Silicon Valley Brain Rot: Income Inequality
There's something wrong with venture capitalists. I wrote about Paul Graham's disturbing views on race previously. Since then, out of a morbid fascination with how the obscenely wealthy think, I started reading some of his essays. Today, I'll be talking about his views on income inequality outlined in his essay Mind the Gap. Turns out, according to Paul, it's actually a good thing, which is convenient for him personally.
Paul seems to miss the point of the wealth gap conversation entirely. He continually refers to the anti-inequality argument as the "Daddy Model of Wealth." He presumes that people concerned about the wealth gap believe that wealth is given to people from some central authority.
There are a few issues here. First, the "Daddy Model" does actually work in some circumstances. Social Security is a great example. Social Security lifts 19.5 million seniors out of poverty1, which is roughly one third of all American senior citizens. We also saw childhood poverty cut in half during the pandemic due to the expanded child tax credit, and then jump back up when the program expired2. This model does actually work in some circumstances.
The second issue is he oversimplifies the avenues to wealth. According to Paul, the two possibilities are that it's created by making something that people want, or created by "Daddy" handing it out. He mentions a few exceptions, but fails to explore those. "Speculator" covers a large amount of the wealth in this country, including himself to some extent. He also fails to mention inheritance/nepotism, which is another important avenue to wealth that doesn't require creating anything.
It's trivial to find examples of people generating obscene amounts of wealth while not creating anything. The recent story of Red Lobster filing for chapter 11 bankruptcy comes to mind. Some private equity firm bought the company, immediately sold off all it's real estate to a third party (almost entirely recouping the money they spent buying the company), and that third party started charging much higher rent than market value. The story goes on, but I'd like to hear how this fits into Paul's idea of wealth.
Maybe most importantly, he fails to mention scale, which is what the wider cultural conversation centers around. Paul likes to wax philosophical, but at the end of the day this is a practical, empirical question. How much would it stifle innovation if there were a 90% tax rate on wealth over $1 billion, and how many more programs that keep people out of poverty could that fund? That's the question, but Paul doesn't seem interested in exploring it.
Paul argues that technology increases the wealth gap, but raises the standard of living for everyone. There may be some truth to this, but it's also worth noting that technology can also make scams and fraud much easier and more lucrative. He actually addresses this objection, and by "address," I mean completely denies it with no evidence or explanation.
Sam Bankman-Fried. Elizabeth Holmes. Most cryptocurrencies. NFTs. Credit default swaps. Need I go on?
Paul's saying that the poor should be grateful that they get to live in houses and wear clothes. That wasn't the case in the dark ages, he says. On it's face, it's a completely disconnected view. There's a difference between living on a razor's edge and being able to handle adversity. If a rich person's car breaks down, they take a day off work and go get it fixed, or just buy a new one. If a poor person's car breaks down, they get fired and now they don't have a car or a job. This can spiral quickly to eviction and homelessness. The idea that the rich and poor lead similar lives aside from the rich having more luxury goods is ludicrous. Paul is completely out of touch with the struggles of the working poor.
"Mind the Gap" is an exercise in Paul self soothing. He's convincing himself that his wealth is more than just being in the right place at the right time. He thinks he deserves everything he has, and that anyone else could do it too if they worked hard enough. He holds a toxic lack of empathy for the working poor. He has to, otherwise the whole illusion falls apart. In a different essay, which I'll write about in a later entry, he literally argues that, on the whole, the working poor are overpaid.
