other opinions. I'd like to hear other people talk about exponential tech progress and see if they believe there more than 3 ingredients and how they think it can be accelerated more besides just the law of accelerating returns. More data about tech progress would be great, to see if in some cases something can slow it down, or accelerate it more (besides just a paradigm shift).

by mike429 11y ago

prostoalex 11y ago

If the premise is correct, the countries with high levels of income equality (I sorted this table by CIA GINI, as it seemed to have most data points https://en.wikipedia.org/wiki/List_of_countries_by_income_equality https://en.wikipedia.org/wiki/List_of_countries_by_income_eq..., and it came up with Slovenia, Hungary, Denmark and Czech Republic) would overtake countries with low income equality levels (and that obviously happened when you look at the bottom of the table with Lesotho, Botswana and Sierra Leone, but it's still lacking dominance over US or Canada or China startup scene). Things that come to my mind on why it's not happening * social expectations change, as more people are simply looking to fit into the societal demands in brave-new-worldy kind of way, there are fewer "rags-to-riches" stories and less media attention paid to entrepreneurs * financial reasons - countries at the top of equality list don't seem to have a lot of free capital floating around looking for high risk. No venture capital volume to speak of, so the few options left are either through academic or government grants (Germany's Fraunhofer Institute is a good model here) or some foreign entities with bundles of cash looking for higher ROI. * taxation reasons - under US tax code investing in startups from a taxable account is interesting (as an asset class) mainly because it's taxed as long-term capital gain, and the shareholder can choose the timing of the tax event (it's only taxable when sale of securities happened). With taxation rules changed, investors will re-crunch the numbers to judge the potential ROI as compared to risk, and perhaps some other asset classes (commodities, real estate, emerging market bonds, energy) will look more attractive. As a side note, when people mean "income inequality" they typically imply better and more universal access to things like food, housing, health care and education. Perhaps the focus should be on making those cheaper and accessible, making the income portion irrelevant. I.e., if someone suddenly had that extra income, what would they spend it on, and why can't we make that cheaper?

mike429 11y ago
Are you really surprised that countries with high levels of inequality (Lesotho, Botswana and Sierra Leone) aren't doing that well in innovation compared to the ones with low inequality (Slovenia, Hungary, Denmark and Czech Republic) ... ? That map of inequality around the world is very interesting, thanks for posting, it totally confirms my point. For me the conclusion looking at it is straightforward, countries that have high inequality are overwhelmingly shitholes, sorry to say, and high innovation rates per capita are not coming out of them. On the other hand countries that have low inequality seem to me to be the ones that on average have high rates of innovation per capita. At worst the data is inconclusive and low/high inequality doesn't have an effect on innovation (which means we can go ahead and be socialist if we want, it won't hurt!) -- and at best it indicates that low inequality and a healthy middle class generally favors innovation (which means we should be socialist to stimulate progress!). Anyone disagrees with this? For the idea that "free capital floating around looking for high risk isn't available in low inequality countries" .... I would say, well give incentives to high-risk investors, and/or spread the risk more. This is what the state/government is good at, spreading risk on lot of people, taking on risky business, big challenges, borrowing money, etc. As you pointed out, there is already such an incentive in place in the US. Btw, isn't that technically speaking a form of "socialism" and "government interventionism"? That's good, there's nothing wrong with doing that if it works. I'm not sure this is a big problem, worth voting neo con for. I think socialism might even deal well with that problem. I'm not sure socialist countries have problems with investing in startups. More data welcome. The idea with socialism and interventionism is to tweak the current system, capitalism, to make it work better. Capitalism was already in the first place an idea to make everyone's life better through cheaper products. It's pretty clear that there is an evolution of political systems throughout history and as someone has pointed out earlier in the comments, taxation in the 20th century was an improvement on capitalism that helped create more wealth for everyone, while keeping innovation going at an increased rate, and avoided revolts and revolutions that were common in previous centuries at the same time. An interesting metaphor: I think it's a good metaphor to say that exponential tech progress is the result of the interaction between 1) smart people that invent and discover, 2) investors excited by profit 3) middle class buyers ... If this is correct, increasing any of these 3 things will improve the output, i.e. more innovation. According to neo cons, the bottleneck to improve in priority is 2) investors excited by profit. Which is important indeed, but I don't think it's the bottleneck currently. It might be the least urgent of the three. It might be that the 3) middle class and 1) more smart scientists and engineers are more the bottlenecks currently. It's possible also that no matter what we do at this point the exponential curve will continue unaffected. What controls that curve exactly? One thing Ray Kurzweil notes about all the exponential tech trends is that they are very steady, continue unaffected during periods of war or peace, growth or recession. So could it be that those 3 "ingredients" that generate "tech progress" don't matter that much? I.e. that we already have enough of the 3 and there is no bottleneck? Kurzweil states that more existing technology leads to more possible combinations, thus more possible innovations (which I think is in rough terms the "law of accelerating returns" if I'm not mistaken). It's possible that law alone is sufficient to generate the exponential curve, and that we are not even near a bottleneck on any of the three factors mentioned. So in the end, it might be that there is a bottleneck in one or more of the 3 ingredients, or that we are not even close to a bottleneck on any of those 3 ingredients, and in that case, we do what we want. We can be socialist or not, and the tech trend might still continue unabated. In any case, I think 1) more engineers and 2) more middle class are the things we should focus on, if there's a bottleneck. That's my impression. I think it's our best bet. Happy to hear other opinions. I'd like to hear other people talk about exponential tech progress and see if they believe there more than 3 ingredients and how they think it can be accelerated more besides just the law of accelerating returns. More data about tech progress would be great, to see if in some cases something can slow it down, or accelerate it more (besides just a paradigm shift).