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pg once pointed out there may be far fewer startups in a society that does not allow concentration of excessive wealth. That's at least one single valid reason.

pg once pointed out there may be far fewer startups in a society that does not allow concentration of excessive wealth. That's at least one single valid reason. http://paulgraham.com/inequality.html http://paulgraham.com/inequality.html "People start startups in the hope of becoming much richer than they were before. And if your society tries to prevent anyone from being much richer than anyone else, it will also prevent one person from being much richer at t2 than t1."

pyoung 13y ago
His logic is a bit off. In a truly efficient market (big if), if taxes were raised so significantly as to have a major impact on the rewards, then you would get a corresponding reduction in risk. I.E. Instead of having a 1 in 10 chance of a startup making it (as he claims in the post) you would probably end up with a 1 in 8 chance (or something similar) as the smaller rewards would, in theory, reduce the number of competitors. You would still end up with the same number of winners however. In reality, there are a number of intangible benefits to starting a business that will overpower any reduction in startups due to higher taxes. Autonomy, excitement, and having a large impact all contribute in the decision to take the risk. Additionally, starting a business is still one of the only ways to strike it rich (unless you get lucky in the athlete/musician/actor department). So for most people with sizable ambitions, a reduction in rewards due to higher taxes will not have any meaningful impact on their decision.
subsystem 13y ago
It would be a much better argument without the strawman of absolute equality.
- emiliobumachar 13y ago
  From the same reference: "This argument applies proportionately. It's not just that if you eliminate economic inequality, you get no startups. To the extent you reduce economic inequality, you decrease the number of startups."
  - subsystem 13y ago
    But that is not the argument he makes leading up to the quote. It may seem like semantics, but mixing absolute and relative inequality makes an increase in equality seem unfavorable.
vidarh 13y ago
Some people start startups in the hope of becoming much richer than what they were before. Most of the people for whome that is a major motivator are gambling, as your risk of failure is massive, and chance of that big payoff is ludicrously small. If you want to become much richer than before, the more rational approach for most people is likely to be to work harder, live frugally, and invest everything they possibly can set aside. I'm not so sure we'd be worse off without those few people whose only motivation for a startup is that they care so much about the potential payoff that they'd not start a company if they couldn't strike it big.
deleted 13y ago
[deleted]
_delirium 13y ago
Is that really why people start startups? I'd hypothesize that most interesting startups were started for more fundamental reasons than just to get much wealthier than other people. Many startup founders are passionate enough about what they're doing that they'd do it even their returns were less than what they would otherwise make (e.g. compared to a Google or Facebook salary). In any case, startups are more constrained by opportunity than desire. Many people have both the ability and desire to bootstrap a startup, but have to work a regular job because they have to provide for their kids, and can't afford the risk. In more equal societies, these people have an easier time quitting their jobs and starting a company.
- grinnbearit 13y ago
  If I had a minimum basic income I would never have to work for anyone else ever again! :) I would absolutely start that Lhasa Apso matrimonial site I've always dreamed of.
dragonwriter 13y ago
> pg once pointed out there may be far fewer startups in a society that does not allow concentration of excessive wealth. There will be far more individual entrepreneurial efforts in a society which does a better job of insuring that: 1) People have the basic needs reliably met independent of wage-labor arrangements, reducing the incentive to choose wage labor of entrepreneurship, and, 2) Marginal taxes are kept low for those who have not yet acheived above average wealth, increasing the ability to acheive moderate concentrations of wealth and for people other than the excessively wealthy to self-fund entrepreneurial efforts. These may tend to be more "lifestyle businesses" than "startups", but I don't see any reason to see the latter as having greater social value than the former.

pyoung 13y ago

His logic is a bit off. In a truly efficient market (big if), if taxes were raised so significantly as to have a major impact on the rewards, then you would get a corresponding reduction in risk. I.E. Instead of having a 1 in 10 chance of a startup making it (as he claims in the post) you would probably end up with a 1 in 8 chance (or something similar) as the smaller rewards would, in theory, reduce the number of competitors. You would still end up with the same number of winners however. In reality, there are a number of intangible benefits to starting a business that will overpower any reduction in startups due to higher taxes. Autonomy, excitement, and having a large impact all contribute in the decision to take the risk. Additionally, starting a business is still one of the only ways to strike it rich (unless you get lucky in the athlete/musician/actor department). So for most people with sizable ambitions, a reduction in rewards due to higher taxes will not have any meaningful impact on their decision.

subsystem 13y ago

It would be a much better argument without the strawman of absolute equality.

emiliobumachar 13y ago
From the same reference: "This argument applies proportionately. It's not just that if you eliminate economic inequality, you get no startups. To the extent you reduce economic inequality, you decrease the number of startups."
- subsystem 13y ago
  But that is not the argument he makes leading up to the quote. It may seem like semantics, but mixing absolute and relative inequality makes an increase in equality seem unfavorable.

vidarh 13y ago

Some people start startups in the hope of becoming much richer than what they were before. Most of the people for whome that is a major motivator are gambling, as your risk of failure is massive, and chance of that big payoff is ludicrously small. If you want to become much richer than before, the more rational approach for most people is likely to be to work harder, live frugally, and invest everything they possibly can set aside. I'm not so sure we'd be worse off without those few people whose only motivation for a startup is that they care so much about the potential payoff that they'd not start a company if they couldn't strike it big.

deleted 13y ago

[deleted]

_delirium 13y ago

Is that really why people start startups? I'd hypothesize that most interesting startups were started for more fundamental reasons than just to get much wealthier than other people. Many startup founders are passionate enough about what they're doing that they'd do it even their returns were less than what they would otherwise make (e.g. compared to a Google or Facebook salary). In any case, startups are more constrained by opportunity than desire. Many people have both the ability and desire to bootstrap a startup, but have to work a regular job because they have to provide for their kids, and can't afford the risk. In more equal societies, these people have an easier time quitting their jobs and starting a company.

grinnbearit 13y ago
If I had a minimum basic income I would never have to work for anyone else ever again! :) I would absolutely start that Lhasa Apso matrimonial site I've always dreamed of.

dragonwriter 13y ago

> pg once pointed out there may be far fewer startups in a society that does not allow concentration of excessive wealth. There will be far more individual entrepreneurial efforts in a society which does a better job of insuring that: 1) People have the basic needs reliably met independent of wage-labor arrangements, reducing the incentive to choose wage labor of entrepreneurship, and, 2) Marginal taxes are kept low for those who have not yet acheived above average wealth, increasing the ability to acheive moderate concentrations of wealth and for people other than the excessively wealthy to self-fund entrepreneurial efforts. These may tend to be more "lifestyle businesses" than "startups", but I don't see any reason to see the latter as having greater social value than the former.