
PG: “Any industry that still has unions has potential energy” - nichodges
https://twitter.com/paulg/status/663456748494127104
======
diyorgasms
Historically, unions have been very antagonistic to capital. Paul Graham is
basically the definition of capital; he uses his wealth to generate more
wealth. And what he is suggesting is that startups could fix the
inefficiencies in the market that unions have created. The problem is that
fixing these inefficiencies would primarily benefit people like PG, who make
their money from the ownership of enterprises rather than labor.

Generally speaking, the inefficiencies of unions exist to protect the
interests of the workers, who generate wealth for the company but more often
than not do not have an equity stake in the business. Unions exist to maintain
the balance between capital and labor, and to make sure that people like PG
don't deprive the laborers of fair remuneration for their work.

While we can almost always find someone who will do a job for less money, as a
society we have an interest in providing an equitable share to labor, as there
are far more workers driving this global economy than there are venture
capitalists (or even just plain old capitalists) contributing to the economy
in the form of seed round funding and the like.

~~~
supster
> Generally speaking, the inefficiencies of unions exist to protect the
> interests of the workers, who generate wealth for the company but more often
> than not do not have an equity stake in the business.

What if we paid workers meaningful amounts of equity? Would that perhaps
reduce the need for unions bc the labor/capital divide starts to get blurred
and then workers are able to share in the wealth they generate for companies?

~~~
jrowley
> What if we paid workers meaningful amounts of equity?

How would you provide equity for public school teachers?

~~~
supster
That's a great point. Maybe we should view the issue from two perspectives: 1)
unions for government employees and 2) unions for corporate employees. Where
maybe the solution for corporate employees is more equity compensation, and
for gov't employees a formal union system makes sense. Though some have argued
that perhaps the gov't should not be in the business of education, and perhaps
encourage a voucher system instead.

~~~
Zach_the_Lizard
In some ways public sector unions are worse than private sector unions. In the
private sector, the stakes are higher; you can contribute to the bankruptcy of
your company if you are too aggressive. You also can only negotiate with the
company itself. Maybe you can get a boycott of products in some cases.

With public sector unions, bankruptcy is very hard to achieve. The union also
isn't negotiating with the government agency; it's negotiating with
politicians as well, who have aims other than efficiency. They want to get
elected. If enough of your constituency is in the relevant union, there's
going to be pressure to not negotiate as hard.

Look at e.g. public transit unions. The DC Metro is falling apart, station
managers sleep at work, escalators don't work ludicrously often, repairs are
shoddy, and the drivers aren't terribly good at driving their trains
(seriously, since they disabled computer control it's started giving me motion
sickness; I have never experienced this on other transit systems). Yet the
union is asking for a raise.

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kuro-kuris
Sometimes the political divide between Europe and the US becomes glaring on
Hacker News. I feel this tweet is one of those moments. Our differences makes
us more interesting but this tweet was a bit hard to digest.

~~~
diyorgasms
I don't think this is a continental divide at all. I think what PG said here
would be considered reprehensible to a lot of Americans, and I count myself
among that contingent.

This isn't demonstrative of a divide between continents, this is a musing of a
man so far out of touch with regular society that he sees a large swath of
society as an inefficiency waiting to be obsoleted by a tech startup (which
would presumably increase his personal wealth in the process).

~~~
geebee
40/60 splits often turn into "group A does this, but group B does that". It
happens a lot.

I remember an article about whether people consider various acts on social
media to be "cheating". So you know, 85% of women considered having a tinder
account to be cheating, whereas 75% of men did (or something like that, I
can't really remember). This was reported, of course, as "men and women differ
about what counts as cheating on social media" when the data screamed "men and
women largely agree about what counts as cheating on social media."

The split may be relevant - it does tell you something when 60% of one
continent feels one way and only 40% of another does, but "Europe is this,
whereas the US is that" is usually a vast oversimplification.

It's generally media driven, the differences make for better headlines, but it
crops up all over the place.

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leroy_masochist
If I were to put this tweet in my own words in order to convince others of its
truth I'd say something like: companies in industries that have met both of
the necessary conditions of having unionized workforces [0] could probably be
improved by the application of recent technological progress to that company's
operations, but most large companies lag in their efforts to refactor their
processes, so there's an opportunity for brand-new companies to gain market
share by using new technology in ways that make them categorically better at
delivering the product or service associated with that industry.

The problem I have with this tweet is that it makes PG look like an arrogant,
detached asshole. It's the kind of thing that non-VC's imagine that VC
partners say amongst themselves while swilling $500 organic Merlot in their
palatial estates in Woodside. PG to a great extent is seen by the outside
world as speaking for the Valley, which is usually a good thing because
usually the stuff he puts out there is thoughtful and makes him look smart.
I'd say this tweet is a pretty big outlier from that pattern.

[0]These are: a) existing for long enough and b) employing enough people that
their workforces decided to unionize

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mikeash
It always amazes me that if you get a bunch of workers together and organize
them so they can act collectively, you get a ton of hate and a lot of people
assume you're destroying value. Yet do the _exact same thing_ on the employer
side and this is not only acceptable, it's the only way we would ever think of
doing things.

In other words, why can't I replace "unions" with "corporations" and have the
statement still be true?

~~~
jnwrd
Wait, isnt doing the same thing on the employer side called a trust? If this
isn't what you had in mind please elaborate.

~~~
obrero
Are you joking? The United States is dominated by the modern trusts. In 1911
Standard Oil was broken up. In 1999 the two major Standard Oil subsidiaries -
Standard Oil of New York and Standard Oil of New Jersey merged once again,
into ExxonMobil. In 1984 Bell was broken up. Now the Baby Bells have merged
back together with the countries local loops dominated by Verizon and AT&T
(and Qwest) and the wireless spectrum also dominated by AT&T and Verizon (and
Sprint...and T-Mobile, which AT&T tried to merge with, then Sprint - and which
will be merged or carried off to the graveyard in the coming years).

Monopoly is the name of the game, or duopoly any how - and everyone from Peter
Thiel to Warren Buffett is pretty open about it. The "Big Eight" accounting
firms have been halved, they are now the Big Four. The media is owned by the
Big Six, which is really the Big Five as Redstone controls Viacom and CBS.

The US is full of trusts and monopolies and the trend has been for more of the
same. Even breakfast cereals have a Big Four. Less than 7% of workers in
private industry are in unions, and that number has been falling.

~~~
jnwrd
Well put, I would further add that much of the equity in these few firms is
owned by massive firms such as Blackstone, and and Blackrock. Concentrating
the ownership into the hands of fewer owners further promotes anticompetitive
action.

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ikeboy
Followup clarification tweets:

 _(I don 't mean in simply paying people less, but rather that industries
afflicted by unions are sclerotic so have left lots undone.)_

 _There is much more money in doing new things than in paying people less._

edit: this received a number of downvotes, and I'm having trouble
understanding why. Presumably providing context is a good thing here, right?
There are comments that would be better informed if they had seen the follow
up tweets.

~~~
Sideloader
Perhaps because it's incredibly vague to the point of being meaningless?

What, for example, does "sclerotic" mean in this context? What things are left
"undone"? There is more money in doing what "new things"? More money for whom?

~~~
ikeboy
I'm not endorsing any of these tweets, I'm literally just quoting them for
people who only saw the first tweet.

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hyperpallium
Without unions (or minimum-wage laws), the price of labour reflects supply and
demand. Skills in shortage have higher wages; unskilled labour drops to
starvation wages - or below, provided there are replacement people.

In good times, with labour in demand, wages are higher, up to the point where
the demand is met. Wages can go no higher. If there are enough people, these
wages might be quite low. The remaining surplus is captured by capital.

In bad times, when demand for labour is low, wages may drop arbitrarily low.

Another solution to starvation-wages or below is social security or, more
radical, universal income. It acts like an employer competing for labour,
providing a minimum-wage threshold, through market forces. If capital doesn't
offer sufficient wages, labour chooses the safety net.

However, this ignores the non-wage benefits of employment: people _like_ to
work, to be important/needed/useful, to be part of something, social contact,
etc not to mention practice and acquisition of skills.

Finally, to be fair to pg, unions also represent a freezing of a particular
way of doing business. Like back-compatibility or a requirement to use a
particular technology, it restricts the way work can be organized. It prevents
work from being "re-factored" \- even if there exists another arrangement that
would be just as good or even better for workers. Inflexibility eventually
causes inefficiency.

[ BTW I think there are three levels of systems that we can optimise for
"efficiency": technical systems are efficient at their task; a business as a
system is efficient at making money; a society as a system is efficient being
something people want to be part of - that is, serving their needs. ]

------
obrero
There are people who work, such as the young programmers in SoMa who work
50/60/70+ hour weeks pounding out code for startups, who after rent and such
don't have much savings piling up in the bank, nor much of a social life.
These are the people who work, who create wealth.

Then there are the parasites - the heirs whose families haven't worked in
living memory. The LPs give money to the VCs and whoever else does Series-A
type rounds nowadays, who filter it to the CEOs. Unlike the poor 22 year old
sap, they have their bets spread. Once a Facebook, or Google, or Oracle gets
big enough, they start extracting their profits from the monopoly type
situation they created, and from the wealth the workers have been creating.

Labor organizes into unions so that the people doing the work, the workers,
get to keep more of the wealth they create, as opposed to the money going off
in dividends to these parasitic heirs. The parasites hate organized labor,
because it prevents the parasites from expropriating more surplus labor time
from people who work and create wealth.

------
dragonwriter
This is sort of self-evidently true; the purpose of a capitalist firm is to
achieve a monopoly (in exactly the sense used in antitrust law, that is, to
achieve a market within which they exercise pricing power) and extract rents
from it for the capitalists the firm serves. Unions are a mechanism by which
labor does much the same thing, limiting the ability of capital to retain
rents even if firms achieve a mechanism to extract them.

So, sure, from the point of view of capitalists, the existence of unions _is_
an inhibition to the realization of capital yields.

------
brchsiao
The main protest here seems to be that fixing what unions break inevitably
benefits capitalists while cheating the worker. I'd genuinely like to know:
what's the best example of an industry disrupted in this way that left workers
net behind?

Everyone knows it's annoying to see the rich philosophize in armchairs while
the rest of the world does the lifting. Is that all that's left to say? pg
seems to be claiming that (a) unions indicate breakage for startups to fix,
and that (b) fixing this breakage is in fact _more_ profitable for startups if
they do it good-naturedly instead of simply taking workers' pie. Is this
false?

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dropit_sphere
You know, like a log of wood does. Light the sucker and you'll unlock all its
value!

------
littletimmy
Absolutely reprehensible.

Dismantle all protection for labor, keep oppressing them, and you will
eventually force a destruction of the very canvas of economic stability
against which you want to tap this "potential energy".

------
api
There are some fantastic counter-arguments in there. For the record I think
both sides have valid points: unions _do_ make industries "sclerotic," but
they also exist to prevent a deflationary race to the bottom in wages. I'd
reference Peter Thiel's comments on competition from Zero to One-- they apply
just as well to labor as they do to companies.

"All workers can't be paid union wages" is perhaps true, but flattening the
labor market completely would result in a squeezing of disposable income that
would harm the economy overall not to mention the well being of its
participants. As Thiel correctly argues: surpluses are required for pretty
much anything outside the status quo to happen. If there are no corporate
surpluses there can be no R&D or expansion. If there are no labor surpluses,
there can be no adoption of anything new or interesting or novel. How many
impoverished check-to-check workers will be purchasing an Oculus Rift or a
Tesla?

A lot of the criticism of unions is also hypocritical. For example, corporate
executives as a class are de-facto unionized. Why is it that companies pay
absurd salaries for directors? Being a CEO is a hard job but it's not that
hard. The reason companies hire superstar directors and pay them superstar
wages isn't because these people are actually hundreds or thousands of times
more effective. It's because these people are _connected_. They're plugged
into the "old boy network" a.k.a. in the union and that confers a privileged
position in relation to things like raising money, making big deals,
protecting companies from government scrutiny (the CEOs union has a revolving
door with government), etc. A great recent example would be Condi Rice being
recruited for the Dropbox board. What expertise does she have in IT enterprise
marketing, distributed systems, engineering team building, ...? None. But
she's very connected in the "union."

I think it's reasonable to hypothesize that any time you see what appear to be
above-market wages being paid for any form of labor, something union-like is
going on even if it's not officially organized as such.

I also love the comparison of YC to a union. It's very much like one. An open
question for pg:

Would he be willing to forego YC's union-like attributes? This would entail
ceasing all collective bargaining with investors on the part of YC companies
and refusing to permit companies to openly leverage the YC brand to increase
their clout in the market. YC could still provide co-working space and
mentorship but could not use any collective marketing, branding, or bargaining
strategies to assist its companies in fund raising or growth.

Wouldn't it be a more efficient market if startups competed only on merit and
negotiated in a flat market domain with investors?

~~~
gobengo
If {YC,CEOs} are like unions, then the corollary to OP is interesting

"{YC,CEOs} have potential energy that could be released by startups."

~~~
api
I believe this is true, and there probably are things that could be done to
"disrupt" both these markets.

YC (and to a lesser extent Silicon Valley itself) have union-like
characteristics. Why is it that a bunch of companies working on distributed
networks that are designed to permit easy global communication have to be
located within 20 miles of each other and consequentially forced to spend
sizable percentages of their investment capital propping up an absurd real
estate market? This is being disrupted by things like AngelList that make it
easier for startups in more reasonable local markets to raise capital on an
open flat market.

The death of Detroit wasn't caused by the death of cars. The automobile market
has grown since the 1970s. It was caused by the global geo-diversification of
the automobile industry. I wonder if the same thing could happen to SV (and
YC) as a result of similar disruptive market shifts in the IT/Internet/tech
markets. Since investors are to a great extent the customers in this market,
the shift could come if investors see superior returns from companies outside
the SV/YC orbit and decide that paying the Valley Tax is not justified. Also
like Detroit, SV's cliquish quasi-unions are perhaps a bit smug and self-
satisfied and don't see it coming.

I'm not sure how you'd go about disrupting the "CEOs union." Let's make the
question more concrete: what value does a union hire like Condi Rice (just
using her as one example) bring to Dropbox and how might a startup replace
that with something more efficient? I personally don't know enough about the
high corporate world to know the answer, but I suspect a few around here do
and might have some ideas. Maybe it would be possible to leverage your
customer base. If you have something people love -- like AirBnb for example --
and are getting flak over it, which would be cheaper: to mobilize your
customers or to hire a $200m/year CEO with government connections?

