It has nothing to do with the fact that they can't/couldn't buy into stocks while the getting was good - and crowdfunding is nothing more or less than a new type of lotto ticket for them.
The sophisticated investors have been putting one over on the new, unsophisticated money for a long time. It has always been that way, and always will be. Still not responsible for the demise of the middle class.
$18,000 a year health insurance for a family of four, homes that cost 10x your annual wage, companies that toss 40+ year olds with 20 years loyalty into the profit volcano, student loans of $150K+ that can't be discharged with bankruptcy and suck you down till the day you die, nursing homes that burn $4K/month for 20 years or until you run out of assets...THAT's what killed the middle class.
That said, large parts of this country (and it's not small) do have industries that are thriving and housing prices that aren't insane.
So "no middle class"? I disagree with. Certainly an endangered one. However, if we keep up the diversity in terms of regions, population centers, etc. it will be hard to wholly homogenize that.
And, I agree, costs are going up.
Solution is simple too, just tax the rich more and redistribute that wealth where its needed. There's no reason to feel guilty about this, we fight their wars, work in their factories, guard their houses and build their roads, if they want to keep this the greatest country on earth they need to invest more in the middle class, like they used to .
 http://www.americanprogress.org/issues/2012/08/pdf/middle_cl... - first chart
I will just donate the money that would be paid in tax to charities like Habitat for Humanity (my preferred one, as I volunteer there on a yearly basis in the summers).
Today's conservatives and libertarians remind me of Captain Hadley in Shawshank Redemption, when he tells his men that his estranged brother left him $30,000 and immediately proceeds to curse the fact that the government will take a large chunk of it. Perspective, my friends! If you make enough money to qualify for the top income tax bracket, be happy about it! It should be an honor to pay more than "your share" of taxes to support your nation, community and less fortunate countrymen.
John Kenneth Galbraith said it better than I can:
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.
So if that means the birth of socialism and the like just so we stop bombing brown people the government doesn't like, I can deal with that. Some things are more important than quibbling over econometrics.
Come to the socialist side. We have cookies.
But economically I'm fine with most forms of governing if it meant that we stopped killing people.
So I go back and just do the same thing for a week or so every summer - build houses.
During the 50s and 60s it was a "more reasonable" 90%.
> The highest rate of income tax peaked in the Second World War at 99.25%.It was slightly reduced after the war and was around 90% through the 1950s and 60s.
I'm in favour of income tax, and I've spoken strongly against people who avoid their tax to extreme levels. But 90% is just nuts. I'd much rather have a 25% and actually collect it from everyone than 40% and only collect it from people who don't pay accountants to avoid it.
There's a really interesting series on UK Channel 4 called "Skint" about a poor neighbourhood in Scunthorpe. It's grim, depressing, watch.
Thought experiment time.
Look at http://www.cbo.gov/publication/42870 (which is discussing 2007, so if you can find a more-up-to-date source, I'd love that).
From that article, the top quintile paid an average rate (not their marginal rate, of course!) of 25.1% of their income in federal taxes, and that these payments made up 68.9% of all federal income taxes. A little arithmetic there shows that if you upped their federal taxes by 50%, they'd lose 12.5% of their gross, and that would cover 100% of the revenue currently generated by federal personal income taxes. So if you wanted to tax the rich and not tax the poor, and by "tax" you mean "federal income tax", it's hugely doable!
If you're wondering how much of total federal revenue is personal income tax, it appears to be around 40% to 50%.
So that means that the 25.1% of income paid by the top quintile makes up 0.68*0.42 == 28.5% of federal revenue. It's pretty clear that if you kept the second-to-top quintile taxed as they are now (12% of federal revenue), cut payroll taxes in half (to say 20% of federal revenue), and kept the non-tax revenue (roughly 10%), that the remaining 58% could be met by slightly-worse-than-doubling the taxes on the rich.
Again. Double taxes on the richest quintile, keep taxes as they are on the next richest quintile, halve payroll taxes, and keep non-taxes, and you're done. You can set corp taxes to zero, and also income taxes for the bottom 60% to zero.
So. If you want to tax just the richest 1%, you can't run the country on that. But you absolutely can run the country just by taxing the rich. If you wanted to.
(Note: this was a thought experiment, not advocacy. I am not a fan of this proposal. I just want to demonstrate that videos like the one I've seen, saying it's impossible to just tax the rich, are using shaky math.)
Otherwise, the US has got an almost 100% budget deficit. you should take that into account when you are doing the math too.
BUT ACTUALLY, even your completely ludicrously irrelevant claim is still false!
The top 1%, earning nearly 20% of income, got taxed at 29.5% in 2007, which made up 28.1% of federal individual income taxes. Obviously if you crank that to 100%, and cut all other forms of government revenue, you can run the country for, uh...
1/0.295 * 0.281 = 95.25% of 2007 total individual income taxes
0.9525 * 40% or so of total federal 2007 revenue = 38%
Looks to me like the budget deficit is under 24%, that is 901B / 3803B (figures according to requested budget for FY2013, which is obviously complicating things since my previous numbers are from 2007, but I'm attempting to take the worst-of-both-worlds to make my claim as hard-to-prove as possible).
0.38 * 2.902/3.803 = 29%
0.29 365 = about 105 days. 3.5 months.
If you taxed the top 1% at 100% (but no wealth tax), and you cut ALL OTHER FORMS of government revenue, including corporate tax, payroll taxes, fees, businesses, everything.... AND you won't let me use the same deficit spending that the current real-life government uses.... AND you take wealth distributions from 2007 (which is less extreme than today, but better-documented) and combine it with the insane spending habits of this year (i.e. worst-of-both-worlds).... you can STILL run the federal government for more than a quarter of the year.
So any claim that taxing the top 1% at 100% will only last the government for a few days is... guess what.... totally bullshit. Let's try to have a fact-based discussion, instead of just quoting completely-preposterous hearsay that some wingnut blogger posted.
Note, again, that the reason all this math works, of course, is that the rich already pay most of the taxes (nearly half of fed indv inc paid by the top 5%). That, in turn, is due to a very-mildly-progressive tax schedule, combined with absolutely insane income distribution.
(aside to intended: no one should be discussing this, exactly as you said, but I won't let that stop me!!! bwahaha!)
(Because when there's more money around, prices and wages go up, and currency-denominated assets like money in bank accounts become less valuable. It's not clear that this does much to the assets in which wealthier people are more invested -- stocks and real estate -- so I'm not arguing that it's a good way of taxing wealth.)
The only winning move is not to play.
Lets take an average middle class person pre boom:
You are urged to take out a mortgage against your property because "House prices have only gone up!".
Your banks are giving you great rates, "you'd be an idiot to not take them. We're giving it out to people with No Income, No Job or Assets! We made the cover of Time with the way prices are going up!"
Everything is rosy, and you would be remiss and getting behind if you didn't take care of your future.
This is what people faced.
Do note - the Middle class isn't the one responsible for manipulating the banking system or creating exotics to over leverage a housing bubble.
Nor are they the ones who are meant to be the educated sophisticated investors.
Further the root of the issue, the housing bubble, required banks to actively sell their products, all the while telling average people that its all turning out great!
In essence: the Banks were derelict in their duty to be wary of leverage, and abused the information asymmetry they enjoyed to convince customers to "Just get a mortgage! You can get that new kitchen you always wanted".
I'd say the middle class got played.
Well, welcome to Europe.
> $18,000 a year health insurance for a family of four
> student loans of $150K+
Nope, not Europe after all.
So, not so different after all.
There are no consequences to failing to pay it back if your income is below £21k.
While convenient to cherry-pick MSFT as an example, there was also countless wealth lost in the dot com explosion (Webvan, eToys, Pets.com, etc)
Yes going public today is harder and that means companies generally have to have a better answer to "how will you make money (profitably)" than they once did. And that is probably a good thing.
It's also surprising that venture capitalists who have on the whole been unable to beat the S&P500 think that the layperson investing in tech companies would fare so well.
This may yield higher returns to investors than they could otherwise receive but, if so, it's only because they underestimate you. If the return on funds invested with you is expected to be higher, the ETF's price will increase until the perceived risk-adjusted return is equal to that in the market. What causes the types of entities who receive above average returns through nontraditional vehicles to achieve them is some combination of the the higher cost of raising that money, more limited availability and social convention.
reasons given to avoid ipo include lower speed/innovation (counterexample: apple), problems with short-term market expectations (cex: google), outside capital not required, maintaining a low profile, and sox compliance. Keith asserts that the real reasons are (a) incorrect assessments of above; (2) BoD issues, and (3) -- the important reason -- private company valuations are detached from reality and have been substantially inflated, so companies have to defer exits for years until their business can actually support the valuation.
That said, the modern startup path does seem to structurally delay IPO, which in the short term has resulted in 20-50% shaves of post-IPO public investors and long term difficulties in adding value of the sort Garry mentions. Just the causality basis isn't clearly SarbOx.
My current theory is the tilting of the king vs. cash towards king, as epitomized by Zuck. It's possible that the market had started driving companies towards private control to emphasize long-term growth over short-term, quarterly stock performance, which drove the Enron-era scandals. The collapse of the tech bubble might have had an impact, too. I concur with Bilal that private audits are a more likely causal link than SarbOx, though that could be our mutual gov't experience talking.
The JOBS Act created the IPO on-ramp (5 year SarbOx tapered exemption to reduce costs of public compliance), as well as 10x expanding the Reg A ($5M → $50M mini-offering cap) exemption to make it easier for startups to blend over into public exposure. However, these non-standard pathways are little known to both the investors that traditionally take early board seats and certainly early-stage founders. It's also unclear how much of JOBS has even been implemented due to continuing backlogs from political obstruction of Dodd-Frank at the regulatory level.
I think it's been proven that investors aren't adequately compensated for taking on "growth" risk. The risk premia attached to "growth" doesn't outperform passively owning the index over long periods of time.
Seems like all A16Z is trying to do is juice the IPO market for more liquidity (from dumb money middle class investors) so that they can have an easier time exiting when they're ready.
But I think there is something deeper and more structural than merely regulatory burden. Public companies suffer from the agency problem. When ownership is diffuse, that problem is more acute, and managers' interests more easily diverge from shareholders' interests. This is true regardless of the regulatory structure. That is to say, it's a fundamental economic problem rather than an artifact of whatever regulatory system is in place. One of the benefits of taking companies public later, if at all, is that ownership stays concentrated during a longer period and owners have much more concentrated influence on management.
There is another economic phenomenon in place, which is this: the economy is awash in capital and companies don't need public capital. When there are hedge funds with billions to throw around, and private equity companies who can engage in billion dollar transactions, why do companies need to turn to the public markets? If there is some profit to be made investing in the next Microsoft, and a private fund can swing the necessary size of investment, what purpose is there to resort to the public markets? Is it ever more efficient or more effective to supply a given amount of capital via the public markets instead of via some private investment Overregulation doesn't help this problem, but it's also ultimately an economic phenomenon. Concentration of wealth (there are a lot of new foreign oil/resources billionaires these days) means more private entities that can raise the kind of money that previously one could only raise in the public markets. Moreover, fewer opportunities for investment means that private funds can meet the underlying economy's need for capital, making public funding less relevant. Changing the regulatory structure isn't going to change that dynamic.
Hmm, don't know what you mean by this. As it stands, the safety net is working -- nobody who worked a significant portion of their lives is living on the street for lack of funds.
What SS does not give is a retirement of the same quality as a rich person's retirement, which should make sense on the face of it. Those Enron folks did have a Social Security retirement, what they lost was the more lavish retirement they had planned for themselves (nb: I'm not using "lavish" in any derogatory sense).
SS was intended to be a safety net, not a golden parachute, so elderly people didn't die freezing and starving in the streets. By and large, it has accomplished -- and continues to accomplish -- this mission.
Now if we can just broaden the population pyramid widely enough (and lucratively enough) to support the great height of the future retirees, we can kick that can so far down the road even we 40-somethings won't have to worry about the scheme's stability.
PS: Also of note he ignored dividends and inflation when looking at microsofts returns which is a sign of basic incompetence.
Also, I would point out that middle classes typically (and by definition, according to some definitions) make money from skilled labour, not investment. Stock profits is just not that big a percentage of a middle class person's lifetime earning.
I blogged about this last year:
If I saw a blog post titled "Unshackle the Middle Class," I would never in a million years have guessed that one of the unshackling mechanisms was a return to "IBM was up three-eighths, closing at sixty-seven and five-sixteenths."
Also regularly overlooked: the risks to startups of accepting funding from underqualified investors. Equity is ownership. Ownership involves baggage. A degree of trust and reputation protection undergirds both sides of startup investing --- and we still get occasional horror stories.
This is a situation that looks terrible in black-and-white numbers, but is probably not as bad as it seems.
I basically agree, but will make the following observation anyway: the figure that matters isn't what fraction of that 96% would be very poorly served, but what fraction of the ones who would invest in startups if they could would be very poorly served.
Imagine a university that targets exceptionally smart students, and also is only prepared to educate the very rich. (Or people whose surname begins with the letter A. Or almost any other small group that isn't basically equivalent to "very clever people".)
Then it will be true that (1) most of the people "locked out" by its rich-people-only policy would be poorly served by studying there, but also that (2) removing that policy would be a public benefit. (Assuming there weren't other adverse effects, e.g. running out of money because they could no longer charge such high fees.)
Going back to startup investing, it's at least plausible that most of the 96% wouldn't choose to do it because of the high perceived risks, and that those who would will be those who (1) are more risk-tolerant because they have more money and/or (2) think they understand the market particularly well. Both of these are probably correlated with being not so poorly served by startup investing.
(They may well not be correlated enough with that to make it a good idea, which is why I basically agree with your point despite the quibbling. But the quibble seems like a generally important distinction whether or not it makes a difference in this particular case.)
Firstly, you seriously think that the middle class is being eradicated due to the fact that they can't invest in private market companies early enough? You believe that most of the middle class has their investable cash at the ready, but is being limited by IPO listings?
No one will argue that IPO times need to come down and we don't need overvalued companies bloating up the stock market. But you are making the presumption that the investable upside of private companies outweighs those that are available in the public market. I'll take 10 shares of BRK any day over some random Ponzi scheme tech startup, thx.
The average returns in the venture market underperform the S&P, which is not constrained to purchase. And the S&P is not exactly everyone's first choice. The issue is not access to private companies, it's access to 1) knowledge, 2) investable cash and then 3) comparable opportunities.
If the issue is that getting access, both on the private and public side, to liquidity sooner than we are currently seeing, I agree. But it has very little to do with the middle class. The title is just linkbait.
How about this idea: lets start human trials of drugs earlier and require less regulations before medications are released so we can help fight disease in 3rd world countries... And boost my Pfizer stock.
Companies like Pfizer would be more likely to get toppled in a free market, than not. As it is, their position is guaranteed by the FDA. They're a government protected company, similar to Verizon or Boeing or Exxon. They roll in the profits, and all they have to do is buy up smaller players that can't hang around long enough to get approvals. The only threat to Pfizer right now is massive European pharmas.
Pfizer loves the system exactly the way it is.
Google finance graph: http://bit.ly/1d7JXnm
I don't know if it's 0%, but even 20% inflation adjusted over 16 years is a very bad return.
Looking at Facebook and Microsoft helps to quantify a very small portion of the total damage, but for many it'll be more convincing that the not visible per se absence of IPOs.
It's the principle; at the opposite end, put your money for this sort of thing into 12 or 20 companies. OK, with a minimum reasonable investment of 100 shares that's a lot of money, but individuals can still do it.
Where do you get 30%?
Social security tax is 6.2% of the first 113k of income, 0 after that
Medicare is 1.45% for income under 200k, 2.35% for income above 200k.
At no income level do these add up to anything more than 7.7%
The housing collapse was fun and all but it's 2013, we need to be finding new ways to increase financial risk for the failing consumer base.
I imagine there would be something similar in venture investing as well. One such example would be the lack of personal contacts which prevents us from investing at the best opportunities. It's debatable whether secondary exchanges have enough liquidity and trading volume to make investing in them pragmatic for anything less than the top 0.5% of the population with respect to net worth. Even then, the lack of due diligence would be frightening.
In practice, the investor base of those funds is a very small number of high-net-worth individuals and families, plus a set of long-lived private institutions such as Ivy League universities, multi-generational foundations, and the like. Sovereign wealth funds (national treasuries of countries like Abu Dhabi, China, Singapore, and Hong Kong) are becoming a larger part of that base now. (Not the US though, the US has no sovereign wealth fund.) Some big pension funds invest heavily in private equity but not as much into venture capital or hedge funds.
The result is that the vast majority of retirement savings for normal Americans -- whether managed by individuals or institutions -- can't access compelling private market opportunities.
2. The number of individuals and institutions invested in these funds who actually understand the instruments these funds invest in (particularly in the hedge fund world) is infinitesimally smaller. In other words, they couldn't give you an educated explanation as to why they invested, they simply got lucky.
3. Access doesn't guarantee returns. Sending your money to John Paulson in 2008 was very rewarding; if you invested in his PFR Gold Funds, you're down more than 50% in 2013 alone. It is almost impossible to predict top performers, particularly given point 2 above, and even if you do invest in a top performing fund, at best your investment is likely to constitute a modest portion of the total funds you have invested.
4. Success is a double-edged sword for fund managers: it's possible to raise a lot more capital (management fees, yay!) and launch new funds with ease, but finding investment opportunities that can deliver meaningful results becomes increasingly difficult as the size of the positions you need to establish grows. In other words, by the time you're investing in a fund manager because of past performance, there's a good chance you've already missed the big gains.
5. If you go back decades, particularly before 2008, hedge funds on the whole provided significantly better returns than buying a major index. But in the past several years, the S&P 500 has outperformed a number of indexes that track hedge fund performance. When you consider fees, most hedge fund investors have overpaid for underperformance the past several years.
6. A number of investment banks are exploring the launch of retail investor-friendly hedge funds with modest minimums (four-figures low in some cases), and Goldman has already launched its own. This is seen as a growth market for the investment banks so you can expect a lot of action in this space in the coming years.
Compelling market opportunities, private and public, do exist and the number of financial products promising average Americans access to them has grown considerably over the past decade. If I want a leveraged investment in publicly-traded mortgage REITs, for instance, UBS has an exchange traded note I can buy tomorrow. If I want to invest in investment-grade bonds denominated in renminbi, there's an ETF for that. And so on and so forth.
The number of sophisticated (and sometimes incomprehensible) financial products available to everyone will continue to grow but that doesn't really matter: the number of individuals who will be invested in the right products at the right time, and keep their gains over the long haul, will always be small. Put simply, access has very little to do with actually being able to exploit compelling market opportunities.
So being able to offer poorly-regulated "high-risk investments" to normal people who can only invest a small amount would be a scammer's dream; they can't put nearly as much resources into investigating the investment, or into recovering funds if it turns out to be a scam.
Nearly all the good opportunties will continue to go to a handful of well-connected wealthy people because it's far less work to raise money that way.
What's happened over the last 15 years is that growth has been mostly stripped out of the public market -- due to the collapse of IPOs and the reduction in publicly listed US companies from 8800 in 1997 to 4100 now. The result is a public market that is more and more just old, slow-growing companies. That's fine if that's what you want, but for people who are investing their retirement savings over a multi-decade period, that's bad news. (E.g. the overall stock market is flat over the last 15 years adjusted for inflation -- I don't think that's a coincidence.)
However it seems the world is not shaping up like that - if we take the theory that startups will simply be the new path into high flying careers, supplanting MBAs and certain colleges, then unlike hedge finds which are capital limited,
startups can take almost unlimited amounts of cash. For example if the tech startups world is a guide you should do a degree then take three years to run a startup. It sounds better than junior graduate trainee. If this holds true for even a decent percent of the world, across all industries, you could shovel cash at these guys forever.
That will take industrial levels of cash shovelling - the sort pension funds are good at, but VCs and even hedge funds really really bad at (high we are raising a limited round for 3 years at 2and20 vs give me 10% of your lifetime earnings and start now!)
I'm going to have to respectfully disagree with the OP, and suggest that, no, I don't think getting in on a few tech IPOs would have solved much.
That said, Sarbox has had so many unintended consequences and resulted in so much destroyed value that I do believe it should be curtailed in one fashion or another.
Legal and regulatory changes in the late '50s created the ecosystem that had IPOs as an ideal exit, and this had a fantastic half-century run ending with SarBox. And since then people are chasing 140 characters instead of flying cars, to paraphrase Peter Thiel. So much destroyed value I'm sure it has more than a little to do with their being no end in sight for the Great Recession.
48% of Americans don't own stocks at all.
A venture capitalist trying to get legal changes made by putting on a faux-populist claim of "it's for the middle class" is vomit-inducing.
Part of why there are fewer small-cap IPOs since 2000 has been due to the required external audits on companies - on average costing $2M. This had forced many companies to delay their IPO until they had the revenue to afford the audits, at which point often they no longer needed an IPO (due to folding, or selling).
The JOBS Act offered a series of exemptions for small-cap companies to be exempt from such audits, though I'm not sure what stage of implementation the SEC has taken it.
1. Decimalization. The argument that the author is making is essentially that "market makers are only interested in working at spreads higher than $0.01, the minimum spread got reduced to $0.01, so market makets are not interested and we have no market makers anymore." Let me restate that in non-financial terms: apple farmers are only willing to sell apples for at least $10, before the government and/or the farmer's market operator mandated that apples be sold for at least $15, now the minimum price was reduced to $5, so we don't have apples anymore. The fallacy is obvious: if there's no supply at $5, then the price of apples will just go back up to $10 or $12 or $15 until there's an equilibrium again. Same with market making and spreads; if no market makers participate with spreads of $0.01, spreads will go up to $0.05, or $0.10, or maybe even $0.23 and we'll end up with a better situation than we had before.
2. Investment and public/private companies: here, the argument seems to be that investing in an early seed round is basically a lottery, investing in public companies is too late, so the middle class should invest in mid-cap firms. That seems oddly specific - the one kind of investment that government won't let us make is exactly the kind of investment that will finally make the middle class prosperous again. The coincidence doesn't invalidate the argument, but it does make it somewhat suspicious.
3. The focus on IPOs as a route to wealth creation assumes that money is generally spread out among the masses. This is increasingly false; the poorest 25% of Americans have less than zero net worth - that is to say, they literally have less to invest than a starving Ethiopian. Deregulation should focus more heavily on the processes of actually creating wealth rather than investing it even if it is ultimately welcome in both.
And the fact that the article does not even mention SOX is just weird...
Sure we may not have the chance for another Microsoft going public but there's still opportunity, it just takes a bit more effort and moving money around more frequently.
1. The post itself is not 100% relevant but the table of returns is worth taking a look at: http://dangoldin.com/2013/05/24/investing-in-tech-stocks/
The dramatic rise in housing was through politics that restrict construction that benefits existing landlords over the middle class.
Housing and public higher education costs can both be addressed by electing public officials that are concerned about living standards for the middle class by simply restoring state funding of higher education and deregulating restrictive zoning laws.
Why should we think Sarbox is any different?
New companies do not.
Generally it has worked well to date.
This is one of the reasons I say it wasn't only SarBox, but that SarBox "was only the last set of nails in this coffin".
Not sure why the author believes that somehow individual middle-class investors will be able to compete with venture professionals who do this for a living and still cannot beat simple stock market index funds.
If I really wanted to get downvoted, I'd point out that trade unions correlate with a strong middle class.
Regarding the banks, that's a real uphill fight. I don't know if there is a more protected, favoured sector. I'd be happy if the mentality that led to the bailouts were to end. That would be a great start.
Wow, the claim that the ability to trade stocks in dollars and cents, as opposed to dollars and fractions, is one of the most significant factors in creating a "hostile environment" for IPOs, because then the minimum potential profit is 1 penny. Essentially re-iterating that stocks are merely trading vehicles, and that underlying value isn't responsible for movement in stock price but rather the mechanics of trading.
Certainly that isn't an advantage worth mentioning at all when comparing the struggles of the middle class to the opportunities available to VCs...
I agree with his belief that total market funds tend to pick up newer IPOs (where valid) sooner than those that, say, stick to the S&P 500.
The author believes that Ponzi schemes are a way to generate lasting wealth, and we are all stupid communists for not seeing this.
That's an ok point, but it ignores the extreme multiplier benefits from participating in that first $500 million. That is to say, very few (likely none) of the private investors would pay at a $500m valuation on a $500m IPO.
If you got in at $50m your return was upwards of 5,000 (4,680) fold vs. 500 fold at $500m. And of course this is all theoretical as Microsoft didn't take meaningful outside money.
Scott tries to say that private investors only had a $500m head start, and compares that to the total $234b market cap. $500m vs $234b is not the important stat line, rather it's the way the returns massively increase if you got in with the private money early. It's the difference between being perhaps being a billionaire versus having $25 or $50 million. Both are great outcomes, but there's no sense in pretending the first $500m shares much in common with the last $234 billion.
Point being: no, the private investors did not just have a tiny head start in the grand scheme of things (ie compared to the market cap now), and that is almost always the reality. They had an extremely massive head start over the IPO money, no matter how you calculate it. Early money multipliers can almost never be touched by public investors.
Give me a fucking break...
Barf. Who is dumb enough to swallow this? Sounds like an echo of Bill O'Reilly's "I look out for the little guy".
You tend to hear this term "middle class" from on high a lot, as it means absolutely nothing. What is the middle class in the middle of? Apparently people with income of $200k or over, or assets of $1 million+ are not middle class in his definition. Excluding worth of primary residence of course, which he neglected to mention. I guess this means doctors are not middle class. They must be in the upper class - a doctor is in the same class as Alice Walton, who inherited $26 billion. What is the dividing line between the middle class and the class under it? What class are janitors in, middle, lower? Class used to mean ones relation to production, but that doesn't fit into the kind of babble people like to put out.
To the big point of why this is nonsense. If you look at the Survey of Consumer Finances done by the Federal Reserve, that 4% of Americans he speaks of are the ones who hold the majority of stocks, the majority of bonds and whatnot. Just look through one of these Federal Reserve papers and you'll see that, other than primary residences, this top 4% own almost everything. Outside of primary residences, the next 5% to 20% swallow up pretty much everything the top 4% does not get. Which is not much, relatively. The bottom 80% have virtually no wealth outside of primary residences.
The idea that the median American will benefit from investing in VC is ludicrous. The median American does not have the money to invest and benefit from this. Stocks, dividends and profits are a weapon against the median American. They are dependent on the stock owners, the small top minority, getting the lion's share of the wealth created by the median American. If American workers had strong unions and most of the created wealth in corporations went to wages, not dividends, this would hurt the owners of stocks. The weaker the median American is in this equation, the better the stock does. The median American is all about wages, the crumbs of VC he might pick up are almost nothing. He has no money to invest, so even if his shares go up 20% a year, it amounts to very little.
Obviously, this is yet another thing to benefit the very wealthy. But to sell it, people have to say it's for the middle class. Whereas the middle class, whatever that means, is actually hurt when the wealth they create at companies goes to profit and not wages. It is coming out of their pockets - they create the wealth, then it goes out to heirs like Alice Walton in the form of dividends. Or payments to limited partners from VC. And the like.