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Of the ten causes of inequality he lists, zero of them explain why Jeff Bezos or Larry Page or Mark Zuckerberg are so much richer than the rest of us. So here'

Of the ten causes of inequality he lists, zero of them explain why Jeff Bezos or Larry Page or Mark Zuckerberg are so much richer than the rest of us. So here's another cause of inequality: that computers and the internet have made it easier to start a company that gets really big. You might think someone proposing x as a cause of inequality would check it against lists of rich people to see if it explained why they were rich. But few people who write about inequality ever seem to do this. I'm not sure why. Is it because they're far removed from the world of startups and don't understand how it works? Is it because they have pet theories they don't want to risk falsifying? In most cases I would guess a bit of both. Most people who write about increasing inequality seem to assume as an axiom that it's due to changes in policy, rather than changes in the world. But if you work your way down the Forbes 400, changes in the world are clearly a big factor. You could tax away 90% of Zuck's wealth, and he'd still be a billionaire.

Mimino123 9y ago
> here's another cause of inequality: that computers and the internet have made it easier to start a company that gets really big. I don't see how it is a problem. It is just another opportunity for talanted people to start their own business. Not everyone can run a company and not everybody's as creative or smart as someone who earns millions of dollars a year. So here's a question: why should someone, who doesn't have any abilities to run business, who isn't creative or smart have the same income per year? I don't really understand what's equal about this.
- montrose 9y ago
  I agree with you: I don't think it's a problem either. But people who start from the axiom that inequality is bad have the choice of either claiming it's bad that people can start companies that grow fast, or not seeing this source of inequality. Most seem to choose the latter.
  - pron 9y ago
    The claim isn't that inequality is bad; it's that a certain level of inequality is bad, and the call isn't for full equality, but for more equality. The reason it's bad, really bad, is this: https://news.ycombinator.com/item?id=16592641 https://news.ycombinator.com/item?id=16592641
  - contravariant 9y ago
    You seem to be implicitly assuming that it's inevitable for fast growing companies to lead to more inequality.
- salawat 9y ago
  Because money is a finite resource, is only useful when it moves, and when only a few people hold the majority of the purse strings, they gain an inordinate say in what problems get enough funding thrown at them to be solved either through active favoritism or passive inaction? Please, we all know someone is going to make the argument you just did. It is the lowest effort, most intellectually shallow argument you can start with. In fact, it's a thinly veiled ad hominem if you think it through long enough as it boils down to "Poor people are poor because they suck." In the United States, we hold it to be self-evident that all men are created equal. Period. When inequality of some form becomes so ingrained in our society so as to become everyday and even praised, it is only natural for a culture that holds equality amongst people as a core characteristic to wonder if something may be a bit off about the system. To answer your question... Why should someone who acts as an executive be worth so much more than the carpenter or operator in the eyes of their fellow men? Businesses are social structures, nominally intended to benefit society (often redefined as shareholders for the hard core capitalists out there) as a whole. Yet... We see that executives and C levels get an exaggerated share of the value produced by the structure. "But they have business savvy!" I imagine someone would retort. Doesn't justify the compensation disparity. They just got an MBA and learned about how to structure a business while the carpenter was learning to woodwork. A business for business sake without professionals capable of understanding and executing the craft or service at hand is meaningless. "No one would accept the responsibility without that level of compensation! It's too straining!" Another may retort. That sounds a bit disingenuous to me. Is it mentally straining? Of course. Not so much so that orders of magnitude difference should justifiably exist between the average worker and the top of the pyramid. Nominally, everyone should have an equal chance to start a successful business. Realistically, the later you come to the game, the more the cards are stacked against you, and in favor of everyone who is already there. I would like to see society move in a direction where there wasn't so much incentive to "get money at all costs", but rather to solve pressing issues that are having a clear and present deleterious effect on society. The inability of many mundane laborers to be able to keep up with the market is one sych issue.
- bryanlarsen 9y ago
  There are lots of factors that are just as important to success as creativity and intelligence like the ability to take risks (you can't be an entrepreneur if the business failing means your children starve), access to capital (a modern internet business doesn't need much, but it does need some. Can you rent a server on AWS without a credit card?) and probably most importantly, plain old luck.
azinman2 9y ago
Or globalization that eliminated middle classes. Or compounding exponential growth from existing wealth. Or shifting of money away from labor towards owners, compensated with stock that has disproportionally grown in recent years. Or...
bogle 9y ago
Those are outliers, I think. Most wealth is family wealth and it is measured in the billions of assets under management. The land is owned. The companies are owned. The bonds and share certificates are in the bank.
- montrose 9y ago
  I believe only about a third of big fortunes are inherited.
  - bogle 9y ago
    Perhaps someone else knows the actual ratio of inherited to earned wealth. I'm sure it varies but the majority of people, in fact almost all of them, are not going to win the lottery. My experience of wealth has been through working in financial services where families have billions (UKP) in assets and whole firms managing that for them for many generations. Also of living in a country that's been owned in very large chunks for hundreds of years (Scotland).
    - TangoTrotFox 9y ago
      In America at least 67% of all "high-net-worth" individuals are self made, with only 8% directly inheriting their wealth. [1] If you consider only men (as women have an easier time marrying into wealth) 76% are self made. I don't think individual wealth is any big secret. The two pathways are either work for others and live well below your means -- an individual earning $50k and living on $20k is a millionaire in 17 years if he tosses that extra in index funds. Or start a business. The problem is that most of us consume near to what we earn, even when that's not necessary and don't have the ambition to start your own business, which now a days can start as simple setting up a webpage or selling some craft online where there is enormous amounts of free support. So becoming wealthy is impossible without, as you put it, winning the lottery. I completely agree with you that dynastic wealth is a huge negative, but at least in America it's not as huge a deal as it would seem. And I think people like Bill Gates are at least going in the right direction. He will be giving each of his offspring 'only' $10 million in inheritance. That's an enormous amount of money, but it's also literally about 1/10000th of his peak wealth. If your parents were worth $1 million, it'd be like them giving you an inheritance of $100. But I'm not sure this direction should be forced. Though I used to find a death tax very reasonable, lately I've come to wonder how justified it is, from the perspective of liberty, for a government to forcibly seize some large majority of the assets of an individual in passing, just because they happened to live a very successful life. And even if we do find this reasonable, enactment is going to be dubious at best as it would simply encourage people to distribute their assets, prior to death, to the same people it would have gone to previously by right of will. [1] - https://www.fa-mag.com/news/most-millionaires-self-made--study-says-14565.html https://www.fa-mag.com/news/most-millionaires-self-made--stu...
crdoconnor 9y ago
>Of the ten causes of inequality he lists, zero of them explain why Jeff Bezos, Larry Page, and Mark Zuckerberg are so much richer than the rest of us. #1 is the tax code and the tax code explains a lot of how those three got so rich (e.g. Amazon's sales tax avoidance). >I'm not sure why. Is it because they're far removed from the world of startups and don't understand how it works? Out of curiosity how close are you to the field of tax avoidance?
- ben_w 9y ago
  The problem with saying it’s the tax code is that there are so few else who also became that rich despite having the same tax code. Personally I think it’s luck, a lottery with no upper bound with ever diminishing odds of winning as the prize goes up.
  - montrose 9y ago
    Luck is a big factor in the success of startups, but it is not the only factor. E.g. Jeff Bezos is lucky, but he's not merely lucky.
    - ben_w 9y ago
      Certainly. I do not mean to imply it is only luck, merely that luck is the major difference between him and any of my successful private sector employers.
  - crdoconnor 9y ago
    >The problem with saying it’s the tax code is that there are so few else who also became that rich The whole point of the article is that there are more ultra wealthy now than there ever were before. >Personally I think it’s luck So what, some people are just luckier now?
    - ben_w 9y ago
      > So what, some people are just luckier now? Yes. Partly. Peak relative wealth — or the specific Gini coefficient — is not something I would expect to be constant, but is something I expect to be modified by social policies more than tax rates: what the money is spent on is more important than how much is raised.
JDiculous 9y ago
I don't see what Jeff Bezos's wealth has to do with computers and the internet (aside from the fact that it's Amazon's domain of business). Andrew Carnegie and John Rockefeller were wealthier than him. Increasing inequality is the natural trend of capitalism because it's easier to make money when you have more money. The only way to reduce this is to raise taxes (like we did with our 70% marginal tax rate on incomes over $5 million/yr in 1940 in today's dollars). Problem is we elect politicians that don't make this happen.

Mimino123 9y ago

> here's another cause of inequality: that computers and the internet have made it easier to start a company that gets really big. I don't see how it is a problem. It is just another opportunity for talanted people to start their own business. Not everyone can run a company and not everybody's as creative or smart as someone who earns millions of dollars a year. So here's a question: why should someone, who doesn't have any abilities to run business, who isn't creative or smart have the same income per year? I don't really understand what's equal about this.

montrose 9y ago
I agree with you: I don't think it's a problem either. But people who start from the axiom that inequality is bad have the choice of either claiming it's bad that people can start companies that grow fast, or not seeing this source of inequality. Most seem to choose the latter.
- pron 9y ago
  The claim isn't that inequality is bad; it's that a certain level of inequality is bad, and the call isn't for full equality, but for more equality. The reason it's bad, really bad, is this: https://news.ycombinator.com/item?id=16592641 https://news.ycombinator.com/item?id=16592641
- contravariant 9y ago
  You seem to be implicitly assuming that it's inevitable for fast growing companies to lead to more inequality.
salawat 9y ago
Because money is a finite resource, is only useful when it moves, and when only a few people hold the majority of the purse strings, they gain an inordinate say in what problems get enough funding thrown at them to be solved either through active favoritism or passive inaction? Please, we all know someone is going to make the argument you just did. It is the lowest effort, most intellectually shallow argument you can start with. In fact, it's a thinly veiled ad hominem if you think it through long enough as it boils down to "Poor people are poor because they suck." In the United States, we hold it to be self-evident that all men are created equal. Period. When inequality of some form becomes so ingrained in our society so as to become everyday and even praised, it is only natural for a culture that holds equality amongst people as a core characteristic to wonder if something may be a bit off about the system. To answer your question... Why should someone who acts as an executive be worth so much more than the carpenter or operator in the eyes of their fellow men? Businesses are social structures, nominally intended to benefit society (often redefined as shareholders for the hard core capitalists out there) as a whole. Yet... We see that executives and C levels get an exaggerated share of the value produced by the structure. "But they have business savvy!" I imagine someone would retort. Doesn't justify the compensation disparity. They just got an MBA and learned about how to structure a business while the carpenter was learning to woodwork. A business for business sake without professionals capable of understanding and executing the craft or service at hand is meaningless. "No one would accept the responsibility without that level of compensation! It's too straining!" Another may retort. That sounds a bit disingenuous to me. Is it mentally straining? Of course. Not so much so that orders of magnitude difference should justifiably exist between the average worker and the top of the pyramid. Nominally, everyone should have an equal chance to start a successful business. Realistically, the later you come to the game, the more the cards are stacked against you, and in favor of everyone who is already there. I would like to see society move in a direction where there wasn't so much incentive to "get money at all costs", but rather to solve pressing issues that are having a clear and present deleterious effect on society. The inability of many mundane laborers to be able to keep up with the market is one sych issue.
bryanlarsen 9y ago
There are lots of factors that are just as important to success as creativity and intelligence like the ability to take risks (you can't be an entrepreneur if the business failing means your children starve), access to capital (a modern internet business doesn't need much, but it does need some. Can you rent a server on AWS without a credit card?) and probably most importantly, plain old luck.

azinman2 9y ago

Or globalization that eliminated middle classes. Or compounding exponential growth from existing wealth. Or shifting of money away from labor towards owners, compensated with stock that has disproportionally grown in recent years. Or...

bogle 9y ago

Those are outliers, I think. Most wealth is family wealth and it is measured in the billions of assets under management. The land is owned. The companies are owned. The bonds and share certificates are in the bank.

montrose 9y ago
I believe only about a third of big fortunes are inherited.
- bogle 9y ago
  Perhaps someone else knows the actual ratio of inherited to earned wealth. I'm sure it varies but the majority of people, in fact almost all of them, are not going to win the lottery. My experience of wealth has been through working in financial services where families have billions (UKP) in assets and whole firms managing that for them for many generations. Also of living in a country that's been owned in very large chunks for hundreds of years (Scotland).
  - TangoTrotFox 9y ago
    In America at least 67% of all "high-net-worth" individuals are self made, with only 8% directly inheriting their wealth. [1] If you consider only men (as women have an easier time marrying into wealth) 76% are self made. I don't think individual wealth is any big secret. The two pathways are either work for others and live well below your means -- an individual earning $50k and living on $20k is a millionaire in 17 years if he tosses that extra in index funds. Or start a business. The problem is that most of us consume near to what we earn, even when that's not necessary and don't have the ambition to start your own business, which now a days can start as simple setting up a webpage or selling some craft online where there is enormous amounts of free support. So becoming wealthy is impossible without, as you put it, winning the lottery. I completely agree with you that dynastic wealth is a huge negative, but at least in America it's not as huge a deal as it would seem. And I think people like Bill Gates are at least going in the right direction. He will be giving each of his offspring 'only' $10 million in inheritance. That's an enormous amount of money, but it's also literally about 1/10000th of his peak wealth. If your parents were worth $1 million, it'd be like them giving you an inheritance of $100. But I'm not sure this direction should be forced. Though I used to find a death tax very reasonable, lately I've come to wonder how justified it is, from the perspective of liberty, for a government to forcibly seize some large majority of the assets of an individual in passing, just because they happened to live a very successful life. And even if we do find this reasonable, enactment is going to be dubious at best as it would simply encourage people to distribute their assets, prior to death, to the same people it would have gone to previously by right of will. [1] - https://www.fa-mag.com/news/most-millionaires-self-made--study-says-14565.html https://www.fa-mag.com/news/most-millionaires-self-made--stu...

crdoconnor 9y ago

>Of the ten causes of inequality he lists, zero of them explain why Jeff Bezos, Larry Page, and Mark Zuckerberg are so much richer than the rest of us. #1 is the tax code and the tax code explains a lot of how those three got so rich (e.g. Amazon's sales tax avoidance). >I'm not sure why. Is it because they're far removed from the world of startups and don't understand how it works? Out of curiosity how close are you to the field of tax avoidance?

ben_w 9y ago
The problem with saying it’s the tax code is that there are so few else who also became that rich despite having the same tax code. Personally I think it’s luck, a lottery with no upper bound with ever diminishing odds of winning as the prize goes up.
- montrose 9y ago
  Luck is a big factor in the success of startups, but it is not the only factor. E.g. Jeff Bezos is lucky, but he's not merely lucky.
  - ben_w 9y ago
    Certainly. I do not mean to imply it is only luck, merely that luck is the major difference between him and any of my successful private sector employers.
- crdoconnor 9y ago
  >The problem with saying it’s the tax code is that there are so few else who also became that rich The whole point of the article is that there are more ultra wealthy now than there ever were before. >Personally I think it’s luck So what, some people are just luckier now?
  - ben_w 9y ago
    > So what, some people are just luckier now? Yes. Partly. Peak relative wealth — or the specific Gini coefficient — is not something I would expect to be constant, but is something I expect to be modified by social policies more than tax rates: what the money is spent on is more important than how much is raised.

JDiculous 9y ago

I don't see what Jeff Bezos's wealth has to do with computers and the internet (aside from the fact that it's Amazon's domain of business). Andrew Carnegie and John Rockefeller were wealthier than him. Increasing inequality is the natural trend of capitalism because it's easier to make money when you have more money. The only way to reduce this is to raise taxes (like we did with our 70% marginal tax rate on incomes over $5 million/yr in 1940 in today's dollars). Problem is we elect politicians that don't make this happen.