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My takeaway- the VC's have leveraged the money from their successes to create a vortex that sucks in money from consumers, into privately owned companies, back into VC pockets, and back into more companies that get more people to spend more money.

The tech vortex that is sucking away quality of life from the middle class and padding the billionaires (and large company) bank accounts. Throwing out a few bones on occasion (fewer and fewer) to entrepreneurs to keep the vortex going.

Vortex is the opposite of bubble, but it does the same thing to the life of the average person.




That's the way capitalism has always worked - it is up to you to make deals that increase your overall level of happiness, and it's up to your counterparties to ensure that those deals also increase their happiness. In past years, instead of "VCs" the villains have been hedge funds, private equity, corporate raiders, giant conglerates, corporations in general, investment trusts, robber barons, and colonial empires.

In return, the average person has gotten information at their fingertips, sheep-throwing, Farmville, Candy Crush, easy travel bookings, a place to stay in every city, a computer on every desk, the ability to fly through the air, a car of their own and a house in the suburbs, and many other things.

The reason money gets drawn away from "the average person" and collects in "billionaires and large companies" is because the average person values money for what it can do for them, while billionaires and large companies value money as a scorecard. Naturally, it makes sense that money will flow away from people who want it so they can spend it, and toward people who want it so they can hoard it. If you're unhappy with this arrangement, decide which side you would rather be on and then act accordingly.


>The reason money gets drawn away from "the average person" and collects in "billionaires and large companies" is because the average person values money for what it can do for them, while billionaires and large companies value money as a scorecard.

That's the reason that people buy things from people who sell things, not the reason for the unequal distribution of wealth. There is no logical necessity in people's spent money accumulating in a small number of pockets. Clearly, given the enormous variation in the distribution of wealth through even recent history, there must be many other factors at play.


The reason for the accumulation of wealth is because most profitable markets (i.e. ones where profits are not competed away) involve owning an asset that others a.) value and b.) cannot easily replicate. Very often these days, that asset is simply the purchasing habits of a large number of consumers. Building machinery is easy, but changing peoples' minds is hard.

The good news - from an economic mobility standpoint - is that technological change is rapid enough that peoples' purchasing habits change all the time. The bad news is that it's often pretty unpredictable which product or service they will land on.


That seems like a non-sequitur. The existence of such assets does not entail massive wealth inequality. It obviously cannot, since such assets have always existed whereas wealth inequality has increased enormously. Purchasing habits are not really an asset, by the way, since a company does not own the purchasing habits of its customers.


> the average person values money for what it can do for them, while billionaires and large companies value money as a scorecard

I don't think you're right about billionaires and large companies, actually, but at any rate: the complaint here is not that massive, nearly record-setting levels of wealth disparity are unfair, or even that people are unhappy. If everyone is materially taken care of, it can be difficult to talk about fairness or happiness. What we're losing out on isn't fairness but self-determination - a democracy can't survive long if a fraction of a percent of the population controls half the wealth. Wealth may not literally equal power, but there is an exchange rate there and it stays pretty stable over time. If a concentration of wealth leads to a concentration of power, that will undermine a democracy which can only work if power is relatively more diffuse. We may be finding out the hard way that capitalism and democracy are not compatible, and if they aren't then so far capitalism appears to be winning.


This is basically what Capital in the 21st Century said too. People who reinvest money they make into making more money are getting richer. Those who spend it are not. Pretty straight forward.


Except that unless you are lucky, you're unlikely to become wealthy from just saving/investing ordinary income. You're both presenting it as if it were a simple choice between being frugal and engaging in consumption, but it's not.


There's more than that implicit in my comment. If you're the sort of person who views wealth as a scorecard rather than a means to consumption, why should you care whether you end up becoming wealthy or not? You'll be too busy making money to spend it. And if you're the sort of person who views wealth as a means to consumption, then of course you'd like to be wealthier, but, well, you know how to achieve that.

(In actuality, the distinction isn't binary - most people desire both consumption and accumulation of wealth, in different proportions. But that reinforces the meta-point I'm trying to make, that money is a means to make choices about your life, and what makes those choices meaningful is the fact that there are constraints in the first place.)


Not to be argumentative (because I think we have somewhat similar opinions on the broader topic), but I am having real problems with your scorecard analogy. I have certainly met people who think that way but a) of course they want to be wealthy, because being in the game but having a low score isn't satisfying and doesn't come with any status benefits and b) even people who are obsessed with money-as-score still like to consume, partly to signify their ability to do so. Furthermore, almost all of the people with the scorecard mentality that I've encountered come from financially privileged backgrounds. I remember one person in particular who was working as a professional investor that I occasionally did some IT work for, and who confided in me that he sometimes felt it was an uphill struggle because he wasn't his father's favorite son and so had to start his investing career with only $1 million of capital. I forebore from mentioning that that was about 30 times my annual income and I would be delighted to swap my problems for his, but it was pretty dispiriting; while I don't view capitalism as a zero-sum game, there are far fewer investment opportunities open to people who have only tiny amounts of capital.

I agree that money can be a means to make choices about one's life, but only past a certain point. Poor people need money to obtain the necessities of survival, and that often doesn't leave a whole lot of options open for making life-scale economic choices. Picture a Monopoly game where some players get the standard $1500 at the outset and $200 each time they pass Go, others get $150 and $20, and one person gets $15,000 and $2000. No matter how good the players in the second group are, they're probably going to perform poorly under those conditions; likewise whoever is fortunate enough to start out controlling large sums is considerably more likely to win.

We all have the same amount of time at our disposal, and how we use that can certainly have a huge impact on our economic futures. But large capital disparities arguably provide a disincentive to maximize productivity insofar as people feel hard work will have little impact on their prospects for advancement relative to their contemporaries.


Actually, it really is that simple.

Save 50% of you income for ten years and invest it sanely and you will become rich. It's a pretty simple mathematical equation.

Most people don't want to admit that it works because they can't defer their consumption for a decade.


Hardly anyone makes more than $2M in ten years. Investing $1M conservatively and moving to the third world might get you a reasonable standard of living, but that's not what people mean when they say rich.


This seems to contain a number of assumptions about income, non-discretionary living expenses, and rates of return. You'll certainly be richer but you're not likely to become rich (which I guess I should have defined earlier, but which I consider to be wealthy enough that you can retire and live off passive income should you so choose).


>In return

In return for what? I've read your post several times now and it's unclear what you are referring to.


In return for forking over the vast majority of their income. It doesn't just vanish (well, except for credit card interest...that does just vanish). The "vortex" that the grandparent's referring to is the money that customers are shelling out for services, which then becomes a tech company's revenue. But in return for shelling out that money, they get mobile phones, cloud storage, a place to stay in every city, on-demand transportation, access to service professionals, a second income stream, exposure for their business, and many other things of value.


The Romans called it bread & circus. You get candy crush and an iPhone to let you work harder.


When you read "public returns" that doesn't mean the middle class. The "public market" the deck is referring just means that the trading happens on the open market (NASDAQ, S&P, etc.) rather than in private deals. Regardless, it is always the big players who make the big returns. The average investor wasn't the one making all the returns on Microsoft either. So you are right that the rich use these tools to get richer, but it is hardly a new thing.


So, those 30% annual returns my dad made in the 90s were some sort of dream? The early players made more, but plenty of people rode Microsoft and Intel up through the 80s and 90s. We all missed the first decade of Dropbox.

Billionaires make wacky amounts of money in stock because we stopped taxing them.


You're just describing capitalism.




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