A very fascinating article that I have truly enjoyed reading minus the last 10 or so paragraphs where Paul expressed it unequivocally that he's a status-quo warrior and that nothing can be done to remedy the problem of the ever widening gap of income inequality in the global economy and more specifically in the US and that it's a "natural" product of the state of affairs in our world. A classical example of « the naturalistic fallacy » [0].
Also, it's also worrying the degree of infatuation or affection for the early 20th century years with central planning of the economy, crony capitalism, robber barons, an all-powerful big government, centralization and concentration of power at the hands of a few, regimented and uniformed society ...etc.
No leftie is arguing or longing for any of these policies. What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.
That's how we envision the solution to fix this problem of "fragmentation" as he put when it exactly is more like a "segregation" problem but not based on racial or cultural factors but on economic one into two completely separate societies between the haves and have-nots, between the 1% and the 99% of the population and it's getting worse and uglier by the day.
>I worry that if we don't acknowledge this, we're headed for trouble. If we think 20th century cohesion disappeared because of few policy tweaks, we'll be deluded into thinking we can get it back (minus the bad parts, somehow) with a few countertweaks. And then we'll waste our time trying to eliminate fragmentation, when we'd be better off thinking about how to mitigate its consequences.
A few people making rules didn't cause this to happen. It was the entire world reacting to things the entire world did for the past hundred years. A few people making rules can't stop that kind of force, even if they have good intentions for everyone else.
>What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich people and highly connected people... That's how we envision the solution to fix this problem
He mentions this:
>You can mitigate this with subsidies at the bottom and taxes at the top, but unless taxes are high enough to discourage people from creating wealth, you're always going to be fighting a losing battle against increasing variation in productivity.
I think you're looking at a lower scale than pg. From how I read it, he's saying that yes, you can do a little bit to ease the inequality, but you're not going to fix it unless you stop all technology from happening or you stop paying people their market rate. He's saying income inequality is a feature of technology allowing people to be paid their market value and that you can't 'fix' that; the most you can do is take from people at one end and give to people at the other end.
> He's saying income inequality is a feature of technology allowing people to be paid their market value and that you can't 'fix' that.
The thing that I worry about is whether this feature is destroying the conditions that allowed it to become a feature in the first place.
He mentioned the example of Apple and IBM, which I see as illustrative in another way. Would personal computing devices have become popular in a highly fragmented world? According to Wikipedia, the Apple II cost over $5k, accounting for inflation. Absent a healthy middle class, which was created by the era of conformity and relative income equality, would there have been enough consumers to create a market for a $5k computer? As we see income inequality rise, are we not also going to see the opportunity for wealth creation diminish as capital congregates in the hands of a class that largely conserves it?
I think we're already seeing this. As an exercise, try to think of something non-niche that costs around $5k, the price of the Apple II, for which there isn't some form of financing (auto/home/college loans and such). I'm hard-pressed to think of something and I believe it's because there's an increasingly small number of people that can afford such a product. We're already losing the conditions that allowed Apple to introduce the personal computer. There's a long ways that this trend can go before it becomes untenable, but the end result of income inequality will be an environment where it's quite difficult to get paid your market value because the market that funds the employment market will have dried up.
> A few people making rules can't stop that kind of force
Can you elaborate please on what kind of force at work? Market forces?
Also, do you have any idea why he's bringing up the subject of "social cohesion" repeatedly throughout the piece? Is social cohesion a hot button issue in the US now that warrants more attention from the general public?
Because I believe that as long as the country is not at war with or in a national state of emergency or in other words, citizens are facing any kind of existential threat, the talk about social cohesion is meaningless and could be divisive as the term is tainted with not so favorable concepts from nationalism, nativism and the likes.
> unless taxes are high enough to discourage people from creating wealth
I don't want to discourage rich folks from creating wealth. I just want them for now to pay their fair share of taxes and close all the loopholes that fuel this income inequality gap and distribute more resources to the least privileged and most disfranchised groups in the society to alleviate their situation.
As for technology has an inequality bias to it, I have to disagree with this assertion and point out that the availability of capital or lack thereof is the main catalyst in this equation not technology.
> he most you can do is take from people at one end and give to people at the other end
But he argues before that point that tax rates and tax receipts are very weakly correlated. This would seem to be a limiting factor governing how effectively a government can flatten inequality through wealth redistribution.
> No leftie is arguing or longing for any of these policies.
This is not correct. If you read "Capital in the Twenty-First Century", the book most lefties are pushing nowadays, you'll see there is a chapter with recommended solutions.
The recommended solutions are things like government control of CEO salaries, confiscatory taxes on the rich (e.g. not taxes to pay for something, taxes to specifically change their status from rich to middle class, something the author even says wouldn't even bring in useful income for the government because there are so few rich to confiscate from), etc.. So their are central planning policies being recommended indeed.
> No leftie is arguing or longing for any of these policies.
To the extent they aren't being argued for (I won't comment on whether they are "longed for" except to say that you don't seem to have read many leftist writings), that's because they are now the norm, so the burden of argument is now on those who want to change them.
For example, it is now considered the norm that the government will mess with the money supply and the banking and financial system whenever it feels like it, in order to implement centralized control of the economy. Nobody has to argue for it; the burden of argument is on those who aren't sure things like the Fed printing money are a good idea (and most of the time their arguments aren't even heard, they're dismissed as crackpots, even though the worst depression in history occurred after the Fed took control of the money supply).
Also, it is now considered the norm that larger and more centralized government is better; the US Federal government, the EU, etc. People talk about a single world government as though it were a natural next step. Nobody has to argue for any of these things. The burden of argument is on those who think centralization of power has done more harm than good (and again, most of the time their arguments aren't even heard, they're dismissed as crackpots).
> What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.
And Graham's point is that, even in a perfect world where economic opportunity and access to capital was perfectly equal, there would still be huge variations in wealth, simply because there will be huge variations in how well people take advantage of economic opportunity and access to capital in order to create wealth. And the more technology advances, the larger the variations will be, because technology amplifies the differences in productivity between people.
So by all means, fight for a fairer world in which there is equality of opportunity. But don't measure your success by equality of outcome. Unfortunately, equality of outcome is exactly how "success" is measured by basically everyone. And we have "lefties" to thank for that.
> No leftie is arguing or longing for any of these policies. What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.
> That's how we envision the solution to fix this problem of "fragmentation" as he put when it exactly is more like a "segregation" problem but not based on racial or cultural factors but on economic one into two completely separate societies between the haves and have-nots, between the 1% and the 99% of the population and it's getting worse and uglier by the day.
This kinda reads like word salad to me -- I have absolutely no idea what concrete policy changes it's meant to imply.
Revert tax policy back from an effective sub 15% at the top to far more reasonable levels.
To start, SS taxes apply to all income levels. Next, you can't avoid capital gains by donating appiceated assets. Further, capital gains is taxed at the same rate as all other income.
And my personal favorite, there are zero corporate tax breaks of any kind.
> What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.
My guess: Relax, what you want is well on the way. The biggies now, in Silicon Valley and Wall Street, are on the way to a land of commodity products, fungible work, high competition, and low profit margins.
Why? Because really powerful innovation they will need but don't much have.
The opportunity? For now, more in innovation.
The opportunity? Be the only guy who knows how to bake really good bread in a land of suddenly huge quantities of just dirt cheap wheat. Or, computer cycles, data storage bytes, data communications data rates per dollar are through the roof, and operating system, infrastructure, and OSS are all just dirt cheap. So, the challenge and the opportunity is to be innovative and make use of this dirt cheap wheat.
Or, 15 years ago, a Web server might have been on one or several single core processors with clock speed of 90 MHz. Now, for much less money can get an 8 core processor with a clock speed of 4.0 GHz. Let's take that ratio in performance:
8 * 4000 / 90 = 356
So, now have one computer that does the work of ballpark 356 computers for less than the cost of one of those 356 old computers.
Find something really good for the new computers to do, guys!
"No leftie is arguing or longing for any of these policies. What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich people and highly connected people."
And what non lefties are asking is how do you solve income inequality without those policies?
Income inequality is not the problem, it's a shorthand for the real problem, which is the mutual reinforcement of wealth inequality and political corruption. Rich people use their disposable income to buy political influence which they then use to get laws passed that allow them to collect rents.
The solution is to 1) roll back the corrupt laws (like the preferential tax treatment of carried interest and high-speed trading) and 2) get rid of the absurd legal doctrine established by the Citizens United decision that money=speech and hence the First Amendment applies to bribery.
This is easy -- any person working a full-time job should be able to pay rent in safe, decent, legal housing, afford to feed themeselves and their family and put clothes on their back.
If this condition isn't satisfied, our economic system doesn't work, period.
The appeal to nature fallacy us to claim that something is right because it's "natural". It's not necessarily wrong to say that something can't (practically) be changed because it's natural. In this sense, natural means "an (emergent) property of nature". For example, as much as we may dislike it, people will continue to fall to their death in the near future, as gravity and its associated risks are natural.
I believe Paul means that these economic properties are to be expected because they arise naturally and it is not practical to eliminate them.
It's a useless way of thinking because many things seem natural until they're proven not to be. We though being tied to terrestrial transportation was natural for a very long time, but it turns out there's no natural law preventing human bodies from taking flight after all.
I don't think Graham is being a status quo warrior here at all and I would have to reread carefully to see if he was really committing the naturalistic fallacy, I think that is an odd reading. I think his reasoning is fairly sound here. He actually laments that solving income inequality is very difficult, which it is. A lot of lip service is paid to this topic and usually all an politician has to say about it is something about manufacturing jobs.
I almost feel you may change the entire field of economics with committing the naturalistic fallacy under your reasoning ...
> the degree of infatuation or affection for the early 20th century years with central planning economy, crony capitalism, robber barons...
I think you 're being deliberately inflammatory here. He's probably well read about the period but there is no "degree of affection" for that kind of capitalism.
Central planning of the US economy & powerful big government (1930s & beyond) was a Progressive Era initiated reaction to the era of robber barons & crony capitalism (1870s-1910s).
I've been thinking about this a lot lately and will ride your coattails for a moment by pointing out that if economics is darwinian, then a possible way out of this situation might be human planning.
It doesn't have to be central, it can be a way of living that amplifies the changes you'd like to see in the world. So for example, say a person acquires a certain amount of wealth and wants to make his or her home solar to stop feeding investment in the fossil fuel industry. He or she should consider installing double the number of photovoltaics necessary and give back to the grid to lessen someone else's burden.
Now apply that philosophy of cooperation to our daily lives and I think that we can achieve a fairly rapid change in the status quo, and that we are seeing it happening all around us.
How can economics be Darwinian? The outcome of economic interactions is not a zero sum, whereas a lion who kills and eats an antelope is engaged in a zero-sum interaction. The antelope gets nothing out of it. As a point of contrast, if you buy a car from Toyota, you have not harmed Toyota, nor has Toyota harmed you (hopefully). It is theoretically possible, when humans engage in trade, for both parties to end up better off. But in nature, in the competition for finite resources, one often sees exchanges in which all species end up worse off. There are many documented cases where predators have been too successful, and killed off all their prey, and then gone extinct themselves -- a negative sum scenario that has no obvious comparison to economic exchanges among humans.
"Obviously the spread of computing power was a precondition for the rise of startups."
If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.[1]
One thing I think you will notice is the manufacturers plaques attached to every little piece of equipment in the submarine ... every one of them the plaque of some tiny little supplier that you have never heard of. Some little Detroit Turbine Supply Company or American Radio Corporation of Maryland ...
Seriously - every single component has a label on it from a firm you have never, ever heard of.
I guess I don't have a deep knowledge of military procurement and supply circa 1942 (or whenever) but it sure looks like startups to me ...
Good observation. Paul's definition of "startup" seems to be "company that grows explosively to a massive size/valuation in a short number of years". The sort of businesses you cite seem to fall under the "small business" moniker, and would probably be one of the mouse-sized companies he referenced in the essay as one that tried to avoid trampling by the elephants of BigCo.
" People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."
Multiple studies have shown that startups are dying in the USA. The great era of startups in the USA was in the mid 20th Century. At least since the 1970s, new business formation has been dying:
"Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation. But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in
high-tech."
And here is the start of the first:
"The pace of business dynamism in the U.S. has declined over recent decades. The decline in business dynamism is evident in a pronounced declining trend in the pace of both gross job creation and gross job destruction. An important component of these declining trends has been the decline in the firm startup rate. The decline in the startup rate has yielded a significant decline in the share of employment accounted for by young firms – this share has declined by almost 30 percent over the last 30 years. "
And please, please, please note that a country can have an incredibly dynamic, innovative industry, but that nation can still be in long-term decline. See here for details:
Are those studies equating "starting a small business" with "startup"? Paul Graham only uses "startup" to refer to business that start small but grow large is a short time, as he says in the OP article itself (and elsewhere). If you equate those two ideas, you won't be able to talk clear about this topic.
This concept of small manufacturers that excel in their niche has been the oldest business model in history.
Especially in Japan and Germany many companies have existed for over a millenium like that, and even today half of the made profits are by small, (50 people or less) companies that are hidden champions.
You probably never heard of http://www.walterwerk.com/en/, but they’re the world’s leader in machines that produce ice cream cones.
As you said, it’s not just since computers that these companies existed – they’ve existed for centuries.
But what is different this time is that for the first time investors are trying to invest in these small businesses, and try to make a huge profit out of them.
> Startups either go Facebook or go bust, they're not created to stay stable at small scale.
Nonsense. Plenty of companies start out as small companies and suddenly find themselves on the upwards slope of a hockey stick, others start out as aiming for that hockey stick and end up being 'just' sustainable businesses.
This whole start-up naming thing denies 125 years of objective reality. You can't start a scalable company deliberately any more than you can reliable write an evergreen book. Time will tell what you've got, not your label of it.
'Startup' has come to mean too many different conflicting things.
You're describing what I would call a "VC backed startup", where you'll either get big or wither away.
The other end of the spectrum (for people here) would be something like a Bootstrapped Technical Startup. Where you're trying to build a cashflow positive business leveraging technology in some way.
Facebook or bust. If this is the definition that we're expected to accept, I will say that as a consumer and human being, I prefer interacting with and being a part of small businesses more than startups.
It would seem this definition paints a startup as a proto-bigcorp. If the prevalence of big corporations is not a cycle we want to repeat, would we not favor businesses that do not intend to become big corporations?
Seems like it might be a kind of survivorship bias. A hundred years from now, will people look at our era as one with a rich ecosystem of startups, or as one dominated by a half-dozen Facebooks and Twitters?
I strongly disagree. As an entrepreneur and a mentor, to me a startup is just a new business that is pioneering something new.
Most new businesses are replicating an existing business model. E.g., if you open a new corner store, it's probably going to end up being like every other corner store. If you're starting a games company, you're probably going to end up like a bunch of other games companies.
Startups, on the other hand, are tackling something deeply innovative. That means early on you have to optimize for learning: understanding customers, iterating on product, seeking product-market fit. It's a very different set of behaviors for the entrepreneurs than the normal new business.
I think you're thinking of venture-backed startups, which require a large enough amount of high-risk capital that nobody will fund them unless they expect to be worth $100m+. But there are plenty of smaller startups that are self-funded or bootstrapped. They can be perfectly stable at small scale, although many of them do choose to grow substantially.
The definition of a startup is a reoccurring theme here and I'd really wish pg would reference it every time he uses the term. For him, a startup = growth [0], and as you can tell by this quora answer[1], not everyone agrees with that.
Interesting. That reminds me of the fact that, after WWII, US domestic producers, to a far greater extent than today, satisfied the US domestic market for all kinds of products. (I think this was largely due to the literally bombed-out industrial base of some US competitors.)
And that amounted to a large number of jobs which are no longer available to US workers.
"Obviously the spread of computing power was a precondition for the rise of startups."
seems closely related to the concept behind the book "Design Rules" (2000, isbn 978-0262024662). Here's a summary from the book flap:
"[The computing industry] has experienced previously unimaginable levels of innovation and growth because it embraced the concept of _modularity_, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established _design rules_. Drawing on the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy."
You can extend this point to the first wide-ranging standardization efforts. Those plaques and part numbers were mandated to facilitate not openness, but interoperability.
The thing to me is Silicon Valley is the place in the US that still looks like that post WWII America. Large monopolies like Google, Apple and FB utilizing fantastic profits and paying amazing perks to employees. Everyone working in and on the same mission acting as a social fabric tying people together. Glass Door and the Internet in general replacing trade unions by helping balance a knowledge imbalance so that workers can maximize their benefits.
The irony of regularly lecturing the rest of the country and world about what the future holds from the position as a final bastion on unassailable US hegemony of last century (2nd only to Hollywood?) perplexes me.
Agreed 100%, that was one of my take aways from the article as well. I suspect that this dominance is next to fall, and I feel that SV has already passed its zenith, perhaps some time ago, and that locals and those intimately tied to its fabric like PG will not be the first to notice. I think the talk of the last few years about a "bubble" may have been noticing symptoms of this rather than a true "tech bubble". There was a WP article the other day about how people are priced out of homes in SV, with the median home price at nearly a million dollars. We are in the early, possibly mid crisis of student debt, and despite a certain lauding of the dropout culture in the tech industry, this debt has fueled its rise over the last 40 years. It is unsustainable.
But that only happens because automation and globalization are barely harming the US. And its not like the oligopoly is not trying - why are there so many appeals for more H1Bs?
If you need skilled workers and the varying skill of a worker produces magnitudes of difference in wealth created of course you need to both be huge enough to afford them and centralized enough to take advantage of them.
The article itself seems like a blinders on interpretation of the US tech industry. Corporate consolidation is at all time highs in areas like food processing, farming, finance, raw materials, and industry. Mom and pop shops the world over are bellying up for Walmart and Starbucks. Startups and creative culture in the tech bubble are against the general grain. Its why money in politics is being considered such a larger problem now than twenty years ago - as dozens of economic effects interact, from people having less spending money to companies consolidating and having guaranteed revenues to regulatory meddling in their favor.
Fundamentally I think that newer generations growing up on the Internet are turning out much more hive minded than their grandparents, because there are just more of them as a fraction of the population. The perfect white nuclear family of 1970 still only accounted for a stark minority of the American public - it is just strange that a disproportionate number of people on HN ended up coming from that class. There was still extreme social unrest throughout the century - prison camps for the Japanese, the KKK, segregation, and the banning of many chemicals due to being "foreign" like opium and marijuana. Just because one microcosm of the American economy that produced most of us was homogenistic doesn't mean the era was exclusively defined by it.
How do you know the race and sex distribution of hacker news users? Or are you just assuming they are like you? (or unlike you? I have no way of knowing what group you might identify with)
You are only mentioning the tech industry in Silicon Valley, which I admit is pretty utopian. This description excludes everyone else in Silicon Valley. You can't talk about income inequality while only looking at those with high income (everyone in the tech industry), and forgetting about those with lower income is a huge reason why income inequality is problematic.
That's very true. And quite frankly, the housing rents, the overstuffed infrastructure, the student suicide rate in Palo Alto, and so forth make SV look pretty dystopian, even for most tech industry workers. The only thing tech has is what Michael O. Church so eloquently said: "Software engineers aren't a privileged set. They're just less fucked than the rest of the U.S. Former Middle Class."
It's certainly true that SV's days as a big tech hardware manufacturer are past.
I am not at all certain, but I have to wonder if something magically keeps SV software innovators glued to SV. This is something I've never understood. But there must be SOME reason why software innovation/work didn't completely disperse from SV ten years ago.
One very simple answer is VC money. They want you local and their talent network (of people for your growing startup) is local. Who knows how different Boston would be if Facebook stayed there? (Just one small example)
People overestimate how quickly unacceptable conditions arise. The Bay Area can get even more congested and expensive than it is today, and most people will make do. Cambridge and some surrounding areas have San Francisco pricing now. It won't so much be a "dispersal" but a hunt for talent, which is why you get Uber and other SV companies in Pittsburgh, where you can live in a steel magnate's castle for the price of a condo in Palo Alto.
"And as long as it's possible to get rich by creating wealth, the default tendency will be for economic inequality to increase."
This seems to be the ontological point of his essay, which reads as a loosey historical narrative manufactured to defend his belief that the fight against "economic inequality" will undermine innovation by disincentivizing the next Zuckerberg.
But it misses the underlying point of wealth creation: if more people create more wealth, then naturally, there should be less poverty. Adding value to the world makes the pie bigger. The real issue is distribution. Our current economic model distributes wealth as a factor of capital, which is hoarded at the top and systematically protected. It would be silly to say that the top 1% of the population, which owns more than the rest of the 99% combined, creates more wealth or is more productive than everyone else on the planet. They just have a monopoly on capital.
Exactly, no matter how much some people try to mystify everything, the "rich get richer, the poor become slaves" is something that history told us happened even before the democracy was introduced to the Ancient Greece, some 2600 years ago. It's nothing specific for the current times. The golden age and democracy we adore since then didn't start with the "more of that inequality" but with the total opposite:
"The seisachtheia laws immediately cancelled all outstanding debts, retroactively emancipated all previously enslaved debtors, reinstated all confiscated serf property to the hektemoroi, and forbade the use of personal freedom as collateral in all future debts. The laws instituted a ceiling to maximum property size - regardless of the legality of its acquisition (i.e. by marriage), meant to prevent excessive accumulation of land by powerful families."
>But it misses the underlying point of wealth creation: if more people create more wealth, then naturally, there should be less poverty.
There is tremendously less poverty in the world now than 50 or 100 years ago: https://www.washingtonpost.com/news/worldviews/wp/2015/10/05.... There's only more poverty if it's defined in a purely relative sense, but the relative definition of poverty is only relevant to ideological arguments and pandering to peoples' envy, not to describing peoples' actual material quality of living.
> his essay [...] reads as a loosey historical narrative manufactured to defend his belief that the fight against "economic inequality" will undermine innovation by disincentivizing the next Zuckerberg
Well put.
The argument that general taxation disincentives innovation has never made any sense to me: no matter how high the tax rate, your post-tax income still scales linearly with your gross income. If your object is to make increasing amounts of money, how does a tax give you less incentive to do so?
Devil's advocate: If more income takes more work, and I'm already rich, then the extra work is only worth it to me if I get a really substantial return, not just some minor increase.
(In reality, only totally naive people believe that any billionaire cares at all about making more money for the sake of the money. It's actually about power and about irrational desire to be higher in the rankings compared to other billionaires… unless they have other motivations that aren't related to their profit, of course)
I think this is one of the most interesting essays he's written in a while, and it echoes many of my own thoughts better than I could express them.
PG seems to argue that the fragmentation of society is a question of efficiency. A natural effect of this is that the world will become more cut-throat. Efficient systems turn hyper-competitive, as seen in university admissions, startups, financial markets. It seems to me that too much "liquidity" mostly causes burnout, depression, dumb risk-taking, and a few really successful winners. Tech is really guilty of this phenomenon by tending to produce one winner for every thousand losers.
In many ways the 20th century was an anomaly -- the wars were more violent, the rate of growth was faster, the cultural shifts were huge and multifaceted -- but we still use tend to see it as a normal state of things. A hundred years into the future we'll be looking at an entirely different world and consider it normal.
PG's perspective is quite US-centric. The aftermath effects of WWII in Europe or Asia was rather different. Among most nations' peoples there's long been little cohesion due to the lack of unifying forces like media or of ethnic homogeneity.
I agree that the economic dynamics of 20th century America won't repeat. But I'm not sure most countries will enjoy a stable predictable trajectory this century. Asia and China are far from being mature ecosystems (economically or politically), and the likely loss of jobs due to further globalization and automation, just as the promise of US-style consumerism is arising portends a bumpy ride, especially for totalitarian-ish societies like China, Saudi Arabia, and even Turkey.
I think this essay ignores the impact of the Civil Rights Movement and feminism in undermining the 1950s. The world of the 1950's wasn't one where women could work, despite that having been the case since the 1920's. It was also the world in which Brown v. Board of Ed. lead to federal troops being deployed in the south to safeguard the rights of citizens, and ultimately lead to the Freedom Summer which radicalized a lot of New Leftists. So perhaps the 1950's was a world based on certain kinds of exclusions, that once removed, broke down.
There's no real reason/mechanism for the exclusions to have made anything work better. Compared to the US being the Arsenal of Democracy, the economic effect of liberalization was very small, ignoring long-term government debt.
The New Left in the 1960s mostly just failed outright. Any change then was due to judicial or executive action.
Partially devil's advocate: Women not working en masse means single-income households as a norm, which means all the real economic value of someone staying at home to take care of home issues and a general supply-and-demand situation where workers needed to be paid enough to make things work on a single income. Flood the market with twice as many workers, wages go down and the expectation becomes two-incomes, and thus people end up working harder (there's still work at home to do), but they aren't richer for it.
Exclusions certainly make things work better from the point of view of the excluders.
Slavery, for example, worked wonderfully for the slavers. When we abolished slavery but kept former slaves from full participation in society, they mostly ended up as underpaid servants and laborers. Women restricted from earning a living on their own still had to survive somehow. Which in the 50s often meant attaching themselves to men and providing them with a lot of unpaid support.
PG you may want to rethink the idea of networks of cooperating companies work better than a single big company. Just finished reading Ashlee Vance's biography of Elon Musk.
Real revelation for this Michigan boy was that at both Tesla and SpaceX Musk had failures trying to use existing supplier networks. By doing a lot of manufacturing in house Musk not only realized cost and time savings but gained an agility and nimbleness that blew away his competitors. Granted Musk didn't need to manufacture his own raw materials. But in doing his own manufacturing he was able to gain a further competitive edge by making his products better. For example the Big 3's supplier networks add to their sloth and look-alike products.
Actually, Tesla and SpaceX are outliers. They are not so much natural offspring of our time as are the outcome of an ambitious person with resources. They started in a desert. There weren't really neither a serious market for them¹ nor a sturdy supply structure that could have gained maturity with the market support. Besides the difficulty of getting into the high-barrier entry and heavy-regulated automotive industry, the existing electric cars related businesses were under constant attack by petroleum cartel. It was only natural to have difficulties in finding healthy suppliers for his Tesla. SpaceX? Well, the existing suppliers for space-ware were not the result of a free market, because there didn't really existed (or still exists) one (for that matter). What existed was either imported from overseas or come from only a narrow circle of small design labs that use to custom-build pieces required by someone for which the cost didn't seem to be an issue - NASA. This obviously doesn't count for something SpaceX could rather rely on.
¹ Here I expect at least some people to bring up something like Henry Ford and his horse & carriage replacement offering as a counter-example in favor to Elon Musk's enterprise. The car vs. existing livestock-based transport and the electric car vs. existing fossil fuel car are not really comparable.
I think big single companies work when you are creating a new market and innovating with new technology. As a market and technology matures, the network takes over.
Great essay. I would quibble with the following though:
> [Technology] means the variation in the amount of wealth people can create has not only been increasing, but accelerating.
The problem with this is that success = ability * motivation * opportunity. There's no question that technology is increasing ability. But it's less clear what's happening with opportunity.
Networks tend to be winner-take-all, which means that technology actually depletes opportunity at the same time as it increase ability. Which I think means that we're actually going toward integration, not fragmentation. Only this time we don't need another WWII to integrate society because it's already happening, it's just less visible.
E.g. the vast majority of the traditional media is controlled by the same six corporations. And to quote Fred Wilson's 2015 wrap up, "10 of the top 12 mobile apps are owned by Apple, Facebook, and Google."
There's no question that individuals are way more free than they were in 1950 or whatever. But I think it's more analogous to free-as-in-beer, as opposed to free-as-in-speech.
When I was a lad I got my hand on a great prize: a copy of Delphi 3 (already obsolete by then), which got me started coding. Today anybody can download much better tools (Visual studio, IntelliJ, etc for free). Any question you have can be searched on the internet, etc. Opportunity has increased _massively_ the last 20 years.
That's ability, not opportunity. (Ability is what you can do, whereas opportunity relates to markets, regulation, social capital, etc.)
My argument is that everyone has the same 15 or 20 basic human needs, and increasingly each of those needs is being met by two or three global corporations, as opposed to two or three local or national companies. Which means that even if you as the individual are more talented or whatever, there is actually less opportunity to use those talents to fulfill human needs at scale in a profitable way. That's why such a large percentage of employees today work low wage jobs in the service industry, as opposed to physical/digital manufacturing.
And network effects are only one way in which technology has decreased opportunity. Another is environmental degradation. E.g. 300 years ago anyone in manhattan could feed themselves just being sticking their arm in the Hudson river. But now all 100% of those (edible) fish are gone, and all the profits that were made from dumping industrial chemicals into the river have been privatized by the wealthy.
A third way is legal regulation. Every time a new technology comes onto the market the government has to regulate, which often shuts out everyone except the super wealthy from competing. (Want to start a cell phone company? Good luck with that.)
There are more one-in-a-million lottery ticket opportunities than ever before. But for the average person, there is actually much less opportunity for them to be successful. And not just less wealthy relative to the rich because the rich can gather sticks faster or whatever, but less wealthy on an absolute scale because there are no sticks left to gather.
It's nice to talk about making furniture and fixing up cars or whatever, but I think the number of fortunes that have actually been created by making wealth without externalizing massive costs onto the poor and middle class are probably few and far between.
Seconded. I learned assembly code on a DOS 2.0 machine by disassembling tons of random bytes and making a hex->assembly lexicon that I could use to write programs in hex. Not because I was trying to be hardcore, but because I was in an information, and software, and hardware desert. My kid, on the other hand, has a 24-hour, 50 gigabit connection to any information he wants, a computer made in 2015, and his choice of nearly any IDE and any programming language he could possibly want.
> Opportunity has increased _massively_ the last 20 years.
The only problem is that it's increased for everyone else, too. Used to be you were a king if you had a board with a nail in it. Now everyone's packing Uzis.
When I made a shareware game using Delphi in the 90s distributed via BBS, tens of thousands of people downloaded it. Now there is so much "stuff" that I have to pay or beg for downloads.
There is no guaranteed formula for success, it is heavily luck dependent. Those who think otherwise are suffering from survivor-ship bias and/or the just world fallacy.
The opportunity is the luck though, since its out of your control, if you take it that the constituent parts of personal behavior that present you with opportunities come from your own motivation.
Readit News
Also, it's also worrying the degree of infatuation or affection for the early 20th century years with central planning of the economy, crony capitalism, robber barons, an all-powerful big government, centralization and concentration of power at the hands of a few, regimented and uniformed society ...etc.
No leftie is arguing or longing for any of these policies. What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.
That's how we envision the solution to fix this problem of "fragmentation" as he put when it exactly is more like a "segregation" problem but not based on racial or cultural factors but on economic one into two completely separate societies between the haves and have-nots, between the 1% and the 99% of the population and it's getting worse and uglier by the day.
[0]: https://en.wikipedia.org/wiki/Naturalistic_fallacy
>I worry that if we don't acknowledge this, we're headed for trouble. If we think 20th century cohesion disappeared because of few policy tweaks, we'll be deluded into thinking we can get it back (minus the bad parts, somehow) with a few countertweaks. And then we'll waste our time trying to eliminate fragmentation, when we'd be better off thinking about how to mitigate its consequences.
A few people making rules didn't cause this to happen. It was the entire world reacting to things the entire world did for the past hundred years. A few people making rules can't stop that kind of force, even if they have good intentions for everyone else.
>What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich people and highly connected people... That's how we envision the solution to fix this problem
He mentions this:
>You can mitigate this with subsidies at the bottom and taxes at the top, but unless taxes are high enough to discourage people from creating wealth, you're always going to be fighting a losing battle against increasing variation in productivity.
I think you're looking at a lower scale than pg. From how I read it, he's saying that yes, you can do a little bit to ease the inequality, but you're not going to fix it unless you stop all technology from happening or you stop paying people their market rate. He's saying income inequality is a feature of technology allowing people to be paid their market value and that you can't 'fix' that; the most you can do is take from people at one end and give to people at the other end.
The thing that I worry about is whether this feature is destroying the conditions that allowed it to become a feature in the first place.
He mentioned the example of Apple and IBM, which I see as illustrative in another way. Would personal computing devices have become popular in a highly fragmented world? According to Wikipedia, the Apple II cost over $5k, accounting for inflation. Absent a healthy middle class, which was created by the era of conformity and relative income equality, would there have been enough consumers to create a market for a $5k computer? As we see income inequality rise, are we not also going to see the opportunity for wealth creation diminish as capital congregates in the hands of a class that largely conserves it?
I think we're already seeing this. As an exercise, try to think of something non-niche that costs around $5k, the price of the Apple II, for which there isn't some form of financing (auto/home/college loans and such). I'm hard-pressed to think of something and I believe it's because there's an increasingly small number of people that can afford such a product. We're already losing the conditions that allowed Apple to introduce the personal computer. There's a long ways that this trend can go before it becomes untenable, but the end result of income inequality will be an environment where it's quite difficult to get paid your market value because the market that funds the employment market will have dried up.
Can you elaborate please on what kind of force at work? Market forces?
Also, do you have any idea why he's bringing up the subject of "social cohesion" repeatedly throughout the piece? Is social cohesion a hot button issue in the US now that warrants more attention from the general public?
Because I believe that as long as the country is not at war with or in a national state of emergency or in other words, citizens are facing any kind of existential threat, the talk about social cohesion is meaningless and could be divisive as the term is tainted with not so favorable concepts from nationalism, nativism and the likes.
> unless taxes are high enough to discourage people from creating wealth
I don't want to discourage rich folks from creating wealth. I just want them for now to pay their fair share of taxes and close all the loopholes that fuel this income inequality gap and distribute more resources to the least privileged and most disfranchised groups in the society to alleviate their situation.
As for technology has an inequality bias to it, I have to disagree with this assertion and point out that the availability of capital or lack thereof is the main catalyst in this equation not technology.
But he argues before that point that tax rates and tax receipts are very weakly correlated. This would seem to be a limiting factor governing how effectively a government can flatten inequality through wealth redistribution.
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This is not correct. If you read "Capital in the Twenty-First Century", the book most lefties are pushing nowadays, you'll see there is a chapter with recommended solutions.
The recommended solutions are things like government control of CEO salaries, confiscatory taxes on the rich (e.g. not taxes to pay for something, taxes to specifically change their status from rich to middle class, something the author even says wouldn't even bring in useful income for the government because there are so few rich to confiscate from), etc.. So their are central planning policies being recommended indeed.
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To the extent they aren't being argued for (I won't comment on whether they are "longed for" except to say that you don't seem to have read many leftist writings), that's because they are now the norm, so the burden of argument is now on those who want to change them.
For example, it is now considered the norm that the government will mess with the money supply and the banking and financial system whenever it feels like it, in order to implement centralized control of the economy. Nobody has to argue for it; the burden of argument is on those who aren't sure things like the Fed printing money are a good idea (and most of the time their arguments aren't even heard, they're dismissed as crackpots, even though the worst depression in history occurred after the Fed took control of the money supply).
Also, it is now considered the norm that larger and more centralized government is better; the US Federal government, the EU, etc. People talk about a single world government as though it were a natural next step. Nobody has to argue for any of these things. The burden of argument is on those who think centralization of power has done more harm than good (and again, most of the time their arguments aren't even heard, they're dismissed as crackpots).
> What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.
And Graham's point is that, even in a perfect world where economic opportunity and access to capital was perfectly equal, there would still be huge variations in wealth, simply because there will be huge variations in how well people take advantage of economic opportunity and access to capital in order to create wealth. And the more technology advances, the larger the variations will be, because technology amplifies the differences in productivity between people.
So by all means, fight for a fairer world in which there is equality of opportunity. But don't measure your success by equality of outcome. Unfortunately, equality of outcome is exactly how "success" is measured by basically everyone. And we have "lefties" to thank for that.
> That's how we envision the solution to fix this problem of "fragmentation" as he put when it exactly is more like a "segregation" problem but not based on racial or cultural factors but on economic one into two completely separate societies between the haves and have-nots, between the 1% and the 99% of the population and it's getting worse and uglier by the day.
This kinda reads like word salad to me -- I have absolutely no idea what concrete policy changes it's meant to imply.
To start, SS taxes apply to all income levels. Next, you can't avoid capital gains by donating appiceated assets. Further, capital gains is taxed at the same rate as all other income.
And my personal favorite, there are zero corporate tax breaks of any kind.
My guess: Relax, what you want is well on the way. The biggies now, in Silicon Valley and Wall Street, are on the way to a land of commodity products, fungible work, high competition, and low profit margins.
Why? Because really powerful innovation they will need but don't much have.
The opportunity? For now, more in innovation.
The opportunity? Be the only guy who knows how to bake really good bread in a land of suddenly huge quantities of just dirt cheap wheat. Or, computer cycles, data storage bytes, data communications data rates per dollar are through the roof, and operating system, infrastructure, and OSS are all just dirt cheap. So, the challenge and the opportunity is to be innovative and make use of this dirt cheap wheat.
Or, 15 years ago, a Web server might have been on one or several single core processors with clock speed of 90 MHz. Now, for much less money can get an 8 core processor with a clock speed of 4.0 GHz. Let's take that ratio in performance:
So, now have one computer that does the work of ballpark 356 computers for less than the cost of one of those 356 old computers.Find something really good for the new computers to do, guys!
And what non lefties are asking is how do you solve income inequality without those policies?
And more fair? Fair by what metric exactly?
The solution is to 1) roll back the corrupt laws (like the preferential tax treatment of carried interest and high-speed trading) and 2) get rid of the absurd legal doctrine established by the Citizens United decision that money=speech and hence the First Amendment applies to bribery.
If this condition isn't satisfied, our economic system doesn't work, period.
I believe Paul means that these economic properties are to be expected because they arise naturally and it is not practical to eliminate them.
I almost feel you may change the entire field of economics with committing the naturalistic fallacy under your reasoning ...
I think you 're being deliberately inflammatory here. He's probably well read about the period but there is no "degree of affection" for that kind of capitalism.
It's exactly the opposite, and even acknowledged in the article: on an international scale, the world is getting more equal, not less.
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It doesn't have to be central, it can be a way of living that amplifies the changes you'd like to see in the world. So for example, say a person acquires a certain amount of wealth and wants to make his or her home solar to stop feeding investment in the fossil fuel industry. He or she should consider installing double the number of photovoltaics necessary and give back to the grid to lessen someone else's burden.
Now apply that philosophy of cooperation to our daily lives and I think that we can achieve a fairly rapid change in the status quo, and that we are seeing it happening all around us.
How can economics be Darwinian? The outcome of economic interactions is not a zero sum, whereas a lion who kills and eats an antelope is engaged in a zero-sum interaction. The antelope gets nothing out of it. As a point of contrast, if you buy a car from Toyota, you have not harmed Toyota, nor has Toyota harmed you (hopefully). It is theoretically possible, when humans engage in trade, for both parties to end up better off. But in nature, in the competition for finite resources, one often sees exchanges in which all species end up worse off. There are many documented cases where predators have been too successful, and killed off all their prey, and then gone extinct themselves -- a negative sum scenario that has no obvious comparison to economic exchanges among humans.
If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.[1]
One thing I think you will notice is the manufacturers plaques attached to every little piece of equipment in the submarine ... every one of them the plaque of some tiny little supplier that you have never heard of. Some little Detroit Turbine Supply Company or American Radio Corporation of Maryland ...
Seriously - every single component has a label on it from a firm you have never, ever heard of.
I guess I don't have a deep knowledge of military procurement and supply circa 1942 (or whenever) but it sure looks like startups to me ...
[1] http://www.maritime.org/tour/index.php
" People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."
http://econweb.umd.edu/~haltiwan/dhjm_jep_5_17_2013.pdf
http://www.brookings.edu/~/media/research/files/papers/2014/...
Here is the abstract of that last study:
"Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation. But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech."
And here is the start of the first:
"The pace of business dynamism in the U.S. has declined over recent decades. The decline in business dynamism is evident in a pronounced declining trend in the pace of both gross job creation and gross job destruction. An important component of these declining trends has been the decline in the firm startup rate. The decline in the startup rate has yielded a significant decline in the share of employment accounted for by young firms – this share has declined by almost 30 percent over the last 30 years. "
And please, please, please note that a country can have an incredibly dynamic, innovative industry, but that nation can still be in long-term decline. See here for details:
http://www.smashcompany.com/business/if-the-usa-is-the-most-...
This concept of small manufacturers that excel in their niche has been the oldest business model in history.
Especially in Japan and Germany many companies have existed for over a millenium like that, and even today half of the made profits are by small, (50 people or less) companies that are hidden champions.
You probably never heard of http://www.walterwerk.com/en/, but they’re the world’s leader in machines that produce ice cream cones.
As you said, it’s not just since computers that these companies existed – they’ve existed for centuries.
But what is different this time is that for the first time investors are trying to invest in these small businesses, and try to make a huge profit out of them.
Nonsense. Plenty of companies start out as small companies and suddenly find themselves on the upwards slope of a hockey stick, others start out as aiming for that hockey stick and end up being 'just' sustainable businesses.
This whole start-up naming thing denies 125 years of objective reality. You can't start a scalable company deliberately any more than you can reliable write an evergreen book. Time will tell what you've got, not your label of it.
You're describing what I would call a "VC backed startup", where you'll either get big or wither away.
The other end of the spectrum (for people here) would be something like a Bootstrapped Technical Startup. Where you're trying to build a cashflow positive business leveraging technology in some way.
It would seem this definition paints a startup as a proto-bigcorp. If the prevalence of big corporations is not a cycle we want to repeat, would we not favor businesses that do not intend to become big corporations?
Most new businesses are replicating an existing business model. E.g., if you open a new corner store, it's probably going to end up being like every other corner store. If you're starting a games company, you're probably going to end up like a bunch of other games companies.
Startups, on the other hand, are tackling something deeply innovative. That means early on you have to optimize for learning: understanding customers, iterating on product, seeking product-market fit. It's a very different set of behaviors for the entrepreneurs than the normal new business.
I think you're thinking of venture-backed startups, which require a large enough amount of high-risk capital that nobody will fund them unless they expect to be worth $100m+. But there are plenty of smaller startups that are self-funded or bootstrapped. They can be perfectly stable at small scale, although many of them do choose to grow substantially.
[0] - http://www.paulgraham.com/growth.html
[1] - https://www.quora.com/What-is-the-proper-definition-of-a-sta...
I started rsync.net with the intention of staying stable at small scale.
It's worked out so far.
"Startups" in this context exist to get VC's an acceptable exit.
And that amounted to a large number of jobs which are no longer available to US workers.
"Obviously the spread of computing power was a precondition for the rise of startups."
seems closely related to the concept behind the book "Design Rules" (2000, isbn 978-0262024662). Here's a summary from the book flap:
"[The computing industry] has experienced previously unimaginable levels of innovation and growth because it embraced the concept of _modularity_, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established _design rules_. Drawing on the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy."
https://scholar.google.com/scholar?q=related:L9DylaW-KYkJ:sc...
https://en.wikipedia.org/wiki/United_States_Military_Standar...
The irony of regularly lecturing the rest of the country and world about what the future holds from the position as a final bastion on unassailable US hegemony of last century (2nd only to Hollywood?) perplexes me.
If you need skilled workers and the varying skill of a worker produces magnitudes of difference in wealth created of course you need to both be huge enough to afford them and centralized enough to take advantage of them.
The article itself seems like a blinders on interpretation of the US tech industry. Corporate consolidation is at all time highs in areas like food processing, farming, finance, raw materials, and industry. Mom and pop shops the world over are bellying up for Walmart and Starbucks. Startups and creative culture in the tech bubble are against the general grain. Its why money in politics is being considered such a larger problem now than twenty years ago - as dozens of economic effects interact, from people having less spending money to companies consolidating and having guaranteed revenues to regulatory meddling in their favor.
Fundamentally I think that newer generations growing up on the Internet are turning out much more hive minded than their grandparents, because there are just more of them as a fraction of the population. The perfect white nuclear family of 1970 still only accounted for a stark minority of the American public - it is just strange that a disproportionate number of people on HN ended up coming from that class. There was still extreme social unrest throughout the century - prison camps for the Japanese, the KKK, segregation, and the banning of many chemicals due to being "foreign" like opium and marijuana. Just because one microcosm of the American economy that produced most of us was homogenistic doesn't mean the era was exclusively defined by it.
https://www.quora.com/Why-do-software-engineers-make-so-much...
(I'm also not sure if Google or Facebook are either, but at least in those cases it's obvious what you mean)
I am not at all certain, but I have to wonder if something magically keeps SV software innovators glued to SV. This is something I've never understood. But there must be SOME reason why software innovation/work didn't completely disperse from SV ten years ago.
This seems to be the ontological point of his essay, which reads as a loosey historical narrative manufactured to defend his belief that the fight against "economic inequality" will undermine innovation by disincentivizing the next Zuckerberg.
But it misses the underlying point of wealth creation: if more people create more wealth, then naturally, there should be less poverty. Adding value to the world makes the pie bigger. The real issue is distribution. Our current economic model distributes wealth as a factor of capital, which is hoarded at the top and systematically protected. It would be silly to say that the top 1% of the population, which owns more than the rest of the 99% combined, creates more wealth or is more productive than everyone else on the planet. They just have a monopoly on capital.
https://en.wikipedia.org/wiki/Seisachtheia
"the relief of burdens"
"The seisachtheia laws immediately cancelled all outstanding debts, retroactively emancipated all previously enslaved debtors, reinstated all confiscated serf property to the hektemoroi, and forbade the use of personal freedom as collateral in all future debts. The laws instituted a ceiling to maximum property size - regardless of the legality of its acquisition (i.e. by marriage), meant to prevent excessive accumulation of land by powerful families."
There is tremendously less poverty in the world now than 50 or 100 years ago: https://www.washingtonpost.com/news/worldviews/wp/2015/10/05.... There's only more poverty if it's defined in a purely relative sense, but the relative definition of poverty is only relevant to ideological arguments and pandering to peoples' envy, not to describing peoples' actual material quality of living.
Well put.
The argument that general taxation disincentives innovation has never made any sense to me: no matter how high the tax rate, your post-tax income still scales linearly with your gross income. If your object is to make increasing amounts of money, how does a tax give you less incentive to do so?
(In reality, only totally naive people believe that any billionaire cares at all about making more money for the sake of the money. It's actually about power and about irrational desire to be higher in the rankings compared to other billionaires… unless they have other motivations that aren't related to their profit, of course)
It's a question of liquidity.
http://www.levyinstitute.org/pubs/wp_589.pdf
This study that I found (after just 3 minutes of googling, btw) says that top 1% own only 34.6%. Do you have a source for your figures?
PG seems to argue that the fragmentation of society is a question of efficiency. A natural effect of this is that the world will become more cut-throat. Efficient systems turn hyper-competitive, as seen in university admissions, startups, financial markets. It seems to me that too much "liquidity" mostly causes burnout, depression, dumb risk-taking, and a few really successful winners. Tech is really guilty of this phenomenon by tending to produce one winner for every thousand losers.
In many ways the 20th century was an anomaly -- the wars were more violent, the rate of growth was faster, the cultural shifts were huge and multifaceted -- but we still use tend to see it as a normal state of things. A hundred years into the future we'll be looking at an entirely different world and consider it normal.
I agree that the economic dynamics of 20th century America won't repeat. But I'm not sure most countries will enjoy a stable predictable trajectory this century. Asia and China are far from being mature ecosystems (economically or politically), and the likely loss of jobs due to further globalization and automation, just as the promise of US-style consumerism is arising portends a bumpy ride, especially for totalitarian-ish societies like China, Saudi Arabia, and even Turkey.
The New Left in the 1960s mostly just failed outright. Any change then was due to judicial or executive action.
Slavery, for example, worked wonderfully for the slavers. When we abolished slavery but kept former slaves from full participation in society, they mostly ended up as underpaid servants and laborers. Women restricted from earning a living on their own still had to survive somehow. Which in the 50s often meant attaching themselves to men and providing them with a lot of unpaid support.
Real revelation for this Michigan boy was that at both Tesla and SpaceX Musk had failures trying to use existing supplier networks. By doing a lot of manufacturing in house Musk not only realized cost and time savings but gained an agility and nimbleness that blew away his competitors. Granted Musk didn't need to manufacture his own raw materials. But in doing his own manufacturing he was able to gain a further competitive edge by making his products better. For example the Big 3's supplier networks add to their sloth and look-alike products.
¹ Here I expect at least some people to bring up something like Henry Ford and his horse & carriage replacement offering as a counter-example in favor to Elon Musk's enterprise. The car vs. existing livestock-based transport and the electric car vs. existing fossil fuel car are not really comparable.
> [Technology] means the variation in the amount of wealth people can create has not only been increasing, but accelerating.
The problem with this is that success = ability * motivation * opportunity. There's no question that technology is increasing ability. But it's less clear what's happening with opportunity.
Networks tend to be winner-take-all, which means that technology actually depletes opportunity at the same time as it increase ability. Which I think means that we're actually going toward integration, not fragmentation. Only this time we don't need another WWII to integrate society because it's already happening, it's just less visible.
E.g. the vast majority of the traditional media is controlled by the same six corporations. And to quote Fred Wilson's 2015 wrap up, "10 of the top 12 mobile apps are owned by Apple, Facebook, and Google."
There's no question that individuals are way more free than they were in 1950 or whatever. But I think it's more analogous to free-as-in-beer, as opposed to free-as-in-speech.
When I was a lad I got my hand on a great prize: a copy of Delphi 3 (already obsolete by then), which got me started coding. Today anybody can download much better tools (Visual studio, IntelliJ, etc for free). Any question you have can be searched on the internet, etc. Opportunity has increased _massively_ the last 20 years.
My argument is that everyone has the same 15 or 20 basic human needs, and increasingly each of those needs is being met by two or three global corporations, as opposed to two or three local or national companies. Which means that even if you as the individual are more talented or whatever, there is actually less opportunity to use those talents to fulfill human needs at scale in a profitable way. That's why such a large percentage of employees today work low wage jobs in the service industry, as opposed to physical/digital manufacturing.
And network effects are only one way in which technology has decreased opportunity. Another is environmental degradation. E.g. 300 years ago anyone in manhattan could feed themselves just being sticking their arm in the Hudson river. But now all 100% of those (edible) fish are gone, and all the profits that were made from dumping industrial chemicals into the river have been privatized by the wealthy.
A third way is legal regulation. Every time a new technology comes onto the market the government has to regulate, which often shuts out everyone except the super wealthy from competing. (Want to start a cell phone company? Good luck with that.)
There are more one-in-a-million lottery ticket opportunities than ever before. But for the average person, there is actually much less opportunity for them to be successful. And not just less wealthy relative to the rich because the rich can gather sticks faster or whatever, but less wealthy on an absolute scale because there are no sticks left to gather.
It's nice to talk about making furniture and fixing up cars or whatever, but I think the number of fortunes that have actually been created by making wealth without externalizing massive costs onto the poor and middle class are probably few and far between.
> Opportunity has increased _massively_ the last 20 years.
The only problem is that it's increased for everyone else, too. Used to be you were a king if you had a board with a nail in it. Now everyone's packing Uzis.
success = (ability * motivation * opportunity)^hugeDoseOfLuck
There is no guaranteed formula for success, it is heavily luck dependent. Those who think otherwise are suffering from survivor-ship bias and/or the just world fallacy.