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I just _had_ to rebut some of these: Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly

I just _had_ to rebut some of these: Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly cap. (And I'd also note that 10% of "any money over that" still adds up given some of the salaries paid to top execs) Secondly, Google's initial funding was only 100k in 98` dollars. The significant 25m round was from kleiner perkins and sequoia, and I certainly imagine that corporate funds for investment would not be held to the same limits as personal income tax. Finally, facebook was bootstrapped out of their own pocket until they got a 500k invesmtent from thiel in 04 $'s. Once again the "big" investment a year later came from a firm. In all of these cases the initial seed/bootstrapping money would come FAR under the 400k limit expressed, adjusted for inflation, and that assumes people wouldn't both save over multiple years, or that we wouldn't see more reliance on companies rather than individuals in early stage investment if the tax code shifted such that it was more advantageous. I defend this largely because in my own readings of history I've attributed a large amount of the current economic state to events of the late 70's and 80s, the tax code changes being a major one of them, and I think your points unfairly detract from the validity of reintroducing such tax structures.

aswanson 9y ago
Great, now rewind and re-run that history but with the Mike Marrkula, Andres Bectolsheim, and Peter Theil being taxed and 90 percent above 400k. How motivated would they have been to risk their capital knowing that 1)They have much less of it 2)What they do make will be taxed at 90 percent 3)Bonds are a safer bet. Further, in this thought experiment, assume that Perkins and Seqouia are much smaller, less successful firms with less money to invest because most wealthy individuals have made the rational choice that risk capital is not worth it.
- existencebox 9y ago
  One would hope that we could draw the appropriate logarithmic taxation curve to constrain risky investment without eliminating it outright. I personally do not see a massive problem with curtailing some of the power/amount of money flowing around in some of these entities; but don't see it as an all or nothing as you suggest. I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio. (I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)
  - aswanson 9y ago
    Im not completely dismissing your argument; I agree with you that something has to be done with unprecedented inequality. Also, Im not suggesting that is an all-or-nothing dichotomy, Im asking you to think of the investor behavioural consequences of that type of tax policy. We of course can never know what those investors would have done given those circumstances, but its important to try to understand what the possibly nonlinear effects would be.
  - aswanson 9y ago
    Also, if you could, would you direct me to the sources of some of your readings of history so I can better understand the perspective you presented, especially regarding the 70s and 80s.
topdopfrop 9y ago
And what about all the other companies funded by the same people who funded Apple, Google, and Facebook, that never became profitable? I'm curious how much capital is spent on failures in addition to the companies that pan out.
- aswanson 9y ago
  Most ( >85 percent) of venture investments are failures. It's a hits driven business, just like the movies or record labels.

aswanson 9y ago

Great, now rewind and re-run that history but with the Mike Marrkula, Andres Bectolsheim, and Peter Theil being taxed and 90 percent above 400k. How motivated would they have been to risk their capital knowing that 1)They have much less of it 2)What they do make will be taxed at 90 percent 3)Bonds are a safer bet. Further, in this thought experiment, assume that Perkins and Seqouia are much smaller, less successful firms with less money to invest because most wealthy individuals have made the rational choice that risk capital is not worth it.

existencebox 9y ago
One would hope that we could draw the appropriate logarithmic taxation curve to constrain risky investment without eliminating it outright. I personally do not see a massive problem with curtailing some of the power/amount of money flowing around in some of these entities; but don't see it as an all or nothing as you suggest. I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio. (I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)
- aswanson 9y ago
  Im not completely dismissing your argument; I agree with you that something has to be done with unprecedented inequality. Also, Im not suggesting that is an all-or-nothing dichotomy, Im asking you to think of the investor behavioural consequences of that type of tax policy. We of course can never know what those investors would have done given those circumstances, but its important to try to understand what the possibly nonlinear effects would be.
- aswanson 9y ago
  Also, if you could, would you direct me to the sources of some of your readings of history so I can better understand the perspective you presented, especially regarding the 70s and 80s.

topdopfrop 9y ago

And what about all the other companies funded by the same people who funded Apple, Google, and Facebook, that never became profitable? I'm curious how much capital is spent on failures in addition to the companies that pan out.

aswanson 9y ago
Most ( >85 percent) of venture investments are failures. It's a hits driven business, just like the movies or record labels.