13 ms·

Why Silicon Valley is not the second coming of the Gilded Age

194 points by pg 13y ago

mcarvin 13y ago
Author states that Silicon Valley corporate structures are more egalitarian when measured against traditional firms. Author attributes this to a more progressive, 'stakeholder' culture in SV. Question: human capital is disproportionately more important to building value in the tech sector than it is in the broader economy (think mines, manufacturing etc). Isn't it more likely that a more equitable equity split is a pre-requisite for success in SV as opposed to being a consequence of it?
- tomkarlo 13y ago
  This a good point. Investment banks also generally have a very high percentage of employee ownership (50%+) because so much of their value is their employee base.
  - dyno12345 13y ago
    50%? That's way better than any SV firm
    - tomkarlo 13y ago
      It's not quite apples to apples. Bankers get paid way more (so they sell off less of their stock) and they are also often paid in RSUs or other forms of stock comp that can't be sold for several years. Tech workers are generally paid with stock that vests each year, and if they're smart they'll sell that down immediately (as they still generally have lots of future stock they're still exposed on, from a portfolio perspective.)
      - dyno12345 13y ago
        sell that down? What does that mean?
- CyrusL 13y ago
  I believe the stakeholder culture is because tech companies often have the potential for rapid growth. For example, a barbershop's capital is mostly human, but there isn't a big chance it will IPO. This means the best barbers don't have much incentive to choose their barbershop based on equity in the compensation package.
d4vlx 13y ago
This article conflates Libertarians with Republicans which I don't think makes sense in Silicon Valley. Yes, nationwide they tend to be in the same group but not in the valley. Judging from comments on HN the valley does sound quite libertarian but not the kind that register and vote Republican. It seems more intellectual and based in logic while Republicans are more about dogma and scoring political points.
- jmduke 13y ago
  Judging from comments on HN the valley does sound quite libertarian but not the kind that register and vote Republican. It seems more intellectual and based in logic while Republicans are more about dogma and scoring political points. I think deciding half the nation eschews logic and intellect in favor of dogma and 'political points' is an extremely unfortunate move. People are not the pastiches you see on TV and HuffPo. (I vote Democrat.)
  - jbooth 13y ago
    More like half of that half. There's polls on how many people still think Saddam had WMDs or think Obama was born in Kenya or whatever. That's still enough to swing primaries and give us the current Congress. I think a good number of small-l libertarians would consider voting Republican if they were a reasonable alternative and if Obama was actually the socialist he's made out to be. But the fact is, they're not and he isn't. Half of the political system is in fact impervious to reason.
    - cpursley 13y ago
      "But the fact is, they're not and he isn't." Exactly. And a lot of libertarians (like me) are to busy making stuff to vote. Plus, we don't want that 'lessor of two evils' guilt hanging over our heads.
- hvs 13y ago
  Little "l" libertarianism has always had a tense relationship with the Republican party. Certain parts of the libertarian philosophy are certainly incorporated within the conservative philosophy espoused by many Republicans, but the GOP has always been a large tent party (like the Democrats) which includes numerous groups that believe many different things that often disagree with each other. But attempting to have a nuanced discussion of politics in this country is as pointless as it is impossible.
stcredzero 13y ago
Since I moved to California and the Bay Area, I have to say I've encountered more smarmyness and arrogance than in Houston Texas. This by itself isn't a negative indicator. However, if you couple it with a tendency for people to judge you by "your cover," then it is. The real attitudes of people, and how they differ from stated ones, are a big part of the downsides of a milieu like the "Gilded Age." Success itself is a part of the problem here. Success attracts attention, both good and bad, making it necessary to bias for false negatives in various interactions. This encourages the "echo chamber" effect. I wonder if Silicon Valley isn't reaching some sort of gradual saturation. The number of people who pretend to be upbeat and curious versus the number who actually are is disturbing to me. (EDIT: To be fair, this may well be because I'm on the wrong side of the filtering membrane.)
- tomkarlo 13y ago
  Every gold rush attracts hucksters. Each time there's a tech boom, there's a wash of entrepreneurs, etc who have no real track record at anything and often aren't genuinely passionate about technology, just getting rich or famous. It comes and goes.
- johngalt 13y ago
  Tech Cycle: 1. Small groups of dedicated technologists create a large step forward in technology. Generally becoming wealthy. 2. People following money all pile in. Pretenders abound; both founders and investors. 3. It becomes impossible to separate the wheat from the chaff. How do you tell the difference between someone who is legitimately experienced and someone who's skill is putting on appearances? 4. Big crash as the pretenders fail to produce similar results. All the crazy money leaves the technology sector. "Who needs an online pet store anyway?" 5. The only people who are left are small groups of people dedicated to technology regardless of the headlines. (return to step one)
  - stcredzero 13y ago
    > How do you tell the difference between someone who is legitimately experienced and someone who's skill is putting on appearances? Those who have legitimate experience can detect their peers. Unfortunately, this is highly contextual. You can be a competent Ruby on Rails guy, but still suffer from Dunning-Krueger when trying to evaluate an iOS developer. You can also go back to first principles. Do people live their lives and engage in conversations in a way that indicates they understand the epistemological stance of scientists? I have a super power in this regard. I exude a field that makes undesirable people prejudge me, to the point where they make factual mistakes.
milang 13y ago
"There is a growing body of research that shows that companies that limit their high-low wage ratios and distribute generous option plans consistently outperform more traditional, inegalitarian firms." I'd love to know more about this growing body of research. A basic Google search yields the ten most profitable firms: Gazprom, Exxon Mobil, Industrial & Commercial Bank of China, Royal Dutch Shell, Chevron, China Construction Bank, Apple, BP, BHP Billiton and Microsoft[1]. I don't get the sense that oil companies and big banks are egalitarian in their approach to employee equity. What am I missing? [1] http://money.cnn.com/magazines/fortune/global500/2012/performers/companies/fastgrowrevs/ http://money.cnn.com/magazines/fortune/global500/2012/perfor...
- mcarvin 13y ago
  Those are profits in absolute terms. I suspect the author is arguing that relative to the size of the company, wage ratios are important. I would argue he is mistaking consequence for cause. Companies with egalitarian wage ratios can afford (read 'need') equitable wage ratios precisely because of the nature of their business (think software firms with barriers to entry, high margins that are dense with human capital vs a company) vs (a chemicals company, that produces a fungible good and can only compete on price - business is characterized by low margins and a greater proportion of unskilled labor - ie more wage equality would put you out of business)
- nostrademons 13y ago
  Both oil companies and big banks compensate their skilled employees very well. It's not hard to make six-figures straight out of an MS as a petroleum engineer or geologist; you can do $200K/year with 5-10 years experience. And banks, of course, are legendary for their comp structures: you could be doing $80K salary + $160K bonus straight out of college and making half a mil or more 5-10 years out. It's the roughnecks, construction crews, and bank tellers that don't make big money. Of course, those tend to be the numerical majority of employees because they're relatively cheap. It's the same thing at Google - engineers can get paid $250K/year, but book scanners get paid $10/hour.
  - throwaway2048 13y ago
grbalaffa 13y ago
There needs to be a corollary to Betteridge's law of headlines: if a headline reads "Why <foo> is not happening", that means it most definitely is happening (or has already happened).
dmmalam 13y ago
"I would be surprised if there were any new industry in the history of capitalism that distributed its economic rewards to its employees as widely as Silicon Valley has." Wall street has been distributing most of it's profits to employees in the form of bonuses for decades. Though unlike SV, it get criticised heavily (a lot unfairly IMHO) for it. Having worked in both, I feel they are full of the same 'type' of people.
- loganfrederick 13y ago
  Having worked with both, they are not quite the same type of people. You might find some similar personality traits (ego, intelligence, and/or arrogance). But there is one major difference: The typical Silicon Valley worker is much more capable of creating a product or service than the average Wall Streeter. This is anecdotal, but the i-bankers I have worked with and met generally have a limited skillset which boils down to Excel spreadsheet manipulation, 10K reading, and Powerpoint presentations. The skillset of Silicon Valley employees crosses a wider intellectual range (CS, statistics, math, art+design, EE, other hard sciences). Their knowledge is also deeper in a wider breadth of fields and can put their knowledge to work.
  - dmmalam 13y ago
    Yea, I did mean personality traits, and moreso sale/trading/asset management than pure i-banking/PE. However while the typical wall steeter used to be a liberal arts major, it has heavily shifted toward STEM. At most i-banks, something like a third of headcount are tech. Even many of the front office are engineers, though again moreso in trading/asset management. Nowadays a large part of the competitive advantage comes from better software - a classic example of 'software eating the world'. Anecdotally some of the brightest people I've known were at BGI (now Blackrock), and they all had deep knowledge in finance, math, stats, tech and old school boys club company politics. [my old boss read math cambridge with stephen hawking and created the first and now biggest by AUM electronic portfolio management system for index funds, grinold & kahn literately [1] wrote the book on active portfolio management, etc] [1] http://www.amazon.com/Active-Portfolio-Management-Quantitative-Controlling/dp/0070248826 http://www.amazon.com/Active-Portfolio-Management-Quantitati...
pdog 13y ago
Off-topic: Why do outbound links on Medium.com have a scary-looking Redirect Notice?
joshAg 13y ago
> For starters, almost all of them recognize that their industry itself arose out of government funding (see ARPANET), and some of the most celebrated achievements of the digital culture (open source software, Wikipedia) involve commons-based collaboration with no conventional definition of private property whatsoever. It’s precisely because we lack a new vocabulary to describe this worldview that we end up lumping the tech sector together in the libertarian camp. I'm pretty sure that's just a form of socialism. > There’s a real estate crisis in Silicon Valley because the companies in the region are much more generous in the way they share the wealth, not less. Don't forget the fact that no town/city wants to build (or make it easier for developers to build) high density housing despite that it is desperately needed to keep up with housing demand.
- eli_gottlieb 13y ago
  I'm pretty sure that's just a form of socialism. Quiet you, we're trying to Talk Like Very Serious People ;-)!
smacktoward 13y ago
The fundamental error of this piece is that it assumes that if you vote Democratic, you're by definition not a one-percenter. But this is just wrong. There are lots of one-percenters who vote Democratic. They just mostly feel more strongly about cultural-liberalism issues than they do about economic ones. But when it comes to economic issues, these folks still tend to lean rightward; they overestimate the degree of social mobility the economy makes possible today, they support "ownership society" initiatives like 401(K)s and health vouchers over social insurance programs, and so forth. These folks aren't found just in tech, they're also quite common in the entertainment industry and other "new economy"/"information economy" sectors. (The derogatory term for them used to be "limousine liberals"; rich people who were totally down with helping the poor, as long as doing so didn't cut into their personal bottom line.) So you have billionaires on both sides. American politics, in fact, has mostly become a battle between billionaires. On one side you have billionaires who care about social liberalism, on the other you have billionaires who care about economic liberalism. But they're all billionaires, so issues that don't affect billionaires personally (like the minimum wage, or how to pay for retirement, or the unemployment rate, or affordable housing) just don't get included in the debate. As far as the political system is concerned, they're non-issues. They don't exist. There used to be institutions that brought these issues into the discussion anyway, like political parties and labor unions. But those have mostly atrophied over the last 50 years, so we have a system where whether the capital gains tax rate is low enough (a question that billionaires of all stripes care deeply about) is continuously and loudly debated, while whether the minimum wage is high enough is hardly ever discussed.
- pg 13y ago
  The fundamental error of this piece is that it assumes that if you vote Democratic, you're by definition not a one-percenter. What? Much of the article is devoted to making the opposite point: that the SV elite overwhelmingly support the Democrats.
  - jiggy2011 13y ago
    Political affiliation seems like a red herring in a two party system. It wouldn't surprise me if people in SV vote democrat because they don't like certain things associated with the republicans (religion , anti-gay rights, guns , whatever) rather than agreeing wholesale with the democratic party manifesto.
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pchristensen 13y ago
The "10Ks of millionaires" figure is striking, but the Bay area is ~8M people and ~2.5M households, so thats ~1-4% of households are millionaires. People using liquidity cash to buy houses isn't nearly a strong an effect regionwide as high salaries and building restrictions.
- uvdiv 13y ago
  Lots of cities have a 1-4% millionaire density. By The Economist's definitions, Frankfurt is over 7%. NYC has 400,000 millionaires (5%). http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-7 http://www.economist.com/blogs/graphicdetail/2013/05/daily-c...
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mcarvin 13y ago
So here are my reasons for high equity allocation in tech (notably missing from this list is that us techies are simply just progressive nice guys). 1. Less cash = more equity. Cash is expensive relative to equity for a start up and payouts are backended. In traditional firms (ie ones that make money) - your salary presents a larger % of the total comp pkg. 2. Human capital more important (in tech vs traditional businesses) = equity alignment is more important 3. VC rounds typically structure 10% to 20% option pools in to contracts. Ostensibly this is to create a pocket of equity for new employees. In practice this is often used as a tool to reduce the implicit valuation - creating a larger option than is needed, which is subsequently allocated because it is there.
YokoZar 13y ago
A much simpler point the author missed is that wealth doesn't exactly cause the housing shortage so much as not building houses. San Francisco has rent control, and most of the peninsula has severe zoning controls. It would be extraordinarily profitable to build commercial buildings with dense lofted apartments in many areas of the peninsula, however they are simply prohibited by local governments. That's neither libertarian nor egalitarian.
- akgerber 13y ago
  Much of the Bay Area (and California in general) housing policy is best summed up as the ol' Republican "Fuck you, got mine" with a mild environmental gloss, combined with an inability to imagine building anything other than auto-dependent suburbia.
- cpursley 13y ago
  One of my first thoughts when he mentioned housing as well.
- joonix 13y ago
  Note that those projects would be profitable only if they were permitted in limited areas only. A broad lifting of regulation would result in sprawl, not density. Look at Houston. Everyone would avoid expensive, dense areas by building out further and further into the land, and in the Bay, there's a ton of undeveloped wooden land that developers would have no problem replacing with tract homes if they were able to do so.
  - YokoZar 13y ago
    Of course, there is room for urban planning. But it's quite telling that none of these projects are starting even in the "downtown" areas adjacent to caltrain stops, which is exactly where you want growth to happen. If a peninsula city actually wanted to prevent sprawl, they'd build up the urban core rather than force people to commute from more permissive cities in the east bay.
    - 13y ago
arh68 13y ago
Sort of a unexpected result, isn't it? The more 'egalitarian' companies distribute (massive) amounts of wealth into a (relatively) large number of people, gentrifying the entire Valley, and threatening to push the old inhabitants out. Is this egalitarianism? In making the middle managers (or whoever these people are) into millionaires, the divide between billionaires and the layman isn't actually improved: now the gap is even wider. There is also some curious use of evidence: Obama won Santa Clara by 42% implies "the most dynamic sector .. is now decisively in the camp of the Democrats", but it was only 30 years ago that Reagan won the same county by >10%. The data seems to imply that the county could swing back next election, but the author doesn't seem to appreciate that idea. Why does the author have a hunch that while they temporarily voted Republican, they're truly Democrats at heart?
- TheCoelacanth 13y ago
  > There is also some curious use of evidence: Obama won Santa Clara by 42% implies "the most dynamic sector .. is now decisively in the camp of the Democrats", but it was only 30 years ago that Reagan won the same county by >10%. Keep in mind that Reagan won the nationwide popular vote by 18%, so winning by 10% in his home state doesn't indicate a strong Republican following there. It just indicates a very one-sided race.
jseliger 13y ago
I find it somewhat funny that the original New Yorker article about the tech industry's insularity is itself hidden behind a paywall; I actually wanted to submit the Packer article itself this morning but didn't bother. Nonetheless, I do think Johnson does a decent job of giving the other side. But I did send this as a letter to the editor, since it concerns a pet peeve that I constantly see in the media: George Packer's essay on Silicon Valley's politics makes several references to housing prices, including that "the past two years have seen a twenty-per-cent rise in homelessness, largely because of the soaring cost of housing." But he doesn't mention how supply and demand affect pricing, as Matt Yglesias does in The Rent is Too Damn High or Edward Glaeser does in The Triumph of the City. Both writers have correctly observed that many urban jurisdictions prevent housing from being built to accommodate growing demand; as a result, prices rise. It's not primarily tech companies or their employees who have driven housing prices in Silicon Valley: it's residents themselves, and the courts that have given residents and politicians extraordinary powers to block development—which is why "San Francisco is becoming a city without a middle class."
- bubbleRefuge 13y ago
  You are right. Why can't more high-rise condo projects get going on the peninsula? Is it b/c of earthquakes? Why not build lots or hi-rise condos along the bart/cal-train corridor?
  - HIbachikabuki 13y ago
    It's not the earthquake issue. It's that the Peninsula is already fully built out & most existing residents/voters don't want any high density development, they want to keep the existing single-family-home environments.
  - khuey 13y ago
    It's because of zoning.
- HeliasVlastimir 13y ago
  This is why homeowners shouldn't be allowed to vote. They are happy to cause homelessness as long as their property values rise. It's disgusting.
ChuckMcM 13y ago
I really loved the insight about how tech companies distribute the wealth created by their growth. When it goes widely you end up with people like Charlie Ayers (Google's chef) who are able to leave and create their own restaurants (more jobs, more creativity). When you keep all the wealth generation to a hand picked set of individuals, it seems you create obligation and cronyism. And for me, the most amazing part, is that since it looks externally 'easy', success results in a rush of folks who want to do that too. When people ask my advice about interviewing at a place like Google I tell them, "Don't interview at Google just because you want to work at Google, interview there because there is something you want to accomplish that you can do more easily at Google than anywhere else." Or people asking for advice on creating a startup, where one of the questions is "What should I build?" Here is a news alert :-) If you don't already feel passionately about building something you don't want to be the person starting the startup. Work at one or two and figure out what it takes to build a company, what works and what doesn't, and be thinking about how your talents might solve a problem in a way that would be useful. Until then, don't quit your day job.
dmix 13y ago
> True libertarians would be repulsed at the thought, but the success of Silicon Valley even suggests that governments could do much more to encourage these kinds of internal compensation structures, in the name of better business and social cohesion. (Not to mention old-fashioned fairness.) Wait, what part did the government play in how tech-companies compensate their employees fairly? Or does he mean the government should be applying to same structure by force on companies in other industries (to share equity with employees)? Does the author not understand the difference between startup culture vs big business?
- Lambent_Cactus 13y ago
  The author appears to intend that latter meaning, where SV companies have more egalitarian ownership structures on their own, but that now that we've seen the results, the government should encourage those structures more broadly in the economy. Actually, the government plays a small part already in how high-tech companies share equity with employees, through preferential tax treatment for Incentive Stock Options. You could imagine many such nudges that could be employed to expand capital ownership short of distributing equity to employees "by force". Remember in general that the limited-liability corporation as an institutional type is itself a creation of government - the notion of a business as a separate entity with distributed owners such that the business can go bankrupt without allowing creditors to go after the non-business assets of the stockholders is an artificial and relatively modern invention with a large and complicated legal structure buttressing it. C Corporations, LLCs, LLPs, PCs and the like are all creations of government and the way they operate in practice is non-trivially shaped by the ways those laws are structured. Is it so outlandish to imagine an alternative form with a deliberately egalitarian bias (an "E Corp"?). It only takes one state experimenting to make it a reality!
  - dmix 13y ago
    Corporations can still distribute revenue and equity as they please. It's a legal structure for taxation and liability. The state forcing corporations to distribute their earnings or equity a certain way is a massively more intrusive structure. If that was done, it would likely be single handily the greatest manipulation of markets and private assets ever done by a government in modern history. If an egalitarian equity structure legitimately benefits the companies, they will adopt that structure. If they don't then their competitors would do it as a competitive advantage. Unless it really doesn't benefit the companies and therefore requires the state to involuntary make them do it?
baron_mango 13y ago
Here's an interesting thing: If the spread of equity and the wealth that has led to has resulted in the rising cost of real estate, then, that same spread has resulted in a greater visibility of the wealth disparity in the US as a whole.
onemorepassword 13y ago
One foundation of the entire argument seems to be that support for the Democratic party makes SV progressive. However, in a global context only the minority left wing of the Democratic party could be called progressive. Also, a simpler explanation for the large support for the Democrats would be that SV consists of intelligent, highly educated and well-informed people that wouldn't dream of supporting the extremist, anti-intellectual and downright insane collection of circus freaks the Republican party has become. Just based on the purely anecdotal evidence of online and personal encounters with SV-dwellers, I would consider most of them to be "open minded conservatives". The other foundation is the way companies in SV are organized and equity dived compared to traditional companies. This could simply be explained as "pragmatic", which is how most companies view it themselves. It seems to me the author is trying to project his own ideas on SV.
- nostromo 13y ago
  I think that's correct. Anecdotally, my personal network in tech seems to side with Democrats for reason like environmental protection, global warming, gay marriage, abortion, and olive branch foreign policy; not because of economic reasons like union support, wealth redistribution, or strengthened regulators.
  - jjoonathan 13y ago
    Makes you wonder if the Republican party isn't intentionally taking the wedge-issue craziness to 11 only so that they can rebrand next election cycle and yank the mat out from under the Democrats. Given the effectiveness of Romney's rush-to-the-center in the 1st debate against Obama, the thought has to have crossed their minds. The timing (tossing last election to win the next one) makes sense because next election they won't be running against a relatively popular incumbent. They don't have anything to gain by doubling-down on the losing side of every social issue on the list -- their core demographic will vote R regardless -- but a pull-the-mat strategy could net them tons of wealthy individuals from the "socially liberal economically conservative" camp.
    - 13y ago
jvm 13y ago
TLDR: You might think Silicon Valley is a rich white boys club. But we're a progressive rich white boys club. Our values are highly superior to J. P. Morgan's (or just about anybody's really) so there is actually nothing to be critical of.
api 13y ago
I think the Valley's insane wealth is a temporary thing, indicative of a comparatively new industry. Detroit once had the highest average income in the United States. Cars are still as popular as ever, but the auto industry eventually shifted and diversified and broadened and left Detroit mostly behind.
losethos 13y ago
Guaranteed every Republican gives more to charity then every Democrat. Jesus criticized those who give publically -- If a Democrat gives to charity he makes a big deal out of it because he's not like a church-goer who sees everybody doing it. All these people have built their houses on sand. I'm marveling at what is in store one of these years when they discover God. God says... shall they hear without a preacher? 10:15 And how shall they preach, except they be sent? as it is written, How beautiful are the feet of them that preach the gospel of peace, and bring glad tidings of good things! 10:16 But they have not all obeyed the gospel. For Esaias saith, Lord, who hath believed our report? 10:17 So then faith cometh by hearing, and hearing by the word of God. 10:18 But I say, Have they not heard? Yes verily, their sound went into all the earth, and their words unto the ends of the world. 10:19 But I say, Did not Israel know? First Moses saith, I will provoke you to jealousy by them that are no people, and by a foolish nation I will anger you. 10:20 But Esaias is very bold, and saith, I was found of them that sought me not; I was made manifest unto them that asked not after me.
jgrant27 13y ago
"Randian libertarianism". Bullshit. Rand was NOT a libertarian. http://www.aynrand.org/site/PageServer?pagename=ar_libertarianism_qa http://www.aynrand.org/site/PageServer?pagename=ar_libertari...
cdugg 13y ago
What's so great about being progressive? Aren't progressives the people who want to re-distribute other people's money? And what on earth is so dreadful about the gilded age? The greatest increase in the standards of living in the history of the US happened in the gilded age. By this idiot newyorker writer's logic, we are supposed to dread and avoid the entrepreneurs that dropped the prices of kerosene, steel and other commodities, facilitated rapid industrialization and improved the living standards of everyone. Why are the billionaires of today (sergei, larry, Zuck etc) any different in nature than the billionaires of those times? Except for the crony capitalists that got in bed with the government, what is wrong with great success and wealth?
michaelochurch 13y ago
The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. That's disingenuous. 0.02% of something that a CEO thinks (based on nothing but his own ego) is worth $10 billion is not meaningful equity. The proper way to model this is that equity compensation tends to be about 1/3 of what the person is giving up in salary, career advancement, etc. If you're paying $30,000 to work there, you'll typically get $10,000 per year in equity, or $40,000 over 4 years. That'll be 0.4% if the current valuation is $10 million. Now, let's say a clueless schmuck puts his whole life savings (or, more accurately, what he'll be getting in lieu of savings over the next 4 years) in some extremely volatile (100-500%) penny stock, because that's actually what's happening (with that penny stock being in one's employer, i.e. controlled by someone who can fire you for "performance" Pincus-style). Some of those people are going to end up modestly wealthy (no employee gets rich) and most are going to be hosed. To say that employee equity in typical startups (there is "meaningful" is a huge stretch. You'd have the same results asking people to pump their savings into penny stocks. A few would get very rich (from modest starting points) and most would wipe out.
- eli_gottlieb 13y ago
  And this is why I'd rather just get large cash bonuses than equity options or grants, if I'm going to work for someone in industry. Give me cash, and I can dump it into my Vanguard index funds for a pretty good expected value.
lhh 13y ago
"The whole premise of stakeholder capitalism offers a powerful and distinct message, because it gets at both our desire to be competitive in the global marketplace, but also to be more fair and equitable in the way we share our wealth. True libertarians would be repulsed at the thought..." This sounds to me like a fundamental misunderstanding of the dynamics of a startup vs big company. In a startup, every employee has an important bearing on the success or failure of the company. Getting the right people on the team is priority number one for a budding startup, and to get the best people you have to promise them a piece of the spoils. In a typical big company, only a handful of people have enough authority to steer the ship. For everyone else, their roles usually aren't mission-critical, or they're relatively easy to replace. You therefore don't need to pay them as well. This isn't about "being fair and equitable" or "sharing our wealth" for its own sake, this is still just about economics. More people are getting stock at tech companies because those people's skills and contributions are more directly linked to the success of those companies. It just doesn't make sense to be giving stock to pilots, pharmacists, and factory workers - if they're amazing at their jobs, it has at most a marginal affect on the company as a whole, and if they quit, the show will go on. Don't get me wrong, I'm completely in support of giving junior people meaningful equity, for a number of reasons. But it still needs to make sense. There are good reasons why we don't see it in other industries.
hkmurakami 13y ago
* The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. * While me may already be better than the rest of the country in this regard, we can definitely do a lot better than we do today. I'd be preaching to the choir so I'll refrain from elaborating on the equity compensation of single digit employees, but there must be a way to share the success more equally than we do today.
_gotmilk 13y ago
I know one thing, Silicon Valley is hurting for more H-1B visas to fill vacant jobs. Perhaps one reason SV overwhelmingly votes Democratic is that the Democrats are in general more pro immigration.
zhemao 13y ago
"It gets at both our desire to be competitive in the global marketplace, but also to be more fair and equitable in the way we share our wealth. True libertarians would be repulsed at the thought." I don't think this guy really understands libertarianism. Libertarian principles don't say anything about how private actors choose to distribute ownership. Most libertarians are only "repulsed" if government forces private actors to distribute ownership in a particular way. If spreading out equity more evenly among employees makes a particular firm more competitive, then awesome, that's how the market works.
dietlbomb 13y ago
Does it strike anyone else as odd that everyone in the Silicon Valley software industry has nearly unanimous views on social policy? I've never been to Silicon Valley, but I have spent my entire life and career among engineers, and I have observed diverse views on such issues as gay marriage, climate change, abortion, etc.
- declan 13y ago
  There's selection bias: some engineers may choose to move to the SF bay area in part because of the perceived views on social policy. One example of this is SF's Castro district especially a few decades ago. Speaking as someone who lives on the SF peninsula, I think it's fair to say there's near-uniformity of views on gay marriage (though drive an hour east and that will flip). Climate change, on the other hand, is an area where reasonable people even in this area are more likely to disagree.
natmaster 13y ago
The author starts with a false premise about what libertarianism is. How can I follow any logic that starts off wrong?

194 points by pg 13y ago

Author states that Silicon Valley corporate structures are more egalitarian when measured against traditional firms. Author attributes this to a more progressive, 'stakeholder' culture in SV. Question: human capital is disproportionately more important to building value in the tech sector than it is in the broader economy (think mines, manufacturing etc). Isn't it more likely that a more equitable equity split is a pre-requisite for success in SV as opposed to being a consequence of it?

tomkarlo 13y ago
This a good point. Investment banks also generally have a very high percentage of employee ownership (50%+) because so much of their value is their employee base.
- dyno12345 13y ago
  50%? That's way better than any SV firm
  - tomkarlo 13y ago
    It's not quite apples to apples. Bankers get paid way more (so they sell off less of their stock) and they are also often paid in RSUs or other forms of stock comp that can't be sold for several years. Tech workers are generally paid with stock that vests each year, and if they're smart they'll sell that down immediately (as they still generally have lots of future stock they're still exposed on, from a portfolio perspective.)
    - dyno12345 13y ago
      sell that down? What does that mean?
CyrusL 13y ago
I believe the stakeholder culture is because tech companies often have the potential for rapid growth. For example, a barbershop's capital is mostly human, but there isn't a big chance it will IPO. This means the best barbers don't have much incentive to choose their barbershop based on equity in the compensation package.

d4vlx 13y ago

This article conflates Libertarians with Republicans which I don't think makes sense in Silicon Valley. Yes, nationwide they tend to be in the same group but not in the valley. Judging from comments on HN the valley does sound quite libertarian but not the kind that register and vote Republican. It seems more intellectual and based in logic while Republicans are more about dogma and scoring political points.

jmduke 13y ago
Judging from comments on HN the valley does sound quite libertarian but not the kind that register and vote Republican. It seems more intellectual and based in logic while Republicans are more about dogma and scoring political points. I think deciding half the nation eschews logic and intellect in favor of dogma and 'political points' is an extremely unfortunate move. People are not the pastiches you see on TV and HuffPo. (I vote Democrat.)
- jbooth 13y ago
  More like half of that half. There's polls on how many people still think Saddam had WMDs or think Obama was born in Kenya or whatever. That's still enough to swing primaries and give us the current Congress. I think a good number of small-l libertarians would consider voting Republican if they were a reasonable alternative and if Obama was actually the socialist he's made out to be. But the fact is, they're not and he isn't. Half of the political system is in fact impervious to reason.
  - cpursley 13y ago
    "But the fact is, they're not and he isn't." Exactly. And a lot of libertarians (like me) are to busy making stuff to vote. Plus, we don't want that 'lessor of two evils' guilt hanging over our heads.
hvs 13y ago
Little "l" libertarianism has always had a tense relationship with the Republican party. Certain parts of the libertarian philosophy are certainly incorporated within the conservative philosophy espoused by many Republicans, but the GOP has always been a large tent party (like the Democrats) which includes numerous groups that believe many different things that often disagree with each other. But attempting to have a nuanced discussion of politics in this country is as pointless as it is impossible.

stcredzero 13y ago

Since I moved to California and the Bay Area, I have to say I've encountered more smarmyness and arrogance than in Houston Texas. This by itself isn't a negative indicator. However, if you couple it with a tendency for people to judge you by "your cover," then it is. The real attitudes of people, and how they differ from stated ones, are a big part of the downsides of a milieu like the "Gilded Age." Success itself is a part of the problem here. Success attracts attention, both good and bad, making it necessary to bias for false negatives in various interactions. This encourages the "echo chamber" effect. I wonder if Silicon Valley isn't reaching some sort of gradual saturation. The number of people who pretend to be upbeat and curious versus the number who actually are is disturbing to me. (EDIT: To be fair, this may well be because I'm on the wrong side of the filtering membrane.)

tomkarlo 13y ago
Every gold rush attracts hucksters. Each time there's a tech boom, there's a wash of entrepreneurs, etc who have no real track record at anything and often aren't genuinely passionate about technology, just getting rich or famous. It comes and goes.
johngalt 13y ago
Tech Cycle: 1. Small groups of dedicated technologists create a large step forward in technology. Generally becoming wealthy. 2. People following money all pile in. Pretenders abound; both founders and investors. 3. It becomes impossible to separate the wheat from the chaff. How do you tell the difference between someone who is legitimately experienced and someone who's skill is putting on appearances? 4. Big crash as the pretenders fail to produce similar results. All the crazy money leaves the technology sector. "Who needs an online pet store anyway?" 5. The only people who are left are small groups of people dedicated to technology regardless of the headlines. (return to step one)
- stcredzero 13y ago
  > How do you tell the difference between someone who is legitimately experienced and someone who's skill is putting on appearances? Those who have legitimate experience can detect their peers. Unfortunately, this is highly contextual. You can be a competent Ruby on Rails guy, but still suffer from Dunning-Krueger when trying to evaluate an iOS developer. You can also go back to first principles. Do people live their lives and engage in conversations in a way that indicates they understand the epistemological stance of scientists? I have a super power in this regard. I exude a field that makes undesirable people prejudge me, to the point where they make factual mistakes.

milang 13y ago

"There is a growing body of research that shows that companies that limit their high-low wage ratios and distribute generous option plans consistently outperform more traditional, inegalitarian firms." I'd love to know more about this growing body of research. A basic Google search yields the ten most profitable firms: Gazprom, Exxon Mobil, Industrial & Commercial Bank of China, Royal Dutch Shell, Chevron, China Construction Bank, Apple, BP, BHP Billiton and Microsoft[1]. I don't get the sense that oil companies and big banks are egalitarian in their approach to employee equity. What am I missing? [1] http://money.cnn.com/magazines/fortune/global500/2012/performers/companies/fastgrowrevs/ http://money.cnn.com/magazines/fortune/global500/2012/perfor...

mcarvin 13y ago
Those are profits in absolute terms. I suspect the author is arguing that relative to the size of the company, wage ratios are important. I would argue he is mistaking consequence for cause. Companies with egalitarian wage ratios can afford (read 'need') equitable wage ratios precisely because of the nature of their business (think software firms with barriers to entry, high margins that are dense with human capital vs a company) vs (a chemicals company, that produces a fungible good and can only compete on price - business is characterized by low margins and a greater proportion of unskilled labor - ie more wage equality would put you out of business)
nostrademons 13y ago
Both oil companies and big banks compensate their skilled employees very well. It's not hard to make six-figures straight out of an MS as a petroleum engineer or geologist; you can do $200K/year with 5-10 years experience. And banks, of course, are legendary for their comp structures: you could be doing $80K salary + $160K bonus straight out of college and making half a mil or more 5-10 years out. It's the roughnecks, construction crews, and bank tellers that don't make big money. Of course, those tend to be the numerical majority of employees because they're relatively cheap. It's the same thing at Google - engineers can get paid $250K/year, but book scanners get paid $10/hour.
- throwaway2048 13y ago

grbalaffa 13y ago

There needs to be a corollary to Betteridge's law of headlines: if a headline reads "Why <foo> is not happening", that means it most definitely is happening (or has already happened).

dmmalam 13y ago

"I would be surprised if there were any new industry in the history of capitalism that distributed its economic rewards to its employees as widely as Silicon Valley has." Wall street has been distributing most of it's profits to employees in the form of bonuses for decades. Though unlike SV, it get criticised heavily (a lot unfairly IMHO) for it. Having worked in both, I feel they are full of the same 'type' of people.

loganfrederick 13y ago
Having worked with both, they are not quite the same type of people. You might find some similar personality traits (ego, intelligence, and/or arrogance). But there is one major difference: The typical Silicon Valley worker is much more capable of creating a product or service than the average Wall Streeter. This is anecdotal, but the i-bankers I have worked with and met generally have a limited skillset which boils down to Excel spreadsheet manipulation, 10K reading, and Powerpoint presentations. The skillset of Silicon Valley employees crosses a wider intellectual range (CS, statistics, math, art+design, EE, other hard sciences). Their knowledge is also deeper in a wider breadth of fields and can put their knowledge to work.
- dmmalam 13y ago
  Yea, I did mean personality traits, and moreso sale/trading/asset management than pure i-banking/PE. However while the typical wall steeter used to be a liberal arts major, it has heavily shifted toward STEM. At most i-banks, something like a third of headcount are tech. Even many of the front office are engineers, though again moreso in trading/asset management. Nowadays a large part of the competitive advantage comes from better software - a classic example of 'software eating the world'. Anecdotally some of the brightest people I've known were at BGI (now Blackrock), and they all had deep knowledge in finance, math, stats, tech and old school boys club company politics. [my old boss read math cambridge with stephen hawking and created the first and now biggest by AUM electronic portfolio management system for index funds, grinold & kahn literately [1] wrote the book on active portfolio management, etc] [1] http://www.amazon.com/Active-Portfolio-Management-Quantitative-Controlling/dp/0070248826 http://www.amazon.com/Active-Portfolio-Management-Quantitati...

pdog 13y ago

Off-topic: Why do outbound links on Medium.com have a scary-looking Redirect Notice?

joshAg 13y ago

> For starters, almost all of them recognize that their industry itself arose out of government funding (see ARPANET), and some of the most celebrated achievements of the digital culture (open source software, Wikipedia) involve commons-based collaboration with no conventional definition of private property whatsoever. It’s precisely because we lack a new vocabulary to describe this worldview that we end up lumping the tech sector together in the libertarian camp. I'm pretty sure that's just a form of socialism. > There’s a real estate crisis in Silicon Valley because the companies in the region are much more generous in the way they share the wealth, not less. Don't forget the fact that no town/city wants to build (or make it easier for developers to build) high density housing despite that it is desperately needed to keep up with housing demand.

eli_gottlieb 13y ago
I'm pretty sure that's just a form of socialism. Quiet you, we're trying to Talk Like Very Serious People ;-)!

smacktoward 13y ago

The fundamental error of this piece is that it assumes that if you vote Democratic, you're by definition not a one-percenter. But this is just wrong. There are lots of one-percenters who vote Democratic. They just mostly feel more strongly about cultural-liberalism issues than they do about economic ones. But when it comes to economic issues, these folks still tend to lean rightward; they overestimate the degree of social mobility the economy makes possible today, they support "ownership society" initiatives like 401(K)s and health vouchers over social insurance programs, and so forth. These folks aren't found just in tech, they're also quite common in the entertainment industry and other "new economy"/"information economy" sectors. (The derogatory term for them used to be "limousine liberals"; rich people who were totally down with helping the poor, as long as doing so didn't cut into their personal bottom line.) So you have billionaires on both sides. American politics, in fact, has mostly become a battle between billionaires. On one side you have billionaires who care about social liberalism, on the other you have billionaires who care about economic liberalism. But they're all billionaires, so issues that don't affect billionaires personally (like the minimum wage, or how to pay for retirement, or the unemployment rate, or affordable housing) just don't get included in the debate. As far as the political system is concerned, they're non-issues. They don't exist. There used to be institutions that brought these issues into the discussion anyway, like political parties and labor unions. But those have mostly atrophied over the last 50 years, so we have a system where whether the capital gains tax rate is low enough (a question that billionaires of all stripes care deeply about) is continuously and loudly debated, while whether the minimum wage is high enough is hardly ever discussed.

pg 13y ago
The fundamental error of this piece is that it assumes that if you vote Democratic, you're by definition not a one-percenter. What? Much of the article is devoted to making the opposite point: that the SV elite overwhelmingly support the Democrats.
- jiggy2011 13y ago
  Political affiliation seems like a red herring in a two party system. It wouldn't surprise me if people in SV vote democrat because they don't like certain things associated with the republicans (religion , anti-gay rights, guns , whatever) rather than agreeing wholesale with the democratic party manifesto.

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pchristensen 13y ago

The "10Ks of millionaires" figure is striking, but the Bay area is ~8M people and ~2.5M households, so thats ~1-4% of households are millionaires. People using liquidity cash to buy houses isn't nearly a strong an effect regionwide as high salaries and building restrictions.

uvdiv 13y ago
Lots of cities have a 1-4% millionaire density. By The Economist's definitions, Frankfurt is over 7%. NYC has 400,000 millionaires (5%). http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-7 http://www.economist.com/blogs/graphicdetail/2013/05/daily-c...

deleted 13y ago

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mcarvin 13y ago

So here are my reasons for high equity allocation in tech (notably missing from this list is that us techies are simply just progressive nice guys). 1. Less cash = more equity. Cash is expensive relative to equity for a start up and payouts are backended. In traditional firms (ie ones that make money) - your salary presents a larger % of the total comp pkg. 2. Human capital more important (in tech vs traditional businesses) = equity alignment is more important 3. VC rounds typically structure 10% to 20% option pools in to contracts. Ostensibly this is to create a pocket of equity for new employees. In practice this is often used as a tool to reduce the implicit valuation - creating a larger option than is needed, which is subsequently allocated because it is there.

YokoZar 13y ago

A much simpler point the author missed is that wealth doesn't exactly cause the housing shortage so much as not building houses. San Francisco has rent control, and most of the peninsula has severe zoning controls. It would be extraordinarily profitable to build commercial buildings with dense lofted apartments in many areas of the peninsula, however they are simply prohibited by local governments. That's neither libertarian nor egalitarian.

akgerber 13y ago
Much of the Bay Area (and California in general) housing policy is best summed up as the ol' Republican "Fuck you, got mine" with a mild environmental gloss, combined with an inability to imagine building anything other than auto-dependent suburbia.
cpursley 13y ago
One of my first thoughts when he mentioned housing as well.
joonix 13y ago
Note that those projects would be profitable only if they were permitted in limited areas only. A broad lifting of regulation would result in sprawl, not density. Look at Houston. Everyone would avoid expensive, dense areas by building out further and further into the land, and in the Bay, there's a ton of undeveloped wooden land that developers would have no problem replacing with tract homes if they were able to do so.
- YokoZar 13y ago
  Of course, there is room for urban planning. But it's quite telling that none of these projects are starting even in the "downtown" areas adjacent to caltrain stops, which is exactly where you want growth to happen. If a peninsula city actually wanted to prevent sprawl, they'd build up the urban core rather than force people to commute from more permissive cities in the east bay.
  - 13y ago

arh68 13y ago

Sort of a unexpected result, isn't it? The more 'egalitarian' companies distribute (massive) amounts of wealth into a (relatively) large number of people, gentrifying the entire Valley, and threatening to push the old inhabitants out. Is this egalitarianism? In making the middle managers (or whoever these people are) into millionaires, the divide between billionaires and the layman isn't actually improved: now the gap is even wider. There is also some curious use of evidence: Obama won Santa Clara by 42% implies "the most dynamic sector .. is now decisively in the camp of the Democrats", but it was only 30 years ago that Reagan won the same county by >10%. The data seems to imply that the county could swing back next election, but the author doesn't seem to appreciate that idea. Why does the author have a hunch that while they temporarily voted Republican, they're truly Democrats at heart?

TheCoelacanth 13y ago
> There is also some curious use of evidence: Obama won Santa Clara by 42% implies "the most dynamic sector .. is now decisively in the camp of the Democrats", but it was only 30 years ago that Reagan won the same county by >10%. Keep in mind that Reagan won the nationwide popular vote by 18%, so winning by 10% in his home state doesn't indicate a strong Republican following there. It just indicates a very one-sided race.

jseliger 13y ago

I find it somewhat funny that the original New Yorker article about the tech industry's insularity is itself hidden behind a paywall; I actually wanted to submit the Packer article itself this morning but didn't bother. Nonetheless, I do think Johnson does a decent job of giving the other side. But I did send this as a letter to the editor, since it concerns a pet peeve that I constantly see in the media: George Packer's essay on Silicon Valley's politics makes several references to housing prices, including that "the past two years have seen a twenty-per-cent rise in homelessness, largely because of the soaring cost of housing." But he doesn't mention how supply and demand affect pricing, as Matt Yglesias does in The Rent is Too Damn High or Edward Glaeser does in The Triumph of the City. Both writers have correctly observed that many urban jurisdictions prevent housing from being built to accommodate growing demand; as a result, prices rise. It's not primarily tech companies or their employees who have driven housing prices in Silicon Valley: it's residents themselves, and the courts that have given residents and politicians extraordinary powers to block development—which is why "San Francisco is becoming a city without a middle class."

bubbleRefuge 13y ago
You are right. Why can't more high-rise condo projects get going on the peninsula? Is it b/c of earthquakes? Why not build lots or hi-rise condos along the bart/cal-train corridor?
- HIbachikabuki 13y ago
  It's not the earthquake issue. It's that the Peninsula is already fully built out & most existing residents/voters don't want any high density development, they want to keep the existing single-family-home environments.
- khuey 13y ago
  It's because of zoning.
HeliasVlastimir 13y ago
This is why homeowners shouldn't be allowed to vote. They are happy to cause homelessness as long as their property values rise. It's disgusting.

ChuckMcM 13y ago

I really loved the insight about how tech companies distribute the wealth created by their growth. When it goes widely you end up with people like Charlie Ayers (Google's chef) who are able to leave and create their own restaurants (more jobs, more creativity). When you keep all the wealth generation to a hand picked set of individuals, it seems you create obligation and cronyism. And for me, the most amazing part, is that since it looks externally 'easy', success results in a rush of folks who want to do that too. When people ask my advice about interviewing at a place like Google I tell them, "Don't interview at Google just because you want to work at Google, interview there because there is something you want to accomplish that you can do more easily at Google than anywhere else." Or people asking for advice on creating a startup, where one of the questions is "What should I build?" Here is a news alert :-) If you don't already feel passionately about building something you don't want to be the person starting the startup. Work at one or two and figure out what it takes to build a company, what works and what doesn't, and be thinking about how your talents might solve a problem in a way that would be useful. Until then, don't quit your day job.

dmix 13y ago

> True libertarians would be repulsed at the thought, but the success of Silicon Valley even suggests that governments could do much more to encourage these kinds of internal compensation structures, in the name of better business and social cohesion. (Not to mention old-fashioned fairness.) Wait, what part did the government play in how tech-companies compensate their employees fairly? Or does he mean the government should be applying to same structure by force on companies in other industries (to share equity with employees)? Does the author not understand the difference between startup culture vs big business?

Lambent_Cactus 13y ago
The author appears to intend that latter meaning, where SV companies have more egalitarian ownership structures on their own, but that now that we've seen the results, the government should encourage those structures more broadly in the economy. Actually, the government plays a small part already in how high-tech companies share equity with employees, through preferential tax treatment for Incentive Stock Options. You could imagine many such nudges that could be employed to expand capital ownership short of distributing equity to employees "by force". Remember in general that the limited-liability corporation as an institutional type is itself a creation of government - the notion of a business as a separate entity with distributed owners such that the business can go bankrupt without allowing creditors to go after the non-business assets of the stockholders is an artificial and relatively modern invention with a large and complicated legal structure buttressing it. C Corporations, LLCs, LLPs, PCs and the like are all creations of government and the way they operate in practice is non-trivially shaped by the ways those laws are structured. Is it so outlandish to imagine an alternative form with a deliberately egalitarian bias (an "E Corp"?). It only takes one state experimenting to make it a reality!
- dmix 13y ago
  Corporations can still distribute revenue and equity as they please. It's a legal structure for taxation and liability. The state forcing corporations to distribute their earnings or equity a certain way is a massively more intrusive structure. If that was done, it would likely be single handily the greatest manipulation of markets and private assets ever done by a government in modern history. If an egalitarian equity structure legitimately benefits the companies, they will adopt that structure. If they don't then their competitors would do it as a competitive advantage. Unless it really doesn't benefit the companies and therefore requires the state to involuntary make them do it?

baron_mango 13y ago

Here's an interesting thing: If the spread of equity and the wealth that has led to has resulted in the rising cost of real estate, then, that same spread has resulted in a greater visibility of the wealth disparity in the US as a whole.

onemorepassword 13y ago

One foundation of the entire argument seems to be that support for the Democratic party makes SV progressive. However, in a global context only the minority left wing of the Democratic party could be called progressive. Also, a simpler explanation for the large support for the Democrats would be that SV consists of intelligent, highly educated and well-informed people that wouldn't dream of supporting the extremist, anti-intellectual and downright insane collection of circus freaks the Republican party has become. Just based on the purely anecdotal evidence of online and personal encounters with SV-dwellers, I would consider most of them to be "open minded conservatives". The other foundation is the way companies in SV are organized and equity dived compared to traditional companies. This could simply be explained as "pragmatic", which is how most companies view it themselves. It seems to me the author is trying to project his own ideas on SV.

nostromo 13y ago
I think that's correct. Anecdotally, my personal network in tech seems to side with Democrats for reason like environmental protection, global warming, gay marriage, abortion, and olive branch foreign policy; not because of economic reasons like union support, wealth redistribution, or strengthened regulators.
- jjoonathan 13y ago
  Makes you wonder if the Republican party isn't intentionally taking the wedge-issue craziness to 11 only so that they can rebrand next election cycle and yank the mat out from under the Democrats. Given the effectiveness of Romney's rush-to-the-center in the 1st debate against Obama, the thought has to have crossed their minds. The timing (tossing last election to win the next one) makes sense because next election they won't be running against a relatively popular incumbent. They don't have anything to gain by doubling-down on the losing side of every social issue on the list -- their core demographic will vote R regardless -- but a pull-the-mat strategy could net them tons of wealthy individuals from the "socially liberal economically conservative" camp.
  - 13y ago

jvm 13y ago

TLDR: You might think Silicon Valley is a rich white boys club. But we're a progressive rich white boys club. Our values are highly superior to J. P. Morgan's (or just about anybody's really) so there is actually nothing to be critical of.

api 13y ago

I think the Valley's insane wealth is a temporary thing, indicative of a comparatively new industry. Detroit once had the highest average income in the United States. Cars are still as popular as ever, but the auto industry eventually shifted and diversified and broadened and left Detroit mostly behind.

losethos 13y ago

Guaranteed every Republican gives more to charity then every Democrat. Jesus criticized those who give publically -- If a Democrat gives to charity he makes a big deal out of it because he's not like a church-goer who sees everybody doing it. All these people have built their houses on sand. I'm marveling at what is in store one of these years when they discover God. God says... shall they hear without a preacher? 10:15 And how shall they preach, except they be sent? as it is written, How beautiful are the feet of them that preach the gospel of peace, and bring glad tidings of good things! 10:16 But they have not all obeyed the gospel. For Esaias saith, Lord, who hath believed our report? 10:17 So then faith cometh by hearing, and hearing by the word of God. 10:18 But I say, Have they not heard? Yes verily, their sound went into all the earth, and their words unto the ends of the world. 10:19 But I say, Did not Israel know? First Moses saith, I will provoke you to jealousy by them that are no people, and by a foolish nation I will anger you. 10:20 But Esaias is very bold, and saith, I was found of them that sought me not; I was made manifest unto them that asked not after me.

jgrant27 13y ago

"Randian libertarianism". Bullshit. Rand was NOT a libertarian. http://www.aynrand.org/site/PageServer?pagename=ar_libertarianism_qa http://www.aynrand.org/site/PageServer?pagename=ar_libertari...

cdugg 13y ago

What's so great about being progressive? Aren't progressives the people who want to re-distribute other people's money? And what on earth is so dreadful about the gilded age? The greatest increase in the standards of living in the history of the US happened in the gilded age. By this idiot newyorker writer's logic, we are supposed to dread and avoid the entrepreneurs that dropped the prices of kerosene, steel and other commodities, facilitated rapid industrialization and improved the living standards of everyone. Why are the billionaires of today (sergei, larry, Zuck etc) any different in nature than the billionaires of those times? Except for the crony capitalists that got in bed with the government, what is wrong with great success and wealth?

michaelochurch 13y ago

The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. That's disingenuous. 0.02% of something that a CEO thinks (based on nothing but his own ego) is worth $10 billion is not meaningful equity. The proper way to model this is that equity compensation tends to be about 1/3 of what the person is giving up in salary, career advancement, etc. If you're paying $30,000 to work there, you'll typically get $10,000 per year in equity, or $40,000 over 4 years. That'll be 0.4% if the current valuation is $10 million. Now, let's say a clueless schmuck puts his whole life savings (or, more accurately, what he'll be getting in lieu of savings over the next 4 years) in some extremely volatile (100-500%) penny stock, because that's actually what's happening (with that penny stock being in one's employer, i.e. controlled by someone who can fire you for "performance" Pincus-style). Some of those people are going to end up modestly wealthy (no employee gets rich) and most are going to be hosed. To say that employee equity in typical startups (there is "meaningful" is a huge stretch. You'd have the same results asking people to pump their savings into penny stocks. A few would get very rich (from modest starting points) and most would wipe out.

eli_gottlieb 13y ago
And this is why I'd rather just get large cash bonuses than equity options or grants, if I'm going to work for someone in industry. Give me cash, and I can dump it into my Vanguard index funds for a pretty good expected value.

lhh 13y ago

"The whole premise of stakeholder capitalism offers a powerful and distinct message, because it gets at both our desire to be competitive in the global marketplace, but also to be more fair and equitable in the way we share our wealth. True libertarians would be repulsed at the thought..." This sounds to me like a fundamental misunderstanding of the dynamics of a startup vs big company. In a startup, every employee has an important bearing on the success or failure of the company. Getting the right people on the team is priority number one for a budding startup, and to get the best people you have to promise them a piece of the spoils. In a typical big company, only a handful of people have enough authority to steer the ship. For everyone else, their roles usually aren't mission-critical, or they're relatively easy to replace. You therefore don't need to pay them as well. This isn't about "being fair and equitable" or "sharing our wealth" for its own sake, this is still just about economics. More people are getting stock at tech companies because those people's skills and contributions are more directly linked to the success of those companies. It just doesn't make sense to be giving stock to pilots, pharmacists, and factory workers - if they're amazing at their jobs, it has at most a marginal affect on the company as a whole, and if they quit, the show will go on. Don't get me wrong, I'm completely in support of giving junior people meaningful equity, for a number of reasons. But it still needs to make sense. There are good reasons why we don't see it in other industries.

hkmurakami 13y ago

* The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. * While me may already be better than the rest of the country in this regard, we can definitely do a lot better than we do today. I'd be preaching to the choir so I'll refrain from elaborating on the equity compensation of single digit employees, but there must be a way to share the success more equally than we do today.

_gotmilk 13y ago

I know one thing, Silicon Valley is hurting for more H-1B visas to fill vacant jobs. Perhaps one reason SV overwhelmingly votes Democratic is that the Democrats are in general more pro immigration.

zhemao 13y ago

"It gets at both our desire to be competitive in the global marketplace, but also to be more fair and equitable in the way we share our wealth. True libertarians would be repulsed at the thought." I don't think this guy really understands libertarianism. Libertarian principles don't say anything about how private actors choose to distribute ownership. Most libertarians are only "repulsed" if government forces private actors to distribute ownership in a particular way. If spreading out equity more evenly among employees makes a particular firm more competitive, then awesome, that's how the market works.

dietlbomb 13y ago

Does it strike anyone else as odd that everyone in the Silicon Valley software industry has nearly unanimous views on social policy? I've never been to Silicon Valley, but I have spent my entire life and career among engineers, and I have observed diverse views on such issues as gay marriage, climate change, abortion, etc.

declan 13y ago
There's selection bias: some engineers may choose to move to the SF bay area in part because of the perceived views on social policy. One example of this is SF's Castro district especially a few decades ago. Speaking as someone who lives on the SF peninsula, I think it's fair to say there's near-uniformity of views on gay marriage (though drive an hour east and that will flip). Climate change, on the other hand, is an area where reasonable people even in this area are more likely to disagree.

natmaster 13y ago

The author starts with a false premise about what libertarianism is. How can I follow any logic that starts off wrong?