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.
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.
And on that, as on so much else, he's more than a little wrong.
Apple and Microsoft simply couldn't have happened without the mega-corps - not least HP, but also IBM, and Fairchild and its spin-offs - which only existed because of post-war military and civilian "socialist" state support for technology.
By the mid-70s that support had been influencing economic policy for more than forty years.
Apple was a product of that system, not a cause of it. Companies like Apple do not happen in a pure deregulated neoliberal market paradise because markets don't have the kind of strategic intelligence that can fund projects like Whirlwind, TX-0, and the original Arpanet - all of which are essential steps on the road to making an Apple or a Google.
>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?
And this is why they can't happen. You can't build your economy by impoverishing your customers with hand-wavey idealism about "market rates." If you try that, at best you run out of customers, and at worst you get a violent revolution.
The smart way to understand the economy isn't as a number of acquisitive centres for a vague thing called "money", but as a way of amplifying collective intelligence and distributing the gains as widely as possible. Status games for their own sake - which include most purely speculative and acquisitive activity - are the opposite of collective intelligence because they concentrate acquisition instead of distributing it.
You can get localised negentropic blips in a speculative economy, but the overall trend will still decrease collective opportunity over the medium/long term rather than increasing it.
Companies like Apple do not happen in a pure deregulated neoliberal market paradise because markets don't have the kind of strategic intelligence that can fund projects like Whirlwind, TX-0, and the original Arpanet - all of which are essential steps on the road to making an Apple or a Google.
Going even further, corporations themselves do not happen in the absence of regulation, and I think that the granddaddy of entitlements -- liability limitation -- is necessary in order to gather enough capital to form great ventures like chip manufacturing.
The book Doing Capitalism in the Innovation Economy  really hammers in this point. I highly recommend it to people who have an interest in this. I wrote a review that captures a lot of my reflections on the book itself and the subject matter .
While I can agree that private entities/markets lacked the capability to fund transformative projects during most of the 20th century, I'm hard-pressed to reasonably apply that to the modern context.
It seems that the most forward thinking, transformative ideas are indeed coming from the private sector markets (e.g. SpaceX), and with the enhanced abilities that our technological age affords to solo individuals, it seems that even small teams may be able to create the next transformative, paradigm-shifting project.
Because technology enables small teams to make big changes that were once only within reach for large entities like the government, the idea that markets don't have the strategic intelligence to do big, long-term thinking, just seems bunk to me. Also, look at the AI lab announced by Altman and Musk, or look at YC's new long-term research lab project. These could conceivably produce the next Arpanet, don't you think?
40-50% of funding from NASA contracts. Yes, this isn't necessarily the same as a direct subsidy, but, in fitting with the article:
"Many of the mid-century oligopolies had been anointed by the federal government with policies (and in wartime, large orders) that kept out competitors."
As for 5k products, like fancy drones, 3d printers or high end bicycles, was the apple II non-niche?
What has happened is instead technology allowed some luxury products to be commodized and available to everyone. I doubt multi-billionairs build their own OS-es, cell phone towers, hardware, batteries, support from scratch. They buy an iPhone. Someone on food stamps could concievable save money and still get an iPhone. They both have a luxury product so to speak. But this is a cool anomaly. It doesn't happen with cars, housing, job opportunities, healthcare, clothes, safety, free time, food, etc.
So I think looking what kind of tech products are avaiable to everyone doesn't work as an argument regarding inequality. What about inflation adjusted salary, isn't that a better metric to look at? Or say the cost of healthcare or housing as percentage of wages... defintely not the type of computer and printers people can get.
Of course, this is tangential to curun1r's claim, which is that somehow an inability for consumers to purchase new technologies would hinder innovation.
The figures are as follows (all in thousands):
14,157 units below the poverty line (12.7% of all units)
5,566 of those Owner occupied (39.3%)
3,191 of those owned "free and clear" (22%)
So his 45% claim isn't even true to start with. It falls to 22% when you consider full ownership.
Seeing yummyfajitas make factually incorrect claims is disappointing but not surprising.
First of all, owning "free and clear" is hardly the expected meaning of ownership in the context of cars or especially houses in the US. I have a mortgage and I still say I own my house. When I told friends I was buying my house, I expect >90% of them assumed I was getting a mortgage. The government reported "homeownership rate" certainly does not exclude households with mortgages.
Second of all, ignoring semantics, the original context was a conversation about whether a significant number of households being unable to afford technology like a $5K computer would stifle innovation. Innovation probably doesn't care whether customers are in debt or not, so this is still perfectly decent evidence to cite about the spending capacity of poor households.
"Disappointing but not surprising". Sigh.
If so, do you also consider the Census (whose terminology I used) to be making "factually incorrect claims"?
Citing any sort of statistics like that without at least breaking it down by age band is pretty pointless, in my experience.
If someone can afford something with financing, they can afford it without. The difference here is not wealth or income, it's spending and savings habits.
So, I get your overall point.
The other thing to recognize is that being poor is MORE EXPENSIVE than being rich. This fundamental fact is often missed by richer (or just middle-class) folks who think that poor people could do better by saving and being frugal etc. Well, if you have no liquid cash at all, you can't even take advantage of quantity discounts or other opportunities, but you still need to eat and have clothes. A decent amount of wealthier people in our system get wealthy via taking advantage of the desperation of poor people, and until that changes, some amount of criticizing the personal financial decisions of poor folks is just victim-blaming.
If you have enough cash to buy a car and enough left to be an emergency buffer and cover other needs and don't have something to do with that cash which promises a higher investment return than the interest on a car loan, then it does not make sense to get the financing. It doesn't matter that the value of the car to you is spread out over time. Buying the car outright is better unless you needed the money for something else or didn't have it or had some investment that would outpace the interest on the loan.
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.
You mean if you can't afford a computer and an AWS account you can't get started? Sure, maybe not, but it's a far cry from the capital you needed in the 1960s to get started. I bet a lot of the readers of this forum know people personally that have made a million dollars or more with their laptop (to a first order approximation).
The point you're making about tech startup costs is true, of course, although it looks like statistically speaking the chances of hitting it big are only slightly better than 'will become a famous singer' or 'will play for the NBA.'
But even if we assume that an average human with a laptop and AWS can now make it big, it seems like in the meantime so much of the other things that working-class people had going for them in the 1960s -- being able to support a family on construction wages, for example -- are gone.
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.
The capital gains rate under Eisenhower was only 25%, while the top bracket was 91%.
And the corporate tax rate under Eisenhower was only 50%.
Very few of the great sources of dynastic wealth in America were built by accumulating wages under normal income rates.
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.
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.
U.S. politics has gotten strange, people complained about welfare mothers not working when that's shat the system was designed to do. IMO, hand out a small fixed amount every month, then flat tax everything last that point and get the government out of micromanaging the economy. Upside, no tax breaks makes everyone's taxes easy, downside would never get implemented.
> Other evidence points indirectly to a strong role of market power. At this point, for example, there is an extensive empirical literature on the effects of changes in the minimum wage. Conventional supply-and-demand analysis says that raising the minimum wage should reduce employment, but as Reich notes, we now have a number of what amount to controlled experiments, in which employment in counties whose states have hiked the minimum wage can be compared with employment in neighboring counties across the state line. And there is no hint in the data of the supposed negative employment effect.
> Why not? One leading hypothesis is that firms employing low-wage workers—such as fast-food chains—have significant monopsony power in the labor market; that is, they are the principal purchasers of low-wage labor in a particular job market. And a monopsonist facing a price floor doesn’t necessarily buy less, just as a monopolist facing a price ceiling doesn’t necessarily sell less and may sell more.
There's also something similar to your subsidy idea today called the Earned Income Tax Credit [https://en.wikipedia.org/wiki/Earned_income_tax_credit]. Guaranteeing a minimum income does seem like a promising idea, but it will probably have to be tried elsewhere before the U.S. will adopt it (if ever).
The theory is that the buyers of labor in these cases will simply buy alternatives - specifically low-labor alternatives, like automation. Think of automated checkout stands at retail stores, but applied to fast food.
Time was, fuel filling stations all had attendants. Drivers didn't get out of their cars when they purchased gas. They drove up and were greeted by an attendant who operated the pump and took payment. We don't do that anymore - now that attendant job doesn't exist. There's nothing stopping that same kind of transition for many other service jobs.
Both states are considering legislation allowing self serve pumps.
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
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.
Unfortunately it's not that simple. The immediate question at hand in Citizens United was about a group of private citizens being prevented from releasing a movie criticizing a Presidential candidate during an election. A movie costs money to produce and requires a large number of people to coordinate, inevitably shading over into a corporate legal structure... just like, say, a union, or a political party, or a newspaper. So how are you going to decide which corporate legal structures are making "legitimate" political speech, whatever that means, and which aren't?
Personally, I would have had no problem with CU if it had remained the narrow decision that John Roberts originally wanted it to be. Clearly, if the First Amendment protects Michael Moore's right to make and show a politically charged film close to an election then it protects Citizens United's right to do the same thing.
The problem came when this narrow decision was extended to a broader one that included for-profit corporations and labor unions. (For-profit) corporations and labor unions are legally "persons" in that they can act as legal entities in their own right (no pun intended) independent of any individual human. And they ultimately consist of groups of humans. But they are not humans. They are human constructs. They are technology. And treating them as if they were humans, entitled to human rights, leads to problems.
So personally, I would advocate retract CU protections (and Hobby-lobby protections for that matter) from for-profit corporations.
I'd also re-instate the historical lower limits on direct contributions to political campaigns.
No, it's the speech of the management. The shareholders only have indirect control. The only power they generally have is to replace board members. And sometimes they don't even have that. Google, for example, is completely controlled by Larry and Sergey. Facebook is completely controlled by Zuck.
If you want "truth" commissions, go right ahead with removing CU, but unless that, this was a great decision.
Assuming that you do come up with a plausible way of drawing a line here, you also need to have general trust that this power will not be abused. Given the heavy politicization of regulatory agencies in the United States, a large portion of the population is worried -- not without substantial justification -- that "is this speech opposed to the party in power" will be one of the factors used to draw that line.
For example, right now, you should be allowed to make a movie about how Reagan sucked, but not one about how Hillary Clinton will suck if she gets elected.
And if a citizen notices that all the politicians are lying, he needs to just shut up about it?
Honestly, does it even matter? Everybody knows all politicians are liars. It's common knowledge; it's beyond being a trope and basically a synonym. But then somehow a large part of the population still cares about what politicians have to say. They know that the politician they oppose is full of shit, and yet they feel obliged to engage with said politician's arguments. And they support another politician, conveniently forgetting that... he is a politician too, so he won't make good on their promises.
Basically, everyone got the memo. Those who were to heed it have already done so.
This is something that confuses me about humanity. The amount of denial and cognitive dissonance going on in general population's interaction with politics is so great you could fuel a power plant with it.
It matters because, if Trump says he wants to deport all Muslims, I should be able to say thats a terrible idea without fear of reproach.
Despite the fact that all politicians may be lairs (although I personally believe thats horseshit), there are people who take the word of them very seriously.
>The amount of denial and cognitive dissonance going on in general population's interaction with politics is so great you could fuel a power plant with it.
Bull fucking shit. Just because Obama didn't end up closing Guantanamo, doesn't mean its all a farce. Political groups have a real effect, or we wouldn't be talking about this. Were the people who fought for gay rights for the past 20-odd years, living in denial? Are those pushing for marijuana reform, living in denial? Are the lobbyist pumping billions of dollars into the system living in denial?
Despite the fact that the system moves a snails pace (which may or may not be the intended goal of the system), the system does have very real effects that are caused by the tiniest nudges in certain directions.
But I tend to think that it's not so much that they were planning to con everyone all along, but rather that they tried to push their ideas and failed to convince the rest of the legislature to go along with it. Maybe it died out because nobody cared about it in that year's Congress, and then the politician gets busy with other things while another year passes until the next legislature.
I imagine it's the same mechanism at work in large companies: Haven't you ever had a new manager come on board, go gung-ho on changing a couple widely visible organizational thing and getting everyone's feedback, and then calm down a year or two later once they're busy with their work? I've probably seen that at least 5 times.
However, there's a key difference: In the above situation, I would expect a politician to keep to the same general platform even if he fails to perform some specific action. The simpler statement 'all politicians are liars' leaves open the possibility that he might completely change his platform and starts actively pushing for things that he never mentioned. I don't know that I actually believe that about all or most politicians.
I'm not convinced that content-based restrictions can be easily applied, either, even putting aside one's confidence in the regulators. To take the above example of a documentary attacking Reagan, it would be easy for it to have the subtext of "and don't vote for Mitt Romney this year, he's just like that Reagan jerk."
If you want some major impact on government revenues (which would also open doors to things like public finance of campaigns, subsidized tuition, subsidized healthcare, etc.), remove the mortgage interest deduction and standard deduction, but then you quickly find out that one man's loopholes are another man's "Washington reaching into our pockets yet again".
I don't think any solution that involves politics can work. We have to solve it outside of politics by making it too difficult to use money to influence politics. We have the technology to do this without winning any votes in Congress. Instead, we need to build tools and educate people.
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.
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.
When we apply economic thinking, this interaction is actually not zero sum - antelopes in general benefit from the signal that they need to be faster.
The antelope loses its life. The lion gains nourishment for a week.
Clearly the total number of utils in the system has decreased.
If that were true nobody would ever feel ripped off. People irrationally engage in inefficient transactions all the time. For example, people who smoke cigarettes are more likely to be (and admit that they are) acting irrationally than truly deriving so much social or chemical utility from puffing on cigarettes that it exceeds the risk-weighted disutility of lung cancer, emphysema and so on.
Generating value out of nothing and ripping people off are not necessarily incombinable things.
Nature is zero sum, economies are not valued in those terms because people prefer houses to trees etc.
But, be careful: http://www.smbc-comics.com/index.php?db=comics&id=2569
You can make this statement being true by moving your definition of "nothing" from economics to lay-people common sense, but then we'd be outside of a territory where we can obtain any actually reasonable observations.
> Nature is zero sum
What is "nature"? Observable universe from now to heat death of the universe? Yes. Earth in near hundred years? No.
> Robbery is also an economic transaction, and it can be positive sum if for example you don't notice.
What? How does the outcome of a transaction change depending on whether it's observed or not? Does it involve quantum particles of trees falling in the middle of desolate forests?
> That does not mean it's a good thing.
My comment didn't state anything about good or bad: these are very stupid terms and using them can't bring anything but loud voices and hurt feelings into a conversation.
If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.
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 ...
" 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."
And what's wrong with that?
Besides it being false of course.
If anything it's more sustainable and more productive (as these business MAKE something, don't just eat VC dollars or at best sell ads) than today's "startups" model, which is based mostly on a speculative bubble + ad money.
All the thousands of major companies, from IBM to Bell and from HP to Apple, Boeing, McDonalds and Kodak, and countless others in all lines of business started as small and grew from there.
It's a perversion (and counters the rest of PGs rhetoric) to narrow startups to "companies funded with VC money for a few years to get enough users/eyeballs in the hope that they can be sold for a few billions" which is more or less the modern kind.
I think pg would likely answer "Nothing". Whenever he brings up that sort of entrepreneurship, it's generally to showcase the rarity and timescale with which these small businesses (IBM, Boeing, GE) got huge in a time before the internet.
I'd agree that the Internet hasn't made big businesses get any more substantive, but it has allowed them to get bigger faster.
I guess a difference would be that now you don't need employees.
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
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:
What's happened, historically, is that as a technology diffuses into new ways of doing things, old industries simply die out, and then the new industry differentiates into replacements for it. Specialized production in the middle ages was divided into guilds (many of which are family names now): you had smiths, cobblers, bakers, butchers, weavers, etc. When the industrial revolution happened, there was simply "industry"; it was only later that this differentiated into the steel industry to replace smiths, the meatpacking industry to replace butchers, the textile industry to replace weavers, etc.
Similarly, when software got started in the 50s, there was only the "software industry". Now, 60 years later, it's differentiating into search, social, messaging, e-commerce, developer tools, homesharing, adtech, fintech, ridesharing, delivery, etc. And it's likely there's more to come: if I had to locate us in the history of the industrial revolution, I'd say we're around 1890 or 1900. At that point, the great industries of the mechanical age (mass-produced automobiles, airlines, plastics, radio, television, recorded music) had yet to be invented.
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.
But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast.
Call them startups or not, but we definitely need a term for the kind of company that behave in this "go big or go home" fashion, and startup is the generally recognized term for it.
So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB.
> But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast.
No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups.
Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it.
The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow?
And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example.
If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.
Contrast that with what we call startups today - companies that deliberately attempt to be that "evergreen book", trying out every trick in the book to force themselves onto growth path. They live within an ecosystem, a big part of which is a mutual adoration society, with additional large layers of parasitic actors trying to suck out some money and status by just hanging around. And surely a good strategy was found - hence contemporary standard business plan of bullshiting customers with half-made shell of a product to quickly reach the point of getting acquired. It seems to work better than "just" starting a company, at least for the founders. Not necessarily for the world at large.
In a way, I think that early Apple and Google had more in common with a pizza place than with a contemporary Instagram clone.
It's possible to form other successful businesses of course. But I like the way this definition calls out the scalability as an important factor. It doesn't make you point about betting against it working any less valid though.
You wrote: "[...] a start-up is more of a determination after the fact than something you decide to build."
I totally agree with your point about companies normally not being able to "grow fast", and I agree with you that luck is a major factor. However, I think you're wrong in saying that people don't try to deliberately build "grow-big" companies.
Believe me, I'm a proponent of building small-growth "bootstrapped" companies, and I've had many conversations with founders about going that route. The vast majority, who had it in their heads that they wanted to be a startup, were deliberate in pursuing "grow-big" strategies. As one easy example, almost every company that raises VC money is either implicitly or, often, explicitly, chasing a grow-big strategy.
I completely agree that the vast majority of companies end up not being able to grow big, and have to decide between becoming a small company and "milking the cow" as you put it, or closing the company. This doesn't mean that they didn't set out, in the first place, to build a "grow big" company! In fact, you can see that this is true in the way that so many of these companies choose not to continue the small business, which could be profitable, but instead choose to fold the company instead.
In fact, reading the writings of YC, or talking with most honest VCs, will easily prove my point - they constantly tell you they are aiming to fund companies striving for $1b+ valuations, and they're fine with 99% of the startups they fund not getting there as long as 1% succeed. They are quite explicitly optimizing for "grow big" strategies.
Btw, I'd like to point out nl's comment below about Steve Blank's definition of a startup, which I always thought was the absolute best definition. A startup is an organization in search of a business model. When someone opens a pizzeria or a software consultancy, say, they're not searching for a business model - they're just executing one. But VC-backed "grow big" startups are very explicitly trying something new.
EDIT: Just to make sure we're not arguing over definitions - I'm claiming two things:
1. That what people, especially on HN, mean when they startup is a company pursuing a "grow big" strategy, and deliberately so vs. a non "grow big" strategy.
2. Regardless of 1, I also think that the majority of modern-day companies (let's say founded in the last 20 years?) that have grown big were deliberately started with the intention of growing big, ala Amazon, as opposed to say FB or Google, which wouldn't fall into this category. I'm less sure about this point, but it is a factual question that we should probably be able to answer.
Usually a startup is understood to be any venture in search of a sustainable businessmodel.
To grow very large, very fast requires only lots of capital. A lot of companies have confused a large capital investment with a sustainable businessmodel and gone bust soon.
It's odd to me that people assume that just because you've got a small business you won't jump at a market opportunity that could lead to something bigger...even Apple at one point was just a few folks selling stuffed PCBs and doing drugs.
pg's 2012 essay http://paulgraham.com/growth.html suggested using the term "startup" for hypergrowth-oriented company, and the term "small business" for slow-and-steady approach.
Both types exist, deserve to exist, and are nown to end up at a different place than the original goal they had in mind. But using suggested terminology saves us from the replay of the same argument over and over.
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?
You might be right about the customer side, that non-"startups" are more likely to be around in 5-10 years, which makes a difference when investing in a new, mission-critical area of your business (e.g. replacing email server)
I think the willful blinkering of business interests toward only the .001 percent business that's exploding RIGHT NOW is a greater contributor to the fragmentation of business today than the fading priorities of WWII ever was. The idolization of the Gambler on Wall Street (or in SV) has misdirected our priorities away from respecting those who seek to build a sustainable business where normal people want to make a sustainable living. Now the prevalence of jobs at yet another ephemeral startup or large corporation awaiting it's next merger/buyout has greatly destabilized the workplace, much less made the job of corporate leader/ visionary/ innovator next to impossible. Instead of creative invention, corporate CEOs now focus instead on cost cutting destruction, and Wall Street applauds.
I wouldn't call that fragmentation so much as disintegration.
There used to be many thousands of such manufacturing-based small businesses in America. They tended to stay focused on their competency or branch out tentatively into related products, flexibly grow and shrink to meet demand, or sometimes get acquired. But I don't think many of them planned to become the next General Electric.
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.
 - http://www.paulgraham.com/growth.html
 - 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."
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.
(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.
"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.
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)
Its important to distinguish enabling upward mobility through entrepreneurship and incentivizing that with reasonable taxes and stopping billionaire bank tycoons from buying houses of legislature with overseas bank accounts and ownership stake in half the multinational corporations in town.
It also contributes to why that wealth concentration is a problem, because it snowballs - in an unbiased economy with modest inflation the rich must reinvest somewhere to maintain their relative wealth or lose it. When you have enough to use force of law to distort the market so you don't have to take the same degree of risk in those investments, or even make them at all, you break the system.
So while wealth inequality is a symptom of globalized economic forces, that wealth inequality perpetuates itself in how it will be used to stymie innovation and promote selective growth for those first to get there.
Citation needed? As PG points out, most startup founders are not poor. They take the risk of innovating not because they are desperate, but because they see a large upside. Reducing that upside will certainly reduce the motivation to innovate at the margins. The only question is how much does it reduce motivation, and do the benefits outweigh the costs?
Even if you were right, the point remains that limiting the upside of risk-taking also reduces the incentives for middle-class people to innovate.
First, Google and Apple have nothing to do with personal wealth, they are corporations. The fact that have lots of corporate wealth means they have resources to put into innovation. They can do that completely independently of whether they pay absurd salaries or stock-dividends. Corporations can profit off their activities and put the profits back into innovation, and when that happens they are business expenses that aren't even taxed!!
So the entire issue about taxation of wealthy incomes is only about wealth that people take home as personal profit and do not reinvest in business.
Now, let's accept the questionable premise that these people with high incomes produce the greatest innovation. That simply means that innovation correlates with high income. It does not tell us anything about cause. Maybe these are people who would be innovative no matter what and our system happens to reward that with riches. If that hypothesis holds, then higher taxes would have zero impact on their innovation. There's tons of evidence that innovative people are motivated in other ways besides getting richer, i.e. that the promise of further riches isn't the cause of their innovative work.
When Steve Jobs returned to Apple, he made it far more productive, and he was personally paid to do so. If his personal wealth was capped he may not have found it worthwhile to do this work that he was clearly exceptionally qualified for.
> Maybe these are people who would be innovative no matter what and our system happens to reward that with riches.
You can only believe this if you believe that people (or just "innovative people") are not even slightly motivated by money, which is clearly absurd. I certainly believe that people are motivated by many things besides money, however at the end of the day money is what gets you many of the things you want. I know that I personally am much happier to work hard when I know I will be amply rewarded.
No, it doesn't: relative to middle-class net worth, hitting it big makes you orders of magnitude richer. Even if you taxed that level of wealth at 95%, it would still be absurdly rich compared to the mean.
It's a question of liquidity.
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?
Turns out, the world in general has a lot more poor people (both absolute, and as a fraction of the population) than the US does, so globally more wealth is concentrated in a smaller population fraction.
I agree that for the world at large the wealth distribution is clearly not good. The good news is that it's been getting a lot better in the last few decades, largely due to India and especially China moving people out of poverty by the hundreds of millions.
For the US specifically, things are less clear.
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.
Some of this is hedonic in nature; if you watch "Fargo" second season, you see in pretty good detail how people lived 35 years ago. I'm pretty sure this would be considered something much more like poverty now. Of course, I'd be ignoring any inflation in price of the homes shown, by design.
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.
The "excluders" in the antebellum South lived under a rather delusional post-hoc rationalization of slavery. John C. Clahoun wrote of this belief system at length. This was minimally modified in the Reconstruction South and after.
My maternal grandmother raised 9 kids during the Depression without the assistance of any men after divorcing her husband. She worked very hard; so did the kids.
In a broad, idealistic sense, yes, I would like each person in the economy producing at maximum. (Assuming we could agree on an ideal value metric, which I'm not sure we can.) There we agree.
But if I am narrowly self-interested (which many humans are), and if I value positional success over absolute wealth (which many do), then I am better off participating in a system of oppression where the value of other people's production is diverted into my pockets. Which is why the great bulk of human history takes place in those sorts of conditions.
> My maternal grandmother raised 9 kids during the Depression without the assistance of any men after divorcing her husband. She worked very hard; so did the kids.
Good for her, and I mean that sincerely. But it's not proof of anything. The question to ask isn't, "Can you name an outlier?" Instead try asking, "What was the average condition of women during the Depression." Or, "Would your family have been better off if women's labor hadn't been systematically devalued for centuries?"
*the present-day use of the word seems incoherent at best - so let's stick to easier-to-see versions for now.
Narrow self-interest appears to be completely at odds with enlightened self-interest. This isn't some ascetic protestation of moral superiority; it's a purely practical mechanism for personally having things that work.
I'm not sure how an average is better (or worse) than an outlier; I meant simply to show what was possible. She was able to use institutions other than marriage for 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.
see... this (and the implication that people working at large companies get less than market rate) doesn't ring true for me. The real "free markets" of labor, like craigslist and the rent-a-coder marketplaces pay about 20% of what you get if you go through a recruiter who has "a relationship" with a large company... for doing essentially the same thing, and from what I've seen, contractor pay (after the middleman takes his cut) is about the same as base pay (for the same work) at a large company.
Now, when I started contracting in the early aughts, base pay was basically the same as total comp, and so I subtracted the payroll taxes and health insurance and could pretty much directly compare contract vs salary wages. In the early aughts, it was pretty unusual for individual contributors to get big bonuses or even stock refreshes (or that was my perception; I was considerably less senor at the time.)
But, from what I've seen, if you are full-time at a big company here, you get a pretty significant bump now, in terms of bonuses and stock.
My point here is just that my experience has been that when I'm selling my labor, the further I move away from "the free market for labor" and the closer I get to a system of rank and privilege as pg describes 20th century corporations, the more I get paid.
My point is just that as a full timer at a big company, you are at the top end of "market rate" for programmers.
If you start your own company, you are on the 'business person' payscale, which is a rather different thing.
You develop a software and are the PM / product lead. You get paid 8 months, while your client makes $8,000 per month during the next 5 years. This is the market rate.
The market PG refers to is not the labour market but the consumer market where the metric used is not time but value.
I mean, I use scare quotes to convey my scorn, but the point here is that agree with it or not, the market doesn't value technical skills very highly.
Sure, as a modern business person, you need to have some technical skills; but technical skills alone? technical skills alone gets you one of those rent-a-coder jobs.
Most of this "value" is... well, if I understood business well enough to tell you why a couple of jabber servers was worth Billions of dollars, I'd be making a lot more money than I am.
but my point is just that a lot of that "value" to the end customer is something that happens between a business person and the customer; it's something that the technical people are not very involved in.
My advice is keep doing your stuff, but aggressively start building your product-based business on the side.
I encourage you to bookmark my blog and read the categories : "Startups", and "Software Engineering" (coming very soon) for free and valuable information. In 2016, there'll be new essays almost daily.
I've been trying to do that for the last decade. I apparently have what it takes to do rather better than rent-a-coder, but my business skills aren't nearly enough to be "opportunity cost profitable" - I can make rent, but I'm not paying myself nearly what one of the local big companies would. Hell, right now I'm contracting to one of the big companies, and spending the money getting my own company back up to snuff. (and again, it's an education. Contractors, if you do the math, make about what 'base salary' would be for the position as an employee. A decade ago, this was also true... the difference being that a decade ago, base salary was pretty much total comp. These days, bonuses and regular stock grants are the norm and make up a large part of compensation. And if you are a contractor? you don't see that money... either it goes to the middleman or contractor bill rates haven't risen with full time compensation. Either way, it's another example of how technical people get paid worse the closer they are to a "free market")
From my observations? (and always consider "you shall know him by his fruits" when listening for advice; People who aren't successful, obviously, don't know how to become successful. So look at successful people, and look at what they did not what they say) From my observations, a lot of business is like getting a $BIGCO job. A whole lot of it is who you know, not what you can do.
My next project, actually, is to get myself into an elite college. Now I don't know if I can pull it off, I'm not saying it's going to be easy... but if I want to get rich, as far as I can tell, the contacts one acquires at an elite college are far more valuable than any amount of actual skill or effort I put into an actual product-based business.
edit: re-reading, I sound kinda bitter, and I'm not, or I shouldn't be. I have a comfortable place in this economic system; I'm certainly not at the top, but I'm pretty far from the bottom. I'd probably be doing worse in almost any system that most people would consider "fair"
Further, if I really was great? or, for that matter, if I hadn't made two or three of the mistakes that I made, I would very likely have become rich off of my own product business. You can succeed that way; I was close enough to see the possibility. But the point is that I did not. I wasn't good enough, while I am good enough to get a pretty cushy $BIGCO job.
I wouldn't go back to college, I actually dropped out from a top tier college 4 months before completing my MSc. To me there's only one good reason an informed entrepreneur would go to college : buy the alumni directory in order to have leads - not a job.
You become good at things by doing them often, do more business. Work on your business 2 to 5 hours every day and hold yourself accountable. I don't believe in MVPs but I believe in flexible revenue models, initially iterate this model as fast as you can.
I'll quote Donald J. Trump "Most entrepreneurs fail because they fail to see their business as their business school".
My experience is that getting to that level of revenue is pretty easy. Anyone can sell something if it's actually a good deal. Getting to the point where you can actually pay yourself that much? pretty difficult. My observation is that most people who got to that level as entrepreneurs got there more through the contacts they had than through their technical skills they had. Of course, not all; I can certainly come up with counterexamples to that rule.
Working at a big company, on the other hand? in my experience? it's really pretty easy.
most of the value of college, yes, is the contacts. But having a list of names is to contacts what one of those scammer emails promising to wire you money is to having a bunch of money actually in your bank accounts.
It follows then that if I'm right that it's mostly about contacts and the assumptions people make about you, you would have gotten nearly all the value you could have gotten from your college experience if you quit four months early.
The answer is no ; as for today. But I believe that the difference between an entrepreneur and an employee is the number of hours an entrepreneur is willing to work for free. That being said, I also expect to start cashing in and make 5 figures a month by the end of this month.
I agree that contacts are key but I also feel you don't have the right perspective here. Business is all about contacts. Even employees have contacts. The key thing is what you do with these contacts and how you seek them.
Reading your comment, I have a sense that you believe a bit too much in perception, luck, and in general passive opportunity. Being an entrepreneur is about influencing people and choosing your destiny, that's why most people do it. If you think like you think, even with the right contacts you probably won't make it as an entrepreneur.
Sorry if there was a communication issue, I don't think the only thing to take from college are contacts. I learned many stuff there. I actually left when I decided I learnt everything I was seeking there and it was no longer worth paying money for it.
What I was saying was that when you are a real entrepreneur, college credentials don't really matter for you.
Well, my impression is that what you really want is security and a constant flow of high income. However what I want is to make the impact I decided to make on the world and become rich by doing so. I'd 100 times prefer to have 50$ left after paying my bills by developing my ventures, than 6000$ left by having a 50 hours a week corporate job.
It's not only about money for me, it's also about how I make it. I want my wealth to be the result of my entrepreneurial success, it's in my DNA, I am driven by that. I refused several CTO positions, and resigned days after being promoted to certain roles that you seem to be aiming for.
As far as my career is concerned, I don't do it for the money, I do it for the success and I hold myself accountable to reach this success. This success is achieving wealth by delivering the unique value I can deliver to the market, using my unique insights and my unique worldview.
I don't know where you're getting a need for security... I'll almost always take what I perceive to be the higher total expected return option, modulo emotional attachments and ethical baggage. My point is just that if you have the skills to get a big corporate programming job, that's probably going to be your highest total expected return option, even if you don't value security.
when I started going into business for myself ten years ago? I could have been you, only, you know, less slick. (And "slick" is interesting, because rhetoric that plays well with one group plays poorly with another. I would have used "plain language" and I wouldn't have quoted an entertainer, but even if the words we used had different connotations, the denotations would be similar) I spent many of those years living as you suggest (having $50 left over after paying my bills... I exaggerate some... but not that much.) Sure, it was pretty exciting, but... it's also exhausting after a few years. I mean, I'm not saying you shouldn't try it for yourself, it's just that you shouldn't fool yourself into the idea that it makes any kind of financial sense at all.
If there was a larger market for unskilled labor, the competition for workers would tend to drive up wages and lower inequality.
Does another job necessarily arise to replace each lost job? That's a question that only a religious person would answer.
We are pushing very hard for computer vision, which is the real barrier to practical robotics that could replace your electrician, plumber, nurse, miner, driver, etc. There is no sacred cow of labor besides what is mandated by the molasses slow state (because I would absolutely argue that learning systems like Khan's Academy, the availability of resources online, and the technological organizational potential of software solve all the criteria to substitute teachers with a security guard watching the kids while they listen to robo-instructor, solve the problems themselves, and ask the neural-net for help when they run into problems - and the kids are of course not all in the same room in an expensive upkeep building called a school). That kind of change though must also be culturally accepted since a lot of effort goes into separating public education from market forces.
Point is, the jobs that we could not send overseas have tremendous pressure on them as a result to be absolved entirely by AI, robotics, and software. It is why the pencil pusher desk job of 1980 - rows of typists at typewriters transcribing documents - went the way of the Dodo and did generate a ton of unemployment that we still have not seamlessly solved.
Most relevantly to this direct topic:
Like I said, there are demonstrable mechanisms, and in-lab and even in-market examples of how these technologies are going to replace almost all these jobs. This is not science fiction. This is market adoption at this point. And we are not at the start of the process, we are in the middle of it.
If you really don't think you cannot replace the human arm with a machine, you haven't been paying attention for two centuries. How is that even a question? We could replace all unskilled work today, if all you are doing is removing mechanical components of labor.
Remember, unskilled labor is "work to be done without training or certification". Driving a truck requires a Class C license, which is a certification. Working at Mcdonalds takes no certification. You need to have state certifications to work as a carpenter, plumber, or electrician. Your janitor doesn't need anything. So when you ask "is there any evidence unskilled labor can be completely replaced" then I would ask what unskilled job is not being replaced right now, from self checkout to vending machines to roombas to combine harvesters.
Thought experiment: let's say a trend starts for everyone earning 6 figures in Silicon Valley to hire a butler and a cook. How many jobs would be created? How many have recently been destroyed? How long before robots are as good a substitute for human butlers as the robot in The Jetsons?
I think people in technologist circles tend overstate the effects of automation and understate the effects of global labor arbitrage (aided by telecommunications).
This word implies creation of new jobs, but all examples that you discussed in the rest of your comment seem to be about the jobs that already exist, not new ones.
PG's post is self-justifying and self-interested.
Here's an alternative explanation of fragmentation: It is the sign of a new industry. It'll consolidate once it matures. Look at semiconductor & hardware consolidation. Google, Amazon, Apple, MSFT, Intel, Oracle etc. absorb a lot of software biz over time. There used to be hundreds of car companies, dozens of aircraft manufacturers.
Plus I don't think your judgments on PG are true.
PG talks about his yearning for something outside the mainstream bubble. For decades the major source for that was the various mostly youth oriented subcultures that made up what we called the counterculture. Hippies, punks, goths, 80s rockers, hip hop, ravers, geek fandom, and a dozen smaller variants provided something that... well... wasn't "red delicious."
Those things still exist but today they feel more like just another culture in the marketplace. They no longer seem to have such potency or power. Maybe I'm just old but I get the strong sense this is true for young people too. Today young people might visit these little subcultures as tourists, but when I grew up they were a much bigger deal. They became your identity. They were almost religious, like modern mystery cults.
Rave was probably the last great youth counterculture. I haven't noticed another one unless you count the "hipster" artisan living thing and that seems more like a lifestyle brand than a true counterculture of the postwar music+fashion+drugs+ideas mold.
In retrospect those subcultures were more like alternative conformity molds. They didn't really alter the underlying zeitgeist of conformity but just provided another channel on the cultural TV dial. Still I do mourn them a bit. Their greatest legacy was as artistic and musical crucibles and nothing has really replaced them. I don't think it's a coincidence that there has been no major musical innovation since the 90s. There has been good music but it all follows stylistic currents set down before 2000. Rave gave us techno and all its various sub-forms and... that's apparently the end of history music-wise.
Edit: would be curious to hear a counterpoint on the last item. Show me a musical style that is as much of a step change today as hip hop and electro in the 80s or drum and bass in the 90s or acid rock in the 60s.
A more equal society is a better society. Always. This was borne out in the work of Wilkinson and Pickett for their book The Spirit Level.
You may have less technology. You may have less innovation. Tough. Creating more of what Earl Dunovant called "cute and useful monkey tricks with energy and matter" at the expense of your fellow man and the planet does not put you ahead, and societies should not seek to optimize for monkey tricks over the betterment of their fellow man.
Inequality (along with the environment) may be the defining issue of the twenty-first century, and once recognition of inequality and its consequences goes mainstream, laissez-faire capitalism will join royalism in the dustbin of discredited political philosophies.
If you can read Russian and aren't familiar with the concept of уравниловка, I suggest looking it up. My search on the English transliteration (uravnilovka) doesn't turn up good descriptions offhand.
If you can't read Russian, I'll summarize. It's basically the argument you're making: that everyone should be equal, and that the most expedient way to accomplish this is to drag down the people who stick up. Which is true: that _is_ the most expedient way to accomplish equality. Historically it also leads to everyone living in communal apartments and a stagnating economy that eventually causes your country to have a revolution because people get so fed up with it. It just takes several decades for the pernicious effects of stifling economic growth and innovation to show up.
Now maybe you didn't really mean "always" when you said "always", of course. Maybe you meant "keeping all sorts of things equal, more equality is preferable". I may be able to buy that, but then you need to convincingly argue that those things can be kept equal.
(We could also have an argument about the data cherrypicking and other shenanigans in the book you mention, but I don't think it's really all that germane here, since you're making a blanket argument which has simple historical counterexamples.)
Was tried, more or less successfully, in the Soviet Union. People were not happy with the results in terms of access to consumer goods and living conditions. Been there, done that, don't want to do it again.
1. Globalization. A lot of manual labour was tied to USA, not so ago to local labour. In last 20-30 years a lot of things get imported from China or outsourced to India.
2. Software (briefly mentioned in original article). Previous technology advancement can give someone leverage, but software got probably the largest leverage in humankind history. Single program can automate what used to do an army of employees. Natural monopolies are common thanks to network effect, economy of scale or technological advances.
Winner takes all market (e.g. Apple has almost all profits in smartphone market, Android got some market share, alternatives are niches).
 I get my impression of economists from EconTalk by Russ Roberts.
Now imagine an economy made of millions of people who all have different needs, desires, abilities, environments, intelligence, etc. How accurately can you predict how a single policy decision will shape the trajectory of such a collection of people? Now the State pushes thousands of policy changes per year into the system without ever really monitoring the response to a single change.
> many economists throw up their hand and say macro economics is too tough and we just can't predict how it will work
The smart ones do, but the mainstream Keynesian school have the hubris to think they can predict the responses of millions. Most Western leaders have been advised by Keynesian economists for much of the 20th century, and the decisions of those leaders have caused vast displacement, pain, and suffering in the form of economic turmoil and war.
Remember, the State is also an economic actor, and it derives its income by coercive force. Progressive taxes simply point a bigger gun at the heads of those who perform better in the economy.
I'm all for reducing the size and complexity of govt, including the frequency of policy changes. A progressive tax can be a small-govt solution.
> ... Progressive taxes simply point a bigger gun at the heads of those who perform better in the economy.
A progressive tax certainly takes more from those who have performed better in the past. I'm concerned about creating jobs and encouraging situations where people can succeed in the future. The people who will create the jobs of tomorrow are not the ones who created past jobs. It's small companies who create jobs, so don't tax them as much; it's the struggling entrepreneur who will create jobs, so don't tax them as much. Instead, tax those who have already succeeded and who are not creating as much relative economic output.
On chaos, you seem to be arguing that a few select simple systems are chaotic, therefore a much larger system must also be chaotic. This doesn't make any sense, complexity != chaos. Think of something like an ant colony, millions of ants in an incredibly complex system, but the system as a whole tends toward very consistent behavior. Killing some of the ants or cutting off on supply of food makes no difference.
It's also incredibly vague to talk about this when there are billions or more inputs to a system like the US economy. Some variables might exhibit chaotic behavior, but that doesn't mean anything you do to the system has a completely unpredictable outcome.
> Now the State pushes thousands of policy changes per year into the system without ever really monitoring the response to a single change.
What? They monitor changes all the time. For instance, the white house is happy to tell you exactly how many more people have health insurance now thanks to obamacare. Many (maybe most?) of the policy changes are close to independent and effect only a small subset of people. And it is usually possible to statistically account for other factors that might be interfering with what you're trying to measure.
> have caused vast displacement, pain, and suffering in the form of economic turmoil and war.
Yet somehow we're living in the safest time in human history 
The two party political system is more unnatural than the few-big-companies system. Libertarians and Evangelicals agree on very little yet they've been voting for the same party for years. Proponents of extreme reform on the other side don't want to vote for a moderate candidate. A Trump vs Clinton election is going to leave too many people without a candidate and force the beginning of the end of the two party system.
You don't have more than two parties in a stable first past the post system. But that is what the US has always had. It takes a pretty big constitutional amendment to adopt an alternate or transferable vote system. But how do you fix a system where those deciding if they want to fix it are only put into power due to the nature of the system as it exists today?
Huh? Libertarians are liberals (small 'l') and what you call evangelicals are (for the most part) social Burkeans. The U.S. happens to have been founded, for the most part, as a liberal state, so the conservative position and the liberal position have historically been on the same side of most issues: welfare, parental rights, religious freedom, education, economic issues, and so on.
There are a few social issues that there isn't general agreement on, but those only seem to affect how libertarian voters feel for an election or two. After some statist behavior actually happens (healthcare reform, the Kelo decision, government surveillance, etc.), libertarians start to realize that conservatives align much better with their goals. At least, they're the lesser of two evils.
I think the problem here is that most people don't actually listen to other opinions on things. Since there is a lack of diversity in mainstream opinion shows, certain positions (libertarian, evangelical, etc.) tend to be only described in caricature. When evangelicals and libertarians start to talk about politics, there's actually a lot of agreement on big issues. Even when they disagree on the ends, they generally agree on the means (big changes should happen with a Constitutional amendment).
- Political entities get large not to achieve economies of scale (i.e. increased efficiency and effectiveness, which may or may not materialize in business... thereby sowing the seeds of future fragmentation when they don't), but rather to achieve scale itself: more votes.
- There's been no de-regulation akin to what occurred in business in the 70s and 80s, mostly because the big parties literally write the rules.
- Elections are pretty much a zero-sum game.
Two-party system is awful in representing people's opinions, but it's much better at another task, that might be even more important — reaching minimal acceptable compromise. Also, you might be overlooking another danger of multi-party system: political force that significantly over-powers all competition. Once something like this appears and gets the power over government, it gets the positive feedback effect and very often becomes a beginning of authoritarian and un-democratic regime. US and UK two-party systems server as a natural safeguard against such a thing happening.
Really, selecting the best possible leader and making best possible decisions are not necessarily the main tasks of a democracy.
E.g. he argues that the greatest receiver of welfare in the US is the wal-Mart family, because they get even richer paying their workers so little that the workers have to live on welfare. (In other words the welfare is "paying" the workers so that Wal-Mart don't have to.) He proposes to rise the minimum wage.
Walmart is operating within the legal employment framework set up by the government, including the welfare state and the minimum wage. That will not change by raising the minimum wage. Rather, Walmart will simply add automation and reduce its employment.
Minimum wage is arguably the worst idea when it comes to improving the lot of the poor. If someone cannot command more than the minimum wage when it comes to productivity, intelligence, etc, then raising that wage means that person will be unemployable. That is, their skills are not worth the minimum amount an employer is allowed to pay, so they will not be able to find a job. Ever. That person will be a permanent liability of the State.
Yes they are, poor people are compelled by lack of opportunity to take whatever they can find even if it sucks. Pretending they have the option of just saying no to a low salary is a bit of willful misunderstanding of the reality of their situations.
> Minimum wage is arguably the worst idea when it comes to improving the lot of the poor.
No it isn't.
> If someone cannot command more than the minimum wage when it comes to productivity, intelligence, etc, then raising that wage means that person will be unemployable. That person will be a permanent liability of the State.
That is the point, a minimum wage allows people the opportunity to get into welfare because minimum wage is part of the welfare system, it sets the low bar. It's better to not have a job and qualify for benefits than it is to have a job that pays so little it's not worth having. The minimum wage forces society to deal with the problem of people who lack the skills to make a market wage, and that's a good thing.
While technically true, you're ignoring a ton of other factors such as the lack of any other alternative employment or the lack of financial capability to move to an area where more employment exists.
When the only jobs available are McJobs, then that is what you are compelled to do, to support yourself and your family - regardless of your intelligence or qualifications because someone else is ready to take your place if you don't accept the job. You have no power to negotiate a higher salary regardless of whether or not you deserve it.
It is a very hard rut to pull yourself out of and stay free from. Companies like Walmart exploit this as much as they can, and have no reason to change their behaviour unless forced to do so.
> Walmart employees are not compelled to work for Walmart; the employment contract is agreed upon voluntarily by both parties. The employees know how much they will be paid and agree to accept the terms. Walmart is operating within the legal employment framework set up by the government, including the welfare state and the minimum wage.
Yes. And if you think everything is fine the way they are now, then don't change a thing.
> That will not change by raising the minimum wage. Rather, Walmart will simply add automation and reduce its employment.
Sounds great to me. You're basically arguing that not having minimum wage is actually holding back progress.
> That is, their skills are not worth the minimum amount an employer is allowed to pay, so they will not be able to find a job. Ever. That person will be a permanent liability of the State.
If an economy can produce the same amount of wealth with much less workforce/work hours than today, then why shouldn't it? Sounds great if you ask me. (And if that's not possible, just hire more people, it's apparently worth it, problem solved.)
"Minimum amount" is in this case "amount needed to reasonably survive", ie. not need extra welfare. If you can't produce enough value that you can't even justify being paid to "reasonably survive" then yes you need help.
Okay, so I'm no economist, but it sounds like you're arguing that not having minimum wage is in itself a socialist measure. In other words, paying people something, anything, is better for the poor than paying them nothing. The only reason to pay the employees anything at all is to "help the poor", because their work is not really needed anyway (their work is worth that little).
To follow that line of reasoning, from a capitalistic viewpoint, it would thus be wise to raise the minimum wage. If people are being paid to do work that's not actually worth it (ie. subsidized via welfare), then don't. I seriously don't understand why capitalistic Americans defend that point of view. Why should the state/government subsidize effectively worthless labor?
What I'm doing is "calling the bluff". People won't get hired? That's fine, the work they were doing is practically worthless anyway, and I'm certainly not for subsidizing that. However, I think people actually will be hired anyway. Because their work is not worthless. I think the only reason people are being paid so little is not because of the "worth" of the work they're doing, but because the market allows it.
I don't know how that happened, perhaps because the big cooperations have too much power, perhaps it's just inevitable in a free market. But I do not support subsidizing labor, and I don't buy the argument that you have to. The money is there, the value of their work is there, there's no problem paying people more, they just don't want to, and luckily for them they don't need to either. And as long as everyone plays along, that's how it's going to stay.
Sometime in the future I'm sure we'll be able to produce enormous amounts of wealth with minimum man power (re: automation). What will everyone do then? That's up for debate, but it looks like the best bet is putting everyone on universal basic income. And that's not a problem, because the wealth is there, the "problem" is that no one needs to do anything to produce it. I'm sure our future selves will find a fix. (If not, then that sounds like a base line for a revolution. Let's hope that's not needed.)
In the meantime, redistribute some of the wealth by raising the minimum wage. Wal-Mart don't need employees? Fantastic, the future is already here.
Thought experiment: Let's make the minimum wage $1000 per hour. I'd like you to think through the ramifications. What would happen?
> Sometime in the future I'm sure we'll be able to produce enormous amounts of wealth with minimum man power
We already do! The amount of productivity possible by a single worker today was completely unheard of 50 years ago, let alone 100 or 200.
> What will everyone do then?
What do we do now? We continue to work, even though we're far past satisfying all of our material needs. Why didn't everyone just stop working more hours than it takes to eat and stay warm?
Come up with answers to those few questions and you'll be well on your way to being an economist ;-)
I'm assuming prices through the roof, companies forced to sack their workers, unemployment rate through the roof, companies go bankrupt, economy collapses.
I believe Sanders is suggesting $10/hour (and that it's around $7 now). That's just a number, but I'm assuming it's the threshold between "needing welfare" and not. So my argument is that if you're paying an adult less than that then that's less than the cost of that person to "reasonably survive", thus artificially low. (In other words, companies are paying less for labor than the actual cost of labor.)
So now instead they're getting $7 from their employer, and in practice $3 in welfare. That's the difference with your example: People are already earning $10/hour, they're just not getting it from their employer. So raising the minimum wage is not raising the cost of labor, it's simply placing the entire burden on the employer instead of subsidizing it. There might even be room for a tax break there once people start number crunching. (Although in Sanders case I'm guessing he has other things to spend that money on, but I digress.)
If raising the minimum wage to the real cost of labor is a problem, then I just don't understand why. The money is there, it's just "stuck" at the top, and minimum wage is one way to help distribute some of the wealth (which really should benefit the economy as a whole, since the incredibly rich can't possibly spend all their money like millions of middle class families would).
> What do we do now? We continue to work, even though we're far past satisfying all of our material needs. Why didn't everyone just stop working more hours than it takes to eat and stay warm?
I guess it's partly because we live in a material world (where having a nice house, car, pretty clothes etc. is rewarding in its own right), and partly because money brings possibilities, and thus freedom: Freedom to travel, to not work, to do whatever one pleases. So money ultimately brings pleasure, and what else is life than seeking pleasure? ;-)
My understanding on Sanders' statement is that it could be paraphrased: "If walmart employes didn't get state welfare, waltons wouldn't be as rich, because they would have to pay more (employees who can't afford food and shelter can't work for you) ... ergo, walmart employees are, at the moment, practically, a conduit of welfare from the state to the waltons".
(That is how I understand his statement -- I don't agree or disagree, I don't know the details well enough to do either)
This doesn't make any sense (though you have paraphrased Sanders accurately). While technically true for some definition of "conduit of welfare", the same is true of almost everybody in society. Welfare recipients are integrated into the economy enough that "if X didn't get welfare, person Y wouldn't be as rich" is true for many, many, many values of Y (neighborhood stores in poor areas, people benefiting from reduced crime ("stealing bread to feed your family" used to be more than a trope), etc). To give an example in microcosm: if you buy a used car on Craigslist from someone, the fact that the seller is a welfare recipient doesn't mean that you're a beneficiary of welfare because you're not paying him enough to live off of.
To the extent that society is responsible for helping the poor (FTR, I personally believe in this responsibility), it makes absolutely no sense to claim that employers (as opposed to the welfare system) are responsible for filling the gap between "market value of a person's labor" and "how much income he needs to reasonably survive".
This particular claim of Sanders is absolutely idiotic: people are blindly pattern-matching it to support for the poor when in reality he's arguing for shifting the burden of subsidies from all of society to arbitrary consumers/business owners/employees affected by artificial wage floors.
I think the difference here is that it's not a matter of a single transaction, it's an employment, so what the employer is basically paying for is the employees time (and time is finite). So a better example would be that you pay someone on craigslist for a service, e.g. paint your house. If the painter works full time painting houses and still needs welfare, then the taxpayers are basically subsidizing house painting ("conduit of welfare" as it was phrased). Why can't those that need their house painted pay what it actually costs to get the job done? Because if the full time painter needs welfare, they're in reality paying him too little.
I think the distinction you're making here is more than trivial, and considered mentioning it but decided that it's still not relevant. My point was that Sanders definition (esp as paraphrased by you) is silly to the point of being meaningless, since it consisted of "X isn't paying enough for Y to get off welfare, thus X is receiving welfare". This applies to my example writ small. Your painter example isn't much difficult from the Craigslist example: the person spends his time doing multiple things that add up to less than enough salary to live off of. That doesn't make any of the purchaser's of his services responsible for the shortfall. To the extent that anyone else is responsible, it's all of society.
> Why can't those that need their house painted pay what it actually costs to get the job done? Because if the full time painter needs welfare, they're in reality paying him too little.
You're defining "what it costs to get the job done" very bizarrely here. If the painter takes odd jobs but his wife is employed too such that the two of them are somewhat comfortable (at least above the poverty/welfare line), by your definition it would suddenly "cost less to get the job done" (since the shortfall to a reasonable income has now diminished/disappeared)? This is of course an absurdity.
The problem again is that you're picking a way to place responsibility for subsidies that makes no sense from either an efficiency or an ethical standpoint. Assuming a need to take care of the poor, we all share that responsibility. The only reason we've "decided" that the burden should fall on arbitrary industries and their employees/customers/owners is because that way we can pretend that we don't believe in taking care of the poor and the robust welfare system that it would entail. All we're doing is creating a shitty, roundabout version of welfare.
Note that I have a tendency to consider complete systems when it comes to policy. In the current political climate, it's no doubt more feasible to implementing higher minimum wages than, say, a basic income. So despite thinking that minimum wages are a terrible idea in a well-functioning system, I wouldn't necessarily vote against them in our less-than-optimal system. I just don't think there's any reason to delude ourselves into thinking that they're good policy per se.
 And in a weaker effect, that their effects should fall on arbitrary
That is in effect wealth distribution, which again closes the big income inequality. (That's the intended effect anyway.)
This would simply shift the cost from the state/government (read taxpayer) to end consumers (read taxpayer).
But the argument has merit if the wage is not livable. The two issues the make this an issue (or a nonissue) is what is a minimum livable wage, and whether or not it is the governments role to enforce that or not. (No idea about the first, I think Yes about the second)
With regards to enforcement of a minimum wage I would say that if we, as a society, want to enforce minimum living standards that is a burden that should fall on all of us and not just companies that employ low skilled labor.