Why does income inequality matter?

[msmith537]

@SmartAleq

See now, one of the things we could have done differently was to be underhanded and try to fuck them back–and there were several ways I came up with that we could have done just that. Problem is, though, that we’re both honest type people who have those pesky ethics things so we elected to just drop back, recoup and wait for the new administration. We’re very much hoping that Obama comes through with the $$ for alternative energy, because I’ll be all over our grant/loan proposals when it does. Shoot, I have most of it already written up just waiting for the go-ahead.

Well clearly you are trying to start an actual business, not run some sort of not-com vaporware scam where you create just enough of a company to get some funding and cash out to some sucker. You have also clearly experienced that when starting a business, there are decisions that you have to make that while not really illegal or unethical, will test your commitment to your ideals.
In any event, it seems a little silly to be talking about starting a ten million dollar business in the same paragraph you complain about “milling about in the underclass”.
You do touch on one of the biggest problems with income disparity, however. When too much wealth is concentrated in too few locations, more and more people have to borrow to get ahead. Things are ok as long as the credit is there, but as soon as lenders are unable or unwilling to borrow, the system collapses and anyone who doesn’t already have a pile in front of them loses out.

[Voyager]

@mazinger_z

As stated before, unemployment was low. I don’t have the statistics handy, and I’m not about to go digging through the BLS reports at my library, but I assume that technological gains have decreased demand for skilled labor. Unskilled labor demand increases, but since these people are interchangeable, and since skilled labor will compete for these jobs (skilled blue collar labor has less wage stickiness than white collar labor), wages stay the same or are lower.

There is lots of anecdotal evidence of engineers being forced into less skilled and lower paying jobs when they get laid off. Perhaps some of these are too old, in the eyes of employers, and perhaps some haven’t kept up, and perhaps some are skilled in dying areas, but their problems are not the result of technological improvements - unless you mean those which allow engineering work to be offshored.

I will disagree with your last sentence, but I’m too busy to dig up cites. I won’t disagree that they have accumulated more wealth, but that’s because they benefited the most from the tax cuts. But, then again, they did contribute the most to taxes so that makes sense that they receive the most benefit. And, since they own the operating capital (corporations and private institutions aside), since it’s easier to do business with less taxes, it makes more sense that they have increased profits, too. Is this fair? Yes, in the sense that for whatever reason, their operations and risk have been rewarded. But, it probably doesn’t help out societal goals of helping the needy. That is a more sustainable and realistic goal than overall wealth equality.

The growth in income is significantly greater than the decrease in their taxes alone (which wasn’t all that big as a percentage.) As for profits, the only difference you’d expect to see is if a tax reduction somehow made an investment’s ROI big enough to be worth funding. Given the uncertainty in predicting ROI, I doubt this happens much. Plus, since companies are measured on profits before taxes, there is an incentive to invest even in this case, since it will make your balance sheet look better and might improve your stock price.
By wealth equality, I think everyone means reducing the gap, not eliminating it, which is neither practical or desirable.

In terms of VC funding in tech start-ups, my experience is somewhat the same as SmartAleq’s. The way to decrease control of IP is to issue warrants in the business, and a hefty cut of the IPO. I used to do this in private practice all the time. It’s the most fair way to do it because these things are really risky. Most VCs don’t even break even at IPO. To say that there isn’t risk with those with the purse strings is a misnomer. This is also a long protracted process, especially for first-time inventors, who clearly have little negotiating leverage. If the tech is good enough, VCs will part with control if they control the IPO/manufacturing process. The problem, of course, is knowing what is good enough, and what the market wants. Why does Amazon.com succeed where pets.com fails (bullshit one-click ordering technology aside)? I think even pets.com has even had some sort of infrastructure that could be sold off at bankruptcy. IIRC, Amazon (and Yahoo?) didn’t even have light fixtures.

Okay then. Remember that Amazon’s success was far from a given - I had stock in it and read a lot of commentary laughing at its business model. Amazon sold relatively expensive and cheap to ship product as opposed to companies selling relatively cheap and expensive to ship bags of dog food.

I certainly wasn’t saying the current VC model is wrong or bad, just that it seemed you were claiming that SmartAleq’s experience was unusual. Since that’s not the case, no problem. I knew people working for startups during the bubble that made the pet food dot coms seem eminently reasonable.

[Voyager]

@gonzomax

We are laying off skilled workers. We are laying off educated workers. We are laying off all sectors. We do not need any kind of workers. The jobs are not here anymore. We thought that the financial institutions would thrive but they inflicted some serious blows to themselves by gross mismanagement. The result of course is workers not involved in those decisions are losing their jobs too.

There is still a need for those who can create and design new products. The demand may fluctuate with market conditions, but it won’t go away. In fact it is easier to come up with something that will sell if you are in the culture. While engineering does get outsourced, there are big advantages to a group being close together. I’ve worked in plenty of projects that have been geographically distributed and there are issues, even when everyone is in the US and not 12 timezones away. I’m not as gloomy as you - but I’m also old enough to be able to make it to retirement no matter what.

[Voyager]

@erislover

I guess I feel that we are, but you have to look at it from an employee’s point of view. Their incentive to invest in themselves cannot possibly improve by company loyalty decreasing or even disappearing altogether. And this impacts not just what they take out of school (I got a wonderful education from the same public institution that others barely walked out of knowing how to add) but what they will take out of their job.

Really? I think it’s quite the opposite. I started in the Bell System, so I know all about the promise of lifetime employment, and people who don’t trust their companies (for good reason) have a lot more incentive to invest in themselves. I’m a lot more outwardly focused than anyone in my organization, spend a lot of my free time catching up, and know just about everyone in my field worth knowing. Paradoxically, I think this has improved my job security, first because it makes me unique, and second because it is easier to hold on to a job when your management thinks you could find a new one in a second. I actually love my job and my company, and so far they’ve loved me, but nothing is for certain. And it is very easy to spend every second focused on one project after another and never grow - and then be surprised when you get dumped.

Working for a small company, I’ve noticed that it is extremely difficult to find people who are willing to stick their neck out and learn something even remotely outside of their field. At first I was a bit miffed at society, but now I’m beginning to think that these people are responding to the information they get: you can be dropped at any time. In other words, for them the potential rewards are not generally worth the additional work.

I’m a master at doing exactly this, and my VP has said that this may be my biggest asset to the company. But doing this takes a certain level of egotism and chutzbah, since you will need to be ready to take action in the new area without formal training and without enough time to really learn the stuff. It’s not something anyone can do, regardless of their intelligence. It is also risky, since you can easily fall on your face. I’d suspect it is a lot harder in a small company where you can’t find a niche as expert with some spare time to learn new things. That’s why I like large companies. I might write most of my papers at home, but it still takes time at work. Anyhow, don’t knock people who don’t stick their neck out - it isn’t a universally held talent, and if everyone were like me, nothing would get done around here.
(Which is not to say this has been some kind of explicit calculation on their part.)

This is Joel Sposky’s problem with the breadbasket of new programmers: he can’t tell the wheat from the chaff. But I feel like companies in general are asking too much without promising anything in return, and people respond to those incentives by standardizing and passing tests. Business gets exactly what it asks for; it, unreasonably, just doesn’t think it’s asking for this.
I agree. And I am 100% certain the human race, nevermind the population of any particular country, is up for the task, if the incentives are right.
[/QUOTE]

[erislover]

You and I are probably quite alike, Voyager. I’ve taken the same path. But I also work for a good company that does more or less care and is full of people who work hard. Only two people, besides the owners, have been with the company longer than I have. But I think it is this that made me so eager to do something more with myself. If I came in to the same grind every day, I don’t know whether I would really care to try. Certainly I wouldn’t care to try for their sake. And if I had an impression of the working world sucking because of that, well, not too much reason to try and improve myself, either, when I could spend more time playing video games. (Actually it is a wonder I ever made it out of my crappy life so many years ago. I was in exactly that boat.)

[msmith537]

@erislover

I guess I feel that we are, but you have to look at it from an employee’s point of view. Their incentive to invest in themselves cannot possibly improve by company loyalty decreasing or even disappearing altogether. And this impacts not just what they take out of school (I got a wonderful education from the same public institution that others barely walked out of knowing how to add) but what they will take out of their job. Working for a small company, I’ve noticed that it is extremely difficult to find people who are willing to stick their neck out and learn something even remotely outside of their field. At first I was a bit miffed at society, but now I’m beginning to think that these people are responding to the information they get: you can be dropped at any time. In other words, for them the potential rewards are not generally worth the additional work.

I’m sure it depends on the company, but my experience with small companies has been the complete opposite. From what I’ve experienced, people work for small companies because they want to be a big fish in a small pond, take risks and wear many different hats. They are often avoiding the pidgeonholeing you get in large companies where you need ten different signatures to get anything done.

It also depends on the people. Some people don’t need “incentives to invest in themselves”. Their incentive is they want to have a fulfilling career and to do that they continue to improve their skill set. They don’t stick around in jobs where they aren’t being challenged or appreciated. They also tend to not stay in the same company for 20 years, at least not without continuous growth. They go to work at companies that tend to reward taking risks and showing initiative.

My current employer, a Fortune 500 insurance company, is the exact opposite. People stay here for 20+ years and are proud of it. As I have found out the hard way, management frowns on showing initative or stepping outside of your narrowly defined (or ill-defined in my case) roll. The company is going through massive restructuring (layoffs) so while I am already interviewing after only 6 months on the job, most of the rest of the company just sits around like sheep waiting to see if the truck is taking them to the lambchop factory today. Many of them will probably find that 20 years experience (really 20x 1 year in some cases) of learning to navigate an incomprehensible beurocracy specific to this organization won’t help them in their new job.

[msmith537]

@SmartAleq

Another hint for you–lawyers and people who go to business school do not get into the ranks of the uber-rich elite. They are hired hands, who might do well, but who aren’t good enough to get invited to the parties.

Lawyers and MBAs often become partners in law firms, managing directors of investment banks or CEOs of large companies. They may not be Old Money or get paid like Derek Jeter from the Yankees (although some might), but if you don’t think they are wealthy, you need wealthy leasons my friend.

The problem is that as soon as you get a little bit of money, you want a whole lot more. A six figure salary seems like all the money in the world to a college grad, until you see how the $1 m a year partners in your law firm live. Of course, they are jealous of their I-banker neighbors and their $20 m bonuses while the I-bankers are sweating the Old Money vanDouchington estate on the hill where generations of vanDouchingtons have lived off of their steel industry wealth for the past century.