34 ms·

Why we need the rich ("on wealth creation by a wealth creator")

28 points by grellas 16y ago

klochner 16y ago
I found it telling that this "wealth creator" used entrepreneurs as his example of wealth creators, rather than bankers and traders (he's from a trading/PE/VC firm).
- rbranson 16y ago
  Right. He makes many good points, but many of his assumptions are flawed. He uses a few examples and anecdotes to paint a picture of the wealthy exclusively as bootstrapping individuals that innovate for consumers and create massive value. While this is certainly can be case, the reality is that the majority are quite different. Look at the wealthiest individuals and most profitable businesses, they are often not creators of value, but manipulators of markets and mediators of commodities. Energy Companies, Corporate Aggregators, and Financial Services. If we are too blind to see that these companies funnel huge amounts of money away from more efficient uses, perpetuate monopolies, and destroy true free market innovation, then we will pay the price. While his criticisms of Marxism were on the spot, they simply summarize how Marxist ideas of capturing the "means of production" by force are outdated in knowledge economies. Marx was right in the end though: look at the economic success of countries that have converted to knowledge economies, as the workers own their means of production, and often are in the position of being able to demand excellent working conditions and payment in exchange for their labor.
  - philwelch 16y ago
    Economic infrastructure and energy are essential services, though. Energy in particular. You'd expect energy companies to be rich, because energy is a necessary part of nearly all the wealth created in any economy (knowledge or industrial).
    - rbranson 16y ago
      I am not saying these industries are not essential and don't deserve the revenues they earn, but the concentration of PROFIT they generate is telling. The margins of players in competitive industries in healthy markets run thin because prices are low and anything left is re-invested into R&D. Just look at the profits Microsoft enjoys -- purely because of their stranglehold on the market, which we'd all agree is bad for the consumer. The concentration of capital and resources that Microsoft retains and mis-manages is staggering. In a true free market, a more efficient, well-managed competitor would have undercut them long ago.
      - kiba 16y ago
        Firefox was killing Microsoft's browser monopoly, without any sort of government intervention, and against enormous inertia. Not all markets are efficient, but some are ripe for the taking by an entrepreneur. Think about all the firms that used windows. If they become less efficient due to using windows, than they will eventually be out-competed by firms that use Linux or MacOS over time, all else being equal.
        rbranson 16y ago
        Firefox and Internet Explorer aren't products that sell on a market though. There is zero cost to the consumer for using one or the other, so competition is exclusively on features. Open source is sort of post-capitalist in a way. Often markets that suffer from stagnation and seem ripe for the taking by an entrepreneur are that way for a reason: monopoly, government policy favoring large corporations, conditions created by the dominant players, etc. These firms use Windows because of the tremendous cost associated with switching, which is a key strategy of Microsoft. Software is one of the few industries where products are designed specifically to create lock-in scenarios, and it is accepted by the mainstream.
        kiba 16y ago
        These firms use Windows because of the tremendous cost associated with switching It generally does not alway means that new firms will use them. If incumbent are bureaucratic and slow enough to the point of negating the regulations in place, than it might be easier for a linux using firm to enter the market. If the regulations is skewed enough, than firms that used windows may in fact not died at all. Even though I know that the regulations is very skewed, I still like to think that the merit of other operating systems will win out in the long run, even if that long run is a really long time.
muhfuhkuh 16y ago
Wow, a super-shady, leveraged buyout and commodities markets manipulation firm with a founder who was associated with the scummiest of junk bond firms _during_ their most criminal of activities, is telling us not to hate pizza restaurant owners and electricians. The thing is, we weren't disliking them, nor do we. We hate 30:1 longshot bet "investors", market manipulators and corporate raiders. That won't change no matter how flashy your flash splashscreen is.
- yummyfajitas 16y ago
  30:1 longshot bet "investors", you mean like VC's and angels? And corporate raiders? You mean the people who buy and improve the value of existing companies [1]? I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? [1] Or occasionally shut them down and sell their assets to more productive companies.
  - deleted 16y ago
    [deleted]
  - muhfuhkuh 16y ago
    >you mean like VC's and angels Since when do VCs bet 30:1 on anything? If anything it's 1:1, because they can't borrow more money against their fund. That's the whole point behind venture capital - people put money in where tradtional banks {d,w}on't. I was referring to CDOs and default swaps, you know, the stuff that almost crashed the American economy a couple years back. >I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? Sure. He's using pizza shops and construction contractors and other working class small businesses as a cover to justify his job of moving rich people's money from one place to another and calling it productivity. In other words, he takes the example of people who, you know, actually provide a product or service to the bulk of Americans as an emotional crutch to justify his firm's greed by pretending that it's largess for Main Street businesses. And, there's a reason they're called raiders. They don't usually "improve" anything except for their wallet.
    - ryanwaggoner 16y ago
Locke1689 16y ago
I think it pretty much went downhill from where he stated that the wealthy aren't the intellectual elite and then used Wosniak, Gates, Allen, Larry, and Sergey to make his point. I guess Berkeley, Harvard, and Stanford are chump schools now? Boy do I feel bad about my rejections...
deleted 16y ago
[deleted]
ju2tin 16y ago
I'm a greedy, conservative capitalist and I still thought this essay was garbage. First, it totally failed to address the question of wealth received through means other than entrepreneurship: What about athletes, movie stars, heirs and heiresses, etc? Second, it posits that owner-CEO's will always grow the value of their companies, ignoring that many CEO's with significant shareholdings in their companies have nevertheless plundered their companies for their own benefit. Third, it claims that the rich got that way by doing work other people don't want to do, by which logic the average garbage man should be rich since he is doing work no one wants to do either. Fourth, it lumps short sellers in with various other parasites trying to feast on the wealthy. But if good entrepreneurs will always (always!) grow the value of their companies, why should they fear short sellers? If the company goes up in value, the shorts will get taken to the cleaners. It sounds like the author resents the fact that short sellers perform a valuable function in exposing the overvaluation of companies that aren't doing as good a job as other people might think. Simply put, this is a poorly-reasoned essay with little to add to the debate about taxing the rich.
- Nwallins 16y ago
  > it totally failed to address the question of wealth received through means other than entrepreneurship These people receive wealth. They do not necessarily generate it. Athletes and movie stars are certainly talented, but entertainment is a place to push excess wealth and not necessarily a source of it. > it claims that the rich got that way by doing work other people don't want to do, by which logic the average garbage man should be rich since he is doing work no one wants to do either. No, doing disdainful work is not sufficient for being wealthy. Nor is it necessary. He is saying that it is common, though. > Fourth, it lumps short sellers in with various other parasites trying to feast on the wealthy. But if good entrepreneurs will always (always!) grow the value of their companies, why should they fear short sellers? Hm, I missed this part in the essay. Most businessmen recognize the value of short sellers in the marketplace, even if it makes their job harder. It's kind of like competition in that way.
  - ju2tin 16y ago
    >These people receive wealth. They do not necessarily generate it. Athletes and movie stars are certainly talented, but entertainment is a place to push excess wealth and not necessarily a source of it. That is my point.
Groxx 16y ago
[one of the comments on the blog, in its entirety] “Oliver Stone, Carl Marx you insolent impertinent “putzes”, your character Gordon Gekko is a putz! It’s not greed that drives this nation, or the “doers”, or the titans of this great nation; it’s Ambition, incentive, and the pursuit of The American Dream!!….. (Not the European Dream, the Soviet Dream, ….the Socialist Dream,……or the “Obama Dream” ….it is THE AMERICAN DREAM!). ….Work ethic, hard work and taking risks for the enjoyment of the fruits it produces. …And it will be shared with whomever the producers are willing to share it with. You don’t decide with whom I share my prosperity (success)…………I DO! You have every right to pursue happiness and wealth. Be not ashamed of doing so. Your founding Fathers penned it in permanent ink: “…..We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness….” (The unanimous Declaration of the thirteen united States of America -In Congress, July 4, 1776) I am willing to pledge all I have to preserve this promise, this hope, this Dream. I will “not go quietly into the night”! The government will not take these liberties away without a fight to the end. As long as there is just one shred of a chance for the “pursuit” of happiness, The American Dream is alive and I will give my full measure, if necessary, to preserve Her for me and my family. Be “resolute”. Pass this on now or risk the fate of working the rest of your life to come out from under the tyranny of socialism, the strong arm of government and the suppression imposed on you by the "Statists". Is this... spam? A Markov-chain generated comment? WTF. I've really gotta quit reading comments on random websites.
- philk 16y ago
  I think of this as the internet equivalent of the crazy guy with a sign standing on a street corner.
  - Groxx 16y ago
    That's the most accurate, concise description of comments like this I've ever seen.
- milkshakes 16y ago
  this might help: http://stevenf.com/pages/shutup/ http://stevenf.com/pages/shutup/
dasil003 16y ago
I actually found it to be an inspiring read about why higher taxes on the rich may be a bad idea (ie. it's not likely that the government would do a better job spending the money). However a glaring omission (one of many I suppose) is the chilling effect that wealth-holders can have on innovation by wielding legal and political power. I don't have a problem with lowering taxes on the rich, but first lets see what we can do about insulating the political process from monied interests.
- nickpinkston 16y ago
  Quite true - the problem we have is not capitalism; it's corporatism: the alliance of corporate oligarchs and the state.
  - stretchwithme 16y ago
    exactly. government slanted in favor of anybody is trouble for everybody else.
  - naradaellis 16y ago
    John Ralston Saul's book Unconscious Civilization (a kind of primer on his theories I think, which one would read before they tackle Voltaire's Bastards) does a wonderful job of elaborating this point, anyone interested in an article such as this would do well to read the book, Capitalism - real capitalism, not the cowardice we see masquarading as capitalism a lot of the time - is fine, corporatism and the power we give corps. by surrendring to them is what is dismantling democracy and individual liberty. (And Ralston Saul posits that this is an age-old battle, whether it be corps. in their modern form, or as in the Catholic Church).
- brazzy 16y ago
  what we can do about insulating the political process from monied interests. Absolutely nothing. Money is power. It's nothing more and nothing less than a societywide promise that people will give you things and do things for you. Trying to prevent the imbalance in money-power from being reflected to a large degree in political power is ultimately futile. Any rules you make will have loopholes and workarounds for those in possession of enough money-power.

28 points by grellas 16y ago

I found it telling that this "wealth creator" used entrepreneurs as his example of wealth creators, rather than bankers and traders (he's from a trading/PE/VC firm).

rbranson 16y ago
Right. He makes many good points, but many of his assumptions are flawed. He uses a few examples and anecdotes to paint a picture of the wealthy exclusively as bootstrapping individuals that innovate for consumers and create massive value. While this is certainly can be case, the reality is that the majority are quite different. Look at the wealthiest individuals and most profitable businesses, they are often not creators of value, but manipulators of markets and mediators of commodities. Energy Companies, Corporate Aggregators, and Financial Services. If we are too blind to see that these companies funnel huge amounts of money away from more efficient uses, perpetuate monopolies, and destroy true free market innovation, then we will pay the price. While his criticisms of Marxism were on the spot, they simply summarize how Marxist ideas of capturing the "means of production" by force are outdated in knowledge economies. Marx was right in the end though: look at the economic success of countries that have converted to knowledge economies, as the workers own their means of production, and often are in the position of being able to demand excellent working conditions and payment in exchange for their labor.
- philwelch 16y ago
  Economic infrastructure and energy are essential services, though. Energy in particular. You'd expect energy companies to be rich, because energy is a necessary part of nearly all the wealth created in any economy (knowledge or industrial).
  - rbranson 16y ago
    I am not saying these industries are not essential and don't deserve the revenues they earn, but the concentration of PROFIT they generate is telling. The margins of players in competitive industries in healthy markets run thin because prices are low and anything left is re-invested into R&D. Just look at the profits Microsoft enjoys -- purely because of their stranglehold on the market, which we'd all agree is bad for the consumer. The concentration of capital and resources that Microsoft retains and mis-manages is staggering. In a true free market, a more efficient, well-managed competitor would have undercut them long ago.
    - kiba 16y ago
      Firefox was killing Microsoft's browser monopoly, without any sort of government intervention, and against enormous inertia. Not all markets are efficient, but some are ripe for the taking by an entrepreneur. Think about all the firms that used windows. If they become less efficient due to using windows, than they will eventually be out-competed by firms that use Linux or MacOS over time, all else being equal.
      - rbranson 16y ago
        Firefox and Internet Explorer aren't products that sell on a market though. There is zero cost to the consumer for using one or the other, so competition is exclusively on features. Open source is sort of post-capitalist in a way. Often markets that suffer from stagnation and seem ripe for the taking by an entrepreneur are that way for a reason: monopoly, government policy favoring large corporations, conditions created by the dominant players, etc. These firms use Windows because of the tremendous cost associated with switching, which is a key strategy of Microsoft. Software is one of the few industries where products are designed specifically to create lock-in scenarios, and it is accepted by the mainstream.
        kiba 16y ago
        These firms use Windows because of the tremendous cost associated with switching It generally does not alway means that new firms will use them. If incumbent are bureaucratic and slow enough to the point of negating the regulations in place, than it might be easier for a linux using firm to enter the market. If the regulations is skewed enough, than firms that used windows may in fact not died at all. Even though I know that the regulations is very skewed, I still like to think that the merit of other operating systems will win out in the long run, even if that long run is a really long time.

muhfuhkuh 16y ago

Wow, a super-shady, leveraged buyout and commodities markets manipulation firm with a founder who was associated with the scummiest of junk bond firms _during_ their most criminal of activities, is telling us not to hate pizza restaurant owners and electricians. The thing is, we weren't disliking them, nor do we. We hate 30:1 longshot bet "investors", market manipulators and corporate raiders. That won't change no matter how flashy your flash splashscreen is.

yummyfajitas 16y ago
30:1 longshot bet "investors", you mean like VC's and angels? And corporate raiders? You mean the people who buy and improve the value of existing companies [1]? I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? [1] Or occasionally shut them down and sell their assets to more productive companies.
- deleted 16y ago
  [deleted]
- muhfuhkuh 16y ago
  >you mean like VC's and angels Since when do VCs bet 30:1 on anything? If anything it's 1:1, because they can't borrow more money against their fund. That's the whole point behind venture capital - people put money in where tradtional banks {d,w}on't. I was referring to CDOs and default swaps, you know, the stuff that almost crashed the American economy a couple years back. >I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? Sure. He's using pizza shops and construction contractors and other working class small businesses as a cover to justify his job of moving rich people's money from one place to another and calling it productivity. In other words, he takes the example of people who, you know, actually provide a product or service to the bulk of Americans as an emotional crutch to justify his firm's greed by pretending that it's largess for Main Street businesses. And, there's a reason they're called raiders. They don't usually "improve" anything except for their wallet.
  - ryanwaggoner 16y ago

Locke1689 16y ago

I think it pretty much went downhill from where he stated that the wealthy aren't the intellectual elite and then used Wosniak, Gates, Allen, Larry, and Sergey to make his point. I guess Berkeley, Harvard, and Stanford are chump schools now? Boy do I feel bad about my rejections...

deleted 16y ago

[deleted]

ju2tin 16y ago

I'm a greedy, conservative capitalist and I still thought this essay was garbage. First, it totally failed to address the question of wealth received through means other than entrepreneurship: What about athletes, movie stars, heirs and heiresses, etc? Second, it posits that owner-CEO's will always grow the value of their companies, ignoring that many CEO's with significant shareholdings in their companies have nevertheless plundered their companies for their own benefit. Third, it claims that the rich got that way by doing work other people don't want to do, by which logic the average garbage man should be rich since he is doing work no one wants to do either. Fourth, it lumps short sellers in with various other parasites trying to feast on the wealthy. But if good entrepreneurs will always (always!) grow the value of their companies, why should they fear short sellers? If the company goes up in value, the shorts will get taken to the cleaners. It sounds like the author resents the fact that short sellers perform a valuable function in exposing the overvaluation of companies that aren't doing as good a job as other people might think. Simply put, this is a poorly-reasoned essay with little to add to the debate about taxing the rich.

Nwallins 16y ago
> it totally failed to address the question of wealth received through means other than entrepreneurship These people receive wealth. They do not necessarily generate it. Athletes and movie stars are certainly talented, but entertainment is a place to push excess wealth and not necessarily a source of it. > it claims that the rich got that way by doing work other people don't want to do, by which logic the average garbage man should be rich since he is doing work no one wants to do either. No, doing disdainful work is not sufficient for being wealthy. Nor is it necessary. He is saying that it is common, though. > Fourth, it lumps short sellers in with various other parasites trying to feast on the wealthy. But if good entrepreneurs will always (always!) grow the value of their companies, why should they fear short sellers? Hm, I missed this part in the essay. Most businessmen recognize the value of short sellers in the marketplace, even if it makes their job harder. It's kind of like competition in that way.
- ju2tin 16y ago
  >These people receive wealth. They do not necessarily generate it. Athletes and movie stars are certainly talented, but entertainment is a place to push excess wealth and not necessarily a source of it. That is my point.

Groxx 16y ago

[one of the comments on the blog, in its entirety] “Oliver Stone, Carl Marx you insolent impertinent “putzes”, your character Gordon Gekko is a putz! It’s not greed that drives this nation, or the “doers”, or the titans of this great nation; it’s Ambition, incentive, and the pursuit of The American Dream!!….. (Not the European Dream, the Soviet Dream, ….the Socialist Dream,……or the “Obama Dream” ….it is THE AMERICAN DREAM!). ….Work ethic, hard work and taking risks for the enjoyment of the fruits it produces. …And it will be shared with whomever the producers are willing to share it with. You don’t decide with whom I share my prosperity (success)…………I DO! You have every right to pursue happiness and wealth. Be not ashamed of doing so. Your founding Fathers penned it in permanent ink: “…..We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness….” (The unanimous Declaration of the thirteen united States of America -In Congress, July 4, 1776) I am willing to pledge all I have to preserve this promise, this hope, this Dream. I will “not go quietly into the night”! The government will not take these liberties away without a fight to the end. As long as there is just one shred of a chance for the “pursuit” of happiness, The American Dream is alive and I will give my full measure, if necessary, to preserve Her for me and my family. Be “resolute”. Pass this on now or risk the fate of working the rest of your life to come out from under the tyranny of socialism, the strong arm of government and the suppression imposed on you by the "Statists". Is this... spam? A Markov-chain generated comment? WTF. I've really gotta quit reading comments on random websites.

philk 16y ago
I think of this as the internet equivalent of the crazy guy with a sign standing on a street corner.
- Groxx 16y ago
  That's the most accurate, concise description of comments like this I've ever seen.
milkshakes 16y ago
this might help: http://stevenf.com/pages/shutup/ http://stevenf.com/pages/shutup/

dasil003 16y ago

I actually found it to be an inspiring read about why higher taxes on the rich may be a bad idea (ie. it's not likely that the government would do a better job spending the money). However a glaring omission (one of many I suppose) is the chilling effect that wealth-holders can have on innovation by wielding legal and political power. I don't have a problem with lowering taxes on the rich, but first lets see what we can do about insulating the political process from monied interests.

nickpinkston 16y ago
Quite true - the problem we have is not capitalism; it's corporatism: the alliance of corporate oligarchs and the state.
- stretchwithme 16y ago
  exactly. government slanted in favor of anybody is trouble for everybody else.
- naradaellis 16y ago
  John Ralston Saul's book Unconscious Civilization (a kind of primer on his theories I think, which one would read before they tackle Voltaire's Bastards) does a wonderful job of elaborating this point, anyone interested in an article such as this would do well to read the book, Capitalism - real capitalism, not the cowardice we see masquarading as capitalism a lot of the time - is fine, corporatism and the power we give corps. by surrendring to them is what is dismantling democracy and individual liberty. (And Ralston Saul posits that this is an age-old battle, whether it be corps. in their modern form, or as in the Catholic Church).
brazzy 16y ago
what we can do about insulating the political process from monied interests. Absolutely nothing. Money is power. It's nothing more and nothing less than a societywide promise that people will give you things and do things for you. Trying to prevent the imbalance in money-power from being reflected to a large degree in political power is ultimately futile. Any rules you make will have loopholes and workarounds for those in possession of enough money-power.