
Why Silicon Valley is not the second coming of the Gilded Age - pg
https://medium.com/the-peer-society/410c644cebe4
======
smacktoward
The fundamental error of this piece is that it assumes that if you vote
Democratic, you're by definition not a one-percenter.

But this is just wrong. There are lots of one-percenters who vote Democratic.
They just mostly feel more strongly about cultural-liberalism issues than they
do about economic ones. But when it comes to economic issues, these folks
still tend to lean rightward; they overestimate the degree of social mobility
the economy makes possible today, they support "ownership society" initiatives
like 401(K)s and health vouchers over social insurance programs, and so forth.
These folks aren't found just in tech, they're also quite common in the
entertainment industry and other "new economy"/"information economy" sectors.
(The derogatory term for them used to be "limousine liberals"; rich people who
were totally down with helping the poor, as long as doing so didn't cut into
their personal bottom line.)

So you have billionaires on both sides. American politics, in fact, has mostly
become a battle between billionaires. On one side you have billionaires who
care about social liberalism, on the other you have billionaires who care
about economic liberalism. But _they're all billionaires,_ so issues that
don't affect billionaires personally (like the minimum wage, or how to pay for
retirement, or the unemployment rate, or affordable housing) just don't get
included in the debate. As far as the political system is concerned, they're
non-issues. They don't exist.

There used to be institutions that brought these issues into the discussion
anyway, like political parties and labor unions. But those have mostly
atrophied over the last 50 years, so we have a system where whether the
capital gains tax rate is low enough (a question that billionaires of all
stripes care deeply about) is continuously and loudly debated, while whether
the minimum wage is high enough is hardly ever discussed.

~~~
pg
_The fundamental error of this piece is that it assumes that if you vote
Democratic, you're by definition not a one-percenter._

What? Much of the article is devoted to making the opposite point: that the SV
elite overwhelmingly support the Democrats.

~~~
jiggy2011
Political affiliation seems like a red herring in a two party system. It
wouldn't surprise me if people in SV vote democrat because they don't like
certain things associated with the republicans (religion , anti-gay rights,
guns , whatever) rather than agreeing wholesale with the democratic party
manifesto.

~~~
btilly
In a straw poll at work some years ago we found that a hypothetic economically
liberal, and socially liberal party would handily trounce both Democrats and
Republicans. I wouldn't be surprised if the same holds fairly broadly among
people in IT.

As the old joke goes, "I can't vote Democratic because I want to be able to
spend my money, and I can't vote Republican because of what I want to spend my
money on!"

~~~
HeliasVlastimir
By economic liberal do you mean left wing? Economic liberalism usually refers
to right wing economic policies.

~~~
btilly
I meant the usual thing.

Right wing economic policies. Left wing social policies.

So relatively low taxes, less bureaucracy, balance the budget, etc. But also
gay marriage, equal rights for a variety of groups, and science based
environmental policies.

~~~
xyzzy123
Totally agree that such a party would be great.

Does left wing social policy include e.g. universal welfare, health care and
access to education though? Or are you thinking mainly of "liberal" rather
than "left wing"?

Part of the problem is that left wing social policies cost money and have to
be administered, conflicting with low taxes and less bureaucracy.... :(

~~~
btilly
You hit the nail on the head. Reality wouldn't let you do all of that without
compromises, and we didn't agree where the compromises should be. But that
wouldn't stop a politician from promising all of the above. :-)

That said, we did find broad agreement on many things that are completely off
the political map in the USA. For example we could reduce the size of our
military, liberalize drugs, get rid of the DEA, and reduce prison populations.
All of that saves money. We also agreed that none of us actually expect Social
Security to still exist when we need it, and so we'd prefer it replaced in the
long run by something out of the hands of the politicians. Something along the
lines of Australia's Superannuation would make sense. (But it wouldn't be fair
to do it like Bush suggested - where it is privatized but with cutoffs that
massively reduce what people can expect to get.)

Absolutely none of that is in the public discourse. But it would have been
more popular in that office than anything being offered by the political
parties.

In other conversations we also agreed that in general it is better to make
rules simple and clear with the right incentives, rather than trying to add
rules and counter rules that are guaranteed to give perverse incentives and a
field day for lobbyists. For example we have laws mandating fuel efficiency
standards, with complex exceptions saying that different types of vehicles get
different treatment. I can't say anything about the net result other than that
I'm sure that it lets politicians say that they solved the problem, while
giving established Detroit companies some benefit. (The most obvious candidate
for a benefit is that the regulatory mess is a barrier to entry for
competitors.) But if you simply tax carbon fuels steeply enough, then
incentives will be right. And then if you redistribute those taxes back to
people in direct payments, then people can afford the taxes, and are left
pushed to choose efficient vehicles for economic reasons.

------
onemorepassword
One foundation of the entire argument seems to be that support for the
Democratic party makes SV progressive. However, in a global context only the
minority left wing of the Democratic party could be called progressive.

Also, a simpler explanation for the large support for the Democrats would be
that SV consists of intelligent, highly educated and well-informed people that
wouldn't dream of supporting the extremist, anti-intellectual and downright
insane collection of circus freaks the Republican party has become.

Just based on the purely anecdotal evidence of online and personal encounters
with SV-dwellers, I would consider most of them to be "open minded
conservatives".

The other foundation is the way companies in SV are organized and equity dived
compared to traditional companies. This could simply be explained as
"pragmatic", which is how most companies view it themselves.

It seems to me the author is trying to project his own ideas on SV.

~~~
nostromo
I think that's correct.

Anecdotally, my personal network in tech seems to side with Democrats for
reason like environmental protection, global warming, gay marriage, abortion,
and olive branch foreign policy; not because of economic reasons like union
support, wealth redistribution, or strengthened regulators.

~~~
jjoonathan
Makes you wonder if the Republican party isn't intentionally taking the wedge-
issue craziness to 11 only so that they can rebrand next election cycle and
yank the mat out from under the Democrats. Given the effectiveness of Romney's
rush-to-the-center in the 1st debate against Obama, the thought has to have
crossed their minds. The timing (tossing last election to win the next one)
makes sense because next election they won't be running against a relatively
popular incumbent. They don't have anything to gain by doubling-down on the
losing side of every social issue on the list -- their core demographic will
vote R regardless -- but a pull-the-mat strategy could net them tons of
wealthy individuals from the "socially liberal economically conservative"
camp.

~~~
refurb
I think the bigger issue is that each party caters to their fringe groups and
then shifts to the middle when they are in office.

GWB backed one of the biggest expansions of entitlement programs since LBJ
(Medicare Part-D).

Obama seems to have no problem ignoring the international community when it
comes to using US force globally.

The only thing that separates the two parties (when in office) are the issues
that can keep them in office (e.g. the issue of abortion and guns is pretty
evenly split in the US)

------
stcredzero
Since I moved to California and the Bay Area, I have to say I've encountered
more smarmyness and arrogance than in Houston Texas. This by itself isn't a
negative indicator. However, if you couple it with a tendency for people to
judge you by "your cover," then it is. The real attitudes of people, and how
they differ from stated ones, are a big part of the downsides of a milieu like
the "Gilded Age." Success itself is a part of the problem here. Success
attracts attention, both good and bad, making it necessary to bias for false
negatives in various interactions. This encourages the "echo chamber" effect.

I wonder if Silicon Valley isn't reaching some sort of gradual saturation. The
number of people who pretend to be upbeat and curious versus the number who
actually are is disturbing to me.

(EDIT: To be fair, this may well be because I'm on the wrong side of the
filtering membrane.)

~~~
johngalt
Tech Cycle:

1\. Small groups of dedicated technologists create a large step forward in
technology. Generally becoming wealthy.

2\. People following money all pile in. Pretenders abound; both founders and
investors.

3\. It becomes impossible to separate the wheat from the chaff. How do you
tell the difference between someone who is legitimately experienced and
someone who's skill is putting on appearances?

4\. Big crash as the pretenders fail to produce similar results. All the crazy
money leaves the technology sector. "Who needs an online pet store anyway?"

5\. The only people who are left are small groups of people dedicated to
technology regardless of the headlines. (return to step one)

~~~
stcredzero
_> How do you tell the difference between someone who is legitimately
experienced and someone who's skill is putting on appearances?_

Those who have legitimate experience can detect their peers. Unfortunately,
this is highly contextual. You can be a competent Ruby on Rails guy, but still
suffer from Dunning-Krueger when trying to evaluate an iOS developer.

You can also go back to first principles. Do people live their lives and
engage in conversations in a way that indicates they understand the
epistemological stance of scientists? I have a super power in this regard. I
exude a field that makes undesirable people prejudge me, to the point where
they make factual mistakes.

~~~
api
This applies to business and marketing too.

A big problem is that innovators lacking business experience are easy prey for
self-promoting douchenozzles who pretend to be able to "accelerate" them. In
reality they don't know what they're doing, don't have the connections they
claim to have, and just want to entangle themselves with something in the off
chance it might turn out to be big.

------
ChuckMcM
I really loved the insight about how tech companies distribute the wealth
created by their growth. When it goes widely you end up with people like
Charlie Ayers (Google's chef) who are able to leave and create their own
restaurants (more jobs, more creativity). When you keep all the wealth
generation to a hand picked set of individuals, it seems you create obligation
and cronyism.

And for me, the most amazing part, is that since it looks externally 'easy',
success results in a rush of folks who want to do that too.

When people ask my advice about interviewing at a place like Google I tell
them, "Don't interview at Google just because you want to work at Google,
interview there because there is something you want to accomplish that you can
do more easily at Google than anywhere else." Or people asking for advice on
creating a startup, where one of the questions is "What should I build?"

Here is a news alert :-) If you don't already feel passionately about building
something you don't want to be the person _starting_ the startup. Work at one
or two and figure out what it takes to build a company, what works and what
doesn't, and be thinking about how your talents might solve a problem in a way
that would be useful. Until then, don't quit your day job.

------
jseliger
I find it somewhat funny that the original _New Yorker_ article about the tech
industry's insularity is itself hidden behind a paywall; I actually wanted to
submit the Packer article itself this morning but didn't bother. Nonetheless,
I do think Johnson does a decent job of giving the other side.

But I did send this as a letter to the editor, since it concerns a pet peeve
that I constantly see in the media:

George Packer's essay on Silicon Valley's politics makes several references to
housing prices, including that "the past two years have seen a twenty-per-cent
rise in homelessness, largely because of the soaring cost of housing." But he
doesn't mention how supply and demand affect pricing, as Matt Yglesias does in
_The Rent is Too Damn High_ or Edward Glaeser does in _The Triumph of the
City_. Both writers have correctly observed that many urban jurisdictions
prevent housing from being built to accommodate growing demand; as a result,
prices rise. It's not primarily tech companies or their employees who have
driven housing prices in Silicon Valley: it's residents themselves, and the
courts that have given residents and politicians extraordinary powers to block
development—which is why "San Francisco is becoming a city without a middle
class."

~~~
bubbleRefuge
You are right. Why can't more high-rise condo projects get going on the
peninsula? Is it b/c of earthquakes? Why not build lots or hi-rise condos
along the bart/cal-train corridor?

~~~
HIbachikabuki
It's not the earthquake issue. It's that the Peninsula is already fully built
out & most existing residents/voters don't want any high density development,
they want to keep the existing single-family-home environments.

------
dmmalam
"I would be surprised if there were any new industry in the history of
capitalism that distributed its economic rewards to its employees as widely as
Silicon Valley has."

Wall street has been distributing most of it's profits to employees in the
form of bonuses for decades. Though unlike SV, it get criticised heavily (a
lot unfairly IMHO) for it. Having worked in both, I feel they are full of the
same 'type' of people.

~~~
rayiner
Yeah, this quote is totally off base. Finance, consulting, law, and accounting
all distribute company earnings very widely (often, entirely) to the people
who do the actual work.

These companies also tend to have much flatter structures than Silicon Valley
tech companies. The greenest associate at a big NYC law or consulting firm
probably has just a few levels above him to the managing partner or CEO. The
structure is instead broad and flat, with potentially hundreds of partners or
managing directors leading their teams with high levels of autonomy.

Pay spreads are also narrower. I don't have numbers for consulting, but many
NYC law firms are 5:1 or less top to bottom for partners, and around 30:1 for
highest earning partner down to greenest associate (and many of these scales
are lock-step, meaning everyone at the same level of seniority is paid the
same). Finance is of course broader (thanks to huge bonuses for traders), and
my impression is that consulting and accounting are narrower. The pay spread
at Yahoo between Marissa Mayer and the most junior programmer is more like
250:1, and even within the ranks of executives the spread is probably more
like 50:1.

The deep irony of these professions is that while they are a major part of the
capitalist system, they are personally mostly free from that system. It takes
very little capital to run a services businesses like these, which means there
is no need to bring in shareholders, which means that the money of the
business stays with the workers rather than being diverted to investors.

~~~
michaelochurch
Thank you for this.

Lawyers and bankers actually have a sharkish will to negotiate for themselves.
They're good at what they do, they're powerful allies and formidable enemies,
and they know it. People don't often try to take advantage of them, even when
one is senior and the other's a greenhorn. They know better. In 7 years, that
junior you tweaked is going to be partner-level somewhere and might end up
surprising you how well he does.

Most programmers work for old-style Theory-X companies where you have to be a
manager to get a fair shake-- because we, as a group, suck at advocating for
ourselves and get taken advantage of in a way that just wouldn't happen to
most lawyers or bankers.

The same is true of most of these Silicon Valley "startups". You gotta
differentiate between companies that are small because they're elite niche
operations (which are some of the best places to work) and companies that are
small because they're shitty. Many of these "startups" are the latter.

~~~
ardit33
That's why you start a company. Build a good looking product, that will really
never make money, and pimp your team to all larger companies. Maybe one will
bite, and will buy your company (basically hiring bonuses).

------
YokoZar
A much simpler point the author missed is that wealth doesn't exactly cause
the housing shortage so much as not building houses. San Francisco has rent
control, and most of the peninsula has severe zoning controls.

It would be extraordinarily profitable to build commercial buildings with
dense lofted apartments in many areas of the peninsula, however they are
simply prohibited by local governments. That's neither libertarian nor
egalitarian.

~~~
joonix
Note that those projects would be profitable only if they were permitted in
limited areas only. A broad lifting of regulation would result in sprawl, not
density. Look at Houston. Everyone would avoid expensive, dense areas by
building out further and further into the land, and in the Bay, there's a ton
of undeveloped wooden land that developers would have no problem replacing
with tract homes if they were able to do so.

~~~
YokoZar
Of course, there is room for urban planning. But it's quite telling that none
of these projects are starting even in the "downtown" areas adjacent to
caltrain stops, which is exactly where you want growth to happen. If a
peninsula city actually wanted to prevent sprawl, they'd build up the urban
core rather than force people to commute from more permissive cities in the
east bay.

~~~
joonix
Yeah, but this planning begins at a very local level. The NIMBYs are only
concerned about their views being blocked and could not care less about the
sprawl occurring 30 miles away.

------
d4vlx
This article conflates Libertarians with Republicans which I don't think makes
sense in Silicon Valley. Yes, nationwide they tend to be in the same group but
not in the valley.

Judging from comments on HN the valley does sound quite libertarian but not
the kind that register and vote Republican. It seems more intellectual and
based in logic while Republicans are more about dogma and scoring political
points.

~~~
pyoung
I think he did a good job at making the distinction. Not sure if you got the
jist of it, but he clearly states that despite the heavy libertarian leaning
culture, SV overwhelmingly voted for Democrats the last few elections,
indicating they were not on board with the Republican platform.

My take on it is that SV is 'liberaltarian', in that they prefer small,
efficient, decentralized organizational structures, but that they also
recognize the need for social welfare as a stabilizing force. Additionally, I
would guess most of them are turned off by the conservatism side of the
Republican party (pro-religion, pro-drug controls, etc), and as such tend to
vote for democrats based on the 'lesser of two evils' decision making process.
This pretty much describes my views, and I would imagine a lot of others in
SV.

~~~
kyllo
_My take on it is that SV is 'liberaltarian', in that they prefer small,
efficient, decentralized organizational structures, but that they also
recognize the need for social welfare as a stabilizing force._

That's how I see it as well.

The fact is, that there is a strong demand for social insurance/welfare
services (e.g. health insurance, unemployment stipends, retirement pensions,
etc), and the supply of those services can either come mostly from the
government (as it tends to in Western Europe) or mostly from employers (as it
tends to in the US).

"Liberaltarians," I think, believe that we're better off letting the
government provide the social insurance services to everyone, so that
citizens' access to them is no longer dependent on employment, which will
increase liquidity in the labor market and take some of the risk out of
entrepreneurship. Then employers also won't have to be burdened with providing
and administrating these expensive "benefits." Win-win.

Meanwhile, people that live in sparsely-populated rural areas believe that
they have less demand for social services, and that their tax dollars are
paying for the social services that are only consumed by low-income city-
dwellers. I've read studies that show this is false, and most rural counties
consume more tax dollars than they contribute, mostly due to farm subsidies.
Regardless, that seems to be the main economic concern of rural Republican
voters.

~~~
cpeterso
> _"Liberaltarians," I think, believe that we're better off letting the
> government provide the social insurance services to everyone, so that
> citizens' access to them is no longer dependent on employment, which will
> increase liquidity in the labor market and take some of the risk out of
> entrepreneurship._

Also, employer-funded health insurance is a drag on US companies that must
compete with foreign companies that can rely on government health
insurance/services.

~~~
kyllo
And it depresses salaries. Companies could afford to pay more in salaries if
they didn't have to pay for health insurance. This could potentially make up
for the higher taxes we might have to pay for a national single-payer health
plan.

Of course, we might not have to pay higher taxes at all if we didn't have all
these private health insurance companies skimming the pot.

------
api
I think the Valley's insane wealth is a temporary thing, indicative of a
comparatively new industry.

Detroit once had the highest average income in the United States. Cars are
still as popular as ever, but the auto industry eventually shifted and
diversified and broadened and left Detroit mostly behind.

------
mcarvin
Author states that Silicon Valley corporate structures are more egalitarian
when measured against traditional firms. Author attributes this to a more
progressive, 'stakeholder' culture in SV.

Question: human capital is disproportionately more important to building value
in the tech sector than it is in the broader economy (think mines,
manufacturing etc). Isn't it more likely that a more equitable equity split is
a pre-requisite for success in SV as opposed to being a consequence of it?

~~~
tomkarlo
This a good point. Investment banks also generally have a very high percentage
of employee ownership (50%+) because so much of their value is their employee
base.

~~~
dyno12345
50%? That's way better than any SV firm

~~~
tomkarlo
It's not quite apples to apples. Bankers get paid way more (so they sell off
less of their stock) and they are also often paid in RSUs or other forms of
stock comp that can't be sold for several years. Tech workers are generally
paid with stock that vests each year, and if they're smart they'll sell that
down immediately (as they still generally have lots of future stock they're
still exposed on, from a portfolio perspective.)

~~~
dyno12345
sell that down? What does that mean?

------
milang
"There is a growing body of research that shows that companies that limit
their high-low wage ratios and distribute generous option plans consistently
outperform more traditional, inegalitarian firms."

I'd love to know more about this growing body of research.

A basic Google search yields the ten most profitable firms: Gazprom, Exxon
Mobil, Industrial & Commercial Bank of China, Royal Dutch Shell, Chevron,
China Construction Bank, Apple, BP, BHP Billiton and Microsoft[1].

I don't get the sense that oil companies and big banks are egalitarian in
their approach to employee equity. What am I missing?

[1]
[http://money.cnn.com/magazines/fortune/global500/2012/perfor...](http://money.cnn.com/magazines/fortune/global500/2012/performers/companies/fastgrowrevs/)

~~~
nostrademons
Both oil companies and big banks compensate their skilled employees very well.
It's not hard to make six-figures straight out of an MS as a petroleum
engineer or geologist; you can do $200K/year with 5-10 years experience. And
banks, of course, are legendary for their comp structures: you could be doing
$80K salary + $160K bonus straight out of college and making half a mil or
more 5-10 years out.

It's the roughnecks, construction crews, and bank tellers that don't make big
money. Of course, those tend to be the numerical majority of employees because
they're relatively cheap.

It's the same thing at Google - engineers can get paid $250K/year, but book
scanners get paid $10/hour.

~~~
throwaway2048
Even roughnecks make a fair amount of money in the oil industry. In canada a
skilled tradesperson, like a ticketed welder, can easily clear 250k a year.
The hours are long, and the work is hard, but it tends to be peicemeal in
basis, so you arnt stuck doing it all year long. Also adding to this, as their
work is typically all over the map, both living and traveling expenses are
typically covered via something like a $100 a day living stipend.

------
joshAg
> For starters, almost all of them recognize that their industry itself arose
> out of government funding (see ARPANET), and some of the most celebrated
> achievements of the digital culture (open source software, Wikipedia)
> involve commons-based collaboration with no conventional definition of
> private property whatsoever. It’s precisely because we lack a new vocabulary
> to describe this worldview that we end up lumping the tech sector together
> in the libertarian camp.

I'm pretty sure that's just a form of socialism.

> There’s a real estate crisis in Silicon Valley because the companies in the
> region are much more generous in the way they share the wealth, not less.

Don't forget the fact that no town/city wants to build (or make it easier for
developers to build) high density housing despite that it is desperately
needed to keep up with housing demand.

~~~
eli_gottlieb
_I'm pretty sure that's just a form of socialism._

Quiet you, we're trying to Talk Like Very Serious People ;-)!

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

------
zhemao
"It gets at both our desire to be competitive in the global marketplace, but
also to be more fair and equitable in the way we share our wealth. True
libertarians would be repulsed at the thought."

I don't think this guy really understands libertarianism. Libertarian
principles don't say anything about how private actors choose to distribute
ownership. Most libertarians are only "repulsed" if government forces private
actors to distribute ownership in a particular way. If spreading out equity
more evenly among employees makes a particular firm more competitive, then
awesome, that's how the market works.

------
lhh
"The whole premise of stakeholder capitalism offers a powerful and distinct
message, because it gets at both our desire to be competitive in the global
marketplace, but also to be more fair and equitable in the way we share our
wealth. True libertarians would be repulsed at the thought..."

This sounds to me like a fundamental misunderstanding of the dynamics of a
startup vs big company.

In a startup, every employee has an important bearing on the success or
failure of the company. Getting the right people on the team is priority
number one for a budding startup, and to get the best people you have to
promise them a piece of the spoils.

In a typical big company, only a handful of people have enough authority to
steer the ship. For everyone else, their roles usually aren't mission-
critical, or they're relatively easy to replace. You therefore don't need to
pay them as well.

This isn't about "being fair and equitable" or "sharing our wealth" for its
own sake, this is still just about economics. More people are getting stock at
tech companies because those people's skills and contributions are more
directly linked to the success of those companies. It just doesn't make sense
to be giving stock to pilots, pharmacists, and factory workers - if they're
amazing at their jobs, it has at most a marginal affect on the company as a
whole, and if they quit, the show will go on.

Don't get me wrong, I'm completely in support of giving junior people
meaningful equity, for a number of reasons. But it still needs to make sense.
There are good reasons why we don't see it in other industries.

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

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

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

~~~
uvdiv
Lots of cities have a 1-4% millionaire density. By _The Economist's_
definitions, Frankfurt is over 7%. NYC has 400,000 millionaires (5%).

[http://www.economist.com/blogs/graphicdetail/2013/05/daily-c...](http://www.economist.com/blogs/graphicdetail/2013/05/daily-
chart-7)

------
dmix
> True libertarians would be repulsed at the thought, but the success of
> Silicon Valley even suggests that governments could do much more to
> encourage these kinds of internal compensation structures, in the name of
> better business and social cohesion. (Not to mention old-fashioned
> fairness.)

Wait, what part did the government play in how tech-companies compensate their
employees fairly? Or does he mean the government should be applying to same
structure by force on companies in other industries (to share equity with
employees)?

Does the author not understand the difference between startup culture vs big
business?

~~~
Lambent_Cactus
The author appears to intend that latter meaning, where SV companies have more
egalitarian ownership structures on their own, but that now that we've seen
the results, the government should encourage those structures more broadly in
the economy.

Actually, the government plays a small part already in how high-tech companies
share equity with employees, through preferential tax treatment for Incentive
Stock Options. You could imagine many such nudges that could be employed to
expand capital ownership short of distributing equity to employees "by force".

Remember in general that the limited-liability corporation as an institutional
type is itself a creation of government - the notion of a business as a
separate entity with distributed owners such that the business can go bankrupt
without allowing creditors to go after the non-business assets of the
stockholders is an artificial and relatively modern invention with a large and
complicated legal structure buttressing it. C Corporations, LLCs, LLPs, PCs
and the like are all creations of government and the way they operate in
practice is non-trivially shaped by the ways those laws are structured. Is it
so outlandish to imagine an alternative form with a deliberately egalitarian
bias (an "E Corp"?). It only takes one state experimenting to make it a
reality!

~~~
dmix
Corporations can still distribute revenue and equity as they please. It's a
legal structure for taxation and liability.

The state forcing corporations to distribute their earnings or equity a
certain way is a massively more intrusive structure.

If that was done, it would likely be single handily the greatest manipulation
of markets and private assets ever done by a government in modern history.

If an egalitarian equity structure legitimately benefits the companies, they
will adopt that structure. If they don't then their competitors would do it as
a competitive advantage. Unless it really doesn't benefit the companies and
therefore requires the state to involuntary make them do it?

~~~
eli_gottlieb
_If an egalitarian equity structure legitimately benefits the companies, they
will adopt that structure._

Interestingly wrong. The problem here is the definition of "benefits the
company". The interest of the company is defined as the interest of its
shareholders, with the interest of different shareholders counting in
proportion to their ownership stake.

The equity structure is itself the terminal teleological value of the company,
and consumer markets make zero evaluation of that structure except in _very_
specialized sub-cases (like when I deliberately purchase King Arthur Flour for
being a worker cooperative, for instance). This is one of those "companies do
not evolve" things; state action is the only thing that will ever change
company structures away from what the incumbent shareholders want, and even a
fresh-founded start-up has incumbent owners in the form of its founders and
seed investors.

------
hkmurakami
* The defining difference between Silicon Valley companies and almost every other industry in the U.S. is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. *

While me may already be better than the rest of the country in this regard, we
can definitely do a lot better than we do today. I'd be preaching to the choir
so I'll refrain from elaborating on the equity compensation of single digit
employees, but there must be a way to share the success more equally than we
do today.

------
jgrant27
"Randian libertarianism". Bullshit. Rand was NOT a libertarian.

[http://www.aynrand.org/site/PageServer?pagename=ar_libertari...](http://www.aynrand.org/site/PageServer?pagename=ar_libertarianism_qa)

------
arh68
Sort of a unexpected result, isn't it? The more 'egalitarian' companies
distribute (massive) amounts of wealth into a (relatively) large number of
people, gentrifying the entire Valley, and threatening to push the old
inhabitants out. Is this egalitarianism? In making the middle managers (or
whoever these people are) into millionaires, the divide between billionaires
and the layman isn't actually improved: now the gap is even wider.

There is also some curious use of evidence: Obama won Santa Clara by 42%
implies "the most dynamic sector .. is now decisively in the camp of the
Democrats", but it was only 30 years ago that Reagan won the same county by
>10%. The data seems to imply that the county could swing back next election,
but the author doesn't seem to appreciate that idea. Why does the author have
a hunch that while they temporarily voted Republican, they're truly Democrats
at heart?

~~~
TheCoelacanth
> There is also some curious use of evidence: Obama won Santa Clara by 42%
> implies "the most dynamic sector .. is now decisively in the camp of the
> Democrats", but it was only 30 years ago that Reagan won the same county by
> >10%.

Keep in mind that Reagan won the nationwide popular vote by 18%, so winning by
10% in his home state doesn't indicate a strong Republican following there. It
just indicates a very one-sided race.

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

~~~
declan
There's selection bias: some engineers may choose to move to the SF bay area
in part because of the perceived views on social policy. One example of this
is SF's Castro district especially a few decades ago.

Speaking as someone who lives on the SF peninsula, I think it's fair to say
there's near-uniformity of views on gay marriage (though drive an hour east
and that will flip). Climate change, on the other hand, is an area where
reasonable people even in this area are more likely to disagree.

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

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

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

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

------
michaelochurch
_The defining difference between Silicon Valley companies and almost every
other industry in the U.S. is the virtually universal practice among tech
companies of distributing meaningful equity (usually in the form of stock
options) to ordinary employees._

That's disingenuous. 0.02% of something that a CEO thinks (based on nothing
but his own ego) is worth $10 billion is _not_ meaningful equity.

The proper way to model this is that equity compensation tends to be about 1/3
of what the person is giving up in salary, career advancement, etc. If you're
paying $30,000 to work there, you'll typically get $10,000 per year in equity,
or $40,000 over 4 years. That'll be 0.4% if the current valuation is $10
million.

Now, let's say a clueless schmuck puts his whole life savings (or, more
accurately, what he'll be getting in lieu of savings over the next 4 years) in
some extremely volatile (100-500%) penny stock, because that's actually what's
happening (with that penny stock being in one's employer, i.e. controlled by
someone who can fire you for "performance" Pincus-style). Some of those people
are going to end up modestly wealthy (no _employee_ gets rich) and most are
going to be hosed.

To say that employee equity in typical startups (there is "meaningful" is a
huge stretch. You'd have the same results asking people to pump their savings
into penny stocks. A few would get very rich (from modest starting points) and
most would wipe out.

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

