WhiteLake Group
  • Home
  • Blog
  • About
  • Contact
  • Home
  • Blog
  • About
  • Contact
Search

In Defense of Paul Graham

1/21/2016

3 Comments

 
I read an inciteful, condescending and somewhat amusing article about Paul Graham recently that sparked an interesting debate about the nature of startups and economic inequality in Silicon Valley.
​

The essay is a reaction to Paul Graham's blog post, in which he differentiates between wealth creation vs. the zero-sum game, the latter which represents certain classes of people who steal from others to become richer (ie, "And if there are people getting rich by tricking consumers or lobbying the government for anti-competitive regulations or tax loopholes, then let's stop them.")
Picture
David Plouffe, former campaign manager for the Obama administration is now an active lobbyist for Uber and driverless cars on Capitol Hill, and responsible for President Obama's new proposed budget of $4 billion to spend on the next 10 years to help companies in research and development of driverless car technology. ​
He also equates the greater freedom of wealth creation as a direct correlation to economic inequality (ie, "Eliminating great variations in wealth would mean eliminating startups.") He uses the example of Mark Zuckerberg as an example of greater wealth creation. Paul Graham says that during the Reagan era, where there was less economic inequality, the Zucks wouldn't have been able to create wealth via Facebook, but instead he would probably had gone to work for Microsoft. However, Mr. Graham forgets that during the Gerald Ford and Reagan Eras, Bill Gates (the Zuckerberg predecessor) created wealth via Microsoft, and many others, such as Steve Jobs created wealth via Apple and on and on. In fact, there were many founders of startups and small businesses that became successful during the Gerald Ford and Reagan Eras when there was less economic inequality. So does that mean that economic inequality automatically translates into greater freedom of wealth creation as he postulates?
​
Picture
Bill Gates and Paul Allen founded Microsoft in 1975, when America had less economic inequality than today and during a time when public university education was free. ​

The author of the inciteful essay- Paul Graham is Still Asking to be Eaten, Holly Wood, which I assume is a nom de plume, questions why startups are the de facto ne plus ultra of wealth creation, and compares the importance of other fields and professions, such as nurses and teachers, and why their roles should be less important than that of founders of startups? But why stop there? What about basketball stars and pro baseball players? Why should certain professions create more wealth value than others that serve an instrinsic purpose to the population? Why are plumbers paid less than doctors? Why are teachers paid less than football stars? However, the writer specifically targets the founders of startups and questions the validity of some social networks such as Peeple- yet the writer never questions the validity of Facebook or Twitter.
​

Picture
Alex Rodriguez, baseball player for the New York Yankees is paid a salary of $21 million annually. 

I think one of the missing links in Paul Graham's flawed argument is that startups oftentimes defied convention, and moved people towards more economic equality than being the product of economic inequality. Iconic founders moved away from the ideals of traditional education (although many could argue that the strongest proponents of the argument for dropping out of university were themselves products of the Ivy Leagues and Stanford). However, for many in the post-industrial era, education was the key towards economic wealth and social mobility. Startups began to question those methodologies, and with the skyrocketing costs of a traditional education, new startups began commodotising on short-term vocational training, such as Udacity, to train people to work in technology companies.

Picture
Udacity, an online vocational school that teaches students to work in technology companies as developers in driverless technology, iOS and Android applications and machine learning. ​

So I disagree that "eliminating great variations in wealth would mean eliminating startups". In fact, startups, in many ways, attempt to streamline economic inequality, to create a more balanced, economic distribution in which many different classes of people can take part. Certainly, as Holly Wood says, not everyone should have to aspire to be an startup founder, and perhaps the ideal created in the media of certain founders borders on cultish media methodologies, whereas the everyday heroes we take for granted- mothers, teachers, counselors, small business owners, farmers, forest rangers, artists, often do not achieve the kind of cult-like following in the media as do models, actors, sportstars, and startup founders.
​


Picture
Kim Kardashian West is the most followed person on Instagram with 58.2 million followers.

The truth is, startups arose from the conditions set by the post-industrial era, as factory work became replaced with software engineering, but in the industrial era, there existed many more small business owners who could've been categorised in a similar vein as startup founders. Startup founders, are in essence, small business owners. McDonald's was originally a small business founded by the McDonald's brothers in the 1950s, which became a recognisable American icon, as was Walmart. All corporations were at one time, a small business or a "startup", including Microsoft, which didn't make a profit until its 4th year in existence, and made around $100K in its first profitable year.It wasn't the conditions of economic inequality that paved the way for startups and small businesses, it was exactly the opposite, a more distributed system of economic wealth that allowed people to take chances to start small businesses.
​


Picture
The original startup founders, Richard and Maurice McDonald who founded McDonald's in 1955, when there existed less economic inequality than today. ​

However, in our present society, especially in the US, the growing trend is moving towards the extinction of small businesses. As economic inequality becomes more widespread, it is the big corporations that wipe out smaller startups, create clone companies or else, the small fish becomes acquired by the giants, therefore creating less competition. David O. Sacks wrote in a facebook blog a few years ago after his startup Yammer, got acquired by Microsoft for $1+ billion that:

Picture

What David O. Sacks postulates is that the heyday of Silicon Valley as a new frontier of startup founders from the 70s and 80s has been replaced by corporate giants and startups based around a network entirely composing of Stanford. Steve Jobs couldn't create Apple today under the conditions of this growing economic inequality and Sergey and Larry couldn't create another Google under the same conditions.

Let us not forget either that despite Y-Combinator's bluechip status, that approximately 80% of its wealth is based on exactly one startup- AirBnB, a startup that almost didn't get chosen into Y-Combinator. As Holly Wood writes, 99% of startups fail, and 99.5% of startups at Y-Combinator have failed; so perhaps instead of simply admiring the wealth creation of one startup- we should analyse why 99.5% have failed at wealth creation? Perhaps centering the startup world around the myopic, incestuous world of Stanford isn't such a great idea after all.

In history, it is usually the middle classes that produce iconic artists. It is also the middle class today that launch the most amount of small businesses. In areas where there are less pockets of economic inequality, there are more small businesses. Venture capitalists are the "benefactors" of today's society, and certainly they are the ones who fund the founders of our era, but it isn't the 1% that is creating the startups nor people in poverty who create them; instead the majority of wealth generation comes from people who have solidly grown up in middle class neighbourhoods where there was less economic inequality.
​

Paul Graham also makes a remark upon poverty and how that topic should hold precedence over the topic of economic inquality, the latter which he views as a natural occuring phenomenon. However, Mr. Graham had an opportunity to do just that- make a difference in poverty via one of his Y-combinator startups, Homejoy, in which a significant portion of the cleaners were found to be homeless people. Here, Mr. Graham could've made a difference in combating poverty, and given these homeless people an opportunity for education and advancement, but instead, what happened was that they were exploited as cheap labour, and forced into the status of independent contractors.

Picture
Homeless shelters in America, a disturbingly growing trend. ​

In the end, Paul Graham and Holly Wood both make two sides of the same argument in their essays: economic inequality is increasing and it is due to financial deregulation. However, I argue that it is up to startups to distribute that income divide, rather than proliferation of economic inequality. As Jack Ma said, the main motive of Alibaba was to empower small business owners and to create an infrastructure to help them through tough times. This is something that is solely lacking in the United States due to the rate of increasing economic inequality. According to gallup 50% of new businesses fail within the first five years and statistic brain research institute reports that 71% of all startups fail by the 10th year. 
​

Perhaps instead of arguing the myriad injustices in the world and pointing the finger of blame towards financial institutions, we should attempt to create viable solutions to this dismal failure rate of small businesses, and think of ways to create more economic equality to support them than make an argument for why startup founders are more revered than nurses.

​By Sierra Choi



3 Comments
khadim hussain link
10/29/2019 12:04:07 am


worldwide.Technology, especially artificial intelligence
has made our lives really easy. From the general apps to
Alexa in our houses technology has seeped in even without
us realizing when this happened. Here is a quick view of
future where AI will have significant role in each phase
of our lif

Reply
AI objectives link
2/5/2020 09:34:07 pm

To keep your audience’s attention, be sure to use a variety of images. Attempt a blend of stock photographs, standards made with the Tumblr pennant producer, infographics, images, and the sky is the limit from there.

http://www.aiobjectives.com/2019/10/10/why-images-are-important/

Reply
rhymes for kids link
11/3/2020 10:16:23 pm

Our main goal is to train and educate our kids or children through different Rhymes for kids and attractive poems for children

Reply



Leave a Reply.

    CONTRIBUTORS


    JOHN ROWLAND, Managing Partner, Whitelake Group

    SIERRA CHOI,
    Adviser, Whitelake Group


    ASHOK PAREKH,
    Director of Investment Services,

    Whitelake Group


    Archives

    June 2022
    March 2022
    December 2021
    October 2021
    September 2021
    May 2021
    April 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    April 2020
    March 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    May 2019
    April 2019
    March 2019
    February 2019
    December 2018
    November 2018
    October 2018
    September 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015

    Categories

    All

    RSS Feed

Proudly powered by Weebly
  • Home
  • Blog
  • About
  • Contact