Trickle Up Economics

For something like 30 years, we have been hearing about trickle down economics in which we lower tax and other burdens on the wealthy, these wealthy individuals invest in the economy, and the benefits of those investments “trickle down” to the middle and lower class. That may well be what happens when the burdens are lowered on the wealthy, but as we all know the wealthiest in the US are gaining ground on everyone else and have been for a long time. This is not a critique of trickle down economics per se. There are other things going on, including a transition of value from labor to capital as a result of technological progress, that are driving the gains of the wealthiest right now.

I would like to propose another approach that I call “trickle up economics” in which we lower the tax and other burdens on the lower and middle class, we invest in educating their children (and them), we make sure they have the skills to get good jobs in the economy of the future, and we make sure they have access to things like good transportation, safe neighborhoods, healthy food, quality health care services, etc that are required for them to be fully functioning citizens in our society.

If we do all of that, we will have a stronger workforce and a more entrepreneurial and innovative society, and that will drive wealth creation in the US that will “trickle up” to the wealthiest people in the US.

The american dream has always been about opportunity. You start out with nothing and through hard work and a good body and mind, you make it and lead yourself and your family to a better life. That, by the way, is the story of the Gotham Gal and me. We arrived in NYC in 1983 with not a penny to our names. Nada. Nothing. I am not even sure how we came up with the security deposit for our first apartment. But we had good educations and had secured good jobs. And we worked for everything we have. We made it.

I am so optimistic about the United States and our economic prospects. I am optimistic about our people. I just want to see us invest in our people. All of them. Because I am sure if we do that, the benefits will trickle up throughout society.

#policy#Politics

Comments (Archived):

  1. jason wright

    ‘trickle’ (not your word i know) seems to lack ambition for the speed of change required, and not only for your country. these regressive hierarchical societies can be found in many countries. however, higher tax countries do seem to do quite well at providing the collective infrastructure you identify as necessary for progress to greater opportunity for all. if tax is lower who pays for this?on yesterday’s post. it might be better for disqus to keep comments in their original chronological order in a thread, and instead use a clear highlighting method to identify comments receiving more votes. some form of colour coding system perhaps. moving comments around destroys the narrative flow.disqus on mobile is only good for reading. i want a feature that allows me to ‘bookmark’ a comment i want to reply to and prompts me to do so when i have a physical keyboard to hand later in the day. some form of sync function between smartphone app and laptop browser extension i’m thinking.

    1. Stephen Voris

      There’s a “sort by” option in disqus right under your name at the top of the comments… at least on the desktop. Only options at the moment are “best”, “newest”, and “oldest”, but either of the latter two should work for what you’re asking for in the second paragraph.Agreed on the per-comment bookmark feature – that’d be great for larger discussions.

  2. mfeinstein

    I agree with you, Fred. The people in our country are another form of infrastructure that we can invest in, like roads and bridges. Unfortunately, we have to overcome two political problems in order for this mindset to be adopted broadly: 1) some people think that there will be freeloaders who take advantage of the investment made in them and don’t use it productively. It’s a form of wasteful spending, like building a bridge that isn’t really needed and 2) there will be challenges in distributing this spending fairly and wisely, with some of the people in power taking advantage of this spending to build more political power and favor those who support them.

    1. B. Llewellyn Shepard

      “people in our country are another form of infrastructure that we can invest in” Exactly.

    2. laurie kalmanson

      repurpose the military budget, leave the 30 percent off the top for thieves and liars, invest it in infrastructure and mass transit; jobs plus things that are the foundation for growth. the thieves and liars still get their cut, but the country gets something for its money

      1. pointsnfigures

        It’s not the military that is messing with government budgets. It’s entitlement spending and pensions.

        1. laurie kalmanson

          that is demonstrably untruepensions are a form of deferred compensation; failing to fund them is irresponsible, a game of kicking the can down the road, but they are part of income that workers earned as part of their wage agreement.entitlement spending is a fraction of the budgethttps://www.nationalpriorit…

          1. pointsnfigures

            We aren’t going to agree. Public sector unions are incredibly damaging to individual liberty. As Heritage shows, entitlement spending is 2/3 of the federal budget http://www.heritage.org/fed…. In Silicon Valley, Mary Meeker also made the same point: http://kpcbweb2.s3.amazonaw…In Illinois, 99% of every tax increase goes to pay public pensions. Rahm just raised taxes $600M in the city of Chicago and it barely put a dent in the public pension problem.Actuaries have understated the pension problem deliberately. http://www.wirepoints.com/a… They understate the liabilities, overstate the rates of return on invested capital, and manipulate the ages when people retire and how long they live.

          2. laurie kalmanson

            collective bargaining, for public or private workers, is the only tool that gives labor parity with organized capitalaccounting shenanigans and fiscal game playing with obligations to workers are irresponsible and should stop. the shutdown grandstanding in illinois is a disgrace, and the opposite of responsible government — but failing to fund the retirement obligations bargained for by generations of workers doesn’t mean it isn’t compensation agreed to and earned https://uploads.disquscdn.c

          3. pointsnfigures

            The data and outcomes in Wisconsin don’t agree.

      2. Kirsten Lambertsen

        We’re spending 45% more on military than we did pre 9/11. And it was out of control then.

        1. laurie kalmanson

          it’s partially a jobs program; repurpose the jobs to building infrastructure. let the contractors keep stealing a third off the top; that will never end — but get something out of it for the country and the future

          1. Kirsten Lambertsen

            not a bad proposal at all 🙂

    3. fredwilson

      Yuppppppppp. I’ve come to accept that some percent of every investment I make will be wasted ot used foolishly. It’s one of the prices of making an investment

      1. Erin

        Hmm, an allowance for ego activity. Economics needs to be less dualistic (liberal vs. conservative) and more ternary- more concerned about who has a self-awareness [ie. meditation] practice. Like who notices when they’re using money or resources to compensate for their insecurities and cravings and can breathe through that and integrate it, rather than act on it. Someone needs to do a study on wastefulness and entrepreneurs with and without a self-awareness practice.

      2. leapy

        Sometimes you can only know in retrospect what was wasted.

  3. Rick Mason

    The problem with trickle up economics is its capital inefficiency. The government operates with an unreasonably high overhead. Then central planners at the state or city level unequally allot the money. Case in point the infamous near trillion dollar bailout. Despite being very generous with Baltimore for example the poorest neighborhood in the city (where the recent riots took place) didn’t see a single cent.But take the example of the city of my birth: Detroit. Four billionaires led by Dan Gilbert start investing in the downtown area. The results in less than five years have been dramatic. Trickle down economics, like the entrepreneurs themselves, is highly capital efficient.The federal government has invested billions in Detroit for the past forty years yet until Dan Gilbert and company started investing very little was happening.

    1. JLM

      .The financial outcomes of big Democratic ruled cities is illuminating.The opportunities embraced by entrepreneurs are equally illuminating.JLMwww.themusingsofthebigredca…

  4. Dave W Baldwin

    Good play on phrases emphasizing good growth comes from multiple directions not one.

    1. Twain Twain

      I’m with you on the “multiple directions not one” position.A lot of economics has been linear thinking:* Tradeoff lines = consumer has to choose A or B and relinquishes one as the other increases.* Hierarchical pyramid = Top 1%, bottom 99%, trickle down, trickle up.It would be so much healthier if economists created models that are much more multi-dimensional.

  5. Dylan Sojumd

    Fred, there’s no such thing as ‘trickle down economics’. It’s one of those myths that through sheer force of repetition is somehow validated.There’s no proof or validation of the ‘theory’ in any serious economic paper. It does not exist.

    1. jason wright

      it’s (the theory) straightforward propaganda.

      1. laurie kalmanson

        speaking of which …

        1. Dylan Sojumd

          Do you think that this scenario resembles reality in any way?

          1. laurie kalmanson

            Just because they can doesn’t make it right

  6. Twain Twain

    Yesterday, a TC article cited Steve Jurvetson’s observations: “But how do we get from here to there? I don’t see a path. . .I think entrepreneurship will feel like winning the lottery. That’s what the American Dream will feel like when it becomes globalized and everyone has access to it, writ large [because everyone has come online]. There will be winners, but it’s a winner-take-all dynamic in information businesses [owing to their] network effects. So, yeah, there will be a Google; there will be a Facebook. But there won’t be thousands of companies, and they won’t be in every single small town.So if you’re not into doing that kind of stuff — if you’re not a Googler or a Facebooker or you don’t want to program for a living — what the hell are you going to do? [That’s why] I think that power law of income inequality will only accelerate. Philanthropy takes some of that pressure valve off, but that’s about the only thing I can think of right now. . .Entrepreneurs love to solve problems and this is a big problem. This will kill us long before climate change if we don’t do it right.”* http://techcrunch.com/2015/

    1. Rob K

      I think you’re taking a very narrow view of “entrepreneurship” one that Steve Jurvetson (and most VCs) espouse, the “big winner” view. I have a number of close friends who have successful small (under$3MM) businesses that generate good cash flow for them. They’ll never be Zuck, but they don’t want to be. They’ll also never need VC.

      1. Twain Twain

        Ah, so to clarify, the part of what Steve Jurvetson says that I agree with is this: “I think that power law of income inequality will only accelerate.”In particular, when we put this within the context of Machine Intelligence and how it will put some employment at risk…

  7. JimHirshfield

    Fred for President!

    1. jason wright

      trickle up Fredonomics

    2. Ken Greenwood

      Amen!

  8. Twain Twain

    For a compare+contrast on what may happen next with the “American Dream” and taxation, here’s what UK Labour Party are thinking wrt taxation changes: * http://www.independent.co.u…When he was appointed Shadow Chancellor, the FT wrote this about John McConnell:* http://www.ft.com/cms/s/0/9

  9. B. Llewellyn Shepard

    I don’t know to what extent you preach to the converted here, but I love it.

  10. laurie kalmanson

    YESbiggest impediment to better educations: property tax based school funding — poor schools in poor neighborhoods stay poorto be completely cynical, if the poor / working classes don’t have surplus income, they can’t buy things, and the economy can’t profit from themto be a decent human being, nobody who shows up for work should be consigned to poverty — fruit pickers, cashiers, shelf stockers, janitors; and people who don’t have work and their children should have clear pathways to work that doesn’t leave them in poverty

    1. Kirsten Lambertsen

      Yes. Yes. Yes.

  11. jason wright

    ‘no taxation without representation’ – as a Brit i know this one all too well.i await the first blockchain election, and crowd sourced railway line.

  12. Kedar Kelkar

    Among so many thoughts America has given the world, “American Dream” is a big one! I look at American Dream as a concept that applies to any society that wants to progress. I live in India and our society is a live validation of the idea of investing in education of masses to trickle-up the economy. 50 years back, India was very poor and very uneducated. We took education seriously in 80s and more so in 90s, and today there are hardly any children without education. This created a large middle-class in India that was almost non-existent in 50s. This middle-class then consumed goods and services, which drove business growth, which created further jobs, which in turn convinced more parents that they should educate their children, and a whole virtuous circle came into being.Of course, there’s a long way to go before we achieve “no-man sleeps hungry”, but the point I wanted to make was investing in people and trickling-up is a very effective method of inclusive economic growth. At the same time, we need entrepreneurs creating new technology and driving value from the other end so that the process of educating the people is more effective.Somewhere in the combination of these two approaches will we find the sustainable method of achieving the “American Dream” for every country that wants to make its people happy!

  13. LIAD

    Say all the things you said without the trickle up to the wealthiest and I’m with you.But stack things or brand the endeavor, so the ultimate goal is to further enrich the richest, leaves a bad taste.

    1. fredwilson

      Good critique

    2. leapy

      Most influence remains with the wealthiest so Fred has to “sell” the proposal that way to get their buy in.

    3. bob

      So rich people don’t deserve better lives, only poor people do?Of course we should focus help on people who are in need of help but the mindset that “he’s rich he doesn’t deserve anything” is really unhealthy.

    4. Richard

      Pretty astute point. In the short term, we need trickle to the middle economics

  14. Morten Josefsen

    Hmmmm … where did I read this before?”Goodbye, trickle-down; hello, trickle-up.”http://www.nytimes.com/2014…Now, if only more of you Americans stop listening to the nonsense coming from right-wing “economists” and look a bit around you … :)Update: I guess soon Fred is going to understand the case for single-payer universal healthcare as well!

    1. Dylan Sojumd

      Read my post below. There’s no such thing as ‘trickle down theory’.

      1. Morten Josefsen

        I agree. Hence my quotemarks around “economists”.

    2. fredwilson

      My problem with single payer is that it takes the individual entirely out of the economic decisions around their health care. I like the co-pay and the deductible. They help the health care market operate rationally

      1. Morten Josefsen

        I think many countries that have single-payer, also have co-pay and deductible. At least we do here in Norway.

        1. Jordan Thaeler

          What happens to your Stateism when your oil revenues decrease?

          1. Morten Josefsen

            I guess we will look a lot like Denmark and Sweden … which have even HIGHER taxes than Norway.Update: Or, horrors, maybe we become socialist hellholes like Thatcher’s/Cameron’s UK with their FREE healthcare.

          2. Jordan Thaeler

            Can’t come fast enough. Love watching generations of crap economic policy turn countries like Argentina into… present-day Argentina.

  15. laurie kalmanson

    socialist

    1. pointsnfigures

      TANSTAAFL. Bernie never ate in that cafeteria when he was at Chicago.

  16. jason wright

    i assume the proponents of trickle down would cite the laws of physics in their defence. a bit like pointing to the existence of god in the heavens in eighteenth century France.we need an anti gravity movement, and a ‘machine’ for generating it.

  17. Varun Narang

    This post totally resonates with me. Thank you, Fred.

  18. andyswan

    It’s FUN FACTS time!1) “Trickle Down” was never a phrase used by Ronald Reagan or any serious economist. It was used as a disparaging term for supply-side. This is a common thing for liberals to do— attribute a stupid-sounding thing to someone and then rewrite history to make it so. Like how Sarah Palin never said “I can see Russia from my back yard”– but instead was the line of a SNL character.2) The top 1% of earners make 17.1% of income. They pay 45.7% of income tax. “Fair Share”?3) The Top 1% pays OVER DOUBLE the tax burden that it did in those grand nostalgic times of 1980, when they accounted for just 19% of tax revenue.4) The top 20% of earners pay 84% of income taxes.5) The Bottom 40% contribute NEGATIVE percentage of income tax. That’s right— they actually receive more through income tax schemes than they pay in!6) Tax revenues are currently at RECORD HIGHS. They doubled from 1980 to 1990 during tax cutsI could go on and on.Income inequality has nothing to do with taxes.It has everything to do with technology and globalization. Those on the power side of the technology/distribution lever get richer and richer by creating more wealth than anyone in history has been able to do.That’s a good thing.tldr The rich are paying an unbelievable share of income taxes. The poor are getting a free ride in that sense.You can debate if that’s good or bad all day. Before you do so, I’d suggest taking a tour of any county where receipt of government benefits has been the normal lifestyle for more than one generation. It will make you weep.

    1. andyswan

      I’ll just leave this here in case anyone ever tries the “fair share” or “trickle” lines ever again.

      1. Twain Twain

        This cartoon says a lot.

        1. Jordan Thaeler

          Red herring. Ever heard of tax deductions? Nominal rates do not equal paid rates. Andy’s table should make most of this clear.

          1. Twain Twain

            Gah, the cartoon’s not about absolute and nominal tax rates and it’s not what I’m debating with Andy.It’s about perceptions and use of language and what statistics politicians choose to present to make their cases.

          2. Jordan Thaeler

            It did seem incongruous with your other musings! Sometimes sarcasm is overly-nuanced in a world of electrons 😉

          3. Twain Twain

            Yeah, those blasted e-bits!I agree with the crux of Fred’s post which is about better ways to invest in people. It’s unclear how the tax piece would be implemented because that’s the domain of the people in the US Treasury who are busy crunching those numbers.I tend to think about wealth distribution more along the lines of equity capital and what mechanisms might be in place in future, where more regular folks who aren’t founders might earn equity in exchange for their content contributions.Reddit was looking into this and came up on legislative hurdles, apparently.

          4. Jordan Thaeler

            Gov’t shouldn’t tell companies how to run. If owners – who take most of the risk of value creation – want to incentivize and keep employees with more generous equity plans, that’s their prerogative.

          5. pointsnfigures

            The end rate paid by almost every American is around 19%. It’s called the Hauser rate of taxation. http://www.hoover.org/resea… Hauser’s law would say the most efficient way to tax is to have a 15% flat tax, no deductions. Tax every entity and person the same. We’d have plenty of money to operate the government and all the money spent on avoiding taxes could be turned into productive capital.

          6. Ryan Frew

            Great read, thanks.

        2. Tom Labus

          Put the defense budget growth in that chart.

          1. Twain Twain

            A-ha, thanks, see yours is an example of the vital qualitative context that goes missing when we’re just presented with stats tables on tax rates.

      2. Sahil Patel

        andyswan fair enough, but the income tax tells only part of the story. Payroll tax = 34% of government revenue, while individual income taxes = 46% (based on 2014 receipts). For all but the wealthiest, Americans pay more in payroll tax than income tax. I’m not sure whether this is fair or not (certainly, one remedy is to make the bottom 80% pay more in income tax), but rooting the debate solely on income tax blurs picture of tax burden.Source: http://www.pewresearch.org/

        1. Morten Josefsen

          No, it does not “blur” the picture to only mention one type of tax. It makes the picture completely irrelevant.

        2. Jordan Thaeler

          The “fair” thing would be to decrease federal and state governments to a point where you don’t need these types of semantics. Best tax plan would call for a low, flat tax on consumption regardless of work ethic. Depending on size of government desired, something ~10% would be suitable. I seem to forget the patchwork of federal programs in the 1780’s… but surely it’s because the founding fathers were too busy creating social programs to document their existence.

          1. creative group

            The amount of population dictates programs and percentage of taxes.1780’s population verses 2015.

          2. Jordan Thaeler

            An increase in population should mean an increase in productivity. If the government were not interfering, only those who were productive members of society could afford to raise offspring. But somehow we keep growing government dependence and poverty in each generations (those is votes!). So we have an obvious free market problem at a biological level…

          3. creative group

            Social engineering? Sounds like China’s one child per family. Now the partisan’s will label you Communist or would that be socialist. Crazy how labels can be loosely applied without understanding the definition.

          4. Jordan Thaeler

            Huh? Where did I say anything about the government telling people what to do? I said the literal. exact. opposite. Reread it.

          5. creative group

            I realize what you posted. It was only a play on what was posted. You didn’t get the satire. Ok. ..Joke? Loosen you collar.

          6. Ryan Frew

            I’ve heard this argument before, but it isn’t one that I expected to find at AVC. You don’t genuinely think that people would stop having offspring just because they coudn’t afford it, if we ceased to provide welfare, right? Because I can assure you that there are plenty of folks in this country who can’t afford a child, or whose life would be significantly more comfortable if they didn’t have one, and yet they have at least one. Poverty tends to drive up the birth rate, not bring it down.

          7. Matt Zagaja

            Generally people who make lower incomes vote less. Also for many people having children is not an economic decision.

          8. Jordan Thaeler

            Fine and dandy but don’t ask someone else to pay for them. The theoretical difference between us and animals is that we are able to control certain urges. Apparently free government cheese reverts a select few.

          9. Matt Zagaja

            Well the question becomes what do we reduce? Cancer research? Consumer protection agencies? the EPA? Sell off some aircraft carriers and close military bases? Is it equitable to simply eliminate Social Security and Medicare? Should we stop payment on some of our debts and tell the bondholders to go pound sand?

          10. Ryan Frew

            I’d be pretty comfortable with that military reduction…..

        3. JLM

          .Most payroll taxes are programmatic — social security, unemployment insurance, medicare insurance.The income tax withholdings are typically refunded at these low levels of income and able to be managed by selecting the number of dependents.It is intellectually dishonest to suggest these programmatic expenses are taxes.JLMwww.themusingsofthebigredca…

          1. Richard

            On the other hand, gov should get of the baby business. Why do we provide tax deductions for depenedents (kids)? If anything one should get a tax deduction for not having kids.

          2. Sahil Patel

            @JLM:disqus Yes, some of those taxes are refunded (largely through EITC). Not all of them. 46% indeed pay no income tax. However, only 18% had zero (or negative) income AND payroll tax. That leaves a lot of households still paying the payroll tax.(Source: Tax Policy Center, backed by Brookings and Urban Institute: http://www.taxpolicycenter….These expenses take income. So yes, they are taxes.

          3. JLM

            .If a person pays social security and then receives a social security benefit at some future date, that is a programmatic investment. As is medicare or unemployment insurance.They are essentially insurance premiums or pension fund investments paid in anticipation of a future benefit.I am not sure why it makes any difference whether YOU call it a tax or not. They are distinctly different than income taxes which you correctly observe is not paid by the bottom 50% of US wage earners.To take it a step further, as you also correctly note, many of the lowest earners receive a net payment from the income tax system in the form of the Earned Income Tax Credit and other programs.If the US Congress hadn’t raided the SS account and converted it to general fund revenue with a bunch of bogus IOUs, the issue of SS would be dramatically different.These are not income tax issues and it is incorrect to suggest they are.JLMwww.themusingsofthebigredca…

      3. bsoist

        What’s the source of this, Andy? I’m not debating it’s authenticity, just want to find it.

      4. Salt Shaker

        The bottom 50% are getting burned at the state and local level, where lower income HH’s and individuals make disproportionately higher tax contributions. Looking at the fed level is only a partial story. There are also considerable inequities w/ payroll taxes.

        1. JLM

          .Move to Texas where there is no personal income tax.I will sponsor you.JLMwww.themusingsofthebigredca…

        2. laurie kalmanson

          Social security payroll tax is highly regressive — caps out now at low 100k — move it up to 300k

          1. Richard

            No. Skip 100-300 and go 300-inf.

      5. jason wright

        the cult of numbers

      6. John Gaffney

        In 1980 the top 1% earned ~10% of the total income, and in 2012 the top 1% earned about 20%. You can’t suggest that the above chart shows that the top 1% is unduly burdened, when their share of total income has also doubled over the same amount of time.

      7. Rob K

        Make sure you take a look at the same chart for percentage of income/wealth

    2. Jordan Thaeler

      Goddamn this is good. Logic overload.

    3. fredwilson

      My post wasnt really about taxes. It was about investing in people. You can read it however you like. How you read it says a lot about who you are

      1. andyswan

        It was literally the first point of your proposal:”I would like to propose another approach that I call “trickle up economics” in which we lower the tax and other burdens on the lower and middle class, “Tax policy was also the first point of your opening paragraph.

        1. fredwilson

          sure, if all you do is read the first paragraph, you could come to that conclusion. i assume that’s all you read then

          1. andyswan

            And the second paragraph, which is your actual proposal.  And any part of it with any specificity at all.

          2. SubstrateUndertow

            If you read that 2nd paragraph the main emphasis is on “other burdens” all of which are a kind of friction-tax inhibiting success for the poor and by extension the society as a whole.- “invest in educating their children (and them)”- “we make sure they have the skills to get good jobs in the economy of the future”- “we make sure they have access to things like good transportation”- “safe neighbourhoods”- “healthy food”- quality health care services”you focused on- “lower the tax”

          3. andyswan

            No…I just assumed that all of those things would be funded by taxes. You can’t talk about govt proving things without talking about taxes. Govt creates nothing. It is a redistribution mechanism.

      2. Jordan Thaeler

        Fred, respectfully, it’s implicitly about taxes. You expressed a desire to pay, ahem, “invest”, in education, job training, etc for people in lower socioeconomic rungs. That money must come from somewhere… it’s not as if our government programs have led to a $100T surplus.

        1. pointsnfigures

          I think actually it’s about taxes, but not about taxes. What sort of policies should the government pursue to invest in people? Tax policy is a piece of that-but not all of that. Although, I think you could apply some basic principles across tax policy and the federal bureaucracy to get the desired outcome.

          1. fredwilson

            yupppp

          2. andyswan

            Well then I am looking forward to that discussion. The only specifics in this post relate to tax burdens and govt benefits/services funded by taxes.

          3. pointsnfigures

            Check out ESA’s in Nevada. That’s a govt policy. It invests in human capital. It takes tax dollars. But I think you’d be pretty okay with it.

          4. Jordan Thaeler

            Link please?

          5. Jordan Thaeler

            Here are some examples of unacceptable answers: welfare, social security, universal healthcare, Dept of Education. The history of American public education is a fascinating story. Localities voluntarily teach local children, private institutions teach those who want advanced education. How did we go so wrong?

          6. pointsnfigures

            Universal Health Care—>Obamacare no. HSA’s sure.

          7. Jordan Thaeler

            No government involvement, please 🙂

          8. pointsnfigures

            Impossible except in virtual reality. HSA’s give individuals power over their own health care and set up the right economic incentives compared to Obamacare. ESA’s do the same for education. http://www.edchoice.org/sch

          9. Jordan Thaeler

            It was the reality for the early life of this country. We have become so greedy and demanding of excess that we do not believe it is possible. I assure you it mostly certainly is.

        2. Matt A. Myers

          It might have led to a $100T surplus if that money went internally and not to pay for wars and causing longer-term problems – the solutions that may have come from that money may have actually helped solve global problems and crisis via @fredwilson:disqus’s trickle up theories; it’s actually what China did in fact, and they do have a $T surplus I believe.

          1. Jordan Thaeler

            ORLY? Hmm I thought Communist regimes were supposed to squelch free thought within their own borders, not outside them: http://www.bloomberg.com/ne

          2. Matt A. Myers

            Ah, the numbers game. Just a quick Google search for non-comprehensive numbers:”The U.S. debt to China is $1.272 trillion, as of June 2015.”- http://useconomy.about.com/

        3. SubstrateUndertow

          You conflate tax with long-term infrastructure/social-capital investment !Then again if you start form assumption that “government programs” have always been a failure simple because you can not easily quantify their social/economic value/benefits – WELL!Those taxes cover a lot of externalized corporate cost that go unaccounted for.They need to be compared against the long-term cost that will be incurred if those social investment are not made.

          1. Jordan Thaeler

            We didn’t spend any of that money for, roughly, the first century and a half, and we were pretty damn prosperous. So you need to be very, very clear on what the word “investment” means.

      3. andyswan

        For the record— I am PRO “investing in people”

      4. JLM

        .Any statement about “government spending” is inherently about taxes.The gov’t has only one source of funding — TAXES.JLMwww.themusingsofthebigredca…Commenting gently.

      5. Oscar Jung

        What do you mean by investing? In Europe and in particular in Scandinavia we have great free public schools and universities are free! That said, our percentage of people taking a university degree is not high only about 18%. And in the bottom 28% still only get a upper secondary education. Even though it is all free. We even pay a stipend of $1000 USD a month to any student to go to school…

      6. Druce

        Keep fighting the good fight for common sense Fred!Just maybe the bottom 50% or so of Americans aren’t lazy mooching bastards, maybe a few greedy jokers are cherry-picking self-serving data?The payroll tax on the first dollar of a minimum wage job is 15.3%! The bottom quintile pays a positive tax rate, even after the EITC, and not counting the employer contribution which is no different a ‘wedge’ from the part that shows up on the payroll form, and not counting local taxes, sales taxes etc.,http://blog.streeteye.com/b…Nobody who has done an honest day’s work for a low wage or looked at the data could possibly say the poor don’t pay taxes.And yet they keep repeating it, or saying the less fortunate just want ‘free stuff.’Politicians who repeat it show they just don’t GARA about facts, common sense, or the bulk of hard-working folks trying to get by, and are just trying to drive a wedge between Americans to score support from narcissists, while losing elections because the vast majority of voters know a crock of BS, and someone who doesn’t GARA about them when they see it.

    4. jason wright

      the rich are paying “an unbelievable share of income taxes” because they receive an even more unbelievable share of income. they continue to remain ‘rich’ (and are getting ever richer) under such a tax regime. i don’t see the rich being taxed to the point where they are becoming merely middle class or poor.

      1. andyswan

        Read it again. Top 1% earn under 20% of income. Pay over 40% of income tax.

        1. Cam MacRae

          Income or ordinary income?

        2. Kirsten Lambertsen

          Are you saying these numbers support the idea that wealth is not becoming more concentrated in the U.S.?

          1. andyswan

            Not at all. I’m saying those numbers dispel the idea that the rich aren’t paying their “fair share”. They obviously are.Wealth is becoming more concentrated because its creation is becoming more concentrated. This is due to technology and globalization giving individuals unbelievably powerful levers that don’t require nearly the amount of human labor as prior generations.It has nothing to do with tax policy. At all.

          2. Kirsten Lambertsen

            It does because the rich in fact are not paying an “unbelievable” *share* of income taxes. They hide their actual income behind the corporate veil, and corporate tax revenue has plummeted since the ’90’s.

          3. andyswan

            In 1990 corporate tax revenue was 93 billion, about 9% of federal tax receipts.In 2014 it was 320 billion, a little over 10% of federal tax receipts.That’s an odd definition of “plummeting”.Source: http://www.taxpolicycenter….

          4. Kirsten Lambertsen

            My chart is from “FRED” so it wins ;)https://upload.wikimedia.or…Corporate profits up. Corporate taxes, not up in proportion.

          5. andyswan

            Right– that’s showing something very different than you originally claimed… that “corporate tax revenue has plummeted”.If you want everything to move in proportion than I assume you’re in favor of the flat tax?15% of any income, from any source gets taxed. We could even push out a prebate of $4500 so everyone under $30k is unaffected.

          6. Kirsten Lambertsen

            Well, I have another chart up higher showing it plummeting. I have charts for weeks to show you anything you want to “prove.”

          7. andyswan

            So… how does a truly proportional tax system strike you? With $4500 or whatever out to everyone so the first $30k of marginal utility is unaffected.

          8. Ryan Frew

            ^ This. Although, why income and not spending? Let’s reward those who save.

          9. Richard

            And eat healthfully

          10. LE

            The problem with a flat tax is the same problem and reason car dealers can’t sell cars (thank god) for the same price to everyone. The reason is you need incentives to get people to do something. “Buy today and I will give you this”. No “this” people are on the fence and will not buy. It’s an important part of the system.Having a higher tax rate (with deductions and incentives) allows the government to motivate people to do things that are good for everyone or that the government wants to use for economic policy or whatever. Government wants to get States to lower speed limits? Tie it to highway funds (the 70’s). (Similar way of doing things I am giving).If you lower the tax rate and don’t allow loopholes and deductions you change behavior. In the end I don’t think that would be a good thing. I am sure someone will drag up some two bit country to dispute what I am saying as in “I am from this country with a population the size of 3 blocks in Brooklyn and we do it this way and it works for us!”.15% of course will change to 18% with deductions for this and that. Then it will go to 20% and the rest is history.As your kids get older you know how you will control them? By withholding things that they want and tying them to particular behavior. So the incentive will be either money or things and that way you will get compliance. Make sense?

          11. andyswan

            Yes I agree taxes are punitive and therefore deductions are rewards.  Government exists to control us as much as possible. I exist to reject that as much as possible.

          12. Stephen Voris

            Maybe so, but there’s an incremental cost on those exemptions in time spent wrapping one’s head around them. Sure, you can hire someone (or buy software) to do that thinking for you… if you’re already reasonably well-off.How high that cost is right now, well, that’s another matter. The fact that flat taxes are being suggested points to “a bit on the high side”.

    5. Guy Lepage

      I’m going to have to disagree with you here Andy. Inequality has to do with education, which in turn has to do with federal/state funding, which in turn has to do with taxes.Education is probably one of the best solutions that I’ve heard in solving income inequality.Maybe being a Canadian in the US I get to see the massive divide in a grade school education that one gets in Canada vs. the US and it’s actually quite jarring.

      1. andyswan

        http://www.cbsnews.com/news/us-edu... We spend more per pupil than any other country.The inequality comes from parenting, which is the biggest predictor of educational success.

        1. Guy Lepage

          And if parents are uneducated, like the majority are, then it’s a vicious cycle and again it comes back to education.

          1. Dylan Sojumd

            This is a common misconception. Many times in history the parents whom have not had the opportunities their kids can have now do everything they can for their kids to make full use of the current opportunities. This was very evident in the rise of the Japanese as well as the Jewish. Both of which faced terrible opposition and have become two of the most prosperous class of people’s the world has ever seen.

          2. Guy Lepage

            Nope. Definitely disagree with you. This is not a misconception. Those parents were educated. Full disclosure. I only have a High School Diploma. In Canada, the education that one receives IS actually strong enough to accomplish what you are talking about. Same in Japan. The grade school education allows for this and it’s mediocre, at best, here in the US.

          3. markslater

            and the UK

          4. bob

            I don’t know where you were educated in Canada, but that is certainly NOT the case where I am. I remember playing on the computer in elementary, recess, lunch, and 15 minute of silent reading after lunch. Literally learned NOTHING. Highschool was not much better.

          5. Guy Lepage

            I have no idea where you are in Canada then.. Ha. I was educated in Regina, SK and Vancouver, BC. We also know that Ontario definitely has the best grade school education in Canada. So knowing that the two provinces make up half of the countries population and Saskatchewan tipping the scale with an additional 1mm that would make it the majority.

          6. andyswan

            I’m looking forward to seeing a plan that educates parents.  I’d actually be VERY open to tying benefits to adult education

          7. Guy Lepage

            I feel it’s a generation out. I also believe that it starts with giving everyone a much better education at the grade school level. A level of education that provides a strong foundation as well as entry into at least a trade. After talking to quite a few highly intelligent friends here, it seems as though that is not what quite what they received in grade school.

          8. andyswan

            It is if you go to private school

          9. Guy Lepage

            Is private school something everyone in the US can actually afford? My wealthy friends in NYC have moved to Westchester so they would not have to pay the $40k per child per year for private school in the city but give their children “almost” as good of an education. So I doubt that’s feasible for most people.

          10. andyswan

            Not when they are being taxed like this, no.  You’re essentially paying for education twice when you have a kid in private school and taxed for failing public schools

          11. Guy Lepage

            Andy, even if you weren’t being “taxed like this”, it still would not be financially feasible for the high majority of families in any country to pay $40k per child per year for private schooling. Don’t get me wrong, taxes are high. But if you’re in the top 0.05% of wealth and 1-3% hurts you, you’ve got some serious financial troubles around the corner and you’re probably not going to recover anyway. You shouldn’t have been so foolish with your money. File for bankruptcy and start again.

          12. Jordan Thaeler

            The beauty of tax and regulation is that increases costs for everyone. What would be the free market rate for college if we took the government out of the student loan business? Many young people who shouldn’t attend universities would attend trade schools and develop skills they could instantly use. Demand falls, supply-side prices fall. Repeat until market is at true equilibrium.

          13. andyswan

            I pay $6500/child/year for a top rate private education.

          14. Guy Lepage

            Wow! That’s seriously an awesome deal. I’ve never heard of a private school costing so little.But if it is that cheap that would mean one of two things, either it’s not a “top rate private education” as there would be more than 200 students in the school or you live in a place that is in the lowest percentile for cost of living, which again would leave the majority of people unable to pay so little for a good education.

          15. andyswan

            http://thelatinschool.org/*Type*: K-12 Classical, Christian*Enrollment*: 623*Average Class Size*: 16*3-Year Average SAT : 1954*3-Year Average **ACT*: 29*ITBS scores* : Top 1% Nationally32% of seniors recognized as National Merit Semifinalists/Commended in last 3 years.38% of seniors recognized as Governor’s Scholars/Governor’s School for the Arts in last 3 years.

          16. Guy Lepage

            Wow.. That’s amazing and good to know. It is in Kentucky. I was raised in a similar economic environment. Regina, SK. Very economic.

          17. Ryan Frew

            Hey! I’m in the Highlands all the time! Great area. That said, Louisville costs of living don’t represent the norm, as you know. So, it’s possible to pay $6,500 in annual tuition for excellent schooling, but not likely for most. In fact, I’d be willing to bet that you can go right down the road and pay more at CAL or Sacred Heart. St. X is certainly more. Go up north a little bit to Western Reserve (OH), Gilmour (OH), or Culver (IN), and all of a sudden you’re paying $30k.

          18. andyswan

            Louisville costs of living are only 4% below national average.I do think HLS is an incredible value. My point wasn’t that it’s always this cheap– just that it can be done.Of course, this relies a LOT on parents and children being bought in— something I don’t think is happening at most public schools.

          19. Richard

            Technically, if you factor in the tax deduction you get per child, other people are footing the bill.

          20. andyswan

            There is no tax deduction for private school tuition.

          21. Richard

            There is a federal tax deduction for each dependent you have. Why do single people need to subsidize your income? They already pay for your kids option to go to public school.

          22. andyswan

            I’m all for removing all deductions as well as any gov’t benefits tied to number of children.Gov should collect a flat % from ALL income from EVERYONE and use it to create services that all of society has the opportunity to utilize… courts, defense, police and some infrastructure.

          23. LE

            Less riff raff in private school. Thats an important part of the learning experience.

          24. bsoist

            Me too. I’ll be in Indiana for a few days next week. Maybe we can discuss it over a Kentucky beverage.

          25. panterosa,

            early childhood ed for the win, along with continuing ed

          1. andyswan

            I consider being there a big part of parenting.

        2. Ryan Frew

          Interesting article, although I think this points to how inefficient we are, above all else. I’d be on board with spending more on education (preferably be reallocating, rather than increasing revenue), but it must come with a hard look at how those funds are being utilized. Our current system is mediocre at best, as a whole.

    6. creative group

      A content Independent that enjoys factual statements be it liberals or right-wing. What Sarah Palin did say was “You can see Russia from land in America” as a follow-up to an off the cuff non recorded answer to a question from a reporter that she could see Russia from her backyard.https://youtu.be/iGSJCDw3ZBwThe term tickle down economics was a term devised by Democrats to describe Reagan’s tax cuts for the wealthy and deregulation of that favored conglomerates. A known fact that the right-wing always forget to share on the Reagan’s facts is he did raise taxes which they oppose.The right-wing conveniently forgets that when faced with rising deficits, Ronald Reagan looked to revenue increases, broadening the tax base, closing loopholes and raising taxes. Yes, he raised taxes in 1982, 1984, 1985, 1986 and 1987.”The majority of the time when facts are inconvenient for either side events are changed to fit a narrative. “Just the facts ma’am” DragnetThere are too many intelligent contributors on this blog to be hoodwinked into being force feed talking points that defy facts.Opinions not based upon facts are still not facts no matter how it is phrased.

      1. aminTorres

        That does look like an SNL set to be honest.

      2. markslater

        dont get it. I thought Andy said she never said it?

        1. creative group

          It appears Andy has a narrative he wants to share. Sounds like too much Fox News, Drudge Report and Breitbart, etc.

          1. Jordan Thaeler

            How are facts a narrative? Do some research on Stateism and then come back with a report for how well it works.

          2. creative group

            Jordon what Andy said regarding Sarah Palin was in no way factual. Read our reply with video. No matter how facts are presented the play book is just to ignore what is presented and if it said long enough without facts enough people will accept it. The playbook isn’t working in this forum be it right-wing or liberal.An appropriate Dragnet dialogue that applies to this getting off the subject matter.https://youtu.be/gxhuUdZzGYw

          3. andyswan

            What I said was completely factual. The quote most often attributed to her is something an SNL character said, not her.

          4. jason wright

            show me facts and i’ll show you a faction 🙂

      3. jason wright

        i hear Putin wants to buy it back

      4. kenberger

        let’s change to another headline quote that wasn’t quite ever said verbatim:

        1. LE

          I actually love that paper headline and have used it here myself. Great netflix or PBS documentary on New York in the 70’s and the social welfare state.

        2. creative group

          kenberger:fair game. The Daily News (TMZ) of their time. Verses using the actual video that providedSarah Palin the opportunity to rephrase the answer she originally was quoted as saying toa reporter. The SNL skit had little to do with the actual original statement that Liberalsused to solidify in their minds she was dumber than a rock.Didn’t expect anything different from partisian political views.When we highlight a misstatement from a Liberal we expect the same.We always registered as an Independent and never wavered. Not a Republican embarrassedby eight years of W Bush who fleed the Republican Party to the Independent Party.We provide equal opportunity fact checking.All you need is a third of the blog to not investigate what you counter and you have a chance at the electorate you need to support any view you post. The playbook is deny, deny, dispute and deny. Didn’t work to well with weapons of mass distruction

        3. creative group

          Oranges vs. Apples. You used a Tabloid and we used Sarah Palin video in her words having a chance to rephrase what was previously said. Yes the Liberals embellished the answer she originally provided but didn’t add or take away her lack of intellectual standing with smartpeople.We will continue to factcheck both Liberals and the Ring-Wing contributors who attemptto change history. Hopefully we will not receive any posts attempting to position theWeapons of Mass Destruction arguement.

    7. Matt Zagaja

      Andy you are right that there are other lenses by which we can look at tax burdens. We can look at how much people contribute in dollars, percentages, and how much groups contribute to the budget as a whole. However looking at things through the lens of percentage of contribution to total income taxes makes little sense because in any progressive income tax stream the people who make more money are going to contribute more dollars to taxes than those who make less. As inequality increases this is going to exacerbate itself. The reason wealthy people are paying so many dollars in taxes is that they’re doing so well.The second thing is that you need to consider the idea of diminishing marginal utility. Marginal dollars for impoverished people provide much larger utility than marginal dollars for wealthy people. You can only enjoy so many Ferraris no matter how many you buy but we all need food and medicine.

      1. andyswan

        Those are fine points.I agree that wealth is being concentrated more (and therefore taxed more) because its creation is being concentrated more.I was dispelling the notion that any of it had anything to do with the “trickle down” or “trickle up” tax systems.Some people are just MUCH better at creating wealth than others, and that divide is growing. Some people see that as a problem, but for the life of me I can’t see why. Other than envy… why do I care if Zuckerberg has bazillions?

        1. Matt Zagaja

          Intrinsically I think the issue is that dollars are votes in our economy and if you are an investor the variety of opportunities you have to be successful will be increasingly constrained if the distribution of capital concentrates towards a narrower voting base. If you want to a start a subscription content site aimed towards a group that doesn’t have the buying power to subscribe to content (because their trade-off is food or medicine) then you can’t make money doing that the way you might succeed creating a subscription content site for a group of people whose trade-off is buying a Gold Apple Watch.The hack that Elon Musk and others use is of course to create an expensive product for the latter group and then use that to subsidize a cheaper product for the former. But I’m not sure it’ll work in every industry.I agree we shouldn’t demonize success and some of the rhetoric is over the top. But I also think that taxes are not some kind of punishment inflicted upon a person for making money. It’s a way we fund society.

          1. andyswan

            It’s a way we currently fund “government”, which is not at all the same thing as “society.”Society is funded through productivity.Sorry but that really bothers me that people don’t appreciate the distinction between those two things.

        2. Mattan Ingram

          In many cases those people are not actually personally better at creating wealth than others, their already existing wealth simply gives them the tools to do so. They are not magically smarter or more capable (sure some are, but that is not the primary factor in generating wealth, already having wealth is).It has nothing to do with envy, and the fact that you can’t see beyond that is kind of astounding. How about starvation? How about not being able to properly take care of your kids? How about having to work 3 jobs to get by?If some of those ultra-wealthy people actually cared, they could use their wealth to significantly improve the situation for millions of people whose lives are abjectly miserable. Not to mention the insanely massive infrastructure problems we have.Yeah there is a lot more going on than just taxes, but the simple generation of wealth alone is not something to be inherently celebrated regardless of its context. You should care if Zuckerberg has billions if he does nothing useful with it, like MOST ultra-rich. Zuckerberg is a bad example though since he is actually using his money to do good things. Most ultra-rich do not reinvest into the country nearly as much as they vacuum out, and what investment they do make is purely monetary and based on short-term profit.Your point would be fine if every rich person was Elon Musk, but they aren’t.

          1. LE

            You are assuming that the only rich people that do things are the rich people that talk about it and that release that info publicly.Common sense wise it makes sense that if you have billions or multi millions you might want to fly under the radar. Why? Because if you don’t others will come out of the woodwork and hit you up for money. You don’t want a target on your back and don’t want to live in a fishbowl. Many rich people don’t want people to know they are rich. And by giving money in a public way they would be a target for violence as only one example. Security detail needed. Many rich people don’t even live in nice houses for that reason.If I was rich in the way that you are talking about, I can assure you that in no way would I want it to be know that I was helping people. I don’t think I am the only one who thinks like this either.

          2. Mattan Ingram

            I am not talking about philanthropy here.I am talking about rich people actually building stuff with their money, not just sticking it in offshore bank accounts and letting it accumulate.Your desire for privacy kind of pales in comparison to the misery people who are not so fortunate go through in this country. If the ultra-rich of America actually wanted, they could drastically transform the future of our country by rebuilding infrastructure, investing in education, technology, science, etc.The fact that you are talking about how “nice” a rich person’s house is shows how deep the disconnect goes. People are suffering and dying while we have the resources and capability to prevent that in the future. That’s NOT okay.

          3. LE

            I said:Many rich people don’t even live in nice houses for that reason.Explain how that means I said “The fact that you are talking about how “nice” a rich person’s house is”.What is a nice house anyway? A house in NYC is shit expensive. Nobody has to live in NYC it is a choice they make. Is that ok with you that they spend their money that way?Also it’s not the obligation of anyone to do what you are talking about. If they want to, that’s fine. It’s a free country. And they don’t need a guilt trip either (which appears to be what you want to give them).People are suffering and dying while we have the resources and capability to prevent that in the future. That’s NOT okay.You actually lose sleep over that? Good for you. Good that there are people like you out there to worry about that. You must be young and without any problems yet of your own to occupy your time. So you can be all idealistic. Maybe you will remain that way. And if I may ask what in particular do you do personally to help with that? Not that it matters that is your choice. Free country. People can do what they want. If you want to lose sleep over all of the suffering in the world and help, that’s fine. Don’t push that on anyone else. Wait until you get older, have a family, and have to pay to live in NYC on a non-startup company wage.Bottom line: Stop implying that people who have money and can help suck because they don’t think like you do. That’s why we live here. Free country my money or the rich guys money is his to do what he pleases with without your thoughts raining on his parade.

          4. Mattan Ingram

            I pay to live in NYC and work at a startup.But despite my fortunate circumstances, privileges, and meager recreational funds, I am not ultra-rich. It’s not even close to a reasonable comparison.I’m not criticizing art here, so the answer shouldn’t be “Can you paint something better?” Sure, give me a few billion dollars worth of paint.Yes it is a free country, meaning I am free to shame the ultra-rich for being lazy, unimaginative, greedy, and downright evil in some cases. I am not implying it, I am SAYING it.They have orders of magnitude more resources and connections than even a privileged NYC-living white guy like me. These are not people who are worried about how to take care of their family! That’s smaller than pocket change.These are people who could ACTUALLY make a difference. And I’m not just talking about philanthropy or building homeless shelters. I’m talking structural change. You don’t get to just shrug that power off just because it’s a free country. ESPECIALLY when those same people are using that money to further their short-term political interests no matter the cost to the country.For shame.

    8. Shushannah

      I don’t know where you came up with that figure of just 17% of income, but more importantly, when talking about wealth (which is important because the very wealthy rarely make income like the rest of the workforce – but they own a lot), the top 1% owns 40%. Compared to 47% of taxes, yeah, I think that’s almost a fair share. Since they can afford it more ($100 to them is worth a lot less than $100 to someone who works at Target), it really seems fair.I am speaking as someone who has gone from the bottom quintile to the fourth quintile in my lifetime. I used to rely on the government to help make sure I was fed. Now I earn more than almost anyone I grew up with (thank you public education!). And I need to pay more taxes! I can afford it.I know I’m not going to convince you, you’re definitely set in your way of thinking (as am I, because of how my life was shaped), but hopefully people reading this will know you’ve made up some of those numbers (where did that chart come from??), and income is different than wealth.

      1. andyswan

        The numbers came from the IRS.We don’t tax wealth in this country, generally speaking. If that’s the new arrangement, then let’s set it up that way officially. Until then, income tax paid vs income earned seems very fair to me.

    9. Murtaugh

      I am curious as to the definition of “income” in that 17.1%. Does it include capital gains? Or is it perhaps just AGI? Not asking a loaded question – I have no idea.

      1. andyswan

        AGI I believe

    10. Stephen Voris

      I wonder – the disagreements here may well stem from a discrepancy between human psychology and physical quantities.Massively oversimplifying, gross income is derived from three multipliers: how many people you help, how much (on average) you help each of those people, and how much those people have to offer you in return. In other words, to get rich, make lots of rich people happy.The tricky bit with this model is that “helping two people” may well be less than twice as good as “helping one person” to the untrained intuition. Scale that up to “helping a million people” (now more widespread, as you’ve noted, through technology), and the discrepancy magnifies to the point where it’s seen as injustice.

    11. Rob K

      Touring Germany doesn’t make me weep. In their system, college education is free, as is a real vocational training program for those who don’t go to college.

  19. James Ferguson @kWIQly

    Much has been said about the shift of reward from labour to capital, but with an ageing population if robotics / AI does not deliver there may be a swing back as we see the end of the western world baby-boom kick in.This *might* imply a swing back towards labour [which would be good], and it may even mean that we desperately need the tech. in place to secure even a modicum of comfort as we age.In either scenario a well provided for and educated work-force has to be plan A because technical change requires massive disruption (social and economic) so must be thought of as plan B (inherently risky).Interested to watch it pan out, but supporting trickle down effects however they are implemented simply has to be a good idea IMO

  20. BillMcNeely

    Is the concept trump was trying to get across on 60 minutes Sunday ?

    1. Tom Labus

      just the opposite

  21. Kwame Som-Pimpong

    While reading your post, my mind went back to a meeting I had with a mayor in Georgia. Somehow the conversation moved to a transportation bill that was up for debate at the time. He told me how he wasn’t in support of measures in the bill that would extend Marta from Atlanta to his city because it would bring crime aka poor black people.So, while I think there is a lot of merit to the idea of trickle up economics, when it comes down to the meat of making something like this happen, people have different ideas of investing in transportation, what a safe neighborhood looks like, etc. Some of those ideas are based on bullshit, which is sad.I really want to see us invest in all of our people too. To do that, it will take a lot of calling people on their bullshit.

    1. Kirsten Lambertsen

      Right on. There’s more than economics at work here.

  22. William Mougayar

    What’s missing to make this happen: budgets, willingness, right people? Is the burden solely on the government to do more? This calls for a Part II on how to do better these things you mentioned?

    1. fredwilson

      Read andys comment and you will understand

    2. Twain Twain

      Maybe the economists reading AVC will help re-draw this diagram, including the taxation piece in it.

      1. Stephen Voris

        Don’t know that it needs much redrawing; it seems to make its point reasonably well. I’d file “taxation” as part of the “regulatory burden” – but then, I’m at best an amateur when it comes to economics.On the other hand, I’d be careful about the “incentive to invest” – done wrong, that can easily turn into “complex procedures” (read: X-thousand-page tax code).

  23. Tom Labus

    Supply side does seem to be the root cause of our current inequity of how wealth is spread out in the US and world. Fantasy tax plans or not it’s not something we want to continue and expect any different results.

    1. pointsnfigures

      We disagree. Demand curves slope down. Laffer’s curve works. By the way, who can utilize current 0% interest rate policy to continue to build wealth? Middle class or wealthy?

      1. Jordan Thaeler

        Ooh pick me!

      2. Tom Labus

        Understand your interpretation and have great respect for your knowledge but I see supply side more as a con then anything else. Cycles always end before distribution to those who bore the burden early on.

        1. laurie kalmanson

          the laffer curve: drawing lines and labels doesn’t make something true.related: decrease in pirates against the increase in global warming, “documented” by the church of the flying spaghetti monsterhttp://www.venganza.org/about/

  24. Guy Lepage

    I definitely agree with this post and I do feel that the wealthy are widening the income gap but we should be cognizant of entrepreneurial spirit. There is a lot of momentum in the US at the moment and I feel that by taxing the wealthy too much, could kill that momentum. 1-3% more per annum would not kill any of the wealthy and that would go a long way for education and so on.

    1. Jordan Thaeler

      You could tax the millionaires at 100% and it wouldn’t cover 2.5 months of government operations (http://www.politifact.com/w…. We have a spending problem, sir.

      1. Guy Lepage

        Don’t think I mentioned covering gov spending in my comment.

        1. Jordan Thaeler

          You’re right: debt is the key to prosperity. My mistake.

  25. pointsnfigures

    Agree, but we probably don’t agree on how to get the desired outcome. I suggest we use common principles like, Network beats hierarchy etc. That would strip away a lot of government control and power and put it in the hands of individuals. An example of that would be the educational savings accounts they are now using in Nevada to radically transform the way we approach education. We could repeal Obamacare, and redo the healthcare system the same way.

  26. panterosa,

    Fred, you are a big proponent of women in business, and workplaces which support women. And, by extension I would assume, the effort to revamp the workplace mentality which is not family friendly, which usually means not woman friendly.Where do you stand on universal day care as an investment in our workforce as infrastructure of people?Ann Marie Slaughter’s new book, which I haven’t read, follows on the bread-winning vs care-giving problem which the US suffers from acutely across the income strata.Day care adoption in the US could solve a host of problems that women (and by extension their families – ie most people from age 20-50), experience in work-life balance. Especially lower income but extending through the middle class to the HBS startup mom.The 0-5 movement seeks to level the playing field for kids entering school, and is the crux of where education crosses into family earning. It follows Universal Pre-K as solid idea to invest in children early. It’s a damn sight cheaper than fixing kids once they’re broken too.

    1. Jordan Thaeler

      I think all of that, and more. Free healthcare, daycare, housing, food, eduction, sex changes. You name it, I’m for it.

      1. panterosa,

        invest early or pay dearly later

        1. laurie kalmanson

          Exactly

    2. Kirsten Lambertsen

      Amen.

    3. andyswan

      Public schools are awful and failing. Why would you want to turn over the care of infants to that same organization?

      1. panterosa,

        early childhood is filled with non government people, like education and science and social folks, you know, the preschool types. they care for kids growth, and could give fuck all on a lot of policy.who takes care of your kids?

        1. andyswan

          “early childhood is filled with non government people” — that’s because gov’t doesn’t pay for it.My wife and I take care of our kids.

          1. panterosa,

            europe is one example where early childhood ed means mothers and their families don’t have to go thru the gymnastics of career dropout mothers do here.stressed out moms, make for stressed out kids and stressed out families. it’s stupid.of course if you have the luxury of caring for your kids that’s great, but it’s not happening below certain income levels.

        2. Kirsten Lambertsen

          Andy is trying to put you in the position of defending the *current* education system. If that’s not your point, you needn’t make it for him 🙂

          1. panterosa,

            Agreed. But I’m caffeinated 🙂

          2. Kirsten Lambertsen

            Heh 🙂

          3. panterosa,

            upvotes for my comment – women. upvotes for andy’s comment – men.therein lies much of the split. this post would play quite differently on @gothamgal ‘s blog as we know.

    4. Twain Twain

      I’m all for invest early in Child Ed and Universal Day Care.The only thing I’d highlight is that Europe is a bit better than the U.S. in this respect but it’s not all rosy.Parents are known to spend an additional £50-100K moving houses so that they fall within the catchment area of a good nursery school, so again it’s not a solution for every social strata.My view is that governments should consider paying parents, who have to forgo paid work to stay-at-home to bring up and educate young children, in the same way they pay teachers because the first few years before kids even get into school are the most vital for developing their cognition, communication and social skills:* http://firstyears.org/miles…Parents who are educating kids should be defined as engaging in employment and the provision of services.That’s not to say the government should just handout benefits to people who have kids. Instead there’d be processes and criteria in place. Maybe, for example, using that milestones chart from firstyears.org as a basis template.If the parent can show they’ve actively educated their child to hit those milestones in advance of the milestone (e.g., the baby can give object when asked before they are 12-18 months), the parents get more government benefits and rewards.

      1. panterosa,

        There are two points here – 1) Early Childhood Ed and Universal Day Care, which should somehow be tied more together to ensure cognitive development and milestones, and 2) the finances/logistics of raising those children for their parents.We know the hoops parents go through for 2, but we have yet to validate the importance of 1 as a value for society, here in the US. The US has such a class based educational system, and politics keeps it there, to our detriment, and fuels an ever more splintered society. It deeply bothers me. And so my passion for 1 will stay strong.

  27. joahspearman

    I’ve gone through several of the comments and noticed a trend. There are a lot of smart people in here with valid points of view on tax policy, but what I’m sensing is two-fold: 1) the conversation is being dominated by white males which has a disproportionate say in what America’s tax policy looks like today (and every year dating back to the Alexander Hamilton era) and it’s no coincidence that many of these people want to protect their wealth now that women and minorities are beginning to move up the ladder from a professional and economic standpoint and 2) if you truly believe technological advances are a key driver in economic stability and upward mobility, then the conversation about the lack of diversity in tech is probably a full generation behind where it needs to be, which is where I see a lot of value in Fred stating we need to invest more in education…as far as I can see, that’s the only place where the government could do meaningful work to level the playing field across genders, ethnic backgrounds, income levels, etc.

    1. andyswan

      Do you have any evidence that the government spending more on education makes students more successful?

      1. Kirsten Lambertsen

        Most everyone here agrees that we need to change how our education budget is being spent. We may not agree on how, but we agree it needs to change.Your question is a straw man, respectfully.

        1. andyswan

          “need to invest more in education…as far as I can see, that’s the only place where the government could do meaningful work to level the playing field”That’s a very specific statement. I’m asking for evidence that it is true. Do we have any?

          1. Kirsten Lambertsen

            Well, does it work for military and defense?

          2. andyswan

            Maybe. Our military is by far the best military in the world. How it is utilized, however— that’s up for debate.I will agree that governments are much better at killing people than educating them.

          3. Kirsten Lambertsen

            Yes, we have the best military in the world.We also know, for sure, that the budget is hugely bloated and waste is astonishing. Should we kill the military budget altogether? Should we privatize the military and let capitalism take care of it? Even I would not say “yes” to that.I can’t see why education doesn’t deserver the same latitude. Right now the waste in education spending is atrocious. But privatization isn’t the answer.

          4. andyswan

            Education doesn’t deserve the same latitude because unlike with the military, there ARE viable private options. And they are successful.I want education systems to be successful. I want to be surrounded by educated people, not dopes. Society is better with better educated systems. THAT is why I support privatizing education. I don’t know if it would save me money or not, I have no financial dog in this fight…. I’m motivated by the same things you are.Why would you oppose a voucher system? Local/State taxes going to fund the education of kids with suppliers of education competing for that dollar? Competitive private markets are consistently better producers than government “systems”. Let them work!

          5. Kirsten Lambertsen

            So if there WERE “viable private options” for our military, you’d be for them?I’m not questioning your motives, btw. You needn’t defend them to me.I want our education and healthcare systems as far removed from the profit motive as possible. Pushing them towards it has been a failure.

          6. andyswan

            Every healthcare system that has been left untouched by government “assistance” has prospered. Private schools are doing much better than public schools. The profit motive is grand.No, I would not be in favor of viable private options for the military, nor for the justice system. I believe that protection of citizens from violence is one of the few valid roles of government.

          7. Matt A. Myers

            If you look at the numbers, sure, they’ve been able to take as much money as they possibly can from people — that’s how you define prospering? Similar you define success in terms of quantity and not quality?

          8. andyswan

            I’m talking specifically about quality. Where gov’t hasn’t been involved quality leaps have been unbelievable. Plastics, LASIK, etc.

          9. Matt A. Myers

            There are problems with your examples though I don’t have time to go through it.

          10. Stephen Voris

            A third perspective, which perhaps touches on joahspearman’s point: people self-segregate. That is, people are more (or, more often) comfortable with others who look like them, think like them, talk like them, and so on – and, completing the feedback loop, they try to make themselves talk/think/etc. like those same people. A couple generations ago we had laws enforcing the “look like them” part, and we did end up repealing them – but the social enforcement remains. Or, most people don’t “marry down”: too much culture shock when meeting the family.Same goes for schools: parents want above-average (quality) schools, schools want above-average (income/engaged?) parents… creating virtuous* cycles at the top, and vicious cycles at the bottom.*on balanceThis tendency is… risky, let’s say. MOOCs break at least one part of the vicious cycle by drastically expanding the number of students a good teacher can reach – but there are indeed other parts of the cycle, and self-segregation is one of them.

          11. ShanaC

            Israel actually is a great example of public-private partnership in healthcare driving innovation. By law you must carry insurance, and the basic teir is paid for by the government – but almost everyone buys more than that. interestingly, one of the things they cover in the basic tier is fertility treatments to a point (not covered at all in the US, except under very rare circumstances). Since that is a pure private choice of who one will go to – Israel actually drives a lot of research advancement in fertility research

          12. thinkdisruptive

            By what measure are private schools doing better? The only measurable difference that I have seen (with kids who were in both the public and private systems) was that the overall caliber of students going to private school was higher, and the parents cared more, resulting in better outcomes. The private schools are not inherently better, except in very rare instances.

          13. thinkdisruptive

            The problem isn’t that education or healthcare systems are private, but rather that there is a monopoly control of the system (by teachers, boards of education, government, and the AMA) who regulate options out of existence. When you allow profit as a motive, but don’t have a free market, you have a disaster (prices go up, but there is no relationship between cost and quality). Free enterprise (profit-based systems) only work when free markets exist to permit competition to do things more efficiently and effectively. Some private schools do a much better job because the administration is able to control their learning environment better, but the gains are marginal compared with what would be possible in a truly competitive system, and most of the advantages (in the education system that exists today) are due to attracting better students from wealthier families and a stronger gene pool (native intelligence). It’s the same reason that public systems from Great Neck or Stuyvesant (see ShanaC’s comment above) can outperform private schools from elsewhere. The school and its teachers are not inherently better, they simply have better inputs to work with.

          14. bmathes

            What? The military is LOADED with private options. Military contractors, suppliers, etc. http://www.fpri.org/article…Granted, this is more akin to school vouchers (public funds going to private orgs). Private security exists for the very wealthy, too. Society seems to work better when everyone doesn’t have to worry about security (good police). Same with good schools.

          15. ShanaC

            there are very few good private options if we look nationwide. Comparatively, in a given area, especially an urban-ish area, there will actually be multiple public options.Do not take this the wrong way, but a Kid who will graduate Great Neck North (Suburb of NYC, one of the top public high schools in the US) or Stuyvesant (NYC Magnet High School, application and exam, again, one of the top high schools in the country) will easy out-test, know more, and be better educated than most private high school rads in the entire US – including likely the school you will send your kids to if they stay local. There aren’t that many private high schools that actually can compete in educating a kid on that level, unless you start going into the Dalton type reaches. There are multiple at that level of high school in the NYC metro area – the public schools graduate more kids, at a lower cost.Meanwhile, because of legal requirments and how private schools are regulated, it is actually much more likely that in a decent district, the private schools in the same area will not conform to education requirements for the kids in it unless you get lucky every year with your teachers.(and I’ve personally seen this in my own education: Due to a bunch of weird circumstances, my RA my first year of college actually grew up around the block from me, though I didn’t actually meet her until I went to college. Her education/preparedness level was way higher than mine. She went to the public school I was zoned into before it got gutted in front of the national media, I went to a private parochial school with a cramming motif in its real life education philosophy. Had I gone to that public school, a bunch of education issues would have been caught early, both positive and negative – everything from crazy math skills way above grade level to severe add for a girl. Eventually I did catch up with my RA, but there was no need to really experience that.)

          16. LE

            budget is hugely bloated and waste is astonishingThat’s a cost of doing business. Waste is baked into the system.Here is an example. Back in the day I used to get frustrated by the parking tickets employees would get. Feeling that they could avoid tickets. Unfortunately to avoid tickets they would have to pay for parking or spend to much time looking for other free parking. So in the end the parking tickets were either “a cost of doing business” or in some cases cheaper than (for both time and $$) paying for a parking lot.There is waste I am sure and very many cherry picked examples that make it look like 50% of dollars are wasted.Waste?How was it not wasteful all of the money that was spent (and economic detriment) when the Pope came to Philly and the entire city and part of the region was shut down? A total clusterfuck of security precautions for a religious event. That was very wasteful. Benefited a small part of the population in particular the politicians who got to shake his holy “I’m just a simple shepard (yeah right..) hand”.

          17. Matt A. Myers

            “Our military is by far the best military in the world. How it is utilized, however— that’s up for debate.”LOL. To ask and quote you: That’s a very specific statement. I’m asking for evidence that it is true. Do we have any?

          18. andyswan

            We have never lost a war because of military capability. We could take out any other military in a matter of months….there would be no question as to the outcome.That’s pretty good evidence.

          19. Matt A. Myers

            Brute force is certainly a tactic. There’s no proof you’re the best military in the world – the loudest and in the most places to maintain capitalistic fingers and political influence in regions, sure.Have to define the word best first.

          20. andyswan

            The one most likely to win a war.

          21. Matt A. Myers

            Defining winning a war? Based on what outcome, etc.. Is it to reach a peaceful state worldwide? It could easily argued that the U.S. is the worst at that.

          22. thinkdisruptive

            We don’t have the will to do what it takes to win a war. We have the technology, and the weaponry, and the training, and the budget (US spends more than 1/3 of the total world military expense). When we fight, we are able to win battles, but we generally lose the war by projecting that we unwilling to do the nasty things necessary to get it over with and move on to the next stage of repairing the infrastructure and bad blood. That means we keep on fighting the same wars over and over again, just like in the middle east or the Balkans, but in our case, we end up strengthening the enemy’s resolve with each iteration and Pyrrhic victory.

          23. Matt A. Myers

            Define success.

      2. Joah Spearman

        Notice I didn’t say “spend more money”. What I wrote was “invest more” which – if you’re not being myopic – could mean a lot of things. People invest time and energy and that’s far more important than money. I grew up the youngest of three boys on food stamps and Section 8 housing and I became the first in my family to graduate from college because I put time and energy into learning and teachers and coaches and mentors put time and energy into me. Now, as I lead my own startup, the most valuable resource I bring to bear isn’t money but time. The more time I can give to it, the more value I create. Perhaps the government – working with private institutions and individuals – could start finding creative ways for time to become an investment vehicle (a la after school programs, etc) for us to consider. Not everyone will become a teacher and hiring more teachers may not be the solution, but getting more people to put some time and energy into the education of others would certainly be a decent place to start.

      3. Matt Zagaja

        I think it’s important to note that a lot of increased spending that “goes to education” is actually just paying for increased costs of the same resources from the previous year whether it be energy or labor, especially healthcare and retirement benefits. In large cities like San Francisco year over year increases in rent and property prices that exceed inflation mean that compensation has to keep up (assuming teaching is a portable skill). In a lot of cases you’re also paying for pension contributions we didn’t make years ago for teachers that are now retired. Not only do you get to pay for to educate today’s children, in many ways your also paying the cost of educating your own generation as well (your parents however got off lucky).That being said I think that there is evidence that certain spending in education is quite useful (if someone is going hungry we know that feeding them will improve academic performance, for example), but like anything at some point the money will suffer from diminishing marginal utility.

      4. thinkdisruptive

        Common sense tells us that there are two serious issues with how money is spent, and how much is available to spend, and your question is the wrong question to ask (no such data would yield useful insights in how to improve education or access to it).Starting with how much is available to spend, it’s clear to me that at the bottom rungs of public elementary and high schools, teacher pay is a serious problem in attracting quality individuals to the profession. You’re a smart person — would you work for 40K? Or even 50 or 60K if you worked in a district that paid more? I wouldn’t. Not even as a vocation because I’m a believer that being an educator is a calling and one that is critically important to the next generation and to enabling everyone to succeed to their maximum potential. I wouldn’t even consider a teaching position for less than 100K, because I feel like I’m barely able to scrape by with considerably more than that (2 college-age kids is very sobering financially if you’re unfortunate enough to be neither poor nor wealthy, but squarely middle class).Unless you can attract a percentage of the people who are good enough to be engineers at Google, or lawyers, or finance professionals, or medical professionals, we can’t really raise the quality of education substantially. So, if you’re talking marginal changes (10% more pay, or 20% smaller classes), then I don’t think you could find any data that would support government spending more making students more successful. You need better quality people as a starting point, which means a lot more than marginal spending increases (although I do believe that really good people with good technology support could support much larger class sizes and do better than what we currently have — i.e. you need a business model change, not an incremental spending change). Secondarily, you also need to focus on cultural changes, which is much more difficult. One of the reasons that asian/indian kids do so well is not that they are smarter, but that their families place a very high value on education, and they are simply expected to work hard and do well as a family value. Imbuing those values in the “disadvantaged classes” could fix much of what’s wrong with schools almost overnight.Regarding how money is spent, most of the education system today is still focused on 19th century systems and values — people need to learn to respect the bureaucracy and follow rules and be at work by 7:30 am to keep the factory running. So much of what we call education is about teaching kids to be good little peons, rather than learning to learn (the most valuable skill today) and solve problems as creative teams. Most of the actual “education” my kids got pre-university could have been conveyed in 3-4 years, and certainly didn’t require 13 years to acquire.At the university level, on the other hand, costs have escalated far beyond the reach of average people and require assumption of debt loads that used to be reserved only for purchasing a large luxury house. Most of the cost increase has gone to administration (teaching staff are paid about the equivalent of what they were 30 years ago, while most non-teaching expenses have ballooned by as much as 10x, and much of this increase has been funded by government backed loans, rather than by grants and merit aid (the way we used to do things), encouraging colleges to just keep pushing the costs up without any accountability for improved results. Obama’s solution of making even more government backed loans available for questionable applicants is a further step in the wrong direction.I don’t know if we actually need more for post-secondary education, but we certainly need to ask as a society whether we are better served with the outcomes today than we were a generation ago, and consider that average college costs have increased more than 1200% in 30 years, while the cost of living has only appreciated about 200% in the same interval. Here, my strong suspicion is that allocating less money and awarding it differently would lower costs, increase accessibility and improve outcomes. Anecdotally, I know there are severe problems with how spending is prioritized at colleges, and after touring campuses with my kids, I got a little sick of hearing admissions staff brag about how they ranked for cafeterias and food choices, realizing that for the next 4 years, my kids would be eating better than me.So, there is lots that could be done if we approached education holistically, and had the will to make wholesale business model changes in how it is delivered, and that would mean spending a lot more in some areas, less in others, and shifting priorities towards competency and ensuring students are qualified for tomorrow’s jobs when they graduate, rather than continuing to create a gross over-supply of liberal arts graduates who are sort of mediocre at writing APA-style essays by the time they’re finished.

    2. Kirsten Lambertsen

      Exactly.

    3. bmathes

      could also help in healthcare, especially child healthcare. I’m thinking overall healthcare and health education. We have lots of programs, but poverty and childhood health problems are still intensely correlated.

    4. Richard

      Start with the low hanging fruit

  28. Salt Shaker

    The national high school graduation rate in the U.S. is a considerably high 81% (though considerably less for Hispanics and African-Americans). For many, that’s the pinnacle of their educational achievement as getting a college education today is repulsively too expensive. And among those who do take the plunge (while in many instances not truly understanding the financial consequences), their debt/income ratio becomes insurmountable. If we want to invest in education, then it truly needs to be made affordable for the masses, without onerous debt burdens.

    1. laurie kalmanson

      public colleges used to be affordable.

  29. Jess Bachman

    I came here to leave a comment… then I saw there was already 120 comments and its not even 9:30 in the morning.

    1. andyswan

      I was looking forward to your comment…and then…it was that. 🙂

      1. Jess Bachman

        Yeah I was totally going to drop some counter-facts, cite some sources, and bring some perspective to this joint… but… i hadn’t even taken a sip of my coffee yet and its too early to be riding the Swan line to Consensus Station. https://uploads.disquscdn.c

        1. andyswan

          That’s a fantastic gif

        2. Ana Milicevic

          + 1000 for the gif.

  30. LaVonne Reimer

    I mostly read through the comment threads. Here’s how it looks to me. Fred couches his case in terms of economics but what hit me between the eyes was the human aspect of it. Too many people suffering. Too many people never having a shot at contributing to the economy. We should do something. The comments (not all but many) strike me as technicalities that we can cite all the live long day to avoid ever having to confront the uncomfortable and messy human aspects of the problem. This is a human issue. Perhaps the most honest statements are those suggesting that impoverished people somehow deserve it or like being dependent on the government. And by the way, we gotta act now. If we really do end up with a gig economy (don’t love the term but believe the trend is real), with our current systems of finance and credit, it is going to get a whole lot worse. Again, the central question is are you willing to listen to the stories of people who are struggling?

    1. Kirsten Lambertsen

      “Perhaps the most honest statements are those suggesting that impoverished people somehow deserve it or like being dependent on the government.”Yes. Zero recognition of the fact that being born white middle class is in itself the key opportunity. Hubris.

      1. Cam MacRae

        White and middle class, or meritocrat? My sense is that this audience tends towards the latter.

        1. bmathes

          Even if you assume a meritocracy, being born into a family and good school district is a huge privilege. You are far more likely to learn good work habits, learn more, make ambitious friends that teach you. All things that a meritocracy rewards._That’s_ modern day “white” privilege. It’s not as much about skin color (though that plays a role wherever people _are_ racist, albeit more implicitly than explicitly these days)

          1. Cam MacRae

            I assume meritocracy in the pejorative sense that Lord Young intended when he coined the term.As he wrote shortly before his death:It is good sense to appoint individual people to jobs on their merit. It is the opposite when those who are judged to have merit of a particular kind harden into a new social class without room in it for others.Ability of a conventional kind, which used to be distributed between the classes more or less at random, has become much more highly concentrated by the engine of education.A social revolution has been accomplished by harnessing schools and universities to the task of sieving people according to education’s narrow band of values.With an amazing battery of certificates and degrees at its disposal, education has put its seal of approval on a minority, and its seal of disapproval on the many who fail to shine from the time they are relegated to the bottom streams at the age of seven or before.The new class has the means at hand, and largely under its control, by which it reproduces itself. And:The business meritocracy is in vogue. If meritocrats believe, as more and more of them are encouraged to, that their advancement comes from their own merits, they can feel they deserve whatever they can get.They can be insufferably smug, much more so than the people who knew they had achieved advancement not on their own merit but because they were, as somebody’s son or daughter, the beneficiaries of nepotism. The newcomers can actually believe they have morality on their side.So assured have the elite become that there is almost no block on the rewards they arrogate to themselves. The old restraints of the business world have been lifted and, as the book also predicted, all manner of new ways for people to feather their own nests have been invented and exploited.Finally:There was also a prediction in the book that wholesale educational selection would be reintroduced, going further even than what we have already. My imaginary author, an ardent apostle of meritocracy, said shortly before the revolution, that “No longer is it so necessary to debase standards by attempting to extend a higher civilisation to the children of the lower classes”.

          2. Drew Meyers

            “being born into a family and good school district is a huge privilege”Complete agree. Everything is relative though — being born in the United States AT ALL is a huge privilege. The life/opportunity we have, is a fairy tale to the vast majority of the world.

          3. Rob Larson

            Agree 100%. And there is no question that things in the US are getting BETTER, not worse. Compare the % of income that Americans used to have to spend on food and clothes vs. today:

          4. Rob Larson

            And those gains (in discretionary income) are not just flowing to the most wealthy. Here are the same spending buckets, segmented by family income:

          5. Rob Larson

            This is not to say “the poor have it just fine”, but rather, “things are improving compared to how they used to be”. And my money is on this trend continuing, despite all the hand-wringing going on.

          6. bmathes

            in the right parts of the US. We are not homogenous :-(. Many sociodemographic pockets have more in common than the 3rd world (education, life expectancy, infant mortality, homicide rates, etc.)

        2. Aviah Laor

          In a meritocracy you would expect to see a bell curve normal distribution of wealth. This is not the case.

          1. Cam MacRae

            No, you should expect a negative skew as the meritocratic social class ossifies.Edit for clarity: Though once ossified (assortative mating, etc.) we resume programming with a heavily positive skew. The broader point is that a no time do we expect incomes to be normally distributed.

          2. andyswan

            Why would you expect to see that? I wouldn’t expect to see that at all!Look at professional sports. A true meritocracy. There’s no bell curve there. Some people are just THAT much better, and that’s all the world wants to watch.

          3. Aviah Laor

            If compensation was set by what the world wants to watch in any field, you would be right. But the wealth is frequently distributed in opposite, and against, to what the world wants to watch. Human traits generally have normal distribution, so the “merit”, and theoretically the wealth based on that merit.

          4. JamesHRH

            Compensation is based on financial responsibility.The world’s greatest Grade 5 teacher still only touches 22 lives a year.The CEO of Royal Dutch Shell has – if he views his job seriously – the health and economic future of 125,000 people on his plate.Big numbers drive big numbers.

          5. LE

            CEO of RDS has a great deal of help with those 125k I don’t mean the rest of the managers I just mean people who can give him advice about things he doesn’t know about. (Just like Potus and Scotus).

          6. JamesHRH

            Accountability is singular.

          7. thinkdisruptive

            Not singular enough. Has the CEO of BP paid shareholders back for the $20 billion in costs related to the gulf oil spill, or paid society back for the damages to the environment? If he’s truly accountable, then he should, but I don’t believe there were any salary clawbacks based on accountability, even though the mistakes made that caused the spill could be traced back to the C-suite. Not only that, but his PR performance after the spill when he whined on TV about how “he’d like his life back” — the one thing the CEO should excel at — was dismal. The only thing it cost him was his job, which is no more accountable than you or I might be for a relatively minor mistake when compared with his performance. Speaking of accountability, how accountable is Obama for the mess he’s made of things? Accountability is just as big a myth as pay for merit at the top levels.

          8. JamesHRH

            BP BoD is a shameful group.

          9. thinkdisruptive

            On this we agree. The majority of boards of big companies aren’t much better though. They are mostly rubber stamps, unless someone prickly like Carl Icahn gets involved.

          10. Aviah Laor

            “Volkswagen AG’s Chief Executive Martin Winterkorn more than doubled his pay for 2011 to €16.6 million. His total compensation was €17.5 million, the highest ever for an executive of a DAX company. The study found Daimler AG’s CEO Dieter Zetsche took home the second-highest direct pay of all DAX-30 companies, €8.7 million, about the same amount he got in 2010.”http://blogs.wsj.com/source…

          11. JamesHRH

            Now you are talking competence, in particular BoD competence.

          12. thinkdisruptive

            The same Volkswagen that falsified emissions records to beat regulatory agencies, and defraud consumers? Volkswagen passed Toyota to become the world’s largest carmaker earlier this year, but at what cost? Is the pay level for either exec a reasonable and fair number when compared with the top few hundred senior managers at either company, let alone the workers who build, service and sell the products?

          13. thinkdisruptive

            Unfortunately, this only works in one direction. When the CEO of Shell screws up “royally” and loses billions, or costs 10s of thousands of jobs, or is held responsible for a major oil spill, he never has to pay back the company or all the people he hurt. The world would be a far better place if we spent more to properly reward the very best teachers, and that money came from the pockets of hired CEOs. (I differentiate strongly between founder CEOs whose vision and grit created and built something of lasting value, and caretaker CEOs — like that of Royal Dutch Shell — who collect unreasonably outsized rewards based on size of company rather than true performance over time). I think in most cases, you could have a random lottery to select the next CEO of a company from the top 125 managers there, and you would not see a marked difference in performance outcomes of that company, except in the case of rank incompetence, and I would be happy to debate that with anyone — and if true, it certainly raises big questions about whether pay levels in the C-suite reflect merit, or board hubris..

          14. JamesHRH

            I am married to someone who fits your description of being in the top 125 managers of Shell (she is no longer there).I have met a lot of the to 125. Very few of them are CEO of the world’s largest company material.I think you have no idea of the pressure of the role. Maybe this will clue you in – http://www.theguardian.com/… .Some major company CEO’s are completely tools – every subset of humanity has some. Most are not.

          15. thinkdisruptive

            Actually, I have met many of the top managers of oil companies, including the former CEO of Shell. He was not as special as you think. The few rare people who I would describe with the near reverence you have for this level of person are those who actually started and built their companies.Of the hired-hand CEOs, the only one I ever met who seemed worthy of the respect you feel was Jack Welch, who was definitely unique. So, I will repeat, most of the top executive team of a company like Shell could step into the CEO’s shoes, and you would not see an appreciable difference in performance. Some would do better, some would do worse, but they would mostly make the same decisions and not transcend the culture and processes of the organization. That’s what big companies like that are designed to do.I wasn’t talking about “tools” — truly crappy people will destroy a company much more easily than someone great could improve or change it (Jeffrey Skilling, Dennis Kozlowski, Bernie Ebbers, and arguably Steve Balmer are in the truly crappy category). My point is, and remains, that the pay levels of these people are unjustified and unjustifiable. Outside of being given a $90 million jet to do his job and having the company pay the fuel expenses (not unreasonable given what he did for the company), Steve Jobs only compensation at Apple beyond $1/year was the increased value of his stock holdings, and who could question that he deserved every penny of that? The best CEO of his time — a man who created unimaginable wealth, great new products, and brought Apple from the brink of bankruptcy to the world’s most valuable company in less than 15 years — earned a small fraction of what most hired hands do today, and none of them could fill his shoes.

          16. JamesHRH

            Comp is screwy because BoDs are weak. Look at Marissa Mayer ( my guess, she’s a sociopath / narcissist ) or Carly Fiorina – they are hacks & getting / got comped like crazy.The Problem: GREAT CEOs deserve every penny, as you say.Weak BoD talk themselves into believing they are hiring that person & therefore throw crazy $$ at weak candidates.I do not have reverence for PubCo CEOs.I have never done the job, but it seems that the bell curve applies. I think you are just wrong about inserting random managers – most would melt from the pressure.

          17. mikenolan99

            Some people are born on third base and go through life thinking they hit a triple. -Barry Switzer

          18. Guy Lepage

            Love that quote. [puts it in pocket] 😉

          19. LE

            Show me a narcissist and I will show you a person who doesn’t suffer from depression because of that attitude and outlook. Nothing wrong with thinking you hit a triple, even if you didn’t, if it makes you happy.

          20. Donna Brewington White

            Ever met a textbook narcissist? Very likely, suffers from depression.

          21. LE

            Sure. Maybe a DSM textbook narcissist. But I am talking more about the ones that people who don’t do a medical diagnosis and workup on complain about. The braggers that annoy everyone.

          22. PerceiveToBeWise

            Show me a narcissist and we can look on and gaze together as they lead a self-destructive lifestyle squandering the opportunity given them. Show me a self-assertive individual and we will see them carry the guy just standing at third base home if necessary to get to where they plan on being. It happens that way in life. Even the idiots who were born wealthy get more wealthy because of someone coming up in the ranks takes the initiative to not only go for their own brass ring but sells it to the rich who buy in and finance it to go along for the ride and profit from it.

          23. andyswan

            Yep… who cares? Why do I care if he thinks he hit a triple?

          24. LE

            Yeah agree it’s funny how that type of shit rubs people the wrong way. Philly is like that. So fucking humble as a result of it’s Quaker roots. The high school I went to was Quaker same shit. No bragging, no overstating just the simple life. And they think that is the way it should be for everyone. Meanwhile it cheapens my degree (as if it matters) because it’s not as impressive as the private schools that brag) although it is still impressive I guess somewhat.The simple life? Because if they like pancake breakfasts on Sunday everyone should get excited about pancake breakfasts. (This is typical liberal shit what is good for them is good for everyone and all of that).Meanwhile some woman who got her money because her father taught Warren Buffet donates $120 million the largest private school gift ever. (From appreciation of Berk stock). And plenty of rich kids go to the school which allowed them to give out plenty of scholarships (because the rich kids pay full load tuition). So yeah money and bragging is bad for sure. World wouldn’t be where it is today if men didn’t go for the brass ring like that.

          25. Donna Brewington White

            Well, if he’s smugly standing on third base and doesn’t know how to get to home plate or see the need and I’m waiting on second, I might care.Wow, that’s deep.

          26. Kirsten Lambertsen

            Keeper.

          27. LE

            Yep. Professional sports is probably the best example I can think of where the rubber hits the road. While luck is involved, it is about as far down on the luck scale as is possible. The closest to pure “earn it” as I can think of. That said, unfortunately, it’s only sports. And really has only entertainment value and also unfortunately many people (in the ghetto let’s say) chase the sports dream (it’s their version of the startup lottery) instead of perhaps being the guy that can fix cars, do plumbing or handyman work. You know I offered a few guys $50 each to haul away some exercise equipment from my basement and they never got back to me? That’s $50 (they probably make $10 per hour) to just lug something up and get rid of it (with their bosses truck and it wasn’t because they were afraid of the boss either..)

          28. Girish Mehta

            Regarding – “While luck is involved, it is about as far down on the luck scale as is possible”.You might be interested to read Michael Mauboussin (if you haven’t), Attached is a interview – he discusses why Ted Williams is the last MLB player to bat over .400 in a season.He finds the paradox of skill – as skill increases, luck becomes more important in determining outcomes.All Streaks are held by skillful players. But not all skillful players have streaks.https://www.youtube.com/wathttps://www.youtube.com/wat

          29. JamesHRH

            Its about the jobs. Colin Cowherd’s list of ‘players you back the truck up and just pay them whatever they want’ (b/c you cannot win without one of them):1) Proven NBA Superstar2) Proven elite NFL QB3) Proven elite NHL GoalieCan’t remember MLB….I think it was proven closer.

          30. andyswan

            Yes but even the difference between the 6th man on the worst NBA team and his slightly-worse counterpart playing overseas is unbelievable in terms of outcome.There are major “breaks” in a meritocracy that makes it look nothing like a smooth bell curve.

          31. JamesHRH

            Absolutely.But the jobs framework still applies. 6th man for the Cavs is tougher job to get & hold, compared to being starting 2 guard @ Real Madrid b/c their is more money @ stake in NBA & the Cavs 6th man job has more $$$ responsibility.Difference in ability may be negligible, I agree.

          32. creative group

            JamesHRH:I miss Colin Cowherd commonsense take on sports. Just can’t find to the time to locate him on Foxsports. If a person is better you pay him what the market bears. But stacking a team with all the best players and calling it even and competitive isjust a lie. That is what the average person has a hard time with the very average person who isn’t really good given the silver spoon up thier posterior and bragging how good they are opposed to the average person they really are like.

          33. Pete Griffiths

            When our toilet’s blocked we all want the world’s best plumber :)Being rich is meritocratic. Some people are just better at being rich than others.

          34. JamesHRH

            Some jobs pay more because they carry more responsibility.VC, QB & Goalie come to mind.

          35. Pete Griffiths

            It’s not quite that simple though, is it?It is hard to imagine a job that carries more tangible responsibility than a trauma surgeon but few such surgeons make outlandish money.

          36. JamesHRH

            I have put some thought into this Pete – I needed to, in order to explain the apparent unfairness in compensation to my kids.A trauma surgeon is a great example but they make pretty good dough and, after some thought, what they really do is save lives that are highly compromised. They tend to pass patients up the value chain once they are stabilized.The heart and eye surgeons that return you to 100% function are the big paydays, because, they take you from stabilized to normalized.It really works, if you grind at it a bit.Even HFT have the responsibility of managing a large amount of money.

          37. Pete Griffiths

            My real point wasn’t the fine points of quantification so much as observing that things aren’t as simple as the responsibility they ostensibly bear. 🙂

          38. John Pettus

            Aviah – Not with inherited wealth. If when people died their accelerated wealth went the the poor, or the church or whatever, then you might see a bell curve.

        3. ShanaC

          a mixture. we just don’t realize it

          1. Cam MacRae

            Given what is now the top comment it appears there are fewer meritocrats than suspected. They’re just disproportionately loud.

      2. laurie kalmanson

        related: we can’t all be skateboard punk rocker coders and ceo’s — the people who do basic jobs and services should be paid enough to not live in abject poverty, and to not need government assistance; they should have decent housing, and their children should have decent schools. the systematic impoverishment of people at the bottom of the wage scale didn’t happen by accident, and it’s wrong.

        1. Kirsten Lambertsen

          Word!

        2. SubstrateUndertow

          the systematic impoverishment of people at the bottom of the wage scale didn’t happen by accident, and it’s wrong.SETTING ASIDE “WRONG”Even more fundamentally it is not sustainable in the long run !Extremes in the concentration of wealth/power/education/control are not so much immoral as the are cyclically/homeostatically unsustainable.Just look around and it becomes very obvious that those chickens are coming home to roost. That threadbare karmic economic interdependency circle is really starting to accelerate under network conditions.It is “Mother Goose” simple!Don’t kill the middle-class goose that laid the golden egg!Any logical golden-goose management regime should seek to extract the full/optimal value from all the resource at hand and as regards a national economy/society the most pivotal resource is the “hunan resource”.We should’t really get too uppity about blaming the wealth class crowd. Their only crime is succumbing to human nature by maximizing their individual short-term situational-control extention opportunities.The blame rest more with all of us on the other side of that unbalanced equation, with all of us middle class voters whom continue to buy into the “Economic Trickle Down” extremism being sold by the well monied public-perception-management propaganda crews (“that come out after midnight and round everyone that knowns more than they do”- Bob Dylan’s Desolation Row).H.G Wells framed the substrate of human history as”a race between education and catastrophe”NOW RACINGcollaborative big-picture economic realism VS catastropheFIRST MOVE OUT OF THE RACING GATEgetting all that public-perception-managemeet moneyout of the democratic governance process !AND NOW we’ve come full circle!back to the old chicken or egg problem 🙂

          1. PerceiveToBeWise

            Did you just come to the conclusion that 1) the poor will always be with us. 2) If you don’t pull yourself up by your bootstraps you will continue to waller in the mud 3) the problem with government intervention is government intervention (absent restraint of pure greed) 4) you can achieve all you can be if you set your sights on it and never take failure as the final answer.Isn’t that just defining Capitalism constrained of monopolistic greed but devoid of excessive regulatory overhead? If so, yes indeed, you have arrived back before the great social experiment by big government being our nanny started.As to economic opportunities afforded due to (good luck) Karma – it decreases as government increases. Less up opportunity but less absolute failure with the abject result of equal poverty for all.

    2. Ana Milicevic

      “Again, the central question is are you willing to listen to the stories of people who are struggling?”I think this is at the crux of this debate and many others on social issues. Those of us who are more fortunate like to believe it’s solely based on our own merits. The narrative that if you’re not well-off in America you must be lazy is easy to believe if you’ve never experienced disadvantage and that certainly rings true for many of our policy makers (who, even if they do hail from less-than-privileged backgrounds seem to largely forget that after the first book deal). How can we communicate empathy towards others when the main credo is every person for themselves?

      1. andyswan

        What if someone were to believe that government programs intentionally create dependence and are incredibly damaging to the individuals and communities they are supposedly designed to help?Does empathy need to be blind?

        1. Ana Milicevic

          No, that’s Justice, she is blind.We can disagree on viable solutions as long as we can agree that there is an underlying problem. Heck, that disagreement will make for better solving.

        2. bmathes

          Not saying this is you, Andy, but many who say that in the next sentence think the various trickle-down economics (subsidizing banks, the wealthy, etc.) somehow don’t create dependence.

          1. andyswan

            Of course it does. Gov’t should not be in the position of picking winners and losers. Full stop

          2. Pete Griffiths

            ANY economic or social policies results in winners and losers. There are virtually NO socially neutral such policies and it is vanishingly unlikely that there ever will be.

        3. SubstrateUndertow

          No – empathy does not need to be blind !It does however need to be realistic. It needs a realistically incremental plan to get from there to somewhere better.Your points are most often well taken but lean a little digital for my analog modelling tastes 🙂

        4. ShanaC

          No, but we would ask how and why, and what kind of proof you have

      2. JLM

        .Come to work early, stay late, work hard, spend an hour a day studying your industry/profession is not a huge secret.JLMwww.themusingsofthebigredca…Gentle comment.

        1. LE

          And stay away from cigarettes, drugs, alcohol …

          1. Twain Twain

            And gravitate towards people smarter than you you can learn loads from and with.Notice how I make time to hang out here so I can learn a whole bunch of things I didn’t know before?

          2. LE

            Does what you learn help you in a tangible way? Or is it just infotainment?

          3. Twain Twain

            It teaches me more diverse approaches of communication.Plus there are always facts and figures that make me go, “Hey, I read something else somewhere else and, actually, these two data sets or bits of analysis are connected or really challenge each other diametrically.”Also, my primary interest is in how to get the machines to understand our perceptions (subjective biases) and a lot of those angles surface in AVC discussions.Especially in any post with a politics slant!!!

          4. LE

            to get the machines to understand our perceptions (subjective biases)My angle, maybe similar in a way, is understanding people so I can manipulate people when making deals or in life in general. Manipulate does not mean “bad”. I am an encyclopedia of people and behavior prediction. [1] So I like to know how people think and react and I use my interpretation of the comments (analog of course) to help me with that. Plus of course, it’s entertaining.[1] He is an example. Had a relative who found out her son’s girlfriend was pregant and said “my life (the mom’s life) is now fucked”. Kid was 19 and headed to medical school. I correctly predicted what would happen to this relative after the baby was born, based on my knowledge of the impact of that statement followed by the actual events that would follow after the birth. Didn’t put money in my pocket of course but did help in other ways. My wife was amazed.

          5. ShanaC

            🙂

          6. Donna Brewington White

            You give a lot too.

          7. Twain Twain

            Thanks, Donna, that means a lot to me.I see AVC as an example of a weave+weft and braiding. Fred provides the first strands and then everyone’s welcome to add their strands and, before we know it, collectively the braids we’ve weaved (aka analysis of any issue) are stronger than any single strand that one person’s placed in.

        2. Ryan Frew

          I think your comment is illustrative of Ana’s point. On principle, I want to agree with you. However, I’m a Big Brother for Big Brothers/Big Sisters and my Little’s mom works from 8a – 12a every day and earns barely enough to keep food on the table. It’s a nice thought to hope that she figures out a way out, but she genuinely doesn’t know how. She can barely read. It’s too late. Poverty is vicious.

          1. JLM

            .It is never too late. For anything.We all need to be in the game.JLMwww.themusingsofthebigredca…Gentle comment.

          2. Matt A. Myers

            Great you agree it’s never too late to help that person out to have a better life.The problem is current policy in this capitalistic system puts a constant ongoing negative pressure on everyone.

          3. SubstrateUndertow

            theoreticslet’s not mix up the map with the territory here

          4. Stephen Voris

            An abstract interpretation: people’s time can be spent on leisure, short-term income (read: keeping one’s head above water; position), or long-term income (read: investing in one’s future; momentum). The poorer someone is, the more time they need to spend on position, and the less time they have available to spend on building momentum.Poverty is what happens when the time required to maintain position exceeds what can be spent.So what does this mean for policy? Aid for both position and momentum may be necessary – the hole can get pretty deep – but the emphasis should be on momentum.

          5. Ryan Frew

            Love the wording, here. Could not possible agree more.

        3. Matt Zagaja

          Worked well in the old economy. This new one however, my friends who make $40K working for small law firms work just as hard as those making $140K for the “big law” firms. Sometimes doing the same type of work. For better or worse many modern careers are more like poker than building bridges. The hardest working burger flipper at McDonald’s is never going to out earn the hardest working hedge fund manager in Greenwich.

          1. JLM

            .Is the $140K guy overpaid?Arguing about averages is silly.Somebody always make more until someone else does.JLMwww.themusingsofthebigredca…

          2. Matt Zagaja

            Not saying the $140 guy is overpaid but maybe the $40k guy is underpaid. Not so much a conversation about averages but on distribution. The $140 guy isn’t necessarily producing more quality work, he’s just being paid more than his similarly skilled peers because he got lucky.

          3. LE

            I think part of the problem is that people who aren’t so smart don’t make smart decisions or don’t have people to help them make smart decisions. You can help your new son in law, should he request the help, make smart decisions. Most likely you have helped your daughter. That will be a big benefit to him and to her. He’d be stupid not to seek out your advice and consider it.Look, my niece wanted to go to college “a” and I told her why I thought she should go to college “b”. She listened, is there now and extremely happy. So I helped her make a good decision. Why did she listen to me? Because she had evidence (from her Mom) that what I thought mattered.As far (parent comment about) “the hardest working burger flipper at McDonalds” nothing to brag about. Easiest job to get, takes no initiative, could easily get a better job by walking through any industrial park and knocking on doors. Really shows nominal initiative and no creativity. Like applying for a job at Walmart. Low energy loser most likely.

          4. Matt Zagaja

            Everyone knocks doors now. My friend is a recruiter at Google and every job posting gets 1000 applicants minimum. Entry level federal attorney jobs get 950+ many from lawyers with years of experience. My current job had 800 applicants that I beat out, and before I got here I applied to about 150 other jobs (interviewed with about 10 and got offered at 3). When the burger flipper knocks the doors there is a line of people knocking behind him ready to take the job as well. Welcome to the NFL.

          5. LE

            Of course google gets 1000 applicants per job. My guess is wherever you work (and I have a few guesses actually) it’s an impressive place that everyone would like to work at. (Am I right? The NFL of education?). the fact is not everyone gets to play in the NFL. Some people need to knock on the doors of the 2nd and 3rd places where they might have a chance to shine.The advice that I always gave people, that worked for the people that I gave the advice to, was to apply for jobs that didn’t yet exist. That way there aren’t hundreds or even 50 people and it’s not the same beauty contest. In fact the one time in my life (before I gave the advice out) that I used this technique it landed me a job (twice) that I wasn’t even qualified to do. I stayed for 1 year and then applied for a job at a competitor which of course was easy to get since I was qualified (and didn’t have any competition). Same thing in high school for that matter. Same thing when I sold things. I didn’t wait for someone to call me to compare I showed up and they made a decision without comparing. (It all worked out of course..)Going after a job and winning the beauty contest is great (and congrats on that). My technique would not work with an Apple, a Google and so on. Or Oracle. But it would work with many other companies out there that are great places to work (perhaps 500 and under employees I speculate).

          6. LE

            And in the case of your son in law he earned the ability to have you help him. Because he distinguished himself enough that your daughter decided to marry him. So there is both luck and hard work. Also the way you raised your daughter.

        4. Twain Twain

          Here’s the most recent example of the American Dream. His parents were not middle class. He didn’t have the best access to private schools. He is also a drop out.But he did what you advocate above.* http://www.independent.co.u

          1. LE

            Actually to me publicity like that is hurtful not helpful. The reason is it sets unrealistic expectations of what someone can accomplish. There is so much luck involved in that and that assumes that being worth a great deal of money like that (with the accompanying fame) is a good thing to begin with.You know I am involved with quite a few people who are doing startups. And what I find in many cases are people with stunning academic credentials (I am talking Harvard, Yale Med School, Phd’s in Robotics, Physics and so on) people who could have a great job and are in in demand fields. And you know what they are doing? They are chasing a dream to be the next billionaire doing some shitty stupid startup that in no way taps into their actual abilities. The pull is that strong. And the things that they are doing are not great and maybe they think they will change the world good luck with that.Do you remember the mid 90’s when the first dotcom boom came? You didn’t find people leaving lucrative or solid careers to gamble. You found people who were either in between work or perhaps just graduated typically with typically non stunning academic credentials. Maybe a few dreamers but generally if you were already a partner at a law firm you didn’t drop that to gamble on the Internet. What you find now is, in some cases that I have seen, people who have gotten advanced degrees (like Medical or law degrees) from top flight schools that are doing their version of the proverbial “shitty photo sharing startup”. It’s really sad they have to go for the brass ring like that after putting in all of that effort to get to what they have already achieved that can give them a nice life.And you know why that is? Because of their perception that even though having success (like that) is hard it is possible. Because all they see are the people who are hitting it out of the park, not all of the losers tied up going nowhere.

          2. Twain Twain

            I hear you and say a big, “Thank goodness I walked away when Ivy Leaguers/Oxbridgies asked me if I wanted to do the “shitty photo sharing startup”!” Haha.My view, which has developed during the hardships of making my systems, is that if you’re going to do a startup, do one where your talents as a team really are going to make a difference and that you’d do regardless of whatever valuation — so, not the 1000th “me too” “shitty photo sharing startup” or “wannabe unicorn”.[I find the word “unicorn” quite silly and unhelpful.]Otherwise, you’re right; just stay in a career that provides your family with a nice life.

        5. Pete Griffiths

          I believe that around 60-65% of those on some form of state assistance are working that that a significant percentage of those work 2 or more jobs. Do that and trying to hold a family together is pretty damn tough. Some will manage it, but it’s not a formula for social success.

      3. bob

        “even if they do hail from less-than-privileged backgrounds seem to largely forget that after the first book deal”So maybe, just maybe, those disadvantages are not as big as you think they are? I’m from as a disadvantaged background as any (in North America) and it isn’t that bad. Now if you were considered poor in rural India or Africa, that is a real problem.The problem isn’t that people aren’t hard working, or that they’re too disadvantaged to move forward. It’s in their mindsets. You’re never going to have a society where everyone is rich, because when people compare against others, they’ll see that they’re poor in comparison. It shouldn’t matter whether someone else is getting richer faster than you, as long as your own life is improving. The focus shouldn’t be on “solving inequality” but on making the world a better place for everyone. But people are jealous and selfish creatures. They can’t stand others being better off than they are.

        1. andyswan

          Thank you. I’ve never seen the point of “income inequality” commentary– why does that matter? Envy? Who cares if Zuckerberg has a zillion… he’s earned it… good for him!It has zero impact on my life except that the wealth he has created also creates opportunities for me.

          1. Richard

            Maybe, what if you lived in NYC and what if 80% of that zillion were used to rebuld the 100 year old underground plumbing im NYC.

          2. andyswan

            Why would I stake a claim to 80% of someone else’s money?!  To save on my water bill?  Absurd.

          3. Richard

            We currently , essentially, confiscate 80% of the middle income’s discretionary income, no?

          4. Aviah Laor

            Sometimes the zillion is an honest reward for creating even more value, sometimes it’s just money shifting hands from many to few, without creating anything but poverty and financial crisis. The idea of a good economy is that money shifting hands benefits both sides. Same critic to over-taxing.

          5. SubstrateUndertow

            Nicely said !Maybe, if we’re lucky, more organic network-embeded metrics will accelerate our collective power to differentiate our reward/punishment of those two flavours.??

          6. Ana Milicevic

            Not sure how we got to income inequality – I’m talking about ensuring as much as we can that people have equality of opportunity.

          7. Matt A. Myers

            He was hired to develop something, stole the idea, lead the people he hired on so he could launch his version first — you like rewarding that behaviour do you?

          8. andyswan

            I like allowing the court of law to determine if that’s true and to determine the correct remedy…. which it has done. I don’t like to speculate on what would have been had the Winklevi been left to run the show.

          9. LE

            I do business with said vi. Really nice guys. Real mensch’s.

          10. andyswan

            I believe that. Everything I’ve read about them screams “life’s winners”.

          11. LE

            Zuck is slippery enough (just like the Clintons) to do the nasty if he needs to. Just like the Uber guys, like the Airbnb guys and so on.

          12. Matt A. Myers

            You ignored my question. Do you like rewarding that behaviour?

          13. andyswan

            I don’t think it is my place to reward or punish that behavior. I think it is the place of the court, which has done so.

          14. Matt A. Myers

            Copping out? Interesting.

          15. andyswan

            You might enjoy judging others more than I do.  I don’t have much interest in getting involved in a dispute between zuck and winkle

          16. Matt A. Myers

            *facepalm*

          17. JamesHRH

            I disagree with that behaviour but, as is so often the case, the numbers worked out for him.And, the Winklevii would have likely ended up with less if it had worked out differently….. @andyswan:disqus

          18. Matt A. Myers

            The brothers had the forethought to hire an ambitious developer who had credibility as a developer – how do you predict they wouldn’t have kept making those choices and therefore would have ended up with less? Perhaps they would have even brought Mark on and he’d own 25-50% even.

          19. JamesHRH

            B/c it is widely accepted that they showed very poor judgement in selecting him.The Zuck texts from that period show contempt for the Vii.They missed that & it’s not a good look on them.

          20. Matt A. Myers

            Seriously you’re putting that on them? That’s pretty weak.

          21. SubstrateUndertow

            Concentrations of wealth is obviously not evil per-se. It is clearly very beneficial/necessary to an economy/society in many ways.The flip side of that equation is that it can often limit global capital investment incentives to a subset of social/economic opportunities that are myopically counterproductive to global social/economic needs/progress.Clearly individual vs collective interests will not always be in alinement.The challenge is to establish a set of distributive Apps-based metrics/processes by which to accelerate the public policy debate/metrics regarding best fit wealth-consentration tipping points and control structures.That organically evolving social/economic tipping-point discovery is better served by a process of integrative-sublation than by black/white polemics.You get up voted for today’s softer tone 🙂

        2. Ana Milicevic

          Happy to hear that your experiences have largely been positive. As someone who has lived & worked in the most disadvantaged regions in the world, an immigrant, and last but not least a woman in technology I’ve seen a very different side to the disadvantage conversation. I can assure you it’s very real indeed and that the best way I’ve found of dealing with it is to raise awareness of systemic issues and then make damn well sure you send the elevator back down to others like you.Many people don’t aspire to be wealthy – they do however aspire to not have to worry about their basic needs. This is where the notion of the American Dream was successful — for as much as we talk about it it’s actually a fairly modest idea that every next generation should be better off than its predecessor. The inequality I’d like to be able to solve is one of opportunity, not of income.

          1. Donna Brewington White

            Appreciate these thoughts, Ana, from this comment and others.Opportunity is the key. Recognizing systemic conditions is also key.And sometimes it is not enough to lead a horse to water, you have to teach it to drink.

          2. Ana Milicevic

            Thank you Donna.

        3. SubstrateUndertow

          I don’t think anyone here is advocating for equality of income or even equality of opportunity, that is obviously just theoretical “pie in the sky” but a reasonable distribution of both is an fundamental requirement/goal as regards long term social/economic stability.

      4. ShanaC

        short answer: you can’tLong answer:You can teach people who think this that it may be incorrect – but it requires getting them into situations where they really understand and inhabit privileged backgrounds

      5. Donna Brewington White

        What is difficult for some people of privilege to grasp is the chronic defeatism that sets in to certain communities.Infusing hope and backing this with opportunity can work wonders, but it takes a while to crack the cement.

    3. JamesHRH

      Sorry LaVonne, listening is not the central question.Convincing 100M’s of people that work can be meaningful and rewarding is the central question. Your concern about the gig economy is the key point.The most intractable problems are ones where facts are irrelevant and opinions are mute because people have a fundamental conflict in values.When these folks bear most of the responsibility to find work, on a regular basis, not just once a lifetime, this problem will be solved (Malcolm Gladwell would support this view, at least) or undergo a 100x multiplier.Fred assumes that everyone wants the American Dream. Most people know they don’t have the drive or capability to be Fred. I worry that Fred does not realize that, after a limited number of working lives that only a select few are capable of living, the meaningful aspects of work drop off more precipitously than AAA personality types tend to realize.The plight of pre-European cultures in my home province of Saskatchewan would be a perfect example of the type of people that Fred believes he can help with this platform.You can argue about how much of Fred’s program has been provided to native people in Canada over the last 50 years, but it is much more in vogue here to argue that we should stop giving them free things that they don’t understand or value and just hold up the European end of the treaties that were signed. There are $100’s B of land claim actions before the courts.And, even cold hard cash does not seem to be the answer. The City of Calgary has tried to buy the Tsuut’ina First nation land on the SW edge of the city – ridiculously prime land, https://www.google.ca/maps/… – for something like 50 years. To his credit, the current Chief explained that the last proposal didn’t pass a band wide vote because (roughly) ‘my band understands land as an asset but sees little value in $2B.’I have no idea what will happen if Canadian courts start to return these lands to native bands. I can’t see it being a smooth transition.I don’t think you can argue that the track record of giving native people things that are not part of their culture has had much success.Its an ongoing clash of values.From my era, I can only think of two people who were able to take advantage of existing programs for native people, which would include free housing, free health care and free education up to what I believe was unlimited post-secondary education (one a police officer, one now a judge).Let’s be clear – good transportation, safe communities and healthy food weren’t given, although you could argue they were possibilities.The short answer is that Opportunity is only one half of the equation.Fred & GG showed up in NYC with a great education………..+ successful parents + a belief that the system would work for them + a Burning Desire to succeed.When the system hasn’t worked for you, you don’t have a Desire to be part of the system and the chances of you stepping up to have a Burning Desire to succeed are infinitesimal.If you think this doesn’t apply to white, lower income America, consider the culture of a Buffalo Bills game ( been there, this story 100% on the button, taken from this article http://grantland.com/featur… ): “Hey, is this the Hammer Lot?” I ask a guy in Ray-Ban Wayfarers. “I was told this was the best tailgating spot.”………I then ask her about what happened to David Gerken Jr. “Everyone here that age gets drunk and does something stupid,” she says, sighing, “so people weren’t surprised that that kid got drunk and did something stupid.”Gordon weighs in. “Nobody wants some kid to get drunk and drown in a fucking puddle, Jesus Christ. But we live in this shitty city.”Buffalo, as the saying goes, is a drinking town with a football problem, so when HBO’s Real Sports wanted to capture drunken revelry for a 2008 segment on binge drinking, they came to Ralph Wilson Stadium. What they filmed — the puking, the staggering lushes swaying their limbs — justified the city’s reputation. Most jarring about the segment, however, was the impotence of the police amid the sloshed tailgaters. An Erie Country sheriff’s deputy told Real Sports that “sheer numbers” made it impossible.For the people in the Hammer Lot, many of whom are in their late twenties, Sundays are a time to abandon responsibility.They’re conscious of what happened on November 15, 2012, but tailgating is a break from the reality of adulthood that work is forever. For the next 40 years or so, this is life.

    4. Twain Twain

      I hear where you’re coming from and believe it may be helpful to provide context on the technicalities because they’re the crux of the problem.Definition of Economics (via Wikipedia): “Economics is the social science that seeks to describe the factors which determine the production, distribution and consumption of goods and services.”Now, everyone here knows our hearts (humanity) also inform our choices as much as pure rationality of the numbers.Yet, if we look at the way tax is applied in economic models (please see images from Demand-Supply to Wage-Labor graphs to Laffer Curve to ISLM interest-savings-liquidity-of-money) we can see that heart is NOT FACTORED IN AT ALL.This 250+ years of inherited economic modeling (the technicalities) isn’t something the US government or any set of philanthropic well-off and well-meaning investors (including Fred) can change overnight.In fact, we’d have to go into Mathematics itself and whether it can measure and model the human heart and our subjective feelings about anything and everything, including what we define as “fair”or “proportionate” tax.For sure, once we’ve solved this problem collectively, the economic graphs won’t just be about the X-Y technicalities and tradeoffs of numbers, interest rates, production output, wage levels etc.Maybe the Z-axis is where the heart (social consideration) goes on the graph space.Maybe we evolve from the linear thinking that the linear lines in economics graphs limit us within.

      1. LaVonne Reimer

        Thanks for the detailed reply. I’m not disputing the relevance of economic theory nor the entrenched nature of our current systems. And I’m not arguing for going all soft on who gets to play in the economy or not. What I do see in the comments below is interpretations of the technicalities and economic theory that are skewed by how one answers the questions like why are people poor? Why is their participation in the economy declining as a relative measure? What do they deserve? It’s why great economists argue at length over cause and effect, stimulus and the like. So let’s just go back there please. Also, I love how the dialog has played out over today. I am one who tends to lurk and rarely comments. Not because I feel excluded. Just I usually only comment when I feel truly passionate about the subject. I have found this day to be enlightening and a little bit fun.

        1. Twain Twain

          Yes, :*), maybe Fred chose the topic to draw more people out to comment! Haha.To be sure, unless anyone on AVC is an economic researcher who’s spent the last decade or so interviewing a representative sample population of folks who span every economic level from below-poverty-line to the tech billionaires, then a lot of comments are anecdotes, biased opinions and unrepresentative of the 320 million people in the US.Maybe Fred can collaborate with Mike Zamansky and make a video featuring his code students from the less advantaged areas of NYC about how their parents are struggling to finance their education.That would make it more real and immediate and heart-felt than any abstractions about the technicalities of economics and tax.

        2. Anne Libby

          I’m glad you spoke up!

        3. Twain Twain

          A further piece of the puzzle. The “Why” questions can’t be and aren’t (yet) answered by existing economic models — regardless of whether it’s taxation, demand-supply, asymmetric information, risk management, price parity etc.The reason is because whilst the, “Who, What, When, Where and How” questions can be approximately answered (since that’s the socio-demographic data that’s been collected by economists and social researchers historically), we haven’t yet done a great job collecting the “Why”.Let’s list some examples of the “Who, What, When, Where and How”:WHO = “What’s your name?”, “How old are you?” , “Where do you live?” , “Are you male / female?”, “Are you married / single?”, “Are you university educated / HS educated”, “What is your monthly household income” etc.WHAT = “Which smartphone did you buy?”, “List the features of the smartphone you were hoping for”, “Which social network do you post your photos to?”, “Do you pay by cash / credit card/ debit card?” etc.WHERE = “Where were you born?”, “Which store did you buy your smartphone in?”, “Are you likelier to seek out more information about your smartphone in store, online or on mobile?” etc.WHEN = “When was the last time you upgraded your smartphone?”, “When’s the best time to contact you about our special brand promotion?” etc.HOW = “How many times have you visited and commented on this site in the last week?”, “How long did you stay on the site?”, “How many smartphones do you own?”, “How will you be paying for this product: cash / credit card / debit card” etc.Notice, there’s an absence of “Why” questions and answers.What we have from those “Who, What, When, Where and How” questions and answers are sets of data that the economists, social researchers and data scientists in techco’s can do probability CORRELATIONS and a whole bunch of other mathematics on.It’s well-known that correlations are not the same and equivalent to causation.Unfortunately, we’ve never collected the “WHY?” questions and answers in a systematically coherent and universal way — ever since the invention of Economics, Statistics and Mathematics themselves.Yet the “Why” is key to mathematically modeling causation and it gets to the very HEART of what makes us think, do and buy into products, relationships, content and more in the ways that we do.It’s not a trivial problem to solve because it also has implications for Machine Intelligence, Neuroscience, the global financial system and the future for global society (factoring in the added complexity not just of income disparity between human+human but also the employment dynamics which arise from human+machine).That specifically is what the likes of Steve Jurvetson the VC is referring to when he observed: “But how do we get from here to there? I don’t see a path. . .[That’s why] I think that power law of income inequality will only accelerate. Philanthropy takes some of that pressure valve off, but that’s about the only thing I can think of right now. . .Entrepreneurs love to solve problems and this is a big problem. This will kill us long before climate change if we don’t do it right.”With that, I’m signing off from AVC as an experiment for a month so more commentators like you, LaVonne, can emerge and share your gold nuggets because what Charlie Crystle proposed is a great idea.Regulars like me should make space for others to take up their seats at AVC bar.And, unlike Jurvetson, I do see a path from here to there so as well as tweaking my “Why” system, I’ll be heads-down, hands-on with my Internet of Things idea which will soon see me return to the Valley.Out-of-the-blue, someone doing a big project with a Top 10 techco spotted some of my “mad” product ideas online and got in touch.Random serendipity’s a great thing! As are comments from people who aren’t (yet) commenting on AVC regularly like you.———————————————————–@FakeGrimlock cracked me up on the ‘AVC – Publishing Dinosaur’ post with his comment: “WHO GOES TO ROCK SHOW WHEN ROCKERS REFUSE TO PLAY?” so I hope everyone will continue to jam, jazz and rock so I enjoy it! You’re all totes brilliant, insightful and [email protected]:disqus @lauriekalmanson:disqus @SubstrateUndertow:disqus @cammacrae:disqus @andyswan:disqus @donnawhite:disqus @wmoug:disqus @domainregistry:disqus @jameshrh:disqus @JLM:disqus @pointsnfigures:disqus @samedaydr:disqus @ccrystle:disqus @fredwilson:disqus @Brandon_Burns:disqus @JimHirshfield:disqus @jessbachman:disqus @ShanaC:disqus @stuartkmarvin:disqus @kwiqly:disqus @liad:disqus @aexm:disqus @annelibby:disqus @davewbaldwin:disqus @jasonpwright:disqus @mattamyers:disqus @mzagaja:disqus @panterosa:disqus @sigmaalgebra:disqus @creative_group:disqus

      2. ShanaC

        I thought the laffer curve has lots of problems

        1. Twain Twain

          All the economic models have lots of problems. They’re all modeling for rationality and things which are quantifiable rather than also explicitly for irrationality (our emotions) and the qualitative reasons we consume anything.It’s because mathematics hasn’t been able to model Daniel Kahneman’s System 1 yet. It deals better with System 2.Kahneman: “System 1 is fast, intuitive and emotional. System 2 is slower, more deliberative, and more logical. It is to do with orderly computations, rules and reasoning.Although System 2 believes itself to be where the action is, the automatic System 1 is the hero of the book. I describe System 1 as effortlessly originating impressions and feelings that are the main sources of the explicit beliefs and deliberate choices of System 2. The automatic operations of System 1 generate surprisingly complex patterns of ideas, but only slower System 2 can construct thoughts in an orderly series of steps. “There are also the probability fallacy issues to consider.This isn’t a trivial problem to solve and it also has implications for Machine Intelligence.

    5. ShanaC

      I’m so happy you’re the first commet. I can barely read politic post days

      1. LaVonne Reimer

        Cool it that helped hook you in! Loved the substance of your other comments throughout.

    1. DJL

      This is why everyone should pay attention to Trump’s tax plan. (And what was Romney’s plan.) The big corporations are holding tremendous assets overseas. Ease the tax rates and it comes back.

    2. Aviah Laor

      The issue is also where the money goes. Many western countries gov expenses approach 40%-50% of the GDP, high levels despite tech, yet services are always in decline.

  31. Mark_GB

    Read nearly every post but rarely ever comment. Compelled to say this is probably my all time favourite AVC post. Mark, small time UK entreprenuer

  32. ForDiscussion

    I couldn’t agree more with Fred… The post is first and foremost about the importance of good education and healthcare. How is it that this does not ring clear with more people here? For those of you with children, don’t you prioritize education for your kids? Of course you do. And, you make sacrifices… live in smaller apartments or houses so your children can go to the best schools, or send them to private school. I am guessing a quick poll of folks here would support this, no? And, if someone in your family has a health issue, little else will be more important to you than getting them the best care. Quality of life with good these services offers an opportunity to realize ones full potential. Expand this to the country level and the benefits come back in spades. The how is complicated, a better tax policy,and greater efficiencies in education and healthcare systems are need. But arguing about the merits of historic tax policies missed the point. Lots of smarts here. We can do better.

  33. Eric Satz

    This should be a discussion of education. Federal spending over the past 15 years has remained relatively flat, running between 7.2-7.6% of GDP, making the US one of the top 5 spenders per student in the world. The issue is not quantity, but quality. Go watch Waiting for Superman. It quickly captures the problem with public education in this country. The answer isn’t more money, it is better teachers with a system that rewards the best and eliminates the worst, the same way companies reward their best employees and fire those who don’t perform.

    1. andyswan

      Better parents would help too.

      1. Ana Milicevic

        Oh, I know! Standardized tests for parents! That worked for kids, right? :/

      2. Eric Satz

        btw, i’m in nashville, so not far from you. the deal you have at latin is ridiculous.

  34. Steve_Dodd

    It is a shame to see a comment based on helping people (those who actually contribute to all of that wealth others speak about) digress to one about stats which are primarily designed to twist opinion. It has been a long known fact that if we provide money for people to spend, and they spend it, the economy wins, hands down. The tax stats quoted in this discussion do not tell the entire story as they are based on “taxable income” not real income.But, I choose to believe that what Fred is discussing here is more about economic and society driven fundamentals, not just taxes and money as they are only a small part of the equation. The fact is that our society is lop sided from an overall wealth perspective. Because the “top end” is so “top heavy” with more money than can be spent, it is not being used to fuel economic growth through purchasing power (and everything that entails from goods, services, education, the health of society etc.). Our tax system has accomplished the exact opposite of wealth distribution, which was its original intention.I believe this is a far more complex issue than just taxes and that “trickle up” has more to do with giving those who fundamentally fuel the economy some breathing room. If they “spend”, we all win but unfortunately we’ve crushed their spending power so there is no more room for more than basic existence.And, I’ll just introduce one more concept that should be considered in all of these stats and numbers, we also suffer from what I’d like to call “trickle out” caused by so much leaving our leading economies (money, manufacturing etc.) that the consumer is being squeezed from both ends.Fred, I applaud you and Gotham Gal for accomplishing what you have. But more importantly, I applaud you for thinking about helping those who actually created that opportunity rather than hording it all for yourselves like the current tax system and popular business attitude encourages.And, you are not alone. Here is another interesting discussion from a leading VC discussing a similar point of view.https://www.linkedin.com/pu…Ordinary Americans are the coal that feeds our economic locomotive, and if Wall Street, banks, and large corporations are going to make their numbers and increase their wealth, they need this segment of the economy to become more economically strong and stable.

    1. JLM

      .I doubt I have ever disagreed more with any comment.JLMwww.themusingsofthebigredca…Commenting gently.

      1. Steve_Dodd

        I’d appreciate your perspective. This is obviously not a simple issue. What am I missing?

        1. JLM

          .I am commenting gently today.Normally, I would savage your comment.I am not to be taken seriously.JLMwww.themusingsofthebigredca…

          1. Steve_Dodd

            Thanks, I think! LOL!

    2. sigmaalgebra

      What you are saying is crude, rough, highly imprecise, and for any implemented policy irresponsible and dangerously so. Still, my guess is that, with more data, details, analysis, etc., basically you are on the right track.My rough analysis: The US economy was booming in the 1920s. Money was being created.How? Fractional reserve banking. E.g., you deposit $10 and the bank loaned out $9, which was deposited, and the bank loaned out $8, which was deposited and the bank loaned out $7. So, lots of money created.Sure, first cut, and basically, all that money created can cause inflation, e.g., in real estate prices.Then the stock market crashes, you lose, and you want your $10 back. The bank doesn’t have it. Then your role in the economy is zero. Then the other borrowers can’t pay back their loans, and the bank goes bust. A lot of people owe money they can’t hope to pay back.That is, we were in a credit economy, created a lot of money, had people borrow a lot of money, had a bubble burst, the money was destroyed, and people owed more than they could ever pay back.We went from 1929 to 1941, 12 years, that way. By analogy, the US economy was an auto engine with no oil in the crankcase.We got out of it in 90 days — suddenly everyone had 1-3 job offers. Why? Our sick economy spread, others got sick and started shooting at us. Then we took seriously responding. We stopped all the hand wringing about moral hazard, etc., printed the money, and fought and won the war.Then in 1945 people expected massive inflation. It didn’t happen. Why not? Because roughly the amount of money printed was about what the economy really needed just for full employment without inflation.From 1999 to 2008, we created/printed a lot of money. We got a lot of inflation, especially in real estate. Then suddenly a bubble burst and massive amounts of money were destroyed. Since 2008, Bernanke, etc. have tried to print enough money to keep us out of another 1929-1941 and have but, still, net, have not printed nearly enough money. So, we have a real unemployment rate of 5, 10, 20, 30, maybe 40%.So, we have a lot of people not producing, using the safety net and being tax takers instead of tax payers, and our economy is sick — Federal deficits due to too little economic activity so too little in taxes and too much for the safety net. Bummer.We have too many people at the top, comfortable in their $10 million houses, saying that printing money is sinful and would cause inflation and that the unemployed should just look for a job. But, too little money, too little spending, too few jobs.My analysis is also crude but, also, may be roughly correct. E.g., with all these years of 0.25% interest rates, we still don’t have much in inflation. Why? Haven’t yet printed enough money.Solution? In the 1930s there was a Betty Boop cartoon that knew: Print money. Now, print money, load up airplanes, fly across the US, and drop the money. Keep this up until the economy gets going again and inflation starts to be a problem again, raise interest rates, keep printing money, etc. until finally we are back to 4-5% interest rates, full employment, and 1-2% inflation. Then tax revenues will be much higher, and we will be able to pay off the deficit — but why bother? That is, the Treasury just borrows from the Fed. Basically, for the $19 trillion, just have the Fed print it, hand it to the Treasury, and declare the deficit paid off. Why not? The usual reason is that it would cause inflation. But now? Sure, we have solid evidence that that much money printing is about just what the economy needs. Or, taxing the $19 trillion out of the economy would slow the economy for no good reason. So, don’t do it.In the future, throttle the wild, uncontrolled creation of money, such creation as happened in the 1920s, 1999-2008, etc. So, raise reserve requirements on banks. Throttle the real estate bubbles. Throttle the boom and bust bubble cycle.Or, the booms create money and inflation and then a bust that destroys the money and, then, deflation. But for a credit economy, deflation is toxic, can ruin us for 12 years and for who know how long until we finally print the money that was destroyed and throttle the wild creation of more money. Simple.But we need much more in details. Lots of lives depend on it.

    3. SubstrateUndertow

      Yup – Wealth that does not go around as wages cannot come around again as sustainable profits.Overly concentrated wealth simply stalls the virtuous circle of production/consumption on which everyone ultimately depends. Economics is all about complex cyclical living-system interdependencies.This discussion really points out just how badly we lack an effective set of modern narratives, metaphor and language memes by which to meaningfully frame the organic living-system complexity-dynamic at the heart of contemporary network-effect economics.Concentration of wealth is not so much immoral as it is an unsustainable network-effect dynamic.

  35. sigmaalgebra

    For the US, Death Knocking at the DoorIMHO it’s just super tough to know what the future holds for the US, the US economy, and US citizens. Super tough.Sure, apparently throughout nearly all of history, including the worst times, somehow some bright, hard working, lucky people, with help of family, location, timing, whatever did well.There will be hard work, creativity, invention, and some successes.But for the whole? The news is not so good. E.g., one of the strongest facts about the US, its economy, and its citizens is the average number of children born per woman, and that’s so low that apparently people in the US of Western European descent are going extinct — and, same story and often worse in Western Europe.Finland? 1.5. So, from( 2.1 / 1.5 )**10 = 29in 10 generations, 29 Finns today will become 1. There stands to be lots of empty land and old buildings in Finland.Spain? Some parts, less than 1. Some whole villages are being deserted.So, in the US, the family trees too quickly turn into weak, sick, or dead limbs at a rate high enough that, in total, the whole population is going extinct.Extinction — for any population, the ultimate failure.Again, this extinction is not just for some of Darwin’s less fit but for the whole population. Sure, some couples will do well in family formation, but, still, there are so few such couples that in total the population is going down, down, down.Maybe if the US population shrinks down to 100 million, 50 million, 10 million, the ratio of land to people will be so good that the birth rate will improve. Maybe. But, with current conditions, in 20 or so generations, except for immigration, the US population will be cut in half or so.Immigration? From poor countries that are having plenty of babies to a rich country that isn’t. For people, the US is a demographic black hole where immigrants go to have their families die off.Here’s part of the situation: For a career, by age 45 need one or more of(1) independently wealthy for life,(2) in a rock solidly stable career as an employee in a high position in a large, very stable organization and already be nearly independently wealthy for life,(3) to own a business that is nicely profitable, is largely immune to changes in the economy and technology, with a very broad, diverse customer base, and has some strong barriers to entry and are already nearly independently wealthy for life and/or have close family members who can run the business well in case your health fails.Net, as an ordinary employee, f’get about it: If you have to change jobs after age 45, there is a big chance you will never be hired again. Resume accomplishments? Good experience? Good education? Good health? Good skills? Nope — they don’t count.Why? In simple terms, the US economy is very sick.Maybe the Amish have worked out something that is sustainable; on average, the US has not.In part, it’s an old story: There are come crucial assets that the accounting fails consider. Then, to keep up the assets that the accounting does consider, just neglect and rip off the assets the accounting does not consider.Can do this rip off in a life, a family, a company, and a country.E.g., for a company, get to be CEO with a compensation package tied to stock price, strongly neglect assets that don’t get considered by Wall Street, from the savings from those neglected assets, show high earnings, have the stock value increase, take the compensation, and resign! Leave a company rotten at its core, take the money, and run!E.g., in a family, have the wife pursue a career so strongly that the checking account, FICO score, and home furnishings all look good, the cars are late model, low mileage, so that everything looks good except that the marriage is having no children or does have 1-2 children but neglects their development.Their development? Okay, the children are in school, eat enough, etc., so are okay on the assets that get counted but emotionally, psychologically, socially, ethically, in self-esteem, self-image, motivation, that is, some assets not carefully considered, they are disasters.E.g., a lot of US mothers have felt so stressed over financial security that they have told their daughters never but never trust your financial security to a husband, instead, pursue your own career for your own financial security, and regard having children as justgiving up the best years of your life and your career to do low grade, menial scut work to raise some man’s children, just create another generation with no progress, and leave yourself financially vulnerable. And why would a mother tell her daughters such things? The mother was under a lot of financial insecurity. Can get such insecurity from any big recession or depression, war, technological change, economic change, etc.Add it up anyway you want: Net, in total, the US is failing, e.g., in many ways but in particular is going extinct — the ultimate failure.In terms any farmer or gardener would understand: For people, the US is just not fertile ground. Two hundred years ago? Yes. Today, with all the progress? No, not even close. The seed is falling on stony ground.Ultimate failure.

  36. Kirsten Lambertsen

    Ugh. You said something really positive and hopeful today. And we’ve all just devolved it into useless grand standing. I apologize for the part I’ve played.I’m going to stop wasting this valuable space (and my valuable time) debating with my good friend Andy Swan.Instead, I pledge to find a way to add some gamification to my kid’s homework, starting today. (He’s literally being bored to death at school this year.) If it works, I’ll offer to share it with his school (a public school).Action is everything.

  37. DJL

    All the more reason to like Donald Trump’s tax plan. The real golden goose is all of the money locked up overseas by huge corporations. (Not rich people.) Once you lower the corporate tax rate, that money comes back – along with a huge number of benefits – like jobs! Companies like GE, Google (“do no evil”) work through the double-Irish and keep billions overseas. This money then gets reinvested overseas. What could be more damaging to the US economy? All this extra money more than pays for the fact that the lower 50% (now 60%) will pay no income tax at all. So all those people can invest the money in their family.The entire “tax the rich” mantra that Obama and Democrats have used for years is complete nonsense and based on pure fantasy. You could double the tax on the top 2% and not make up the spending deficit for 200 years. It is insane. There simply is not enough money there to make a difference.No matter what you think about Trump, this is one of most realistic and and sound tax plans I’ve seen.

  38. iggyfanlo

    Bravo! Add in Universal Basic Income, and we’re on your way tot he U.S. we wall want

    1. DJL

      Uh, you mean the U.S. that you want. Please don’t include us people who value hard work and accomplishment.

      1. iggyfanlo

        DJLI agree with the value that hard work and accomplishment are important and admirable. But I think that UBI is confused with communism/socialism. Communism/socialism theoretically implemented a floor, but by simultaneously implementing a cap, it created severe social and economic problems (witness pre-1989 Soviet Union). But having UBI without a cap allows for greater creativity, hard work and accomplishment but with a knowledge that basic needs are taken care of and energies can be focused on the passions of individuals.I know I had my floor or UBI… it’s called great parents… My great wish is for everyone to have that luxury.

        1. DJL

          I understand your point. But it is pretty hard to consider UBI as not being the ultimate in socialism. How about we keep our families together so there are more great parents?

          1. iggyfanlo

            That’s a fantastic goal, but for those unfortunate children who don’t have great parents, I would venture the vast majority had no culpability… no why not give them that gift? We humans are an increasingly eusocial species… we cannot live without helping each other and working together…Or perhaps in others words, it does a village

  39. Cookie Marenco

    Thank you, Fred. Well said.

  40. Harry DeMott

    Dude, just sopped by to check out the conversation, and this has turned into an apocalyptic wasteland today. Feel like I’m watching the Maze Runner: Scorched Earth – either that or a split screen with Fox News on one side and CNBC on the other – Cormac McCarthy’s The Road on the iPad in the lap.I think you hit it right Fred: opportunity is all about having the educational background to take advantage of those opportunities that come your way – or those opportunities that you make. But people also have to have the attitudinal background to seek out or see those opportunities for what they are.the funny thing about the political and tax aspects of the conversation below are that both sides are essentially right. We do have income inequality and it is getting worse courtesy of technology and the law of large numbers – and it is equally true that those in the 1% (or even in the 0.1%) are paying a far higher % of taxes than everEveryone seems to agree that we should invest in education for the next generation – however, what has not been discussed here is just how that education is going to be delivered. Taxation and arguments thereon are essentially arguments on what services a government should provide the people it serves – so if we all agree that education is one of those services that should be provided – then we should make damn sure that the education provided prepares kids for the world we live in today.And that’s fundamentally the problem. The education system is not geared in the least to the skills necessary for modern life – so those “haves” or “1%” end up in private schools and go on to found Facebook and make billions. And good for them for doing so – and damn the system that doesn’t provide the same opportunity for our tax dollars.Why should we have to have “Girls who code”? As a father of two daughters in and around high school, I would be appalled if my daughters DIDN’T emerge from high school knowing the basics of coding – and yet most people will not learn these rudiments – and thus be ill prepared for adult life.Moving from an agrarian economy to an industrial economy to a knowledge based economy is a huge shift – prizing intellectual capital over physical capital. Education has not changed nearly enough to keep up with Moore’s law and the changes it has wrought.So for sure – let’s invest in the education of the next generation – but like any good stewards of capital – let’s make sure that we get a return on our investment – and hold those in charge accountable for the results we see.

  41. Roy McKearnan

    FredI would like learn more about how you and your family went through the ‘nada’ phase to where you are right now. I strongly believe your resolve to do better everyday is probably the secret but would like to know that from you .More than anything else, this has a trickling down effect on most of us entrepreneurs here

  42. Murtaugh

    This comment thread is depressing. Where is the empathy for those dealt lesser hands to play in life?

  43. Simone

    I get to learn so much from the ‘war of details’ (economic and political theories) in the comments every time Fred is actually trying to discuss a universal principle – in this article, access to good education for all.Universal, free, good education was possible in the past and I understand it still is in some Northern European countries.Good parenting implies today that parents have relatively high income to allow children’s access to expensive education that contributes to a child success mainly via networking (not necessarily that expensive schools equal high quality of education). This correlation between parents’ income and children opportunities is a sad handicap for children from a modest background. Going back to Fred’s post, someone with the power to act, should have an incentive to care. Same as ‘someone’ should have cared about e.g. offshoring jobs or rapid expansion of technology everywhere in the world. Sometime in the future this someone may not be able to ignore any longer the long term implications of limited access to free, quality education. But ‘later’ is not our favourite time for action.

  44. Simone Brunozzi

    As your business partner Albert says – base income for everybody. Simple as that.

  45. derekdj

    There’s one fundamental problem with what Fred suggests, that is we have a political party that is ideologically against “trickling up”, social safety nets, public assistance programs, let alone providing an equal playing field to raise up the poor and quickly dwindling middle class.What Fred suggests is essentially Eisenhower’s Great Society, the foundation that helped build the US’s burgeoning middle class. In a country that is concerned with progress and economic growth there’s two concepts that come into play; broken windows and social safety nets. If you’re a small business owner, home owner or even large corporation, you’re going to invest your money and resources into communities that are safe, with good infrastructure, schools and healthcare. None of this ever happens from private spending alone, one only has to look at NYC in the 70’s, the Bay Area and today’s Texas. Public spending, stabilizing communities in conjunction with private industry helps spur growth.But, in today’s economy where labor and profits are portable, those at the very top of the wealth chain aren’t concerned about domestic well being. They can and do lobby for an ideology that benefits and protects their accumulation of wealth without having to return any of it back to the nation. Why should the Koch brothers worry about the poor, when they’re profiting from selling dirty energy to China and selling low grade processed food products to Americans?

    1. DJL

      Unfortunately, this is the common myth perpetuated by the media and not by informed citizens. In fact, it is well documented that Eisenhower’s “Great Society” is a total failure at every level. Over 40 trillion dollars have been spent – and the number of people in poverty is exactly the same. Why would you want more of that?There have always been safety nets. And never once has a Republican advocated removing them. And yet the fiction persists. Mitt Romney gave more to charity than the Clintons, Obama, Pelosi, and AL Gore COMBINED. As as for the Koch brothers – they donate tens of millions of dollars to a ton of causes. They have created tens of thousands of jobs which feed families.The great giveaway is a myth to make rich, white Liberals feed good about themselves. It simply does not work in helping people, but instead keeps them in poverty. The Democrat party needs a permanent underclass of dependent voters or they will never win another election. That is why they support social programs – not to really help people. Or they would put their own money where their mouths are.

  46. LE

    we invest in educating their children (and them), we make sure they have the skills to get good jobs in the economy of the futureTo which I say, in the spirit of Caddyshack and Danny Noonan, “the world needs ditch diggers”. [1]Let me explain. You know how difficult it is to find a reliable good handyman or a person who can renovate your bathroom with no tsoris? Or a painter? Very difficult. It’s hit or miss (and forget any of those sites that claim to make it easier good luck with that). This push that everyone needs to be college educated is absurd (and I am not claiming you are saying that but that might be the way your sentence is read). Skills and education in the traditional sense doesn’t have the impact that it had back in the 50, 60, and 70’s.The world needs people that can do many things and making everyone think that college is essential is simply not the way to go. And as you know the current crop of college graduates (unlike the way it was when I graduated .. from memory) is doing by and large crappy jobs simply because there apparently is not enough white collar work to go around.The point being the solution is not more and better education with the idea that that education will lead to better outcomes. And it’s not “everyone learn to code” or “everyone get engineering degrees” which is simply lead to an oversupply either now or down the road (as happened at one point with nursing degrees).[1] https://www.youtube.com/wat

  47. Dave Pinsen

    I would like to propose another approach that I call “trickle up economics” in which we lower the tax and other burdens on the lower and middle class, we invest in educating their children (and them), we make sure they have the skills to get good jobs in the economy of the future, and we make sure they have access to things like good transportation, safe neighborhoods, healthy food, quality health care services, etc that are required for them to be fully functioning citizens in our society.This is why we need to vote for Hillary (and why we needed to vote for Obama).

    1. DJL

      So, Dave. How did all those things work out? Safe transportation (Amtrak), safe neighborhoods (Baltimore), healthy food, quality healthcare (loss of Doctor and plan due to Obamacare), etc. I think you are saying you need to vote for Donald Trump or Ted Cruz – the both want to give less money to the government and more to the people. The government could not run a hot dog stand and make a profit.

  48. Bipper Media

    Great post Fred! I would love to hear your story about how you got into the VC business? Was this through the job you had? Did you build a company and then sell it? etc…thanks again

  49. Brandon Burns

    I’ve been resisting the urge to comment when I don’t have a specifically strong opinion to voice, but I feel the need to say that I’m extremely happy to see this post.Also, #feelthebern

  50. sigmaalgebra

    Mostly now it’s not an economics problem and, instead, is just a banking, and central banking, problem in our credit economy.E.g., with our banking system and in our credit economy, we can (1) blow bubbles and (2) have the bubbles burst and suffer crashes. The main way to blow bubbles is for our fractional reserve banking system to lend too much money. Other approaches are various approaches to unregulated banking; part of that in the past was Fannie and Freddie, AIG, GE, CMOs, etc.That money creates inflation and bubbles. When the bubbles burst, the money the created is destroyed and we get deflation.For our credit economy, deflation is toxic: When there is a lending deal, both the borrower and the lender see a good deal; the borrower gets the cash, the lender gets a profit, and both see the way clear for the borrower to pay back the loan.Then with a crash and deflation, there’s no way the borrower can pay back the loan, and both the borrower and the lender are seriously hurt financially and, thus, so is the whole economy. E.g., people lose their jobs. Families are destroyed. People die.So, deflation is toxic for a credit economy.E.g., with deflation, we can go a decade or more, e.g., 1929 to 1941, and just stay sick, with people dying.Starting in the 1990s, we did it again, and the bubble burst in 2001 and again in 2008. Now we’ve gone from 2008 to 2015 with a sick economy.So, for a credit economy, can’t put up with deflation. So, can’t let a bubble burst destroy money. So, when a bubble bursts, have to replace the money; that’s the Fed’s job. Sorry ’bout that; basically have to print the money that was destroyed. So, before a bubble bursts, need to throttle the ability of fractional reserve banking to create money and blow bubbles.The excess money and inflation were created, before the bubble burst; the money printed after the bubble burst is just replacing what was destroyed so that we won’t suffer deflation.If we don’t blow bubbles, then we won’t have to print destroyed money.Blowing the bubble feels so good, like some drugs. After the bubble bursts feels so bad, like withdrawing from a drug habit.As inhttp://avc.com/2015/09/tric…the problem is serious, really serious, so serious thatFor the US, Death Knocking at the DoorThat death is from bubble blowing and more. The bubble blowing is what keeps us from having a stable economy with solid and sustainable growth. So, we suffer all the way to going extinct.

  51. howardlindzon

    I think leadership mostly likes the ‘trickle on’ economy. Its so damn complicated and broken up top. Lucky we have peeps like you trickling up

  52. howardlindzon

    glass half full. Only way to attack change. got to get people seeing the upside and help them leap

  53. John Dietl

    Are we really willing to do what it takes to provide “safe neighborhoods”?Do we want increased police presence? Increased arrests? Increased imprisonment? Increased executions? Increased scrutiny over minority communities which are the least safe? Increased disparity in racial outcomes in sentencing, imprisonment, and school expulsions?

  54. BILLY MAYS GHOST

    Sounds like collectivism. No thanks.

  55. W3R3C3 SPQR

    …SMELL MY FEET

  56. creative group

    This discussion so required the women to provide insight and prospective to this discussion.Thank you for LaVonne Reimer, Kirsten Lamberten, panterosa and Ana Milicevic to name a few whose contribution to this topic provided perspective. There are those among the contributors to this blog who continue to forget the years of nurturing that it took to get them to where they are currently at. The I was working since I was twelve bs only works when you are telling the story to others who are drunk.Everyone was incapaticated as babies. We all required help. Some help was better than others. Some family structures were intact and some had to overcome dysfunctional odds.Yeah you were raised by wolves we get it.(Edited to add two more great contributors to this topic, thanks Kirsten Lambertsen)

    1. Kirsten Lambertsen

      Thanks, man. Shout out to @panterosa:disqus @aexm:disqus

  57. sdewye

    The answer to all of our macroeconomic problems is a new and different monetary system. It would positively eliminate poverty–at no cost to anyone, without redistributing anything. At the same time, it would eliminate using taxes to fund government. (All government–federal, state, and local–would be funded forever at the current per capita rate as part of the functioning of the monetary system.) The market-based economy would become the self-regulating thing it is supposed to be in theory. Using fiscal or monetary policy to ‘manage’ it would not even be possible. If curious, see http://www.ajustsolution.com.

  58. Tom Labus

    this one is still going!

  59. LaMarEstaba

    I am part of the gig economy, and I do okay. But there are definitely policy steps we should take to ensure everyone has a job and safe place to live…healthcare and all that.

  60. arvandijk

    You are effectively describing capitalism (trickle down) vs socialism (trickle up). And that’s not a bad thing 😉

  61. PhoenicianRomans

    I would like to propose another approach that I call “trickle up economics” in which we lower the tax and other burdens on the lower and middle class, we invest in educating their children (and them), we make sure they have the skills to get good jobs in the economy of the future, and we make sure they have access to things like good transportation, safe neighborhoods, healthy food, quality health care services, etc that are required for them to be fully functioning citizens in our society.You’re forgetting three interrelated points:i, This is what passes for “socialism” in US political discourse, and anyone proposing this on a national stage will be equated with Stalinist Russia.ii, The elite – the 1, 0.1 or 0.01% who exist mostly as rentiers squatting on top of existing income flows – will see this as disruptive to their interests, which include keeping people fearful of the consequences of not doing what the “job-creators” want. Their interest is NOT in “doing better” – they have more than any one person could comfortably spend. Their interest is in “doing better than others”, which requires a sharp contrast with the rabble. They will therefore be against it.iii, The rabble – that is, nearly everyone – can be distracted by a narrative that those who will benefit most by these policies are the ones at the bottom. You know, THOSE people. This is just welfare for THOSE people. They are taking your money – which you are kept fearful about – and giving it to THOSE people, and this means that you will have to compete to keep your job – which you are kept fearful about – with THOSE people. They will therefore be led to be against it.

  62. Joel Natividad

    Govt is about redistribution alright. Check out how much states like Kentucky pays in federal taxes ($30B) and how much it spends ($71B) – https://en.wikipedia.org/wi…Isn’t govt society’s mechanism to manage and advance the common good? That allows jurisdictions who may not be as blessed, to partake and participate in a healthy economy?That is the main source of funding for “basic research” that will never be VC-funded, though essential to advance the state of the art that is the foundation of modern life?I’m not a big fan of govt inefficiencies myself, but making the statement “it produces nothing” is extreme.It’s disheartening that Fred’s blog post has resulted in some folks staking out ideological positions.Can’t we all agree that the current system isn’t working, and a pure market-based approach won’t work? If a VC can espouse for “investing” in people, accepting that not all “investments” are efficient and is the “price of making an investment”, why not?This brings to mind Tim O’Reilly’s guidance to startups – “Create More Value Than You Capture”https://www.youtube.com/wat…

  63. RZ2849

    “we lower the tax and other burdens on the lower and middle class”The lower and middle class largely don’t pay taxes.

  64. LE

    people blaming poverty wages on the poor instead of the employers willing to pay them.Employers are the problem. Oh geez. Yeah it’s all baked into what the market will pay for help.Let’s see what happens if the local average supermarket decides to pay the same wages as an upscale supermarket. I just bought some stuff from Whole Foods and paid a boatload for that food. Like $7 for watermelon chunks. They wanted $16 for some lox that I can buy at the other market for $6 for the same oz. I assume a nice part of that goes toward wages somewhere in the supply chain. Why do you think it’s so simple for a business whose customer base and market niche requires them to keep labor costs in check “the bad employers” can simply pay more and then pass that amount on to customers?Look, maybe out where you are the poor people are super special in some way and just need to be given the chance to prove themselves. But when I dealt in the past with poor people as employees what I found was that it was near impossible to get them to reliably show up for the job and not give us fucking excuses and bullshit and lying as to why they were late or missed work. I remember asking one guy for his social security number. His answer was “oh ok, use this one”. (He had several..) Well ok maybe all of this is the result of poverty. But that doesn’t mean that it will be fixed by increasing wages. It’s all baked into the upbringing and the neighborhood.Look, in the end I am sure you aren’t doing a blind test of hiring random poor people.Most likely you are in a position to cherry pick the cream of the poverty pot, right? But at a certain point the question is “how many of those cream exist”? How many people do you need to interview in order to hire one of these special hard working people living in poverty. 20 to 1? 30 to 1? It’s not 2 to 1, right? That you pay so well.

  65. pointsnfigures

    Flat tax takes away all the lobbying, all the cronyism, all the monkeying all the stuff everyone hates. Warren will pay more than his secretary. Increases the amount govt gets, while broadening the tax base, albeit at a much lower rate.

  66. pointsnfigures

    course, I referenced Mary Meeker too who had the same conclusions. You can also do the math yourself. There are plenty of places to find the data. Defense encompasses about 17% of the budget. Entitlements are the bulk of the budget, and growing out of control. Wait until the full effect of Obamacare hits. FDR is the one that instituted them, and LBJ grew the breadth of the programs. No President has stopped their growth.

  67. SubstrateUndertow

    Lets not kid ourselves here!Spending smarted is a must but that will almost certainly need to be combined with speeding more, if for no other reason than the costs incurred in analyzing and remediating the present failings.You have to get there from here !

  68. Kirsten Lambertsen

    Well, actually… not a red herring. (But pickled herring IS delish – ever tried it?) I supplied data to back my statementhttp://avc.com/2015/09/tric…This is a BYOD party.Thanks for playing!

  69. ShanaC

    i love pickled herring. i know a secret supply of the best in nyc too 🙂