This is just an aside, but the claim of Zuckerberg as an example of social mobility is ridiculous. If anything, it reinforces the notion that the children of the top 1% have a much greater chance of getting there themselves. His parents were a psychiatrist and a dentist and he was sent to elite private schools followed by Harvard.
Gates actually falls in that category as well - extremely high income parents and elite prep schools prior to Harvard.
This is the concern - that the US continues to trend towards an economic system in which the overwhelming predictor of future success is the income level of your parents.
How much of the success is the income vs the genetics? If two parents are highly educated, value learning, and invest in their kids - then the kids will have both Nature and Nurture working for them.
I firmly believe that we are screwing the middle class with the education bubble right now, and that we need to get advanced education available to more who are capable of taking advantage.
Kickstarter and Indiegogo have made it possible to fund your idea without needing introductions to the team on Sandhill Road.
I like how you lump a psychiatrist, a dentist and a tech billionaire all in the “top 1%”.
Median American household income: $50,000
Average salary San Jose, CA (Silicon Valley) software engineer: $97,000
Dentist: $150,000
Psychiatrist: $180,000
Mark Zuckerburg: $1 plus whatever the interest and capital gains on $9 billion is
Um…on the Accounting and Finance 101 basis?
The average American has little to no revenue generating wealth. They exchange their labor for their income. If they are unable to provide their labor or whoever owns the source of their income becomes displeased with them, their income stops.
People who own wealth get their income from that wealth, not their labor - companies, real estate, dividends, and so on.
The reason capitalism works is because people work harder for things they own. They wouldn’t invent things or start businesses or fix up houses if they didn’t get to keep the proceeds.
And that’s the problem with inequality of wealth. You get a massive number of people who don’t give a shit because they have nothing vested in the system.
Firstly, you and I would both have hired sales teams, marketers etc. But very often there is one winner and that winner takes the prize and gets wealth that is wildly disproportionate to the value they create. In my example neither of us have done anything, personally, that is terrifically novel. I haven’t created for mankind anything very different to what existed already or to that which you also created. But there tends very often to be one or very few winners who scoop the pool.
When two runners race and one wins by a small margin, the winner may have put in a tiny percentage more effort. But one gets first prize which may be ten times the prize that goes to the runner up. Yet the winner hasn’t created ten times as much value. They both created the race; and neither has really created more value than the other. If the winner hadn’t even been there someone else would have won the race in a fractionally greater time. It’s just that much of life is winner takes all.
This is why your statement “You most certainly DID create more value” is irrelevant to my point. I never said that (say) Gates does not create more value. Indeed I’ve been at pains to say he probably did create more value. My point is that the wealth he has obtained is way, way, way out of proportion to the value he put in.
Secondly, note how you say [my emphasis] “You made a phone more popular. If the market wanted it, you hired sales teams, marketers, and built factories to crank out phones.”
You contradict yourself in a relevant sense, and you make my point for me. The sales teams, marketers, factory builders etc were not me. They were them. Yet I get the wealth from the value they create. Which is what I’ve been saying all along.
All of which almost certainly would have happened without him anyway. The entire internet is based on interoperability and as I understand it, it was created by government employees and academics. You are exactly right: without Gates all those would-be MSFT employees would have done something else for someone else. They would have spent their lives building factories and writing code and marketing and so on, which is actual value creation, regardless of Gates. Computers would still have happened, software would still have been written. Gates is not a necessary part of the equation. He may have been useful. He may have been immensely useful. I don’t accept for a moment that he added value that was so utterly vital that the wealth he obtained from the exercise was proportionate to the value he created.
I noticed you completely ignored this question earlier, but since you are offering a quantitative analysis, how, exactly, are you determining “value” here? If it’s “way out of proportion”, can you show us the math that lead you to that conclusion?
After this, I think we’ll move on to art that sells for $100M +. I mean, how long do the artist take to paint that picture anyway?
Every individual produces a certain amount. They should be free to distribute the resulting money how they see fit. If this results in income inequality it is because some people are voluntarily given more money than others, or some people are using violence (legal or illegal, directly or indirectly) to attain more money than others.
No I can’t show you the math. Let’s say MS puts out a product which earns $51M and that was worked on by Joe, Bob, Fred, Michael, Steve, Susan, Peter, Mary, Sally and Jane and also Bill, who did some work on the product and owns the company. Let’s say the first ten guys get $100k in salary each and Bill gets $50M. Can you show me the math that says the value Bill put into the product was $50M and the value they put in was $1M collectively?
Your art example falls flat on its face because only the artist worked on it. Now if the painting was a collective effort by Joe, Bob, Fred, Michael, Steve, Susan, Peter, Mary, Sally and Jane and also Bill, who did some work on the art and owns the production company, then you might have a good example. But then you know what I’d say about the situation, right?
Your misconception is that someone “just would have created it” and that the great wealth is somehow magically bestowed upon the inventor. It’s bestowed upon them because they formed the company and successfully grew it into something of value.
And the fact is, a lot of the people who helped them also became wealthy.
I think this is where we disagree then. If you create a company, and people buy the products, and you take it public - you deserve that wealth. If you are smart (as Gates was, and as is the style of the tech industry), you shared the wealth opportunity with your employees. They also get some wealth, a piece of the action, if you are smart. In doing so, you get better employee loyalty and performance. For an old-school example, check out Lincoln Electrics’s piece-rate compensation plan that is also tied to profit sharing.
I completely disagree with you that the employees of Microsoft would have created the same level of value if Microsoft would not have made it. Many of them might have created code that went noplace (Wordperfect for docs, or Lotus 123, or Wings, or DR DOS, or SCO, or other software firms that did not make it).
So Bill fronted $100k a year to Joe, Bob, Fred, Michael, Steve, Susan, Peter, Mary, Sally and Jane (That is $1 million per year). Call it $1.5 million once all other expenses are factored in. The time to develop was probably two years - so Bill risked $3 million. If a software firm, he also gave some shares to them.
I’ve never said anything about “deserve”. My point is that gazillionaires do not create all the wealth they have.
As to your latter point so do you think if Gates hadn’t descended from heaven and through sheer heroic knowledge and effort bestowed MS products on us, we’d still be typing on manual typewriters or something? It’s laughable. Someone was always going to fill that technological space.
The actual people who wrote the code etc were always going to write it for someone. Gates was just the owner who happened to get the lead in the market at the right time. If MSWord didn’t exist then something (like Wordperfect or whatever) would have filled the void and some other software house owner would have made it big. Wordprocessing software was always going to get written (indeed it pre-dates Gates) and there was always going to be a market leader in wordprocessing software.
There is no evidence at all that such software is a hundred billion dollars better due to Gates happening to be the guy that won the race to be the market leader.
Did you ever use Wordperfect before MS Word came along? It was crap, a pain, hard to deal with, and I happy it died the hard death it so deserved. Gates made billions because he made products people wanted. He rode his engineers hard to stay in front, and he rewarded them quite well when the succeeded. Same for Jobs, and many others. As the cheesy Go Daddy Superbowl commercial illustrated - lots of people have ideas, only a few have what it takes to bring it all to fruition.
People can write code, but without direction you get crap. Leadership matters, as I have seen time and again. Yes, there is also luck and connections. Go read The PayPal Wars to see what they went through to get to launch. Then tell me again that leadership does not have an impact. Look at how Apple was lost without Jobs.
The tech world is full of people who just wrote code, and that code is irrelevant today because they wrote the wrong code for the wrong market. Gates created value in office productivity, and in all of the various other companies that sprung up around him. 40k people will be at Microsoft Convergence in a couple of weeks, many of them are small IT shops that leverage Microsoft technology to solve the problems of their client companies. There are thousands of those firms - just for Microsoft products. Oracle (Larry Ellison) spawned the same industry - Oracle consulting shops. Each of those is another group of people making and earning money.
You say “someone” would have written the code, but “who”? And not just write the code, but recognize the potential opportunity that code could have. And then continue to grow the business into a worldwide phenomenon.
You are right that it didn’t matter that Bill Gates was the one who did it. But how do you know anyone would have if there was no opportunity to reap the benefits?
And the point that you are missing is that one of the main reasons Gates was able to do what he did was because he had access to a computer lab at an early age. THAT is where the issue of wealth inequality comes into play. Not the end result where he’s a billionaire and most people aren’t. The worlds smartest kid growing up in some ghetto or backwater trailer park would not have access to the computer lab and discarded computer parts Gates and Paul Allen were able to spend their early years toying with at the prestigious Lakeside School.
Just want to state that I learned PASCAL in small town school in Oklahoma. Three of us in that class have gone onto the tech industry. Two of us play the startups, the third is on the services side. All of us were in the middle class. I agree completely - we HAVE to make sure that kids get a chance to find their passion and where they can grow.
I suspect this is not a great surprise to a lot of people looking at the society from outside. Fwiw, the more interesting questions might be how did it become so skewered, and why is this such a surprise to the population experiencing it…
This doesn’t look at the crazy hours American employees work, or the heathcare situation (as was), or vacation entitlement, or unemployment entitlement, etc, etc. All of that stuff is also way, way off the scale compared to, say, western Europe (and I’d guess the Anglosphere and most of first world Asia)
It’s also interesting to consider how government plans to reduce the debt - LOL, the entire political class is shameless.
I think you can get part of the answer by reading some of the “pro-inequality” comments made by Americans in this thread. I’ll guess many of those commenters are themselves not even rich.
A comparison of American and Western European values may be informative. 49% of Americans agree with the statement, “Our people are not perfect, but our culture is superior to others;” but only 27% of French agree. 69% of Spaniards think the state’s social safety net is more important than individual freedom from the state; this is almost reversed in America.
I certainly wasn’t trying to lump anybody into anything. It’s a simple fact: the salaries of a psychiatrist and a dentist, combined, are very close to, if not in, in the top 1% of income (which is roughly $350k or so). Your own list proves that.
Folks were throwing out Zuckerberg and Gates as examples of social mobility. I’m sorry, but moving from the top 2% to the top 1% is not mobility, no matter how astronomical the very very top is.
ETA: I’ll add that your comments about ensuring access to education and enrichment are exactly on point. Bill Gates is Bill Gates because of both his natural gifts but also the environment he was raised in. Sadly, that environment is entirely lacking for large swaths of America, and there doesn’t seem to be much enthusiasm behind the goal of fixing that.
Sure I used Word Perfect back then. It was crappy. So was MSWord back then. As I understand it WP was preferred by many advanced users. It lost out because MS leveraged its control of the OS market to cause its word processing software to become the defacto standard, is all. Gates didn’t create the value that there is in having a defacto standard.
And no one is saying that code writers don’t need leadership. The question is whether the leader creates **all **the value they are rewarded for.
You keep going on about wrong code that didn’t sell. It’s irrelevant unless Gates really has the magic touch that means the code he commissions is always the right code. I accept that would be of immense value, if it were true but do you have any evidence for that proposition? In fact, MS has put out a lot of truly shitty stuff, is my understanding. It’s just that once Gates got a virtual lock on the OS market, he could hire the best, still make a boatload of mistakes, and still come out ahead.
Nobody least of all me has said that entrepreneurs should not reap benefits (speaking of strawmen). What I have said is that I don’t think Gates (or pretty much any other of the mega-wealthy) “create all that wealth” they have.
What the hell are you talking about “that I am missing”? I haven’t been talking about anything to do with this aspect of the topic, let alone missed anything.