January Since the s, economic inequality in the US has increased dramatically.
And in particular, the rich have gotten a lot richer.
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Nearly everyone who writes about the topic says that economic inequality should be decreased. I'm interested in this read article because I was one of the founders of a company called Y Combinator that helps people start startups.
Almost by definition, if a startup succeeds, its founders become rich. Which means by helping startup founders I've been helping to increase economic inequality. If economic inequality should be decreased, I shouldn't be helping founders.
No one should be. But that doesn't sound right. So have we just shown, by reductio ad absurdum, that it's false that economic inequality should be decreased? That doesn't sound right either. Surely it's bad that some people are born practically locked into poverty, while at the other extreme fund managers exploit loopholes to cut their income taxes in half. The solution to this puzzle is to realize that economic inequality is not just one thing. It consists of some things that Paul Graham Wealth Essay bad, like kids with no chance of reaching their potential, and others that are good, like Larry Page and Sergey Brin starting the company you use to find things online.
If you want to understand Paul Graham Wealth Essay inequality—and more importantly, if you actually want to fix the bad aspects of it—you have to tease apart the components. And yet the trend in nearly everything written about the subject is to do the opposite: Sometimes this is done for ideological reasons.
Sometimes it's because the writer only has very high-level data and so draws conclusions from that, like the proverbial drunk who looks for his keys under the lamppost, instead of where he dropped them, because the light is better there. Sometimes it's because the writer doesn't understand critical aspects of inequality, like the role of technology in wealth creation.
Much of the time, perhaps most of the time, writing about economic inequality combines all three. The most naive version of which is the one based http://agnix.info/edu-help/frank-de-groot-thesis.php the pie fallacy: Usually this is an assumption people start from rather than a conclusion they arrive at by examining the evidence. Sometimes the pie fallacy is go here explicitly: But the unconscious form is very widespread.
I think because we grow up in a world where the pie fallacy is actually true. To kids, wealth is a fixed pie that's shared out, and if Paul Graham Wealth Essay person gets more it's at the expense of another.
It takes a conscious effort to remind oneself that the real world doesn't work that way. In the real world you can create wealth as well as taking it from others.
A woodworker creates wealth. He makes a chair, Paul Graham Wealth Essay you willingly give him money in return for it. A high-frequency trader does not. He makes a dollar only when someone on the other end of a trade loses a dollar.
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If the rich people in a society got that way by taking wealth from the poor, then you have the degenerate case of economic inequality where the cause of poverty is the same as the cause of wealth. But instances of inequality don't have to be instances of the degenerate case. If one woodworker makes 5 chairs and another makes none, the second woodworker will have read article money, but not because anyone took anything from him.
Even people sophisticated enough to know about the pie fallacy are led toward it by the custom of describing economic inequality as a ratio of one quantile's income or wealth to another's. It's so easy to slip from talking about income shifting from one quantile to another, as a figure of speech, into believing that is literally what's happening.
Except in the degenerate case, economic inequality can't be described by a ratio or even a curve. In the general case it consists of multiple ways people become poor, and multiple ways people become rich. Which means to understand economic inequality in a country, you have to go find individual people who are poor or rich and figure out why. This is one way I know the rich aren't all getting richer simply from some new system for transferring wealth to Paul Graham Wealth Essay from everyone else.
When you use the would-have method with startup founders, you find what most would have done back inwhen economic inequality was lower, was to join big companies or become professors. Before Mark Zuckerberg started Facebook, his default Paul Graham Wealth Essay was that he'd end up working at Microsoft. The reason he and most other startup founders are richer than they would have been in the mid 20th century is not because of some right turn the country took during the Reagan administration, but because progress in technology has made it much easier to start a new company that grows fast.
Traditional economists seem strangely averse to studying individual humans.
It seems to be a rule with them that everything has to start with statistics. So they give you very precise numbers Paul Graham Wealth Essay variation in wealth and income, then follow it with the most naive speculation about the underlying causes.
But while there are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum, there are also a significant number who get rich by creating wealth. And creating wealth, as a source of economic inequality, is different from taking it—not just morally, but also practically, in the sense that it is harder to eradicate.
One reason is that variation in productivity is accelerating. The rate at which individuals can create wealth depends on the technology available to them, and that grows exponentially. The other reason creating wealth is such a tenacious source of inequality is that Deer Hunting With Jesus Essay can expand to accommodate a lot of people.
But that won't eliminate great variations in wealth, because as long as link leave open the option of getting rich by creating wealth, people who want to get rich will do Paul Graham Wealth Essay instead. Most people who get rich tend to be fairly driven. Whatever their other flaws, laziness is usually not one of them. Suppose new policies make it hard to make a fortune in finance.
Does it seem plausible that the people who currently go into finance to make their fortunes will continue to do so, but be content to work for ordinary salaries?
The reason they go into finance is not because they love finance but because they want to get rich.
If the only way left to get rich is to start startups, they'll start startups. They'll do well at it too, because determination is the main factor in the success of a startup. In a zero-sum game there is at least a limit to the upside.
Plus a lot of the new startups would create new technology that further accelerated variation in productivity. Variation in productivity is far from the only source of economic inequality, but it is the irreducible core of it, in the sense that you'll have that left when you eliminate all other sources.
And if you do, that core will be big, because it will have expanded to include the efforts of all the refugees. Plus it will have a large Baumol penumbra around it: You can't prevent great variations in wealth without preventing Paul Graham Wealth Essay from getting rich, and you can't do that without preventing them from starting startups.
So let's be clear about that. Eliminating great variations in wealth would mean eliminating startups. And that doesn't seem a wise move.
Especially since it would only mean you eliminated startups in your own country. Ambitious people already move halfway around the world to further their careers, and startups can operate from anywhere nowadays.
So if you made it impossible to get rich by creating wealth in your country, people who wanted to do that would just leave and do it Paul Graham Wealth Essay else. Which would certainly get you a lower Gini coefficient, along with a lesson in being careful what you ask click to see more. We had a 40 year stretch in the middle of the 20th century that convinced some people otherwise.
But as I explained in The Refragmentationthat was an anomaly—a unique combination of circumstances that compressed American society not just economically but culturally too. Startups are almost entirely a product of this period. And even within the startup world, there has been a qualitative change in the last 10 years. Technology has decreased the cost of starting a startup so much that founders now have the upper hand over investors.
Founders get less diluted, and it is now common for them to retain board control as well. Both further increase economic inequality, the former because founders own more stock, and the latter because, as investors have learned, founders tend to be better at running their companies than investors.
While the surface manifestations change, the underlying forces are very, very old.
Startups are not magic. They don't change the laws of wealth creation. This essay is about how to make money by creating wealth and getting paid for it. And creating wealth, as a source of economic inequality, is different from taking it—not just morally, After reading a draft of this essay. Brain Pickings remains Paul Graham on Money vs. Wealth meditation on prestige vs. purpose remains a must-read — in an essay titled “How to Make Wealth. How to Make Wealth: What is Paul Graham's best essay? technology or startups and wouldn't otherwise know or care who paul graham is. This essay comes from. Paul Graham (/ ɡ r æ m /; born 13 November ) is an English born computer scientist, entrepreneur, venture capitalist, author, and blogger. He is best.
The acceleration of productivity we see in Silicon Valley has been happening for thousands of years. If you look at the history of stone tools, technology was already accelerating in the Mesolithic.
The acceleration Paul Graham Wealth Essay have been too slow to perceive in one lifetime. Such is the nature of the leftmost part of an exponential curve.
But it was the same curve. You do not want to design your society in a way that's incompatible with this curve.
The evolution of technology is one of the most powerful forces in history. Louis Brandeis said "We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both.
But if I have to choose between ignoring him and ignoring an exponential curve that has been operating for thousands of years, I'll bet on the curve.
Ignoring any trend that has been operating for thousands of years is dangerous. But exponential growth, especially, tends to bite you. Can you have a healthy society with great variation in wealth? What would it look like? Notice how novel it feels to think about that.
The public conversation so far has been exclusively about the need to decrease economic inequality. We've Paul Graham Wealth Essay given a thought to how to live with it. I'm hopeful we'll be able to.
Brandeis was a product of the Gilded Age, and things have changed since then.