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The Unexotic Underclass

• bokonist 12y ago
  Here is the basic problem. When you build a product for savvy people, your interests are aligned. Savvy people will only pay you money when you build a good product. Thus, the only way you can make money is by actually doing good, by creating a product useful to other people. This is the happy coincidence that draws so many to entrepreneurship - we get to build things, create value, and get paid $$$. When you build a product for less than savvy people, the easiest way to make money is by tricking them. Even if if you do not want to play dirty, you will be driven out of the market by people who do. You will be competing against people who make something look like a great deal (no down payment, zero percent APR!) but where it turns out the customer is getting screwed in the long term. You might want to sell a fair product, but since you are selling to less than savvy people, they ignore your product and buy the product that is tricking them, that looks like a better deal than it is. When less savvy people buy good products, it's usually products that are being passed on via reputation by the more savvy set. Thus if you want to build good products for the underclass, build it first for savvy upper-middle class people, and if it is good, it will eventually filter down, like email, smart phones, and a hundred other technologies have.
  • Retric 12y ago
    It's not that it's easier to make money scamming poor people. It's just easier to make money scamming people period. Rich people and poor people tend to fall for the exact same scams. The Vast majority of VC's are really running get quick scams to separate people / institutions with money from it. And if you dig into it so is much of the banking sector. EX: Morgage backed security's are really AAA. See savings and loan crisis part 237: http://en.wikipedia.org/wiki/Savings_and_loan_crisis http://en.wikipedia.org/wiki/Savings_and_loan_crisis Yes, the banking sector collapsed twice in 15 years, look out 2020. Or roll back to the stock market crash of 1973-74 where the dow lost over 45% of its value. Followed by 14% annual inflation! Budweiser is a classic example of non scam product targeting that demographic. And there plenty of others. Just think bingo card creator not twitter.
    • pastProlog 12y ago
      > The Vast majority of VC's are really running get quick scams to separate people / institutions with money from it. What you're saying is a calumny against VC's. VC's have helped create plenty of businesses and assets that investors value and have poured money into - like the whole Bitcoin ecosphere. Why, I have heard the top VC's, angels, and even YCombinator high mucky mucks raving about Bitcoin. If people listened to you, they might not pour their money into such valuable assets like Bitcoins.
      • klochner 12y ago
        Was that sarcasm?
    • gohrt 12y ago
      Budweiser is swill that passes for beer in the USA, because it is cheaper than what most of the world recognizes as beer -- until savvy people made microbrews popular in USA, and they are not in grocery stores.
      • lambdaphage 12y ago
        http://crookedtimber.org/2007/05/10/in-praise-of-budweiser-contains-extended-footnotes/ http://crookedtimber.org/2007/05/10/in-praise-of-budweiser-c...
      • eli_gottlieb 12y ago
        You're being downvoted because America produces plenty of fine beer domestically, not just microbrews but major brands like Samuel Adams as well.
        • obvious_throw 12y ago
          The Boston Beer Company (maker of Samuel Adams) is still technically a craft/micro brewery, since they produce (intentionally) less than 6 million barrels annually. The entire craft brew industry produces less than 8% of all domestic beer. Calling Sam Adams a "major brand" is a bit of a stretch.
  • idlewords 12y ago
    Your assume that poor people are poor because they lack the savvy to be born into the upper middle class. That's a common misconception. Poor people are actually poor because they don't have any money. The easiest way to make money is not by tricking the poor, but by tricking the rich (they're the ones who have most of it, after all). Unfortunately, that same money allows even the dumbest rich people to aggressively defend their interests against savvy people like you. While no one gives fuck all about the poor.
    • rattray 12y ago
      > no one gives fuck all about the poor. That's blatantly untrue. People care. Ask yourself; how many of your friends "don't give fuck all about the poor"? I find it hard to believe that a majority of people would not wish a better life on poor people. But solving their problems is intimidating, difficult, and probably unprofitable. If the true problem is that poor people are poor because they don't have any money, the obvious solution is to give them money (eg; EITC, UBI, free healthcare, free education etc). If all people have money -- and if you're correct that savviness doesn't really play into it -- all people will have companies trying to solve their problems. I think Silicon Valley needs to wake up to the fact that some problems aren't best solved through technology, or through "people caring", but simply through better governance.
      • cbd1984 12y ago
        > some problems aren't best solved through technology, or through "people caring", but simply through better governance. And here you run up against a religious belief named "The Government Is The Problem", which is utterly intractable and ineradicable in someone with an advanced case, and will never die off because it's founded on either blatant self-interest (A regulatory body is harming my profits!) or soured optimism (I thought everything was perfect until the scales fell from my eyes! Now I think everything is perfectly horrible!). It's related to cynicism, which has posed as maturity for so long some people honestly cannot tell the difference.
        • rattray 12y ago
  • spitfire 12y ago
    I disagree. There's a lot of pain that you can solve in everyday peoples' lives that people could create businesses around. Look at patio11. He builds appointment reminders. Can you believe that's a real feed-your-family business? It is. Here's what I think he was getting at. Build a solution to problems normal people have. An example of this: A jobs site that works for everyday people. IE: Monster.com that doesn't suck. There's all sorts of developer rank and 37signals job boards for you to go to if you're one of the supermen(women). But if you're a normal person, There should be.
  • ForHackernews 12y ago
    I don't think your first paragraph is true. Plenty of companies targeting savvy (read: up-market) consumers still use "dark patterns" to try and trick them or rip them off: Free trials that bill you unless you cancel, opt-out special fees, shady marketing that borders on spam. Honestly, when I think of the things I regularly spend money on, there are precious few where I feel "This is a great product that I am happy to support" much more common is the feeling "Well, I really need X, and they're the only ones that make an even halfway acceptable X." or "I guess Y is okay, but it's overpriced for what it does."
• firstOrder 12y ago
  > If you're itching to start something new, why chase the nth iteration of a company already serving the young, privileged, liberal jetsetter? Because those are the projects which angels and VCs bankroll. Because those are the people who have disposable cash. I was just reading an article on a conservative web site, actually one run by Ben Horowitz's father ( http://www.frontpagemag.com/2014/dgreenfield/cbs-colbert-and-contempt-for-america/ http://www.frontpagemag.com/2014/dgreenfield/cbs-colbert-and... ). It talks about how TV doesn't care about older viewers, rural viewers, and increasingly only cares about young professionals on both coasts, and how television programming is being focused on such people. Not sure how true it is but it makes sense. Audre Lorde once said that the master's tools will never dismantle the master's house, and capitalism is not going to solve the fundamental contradictions of capitalism, other than by imploding, as so many economic systems before have done (feudalism, slavery, primitive communism). Also, anyone who has done work organizing working class people knows the solution is not for a genius from MIT to swoop in with some corporation to try to fix problems wrought by corporations. You see what is possible and organize around that. The American white working class once had power, and it chose to send bombers north of the Yalu river, support a war in Vietnam, on and on up to modern day with Obama's support of the Honduran's military overthrow of Honduras's democracy etc. The AFL-CIO saw it's steepest decline under someone who never worked or ran a union, but was involved undermining foreign unions in cahoots with the CIA and American big business. And on and on. Now they go down to fundamentalist churches and watch Fox News as they age, and slowly become a minority in their own country. Empowering white, blue collar Americans gave us No Gun Ri and My Lai. Thanks, I'll pass. I'm glad to see the sun setting on the white American working class.
  • dasil003 12y ago
    Yeah, as someone who qualifies as privileged having grown up firmly middle-class and blessed with computers and the interest to learn them since the 80s, I am not incredibly inclined to channel my entrepreneurial spirit into something unfundable to satisfy the moral call of an ex-Goldman MIT graduate on a guilt trip. Put simply, I can not move the needle through self-sacrifice. That doesn't mean I don't have ethics and integrity about what I choose to do, but just that I'm not fool enough to believe I can solve (eg) poor single mothers' problems in this country with an app. The problems are not going to be solved until culturally we come to a common understanding about what the concentration of wealth is actually doing to the country, so the zeitgeist can move past this sort of ra-ra Fox News pro-corporate anti-socialist propaganda that millions of people believe on principle because it appeals emotionally to their rugged individualist values, but actually only serves as an idealogical wedge to distract the proletariat while the oligarchs continue with business as usual lining their pockets behind the scenes.
• x0x0 12y ago
  fta: But there’s only so much Washington can do to help out, what with government penniless and gridlocked, and its elected officials occupying a caste of selfishness, cowardice and spite, heretofore unseen in American politics. This is pure both-sides-do-it bullshit. In reality, one side recently passed an amazing transformation of health care to attempt to pull the united states -- still the world's richest large country -- up to the level of any civilized first world country. That is, we've moved towards providing healthcare to all americans as a birthright. One party was unanimously opposed, either for venal reasons, or outright stupidity (Sarah Palin's death panels, and thank's John McCain for that!), or evil (all Republican governors in the south). Somehow Europe, Canada, Japan, etc, all make health care work but we can't. We could also discuss the ever declining (real) minimum wage, which had it kept up with real income growth in the US economy would be in the $20 dollar range or so. One side of the government -- and no, the Dems didn't cover themselves in glory, but who exactly decided to spend over a TRILLION dollars on a war in Iraq for reasons that are still up for question, on the basis of flimsy and nonsensical evidence funneled through willing accomplices in the media, against all evidence from people with a history of correctness that both (1) there where no WMDs, and (2) invading Iraq would upset the jenga tower that is iraq and the middle east? Any article that can describe largely political problems without once mentioning republicans or putting the blame for much of this squarely on them is worthless and frankly part of the problem.
  • jcalvinowens 12y ago
    > the ever declining (real) minimum wage The last 30 years of minimum wage adjusted for inflation: http://i.imgur.com/7kRykeS.png http://i.imgur.com/7kRykeS.png I'm not saying it shouldn't be higher, but it's actually currently higher than it was for most of the last 25 years.
    • vixen99 12y ago
      As with most issues, there are costs and benefits with the minimum wage. It appears that Norway, Austria and Germany, amongst others, do not see a balance in favor of the benefits. Unsurprisingly their unemployment rates are low. Were I useless to an employer (as once I was) I would rather work for some wage (as I did) rather than exist (and get used to existing) on handouts from the wealth created by other tax payers' work.
• Afforess 12y ago
  Maybe I lack vision - but I don't see how any of the problems of the white collar and working poor can be solved by Silicon Valley. It would be impossible for a startup to work with the government in processing Veterns claims, for example. The regulations barriers are immense and the security and compliance problems are legion. Similarly, how are startups supposed to improve the earning potentials of the working poor? MOOCs? Don't make me laugh. Most of these people wouldn't want to take one, they are not interested in an Education. They can barely fit in their current paycheck to paycheck lifestyle into their current schedule. And even if we could retrain them - as what? Coders?! Most people do not have the aptitude or patience nessecary.
  • svmegatron 12y ago
    > The regulations barriers are immense and the security and compliance problems are legion. Paging Uber ... I am kidding, kind of. I do wonder what would happen if a well-capitalized startup did something in this space. Provide services directly based on the hope/promise/belief of future repayment?
    • marcosdumay 12y ago
      > I do wonder what would happen if a well-capitalized startup did something in this space. There's a problem with this line of thinking... A statup is a company that lacks capital, and compensates that by an improved supply of other kinds of resources[1]. Compared to a mid-sized company budget, VC rounds are change money. Red tape and government bureocracy are common examples of problems that can be solved with money (== people's time, not competency), and nothing else. Startups in that enviroment either discover one of the few exceptions or die. [1] Besides other constraints you may want to apply to that term, like high growth potential. The point is, that one constraint is there.
  • idlewords 12y ago
    Not every solution takes the form of a startup. And there's always the lifehack of asking the working poor what they think, and listening to them. Maybe some of them have the vision we lack.
  • 12y ago
• scythe 12y ago
  >entrepreneurs have stopped chasing and solving Big Problems What is strange to me is that people believe entrepreneurs ever solved "Big Problems". Who in history falls into this class? Thomas Edison? Alexander Graham Bell? Henry Ford? Guglielmo Marconi? Nonsense, I say. These men didn't solve the "big problems" of their era -- they didn't attack issues that were popular in the public consciousness. They were really much more similar to today's SV entrepreneurs: they created markets, rather than entering them. We never needed light-bulbs, and we never needed smartphones. We never needed the telephone, or Google. We never needed radio, and we didn't need Netscape either. We never needed cars, nor did we need Paypal, Bitcoin and Square. The mistake is that thinking the first inventions are somehow more fundamental, just because they're older. That's nonsense. Big Problems, to the extent that they are ever solved, are almost always solved collaboratively, by coalitions of scientists and engineers, involving both the public and private sector, and the solution rarely appears by flipping a switch. Norman Borlaug wasn't an entrepreneur and he didn't work alone. Ditto Edward Jenner, James Watt, you name 'em, we got 'em. These men were not entrepreneurs (though Watt worked with one). >And yet, veterans who’ve returned from Afghanistan and Iraq have to wait roughly 270 days (up to 600 in New York and California) to receive the help — medical, moral, financial – which they urgently need, to which they are honorably entitled, after having fought our battles overseas. >Technology, indeed, is solving the right problems. Why on Earth would we expect technology to solve political problems? >Meet the people who have the indignity of being over 50 and finding themselves suddenly jobless. These are the Untouchables of the new American workforce: 3+ decades of employment and experience have disqualified them from ever seeing a regular salary again. Once upon a time, some modicum of employer noblesse oblige would have ensured that loyal older workers be retained or at the very least retrained, MBA advice be damned. But, “A bas les vieux!” the fancy consultants cried, and out went those who were ‘no longer fresh.’ As Taylor Swift would put it, corporate America and the Boomer worker “are never ever getting back together.” Instead bring in the young, the childless, the tech-savvy here in America, and the underpaid and quasi-indentured abroad willing to work for slightly north of nothing in the kinds of conditions we abolished in the 19th century. Economics: the only field you don't have to study to rant about on mit.edu. >“What do we have to do with any of this? The unexotic underclass has to pull itself up by its own bootstraps! Let them learn to code and build their own startups! What we need are more ex-convicts turned entrepreneurs, single mothers turned programmers, veterans turned venture capitalists! You don't have any numbers, you don't have any sources, you don't have any data. You think my only objection is that it's not my responsibility? My objection is that it's insane. Khan Academy, though, looking at America's education system. Fitbit, targeting the number one cause of preventable death in the developed world. That e-cigarette guy from China, taking on number two. David Nichols and the psychedelic renaissance (not a company but it can't be), bringing MDMA to veterans. Theranos, making blood tests affordable for the 80% of Americans who make five figures or fewer. Prepolarizing MRI. Various on-demand laundry and cooking servies. It's out there. In some cases it doesn't matter: single mothers'[1] problem isn't that they aren't targeted by startups, it's that they don't have any money! And you know what? It's fucking hard. These companies don't take off like bottle rockets the way Dropbox and Google did. Bringing products to disconnected people in disparate areas who don't like you is a lot harder than selling restaurant recommendations to the other nerds on the train. [1]: you might be able to make an app so that single parents can find each other and trade-off childcare, but it probably exists already anyway. I'm not exactly Nostradamus, here.
• declan 12y ago
  >what with government penniless and gridlocked Um, the U.S. federal government will be spending something like $3.4 trillion in the fiscal year beginning at the end of this month. That's pretty much the exact opposite of truly "penniless." As for gridlocked, sure, it's going to be difficult for the Dems to expand Obamacare, and it's going to be difficult for the GOP to repeal Obamacare, so by that crabbed version of "gridlocked" the author has a point. But in reality, you'll see 99% of appropriations bills (measured by pages of text) over the next few months become law with enthusiastic bipartisan votes. You'll see the NSA's budget increased for next year by an enthusiastic bipartisan vote. You'll see the number of new federal regulations expand every year with no outcry from any U.S. senator of either major party. Etc. That's pretty much the exact opposite of truly "gridlocked." On a more HN-relevant point, the author's suggestion of fixing the VA is something that needs to be done by the Feds, not an app. They created these serious, systemic problems for veterans and they're the only ones that have the legal authority (and responsibility) to implement a fix. The WSJ has been writing for years about sensible plans for VA reform but nobody in D.C. seems to be listening.
  • ejain 12y ago
    Need to distinguish between legislators and administrators. Selling a solution to latter is a losing proposition, because they are usually struggling to accommodate all the spending mandated by former.
  • onion2k 12y ago
    Imagine I give you $20. Then I tell you that you have to spend all of that $20 on x, y, and z. Are you penniless? Yes. You have no money. All of the government's $3.4 trillion is budgeted for, allocated and spent. What makes the government penniless is the fact that they can't do anything else because they have no budget for it.
    • refurb 12y ago
      But the gov't creates the budget. They choose what to spend that $20 on.
• WalterSear 12y ago
  It's a lot easier to get money out of people who have some to spare. And people say Big Problem when they are embaressed to admit that it's Big Money that they are really after, when you get down to it. That said, I know quite a few people trying to solve big problems in SF. http://www.handup.us http://www.handup.us for example.
• patio11 12y ago
  I like parts of this article more than others. For example, while I share a certain sense of frustration that SV seems to spend a disproportionate amount of resources on mobifotosocialgames, smartphones and their downmarket progeny are an enormous quality-of-life improvement for broader America. There's virtually nothing a cash-poor-responsibility-rich person needs to do that having a smartphone does not make them better at. Commute to work? Apply for benefits? Schedule appointments with doctors? Successfully keep those appointments? Keep tabs on kids while working/errands? A smart phone makes you better. As an entrepreneur who makes stuff for people who are not the usual suspects, the challenges to doing this are numerous and largely not conducive to the VC-funded trajectory. You have to convince people to pay you money for your services, you have to be able to service those customers profitably, and the customers are disproportionately pathological. Most of the software they consume is getting written by AppAmaGooFaceSoft because they can underwrite it with their massive monopoly rents, subsidize the cost straight down to zero, and deal with the CS headaches attendant in serving poor people by sending them to a call tree / web app backended by a Markov chain backended by /dev/null. There's also a bit of "every problem has a software solution" enthusiasm which is, well, a bit overstated. (Sometimes this isn't stated outright, but when you expect to do something meaningful on e.g. $500k in an angel round, you implicitly expect to do something meaningful 100% in software, because $500k isn't even enough to launch a single McDonalds in the real world.) Many problems have an 80% software solution attached to a 20% "interface with the real world" mandatory bit. The marginal cost of that last bit, though, is hundreds, thousands, or tens of thousands of dollars per client served. Or it has highly non-trivial political/regulatory barriers to entry, like "Convince an incompetent, intransigent, and politically invulnerable agency to disemploy half their workforce, who are by the way mostly veterans, whose main professional competence is doing an important thing slowly, poorly, and expensively."
  • incision 12y ago
    >'Commute to work? Apply for benefits? Schedule appointments with doctors? Successfully keep those appointments? Keep tabs on kids while working/errands? A smart phone makes you better.' Spot on. Years ago, I maintained a couple of desktops in a sort of 'job center' where people could submit electronic applications for various low-end, entry-level positions. The most common issue - no email address. Second most common - has email, but has to take the bus to the library to check it. Cheap smartphones have been a boon at that level. There's a whole segment of the population that was missing out on all the benefits of being connected until very recently.
• 3pt14159 12y ago
  Let's take a look at the real problems facing America and the rest of the developed world: 1. Mismanaged IT in critical infrastructure. 2. Misallocated funds in programs helping the destitute. 3. Cyclical loops of depression-lack of opportunity-lack of skill building. 4. Health disorders on a massive scale, like metabolic disorder, that can be solved with very simple things like diet and exercise. These places are not where a bootstrapped startup can make a difference. They are mired in red tape and ignorance. Show me the path to get people off of sugar diets. Show me the path to get the VA to modernize their forms and applications. I'll do it right now for free. It isn't just me, so many of us are ready and willing to help. The truth is that we build Instagrams because people will use them. We build them because the biggest hurdle is Apple's insane app verification process; but the bigger problems are so much harder to solve because the blockades are human and political. Barriers that most of us can't hope to cross.
  • peteretep 12y ago
    > They are mired in red tape and ignorance. So was provision of taxis
    • dasil003 12y ago
      That flippancy cuts both ways. The solution to the western diet is right there around the edges of the supermarket, and probably most people by now realize it's there, but they keep buying the flavor-enhanced processed grains because they taste good and are addicting. There is no red tape from people solving this problem for themselves, and that problem (#4 from pi) is about 10000 times greater than whatever problems people have or had with taxi provisioning.
      • NoPiece 12y ago
        But how do people know to go to the edge of the supermarket when the government has been telling them, and schools have been teaching them go to the middle? This is the food pyramid the government was pushing from 1992-2005. You should have 6-11 servings of bread, rice, pasta, and cereal a day! It was red tape and ignorance that pushed people to the middle of the market. http://i.imgur.com/QtDfDAl.jpg http://i.imgur.com/QtDfDAl.jpg
• 7Figures2Commas 12y ago
  The "unexotic underclass" that the author refers to is already being served by a multitude of entrepreneurs and businesses. The degree to which it is served well varies considerably from demographic group to demographic group, geographic region to geographic region. What the author apparently fails to recognize is that the biggest challenge for the entrepreneurs and businesses trying to serve her "unexotic underclass" is access to debt financing. Venture capital is not appropriate for every type of venture. While there's a strong argument to be made that venture capitalists would be wise to make a conscious effort to give greater consideration to businesses run by and targeting people who don't look and live like they do, the reality is that the economic structure of venture capital is incompatible with the majority of businesses that require capital. Put simply, for every business for which equity financing is appropriate, there are probably a hundred or more for which it is not. If the author wants to see more businesses serving the "unexotic underclass" and serving it well she should focus more on the market for debt financing and not the market for equity financing.
  • idlewords 12y ago
    I would expand your argument to say there are more effective ways to serve the underclass than entrepreneurship.
• eddyparkinson 12y ago
  "Make something people want." - is on Y-combinator t-shirts. It is not about class, it is about solving a want or a need in a sustainable way.
  • potatolicious 12y ago
    > "It is not about class, it is about solving a want or a need in a sustainable way." Of course it's about class. YC (and everyone else in this industry) is very good at solving a want that they understand, and very bad at solving wants they don't understand. And our industry is consisted almost exclusively of upper-middle class white urban men. In fact, this demographic is even more prominent in the entrepreneur class than it is in the general tech worker population. So quelle surprise when the only wants we seem capable of solving are the wants of upper-middle class white urban men: instant deliver-anything, means of private transport, outsourcing household chores, newfangled ways to display conspicuous consumption... Deliberately or not, this is all about class.
    • aianus 12y ago
      All progress is aimed at the rich. The first people with light bulbs were rich, the first people with indoor plumbing were rich, the first people with cell phones and automobiles were rich, etc, etc. It's not nearly as much fun to solve poor people's problems since often the solutions already exist; they just can't afford or otherwise access them.
      • jamesdelaneyie 12y ago
        If they can't afford it, then it's not really a solution to their problem is it?
        • marcosdumay 12y ago
          At the plus side, differently from money, innovation tricles down quite well.
      • 12y ago
• gyardley 12y ago
  Yes, somehow the vast majority of investors and entrepreneurs out there have continually overlooked this truly great area of opportunity. That's totally the most plausible explanation here - certainly more plausible than 'this market isn't being served because serving it is largely a sucker's bet.'
• burgers 12y ago
  I can sum this up so very simply. The way to make the most money is to get as close to money as possible. Hence why finance is such a lucrative career. We are seeing the obvious flaws of capitalism now that capital is no longer tied to low skill labor for manufacturing. Want to make a ton of money 1 year from today and have good credit? Spend your days with an MLS subscription finding under-priced homes to flip in a couple weeks. You'll be a millionaire in a year I guarantee it. Want to help single mothers for the rest of you life? You'll barely get by, I guarantee it. Why? Because its further from a transaction. Nothing more, nothing less. EDIT: I'd love it if the person who down voted me would explain why so much money is flowing into blockchains. You don't think that has anything to do with how close it is to the transaction?
  • patio11 12y ago
    Are you a millionaire real estate speculator? Knowing something about it, your scenario strikes me as neither low-risk nor guaranteed. If it were low-risk and guaranteed, it would be profitably scaled -- capital is available in abundance. why so much money is flowing into blockchains It's an asset bubble backed by an extraordinarily sophisticated emergent P2P Internet marketing operation which is a quantum leap improvement over a boiler room. Like many asset bubbles, it is snaring both the rich/savvy and the non-wealthy/non-savvy.
    • SomeCallMeTim 12y ago
      My parents eventually made "millionaire" status on real estate investments. And you're 100% right. The reason my parents did well is that: a) Few people (at the time) knew about tax and bank auctions b) At the time both kinds of auctions required that you show up and pay in cash equivalent. They had a worker's comp settlement that allowed them to invest in properties where others didn't have the cash. Now banks tend to let you finance REO properties. c) My dad was a competent home inspector/contractor who could tell (within reasonable margin of error) if a house was a good deal, and could do the work himself to fix it up d) It was the Right Time to be investing in their geographical area So yes, it's possible to do something like this, but for the most part you need to have access to a source of properties that is not already being shopped by a ton of competitors, have access to a building inspection skillset (or pay $400+ per property you inspect), have access to inexpensive contractors (or they'll eat up your profit), and to a certain extent, you need to be lucky and invest in the right market at the right time.
• BrandonMarc 12y ago
  The previous discussion of this article is actually quite fascinating, itself ... https://news.ycombinator.com/item?id=5782704 https://news.ycombinator.com/item?id=5782704
• vinceguidry 12y ago
  I'm not really understanding the author's position. He seems to think the point of business is to solve problems rather than turn a profit. There are no end of problems to solve in the world, but only a very few of them are profitably solved. You can't keep going without profit. If you want to solve a social problem, you need the tools of social policy, which can bring enough resources to bear that you can afford to ignore profit.
  • TheOtherHobbes 12y ago
    I'm impressed by the number of commenters who didn't realise the author is a woman. >There are no end of problems to solve in the world, but only a very few of them are profitably solved. They're (not) profitably solved because the economic and political systems have been designed to make them unprofitable. The basic problem is a feedback system which rewards certain activities as 'profitable' and punishes others as 'unprofitable'. Nothing about this is impossible to change. It's a political choice, not a scientific law.
    • vinceguidry 12y ago
      > They're (not) profitably solved because the economic and political systems have been designed to make them unprofitable. Not so, and even if it were, that would only further underscore the fact that you still can't solve them with capitalism. The author is effectively recommending that the local high school football team get out there and fix homelessness in the city. The best you can hope for is that they'll provide a nice photo op for the mayor. > The basic problem is a feedback system which rewards certain activities as 'profitable' and punishes others as 'unprofitable'. Could you go into detail? Because to me that "feedback system" just seems to be the market. You can't tell people what to want or what to like. That's the basic reason why we have markets. You might be able to influence the system in small ways through social policy, but again, you can't dictate to people what they should want or not want, because they won't listen to you. The best you can hope for is something like the Fed. You manipulate the levers you have, not the levers you wish you had. What the author should have done was offer up some ways for Silicon Valley to solve big social problems in profitable ways. Since they don't exist or are really hard to find, otherwise someone else would have gotten rich already solving them, all she can do is moralize.
• mbesto 12y ago
  What people fail to realize is that Facebook/Google/Twitter/<insert every other digital advertising company that exists in SV> are solving the greatest business problem that exists - how to create a customer. Peter Drucker: There is only one valid definition of business purpose: to create a customer. It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance—especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers “value,” is decisive—it determines what a business is, what it produces and whether it will prosper. The customer is the foundation of a business and keeps it in existence. He alone gives employment. And it is to supply the consumer that society entrusts wealth-producing resources to the business enterprise. Because it is its purpose to create a customer, any business enterprise has two—and only these two—basic functions: marketing and innovation. They are the entrepreneurial functions.
• mahyarm 12y ago
  These companies exist, but they don't get hyped that much by the VC marketing machine and are probably funded outside of it. In a way, those companies are like Walmart, MVNOs like republic wireless and apps that are popular, but you don't hear about because they don't target that lucrative market with disposable income. How much do you hear about coupons.com?
• mathattack 12y ago
  Deeply left of my politics, but I like the market orientation of the solution. Very well written to get me to agree with a point of view I wasn't inclined to like. :-)
• javert 12y ago
  If it's true that 1 in 10 Americans are war veterans, they could literally revolt. They probably have the numbers and potential support from the military needed to succeed. Because the VA, and by extension the federal government and the American people, treat them like absolute garbage, and this is not going to get fixed in the current system. Wouldn't be the first time: http://en.wikipedia.org/wiki/Bonus_Army http://en.wikipedia.org/wiki/Bonus_Army
  • declan 12y ago
    >Wouldn't be the first time: http://en.wikipedia.org/wiki/Bonus_Army http://en.wikipedia.org/wiki/Bonus_Army Thanks for reminding folks about the Bonus Army. This was a sad day in U.S. history. But remember the Bonus Army did not revolt. It was, I believe, a peaceful protest. The firepower came from the other side, when Hoover and MacArthur decided to send in the regular army (so much for the First Amendment right to petition the government for a redress of grievances). I wonder how U.S. history would have turned out differently if the Bonus Army veterans actually had been armed and defended themselves against troops that were attacking them and their families with bayonets... Nowadays, especially after the Gun Control Act of 1968 and additional restrictions under Bush 1.0, the the disparity in armament between civilian vs. military is a bit greater.
• callmeed 12y ago
  To those who commented on the financial or regulatory hurdles in serving these people: Maybe another way to look at this is: instead of creating a startup to serve veterans or single mothers–why not create a startup that can employ veterans AND single mothers? One of the biggest problems facing single mothers is the high cost of childcare. In many instances, it makes going to work almost pointless because it eats 50%+ of your paycheck. So, why not a crowdsourcing service (a la mechanical turk/crowdflower) that employs single mothers at home in the United States? (personally I think people would eat that up and even pay a premium for US-based workers) Veterans could also do crowdsourcing work, on-demand security, and on-demand driving/moving off the top of my head. Yet another way to tackle this could be to go into an industry that already has the means/access to help these people and partner with them. I'm mainly thinking of education. California's community colleges (there are over 100) cater to these people already. They have night classes and veterans offices. They have programs for in-demand jobs like nursing. Yes, there's the same bureaucratic/regulatory issues since they're a government institution ... but if Starbucks can do a deal with Arizona State, surely a founder who is ambitious enough can get something done.
  • capisce 12y ago
    Unfortunately (or fortunately, depending on your viewpoint and how the profits get distributed) there tends to be more money in replacing people with automation than in employing them. And even when employing them there is always the incentive to pay the least amount that the market will bear. Crowdsourcing etc also provides very little in the way of job security.
  • Nursie 12y ago
    >> Maybe another way to look at this is: instead of creating a startup to serve veterans or single mothers–why not create a startup that can employ veterans AND single mothers? I have a friend who does something similar to this. It turns out to be really hard, and not exactly hitting the exponential growth she wants despite being in the media frequently. Keeping the cash flowing is hard. The reason the startup scene is comparatively easy is that everyone is motivated, energetic, young, very intelligent, able to work long hours, and the products can scale without needing a mirrored scaling up of staff, structure, management and materials. Aiming to employ large numbers of people is a very, very different proposition.
• tinco 12y ago
  I would really love to cater to the unexotic underclass, but how? I mean he goes on and on about how much opportunity there is, but I don't see it. I know how to get 500 white liberal suburbanite young males to pay me $10 per month. They have the money and they love to spend it on tech and gadgetry that makes their lives even more comfortable. But single house mothers? Poor Romanians? How would I even get them to pay me half a cent. In my mind, all these people really want and need is money, they are a receivers market, not a spenders market. I imagine them needing to spend money on food, education, housing and entertainment. All incredibly tough nuts to crack. If you even succeed at coming up with something those people want to spend money on, you're directly competing with the poor people dominators like Coca Cola. The IT startup scene we're in is just a kids playground, do we really believe someone like Mark Zuckerberg could survive in the business of making money off poor people (directly)?
  • rwallace 12y ago
    Fair point. Maybe the answer is, instead of trying to sell something to the poor, look for a way to enable the poor to sell a service to the rich? I mean, two of the biggest success stories in the recent startup scene are Airbnb and Uber. What do they do? Provide a way for people who don't have much money but do have a useful asset (a spare room, a car, respectively) to make a bit of extra cash selling a service to those with disposable income. What other opportunities along those lines are still open?
    • graeme 12y ago
      Unfortunately, this is the future. I say unfortunately, because I think if we could see the final version, we'd recoil. The sharing economy, at heart, is about the monetization of spare capacity. So far it's mostly been physical assets, but spare time is next. Anywhere you find a poor person watching TV (or, god forbid, reading a book) there's spare capacity ready to be monetized. And, why are they sleeping so much? They could be working. The sharing economy is also about getting around transaction costs. Ideas like "minimum wage" and "minimum shift length" can be viewed as transaction costs that services can route around. A marginal hour's unskilled labour isn't worth very much. There's always been exploitation of this fact, but web services have the potential to scale it up.
• jbackus 12y ago
  > too many brains and dollars have been shoveled into resolving what I call ‘anti-problems’ – interests usually centered about food or fashion or ‘social’or gaming A few things come to mind when I hear people say things like this: 1. This type of complaint usually indicates observer bias. People don't read about, or share, news about boring industries. Go look at the last 25 investments on https://twitter.com/VCdelta https://twitter.com/VCdelta and see how many are truly "anti-problems." 2. People who look down their nose at entrepreneurs who don't pursue "Big Problems" probably don't realize how hard the "Small Problems" actually are. 3. If you think smart people are missing out by not pursuing some massive task, like helping veterans, then I have good news for you: that means you believe there is an opportunity for someone to improve society and make a lot of money in the process. Go invest your time and/or money, improve the world, and reap the rewards. If you don't know how to fix the problem then maybe things aren't as simple as people choosing not to make the world better. If you know how to fix these issues, but you don't know how to make money doing so, then you are really just saying that investors should instead be philanthropists. If you don't think you're smart enough/strong enough to solve these problems then maybe you shouldn't be telling others you know what is best.
  • lotsofpulp 12y ago
    Excellent post! The easiest way I can think of to help the poor is to change their core values which lead to things like being single mothers and joining the army as a last resort. However, that will seemingly require a ton of investment in education and birth control, which is political suicide for now. You can give them money and time, but you can't give them the ability to disregard their peers' values towards unprotected sex and getting married at 18 and not caring about school.
• arh68 12y ago
  I'd just like to point out the simple fact that veterans do get one certain type of benefit coming home, and it's that they get automatic preference for any federal job placement they apply for. The preference doesn't expire on placement, but exists for promotions too. Plus they can get ~0% down mortgages, no problem. So it's not all doom & gloom.
• disjointrevelry 12y ago
  The article boils down to a basic fact: "The unexotic underclass are unexploitable." Despite all the dancing around this fact, it pops out in the article like a pimple on an ivy leaguing debutant's nose in their weekly dermotalogist face cleansing. There is more than a hint of the populist a. randist philosophy throughout this article. Maybe this is a cult, and it goes without saying. The privileged group (such as the author's) consider themselves hero's and the saints of today's countries, the ultimate problem solvers that defeat the overbearing complications of governments and regulation. The expectation of privilege versus the torrent of their own baser instincts that pervades their own reflection, is one even a clever author can not mask with the vanity of the wealthy with the needs of the exploited and poor. Lets get straight to the point. The 'exotic' underclass are in resource rich regions. Investments into these 'entrepeneurs' is miniscule to the massive profits from the resources from the "emerging third-world countries". The article is a complaint, that the unexotic underclass is unexploitable. Nothing much else is expected from the a group of sycophants whose main desire was to wheel and deal financial sludge on wall street.
  • jrochkind1 12y ago
    I think you are rough on the author -- the author doesn't know they're complaining that the underclass is unexploitable -- they actually believe that 'entrepeneurs' can help the 'underclass' by selling them the right products, if only they'd try harder. The author diagnoses the disease, but their prescription, 'innovating' new things to sell to the underclass (whether in the first or third world) -- will never cure it.
    • corford 12y ago
      Don't normally do "pedant" posts but this is the second time I've seen it in this thread. The author is a she not a he :)
      • jrochkind1 12y ago
        thank you! Will correct in my post with gender neutral wording, which I should have used from the start.
• DanielBMarkham 12y ago
  Oh boy. What a mess. So there ARE two sides here. Side 1 is the "I want to have a startup so that I can do something important to me. Side 2 is the "I want to have a startup so that I can do something important to others. I will find some way to make this important to me as I go along. Side 1 folks are tweaking on a moral crusade. Let's change the freaking world, folks! Side 2 folks are deeply ignorant. I do not know what people want that I can make. Maybe they want better restaurant recommendations based on blood type. Maybe they want job recommendations. Maybe somebody would want jobs for cats. Has anybody done that? Beats me. If this were a war to improve the future of humanity, Side 1 folks are always the ones charging up the beach on D-Day. Rally after me, men! The cause is just and victory awaits! Side 2 folks are always trying to find a better way to make the machine gun fit to the machine gun mount. You know, if the bearing fit this other way, machine gunners would have a bigger field of fire.... Side 1 guys are the evangelists. Side 2 guys are the plodders, plodding along. Tinkering. There is no right or wrong answer here. One out of every 10K or so of the change-the-world guys actually change the world. Very cool! One out of 100 or so of the better machine gun mount guys actually do something that somebody, somewhere finds useful. Very cool! My problem is when the Side 1 guys go on these long tears about what the rest of us "should" be doing. Dude. I've been working and living in the startup scene for a long time. Am I supposed to get all emotionally fired up because of social injustice? Or perhaps just go do something other folks might find useful? Because that thing where you run on passion for a year and burn out? That's not so much fun. I love charities. I love hobbies. I think it's fine to have something that's a cross between a hobby and a charity. Perhaps this is what the side 1 guys really want for the rest of us and they are just doing a bad job of explaining it. Or perhaps they should just leave the rest of us alone while we go try to make something useful to somebody, anybody.
• squidmccactus 12y ago
  Why is this posted to HackerNews? This isn't innovative.
• lotsofmangos 12y ago
  One thing that annoys me with this, and I keep noticing time and time again from people who are presumably more used to lecturing selected groups than writing for public consumption, is that there seems to be an assumption throughout the text that the people being referred to within it are not going to be part of its audience, despite it being posted on a publicly accessible web page.
• bettyx1138 12y ago
  the problem is that fixing problems to make the world a better place is not profitable to investors in our system. our system needs fixing. the important problems won't be solved by products coming out of tech start ups but by service design applied to our dysfunctional social and political systems. imho. i'd love to ponder and write more about how SD can fix things but i am late for my job designing apps for the privileged class. :-\
• gphil 12y ago
  This has been alluded to in other comments, but without any data. The "unexotic underclass" has virtually no money to spend compared to the upper classes. The bottom 40% in the US has only 0.2% of the wealth! Source: https://en.wikipedia.org/wiki/Distribution_of_wealth#mediaviewer/File:U.S._Distribution_of_Wealth,_2007.jpg https://en.wikipedia.org/wiki/Distribution_of_wealth#mediavi...
  • joshuahedlund 12y ago
    Wealth != income. Do you know how many lottery tickets are purchased by the "unexotic underclass"? There are those with "virtually no money to spend," to be sure, but there are plenty of working poor with a combined large amount of money passing through their hands that never generates wealth because it is immediately spent, both to meet needs (often inefficiently), and to meet wants (often with little long-term thinking, which for various reasons can be entirely rational in given circumstances). The opportunities lie in trying to identify improvements in that cashflow (which is hard to do if you are so disconnected from the "underclass" that you can't even fathom why someone would spend so much on lottery tickets, and thus how you would ever convince them to spend money on your service instead...)
    • gphil 12y ago
      According to data pulled from here: http://www.wealthandwant.com/issues/income/income_distribution.html http://www.wealthandwant.com/issues/income/income_distributi... (Summary Table 1. Effective Federal Tax Rates, 2005) The bottom 20% makes around 4% of the total income, so I grant that income is not as lopsided as wealth. And sure, you could potentially build a successful business targeting that. But it certainly doesn't seem like nearly as attractive a demographic to target as the other 80% with 96% of the cash flow. For what it's worth, I favor a greater amount of wealth redistribution than we currently have not only because I think it's the morally right thing to do, but also because I think it would result in greater overall spending. (e.g. people who have a lot of surplus money now are less likely to spend those incremental savings than those who need more money to live comfortably now.)
• rayiner 12y ago
  I like the cut of the author's jib. One of the things I think is under appreciated is that it's not like the poor don't have money. They do, they just can't afford to waste it on $15 a pop food delivery. But at the same time, it's hard for poor people to spend money efficiently. The yuppie who shops at Costco is getting a better price on food than someone who lives in an urban food desert. Is there a technical solution to these inefficiencies? I bet there is. I think the biggest, most fundamental problems facing at least the urban poor is the breakdown in social structures in these communities. And social networking technology could help here. There just needs to be a focus shift from helping teenagers sext each other and get laid to helping their parents make sure they're not cutting class.
• tsunamifury 12y ago
  I built language learning applications that reached over 10 million users in the developing world and my brother built a startup that employs only ex-cons in one of the worst neighborhoods in America. We learned a few things from actually doing this: TL;DR its really expensive to make products for the 'forgotten underclass' due to many unforeseen issues. 1) Poor areas are overrun with corruption and graft. Its very hard to do the right thing, when individuals with power will actively work to put a bribe barrier between you and your work. Its like these individuals smell out good intentions and attempt to tax them for the perceived weak-minded good intentions. An example would be, after my brother created several successful startups using ex-cons, he wanted to turn the program over to the City. He quickly learned without a politician attached and 'sitting on the board' you couldn't do this. The price of this? Paying him 70% of the donations coming in to support the program. I have numerous examples more blatant in 2nd and 3rd world nations. 2) Economy of Scale. You must serve more customers in order to make up for lower prices the market will bare. This is easy to say and very very hard to do. As you scale, you can't afford more workers, so your quality inevitably goes down. Other things like support, QA and tasks that don't scale past 1:10 user rations become very poor quality, turning off people to the product and making you ashamed of your work. 3) Not knowing what the problem is. You can guess at problems for a class of people you aren't a part of, but its pretty hard to design a new solution for them. Your instincts are often wrong and you have to do a lot of expensive testing and research you can't afford to get the right solution. See problem 2. 4) Distribution to customers. Want to get the product to this underclass? Do they have smartphones? Do they have computers? Often no. How are you going to ensure they see your product let alone purchase it? Maybe they do have smartphones, but they use everything from dumb-phones to android 2.3 devices to Nokia-whatevers. Development for all those things will cost you 5x as much as just making a food iPhone app. (see 2 again) 5) Value offer. This becomes very very hard when your target market is low on funds and often makes anti-self-interest choices. The individual who uses what little money they have to feed their family with fast food is going to pay money for your education app? Its pretty unlikely, they have more pressing needs in their hierarchy that they are often too scared and desperate to solve properly. 6) Their problems can't be solved with software. Often these people have real-world problems that require hands on work and real product to solve. My brother worked very hard to add software where possible but needed to do mostly 'real world' labor to get to his customers. Software is inherently cheap to produce compared to hardware and manual labor. Finally, this work will eat you away until you have very little left. Your rent will go up as your friends sell their startups. You won't have time or money to rebalance your life with exercise or entertainment. You will becomes socially isolated from those who have the money to support your work. You will put immense pressure on your significant other to either make up your losses financially or support you. You will put your children's future in jeopard. You won't have children. You will see little return on your effort. You will be fighting a society which applauds your effort but is unwilling to help you continue. In short, you might become part of the class you are trying to help.
• nickthemagicman 12y ago
  There's a lot of people interested in helping the poor. There's humongous social and political barriers that make it almost impossible. Ideas I have: -Make a centralized site for homeless people to find resources. At the moment they're all scattered. -Make an easy to use food stamp app. -Ride sharing apps -Apps showing where buses are and how far away they are so poor people aren't just sitting at the bus stop waiting. -and there's a lot more. However a quick look at all these requires technological literacy by the poor, governmental cooperation, or both. It's not just an easy tech problem to solve. It's a social problem.
• gp2gp 12y ago
  Ugh. Just see... http://bt.tn/ http://bt.tn/
• carsonreinke 12y ago
  `There is life, believe me, outside of NY, Cambridge, Chicago, Atlanta, Austin, L.A. and San Fran.`
• ilaksh 12y ago
  The big problems are structural. And the first structure that needs to be fixed is your belief system, which supports the existing structure. Start with the word "developing nation". I believe that is a racist term that is used to cover for gross inequality of resource distribution between relatively rich nations and poor ones. Social Darwinism is another belief system that causes quite a few problems. Basically, anyone who isn't doing well financially, at a root level, many believe that they should either die, or live in squalor, because obviously they have little worth to society. People won't say that outright, but when you get right down to the details, most believe that. You really have to look at the function of money in society and how it connects to the structural belief frameworks. Also, in the existing framework, the general availability and buying power of money (which currently has been going down for some time) affects everything and everyone. The _vast_ majority of people on this planet do not have any security for basic necessities. That is a result of the basic organizational principles of our "civilization". And the belief system assumes they are inferior and that helping that majority of people is a charity effort. I look to technology to continue to mitigate these structural/cultural problems.
• jonnycowboy 12y ago
  Why not create a "food stamp" delivery service? Hire ex-cons for delivery & older "unemployable" graduates to manage the whole thing. Deliver in the evening after the parent(s) are back from work. Better yet, try to change the system to allow EBTs to be used to delivery ready-made meals...
  • lilsunnybee 12y ago
    SNAP in many cases isn't enough for the whole month already. Adding restaurant and delivery fees into the mix would really just cause more problems for people running short and going hungry at the tail end of the month.
• mb2100 12y ago
  Surprised that nobody has mentioned Ushahidi yet, seems like they are doing great work in Kenya: http://www.ushahidi.com/mission/ http://www.ushahidi.com/mission/