Just to be clear: I agree with your point on focusing on creating value. And after I read your comment, I agree that none of the startups in the articles are truly creating that much value.
However, is it that simple to qualify when you're creating value? If I had read the article before HN's comments, I'd have thought the startup is cool (admittedly trivial and silly, but we have a lot of those nowadays), rather than parasitic. I'd have thought it's just a clever hack in helping more efficient distribution - in the true spirit of capitalism. Yes, while it would shift the value to rich people, it also free up the rich people's time, so they (rich people) can create more value. Assuming that rich people is richer because society decides that their time is more valuable, they can create more value in the same amount of times of some other poorer people.
Of course, that might be not morally justifiable. But creating value and being morally correct is orthogonal.
I'm not living in SF the SV area, but I've a few friends there. Every time they talked to me about startup ideas, I've always felt off about those ideas. I kept telling myself that trivial value is still value, and potentially if it can help many people, the net gain would still be large. How do I know where to draw the line?
Edit: it seems like quite a few people have problem with my post, so let me rephrase the middle paragraph a bit:
Ignoring the mentioning of rich/ poor, parking spot is a commodity. And just like other commodity in life, everyone values it differently. What's wrong in letting people paying for what they think it's worth for? The rich will always have advantage in buying commodity, and that's a fundamental issue in our society, but that's an entirely separate problem to fix, and the solution isn't telling people to stop producing commodity, or distributing them.
In this specific case of parking lot, it's bad either way because a private company is skimming profit from public space.
Not sure why you were downvoted; I think it's a great question.
I don't think it's that hard if you look at it systemically. If the problem is parking, none of the JerkTech startups are solving the problem, they're just shifting the burden. And they're probably making the problem worse, as now they've created a financial incentive for people to occupy hot parking spaces so they can get paid to leave.
On the other hand, if the problem is "rich people don't have enough time", then there are plenty of ways to solve that. Indeed, Uber basically set out to solve the problem of "rich people don't have enough time and/or feel important enough". Thus the fleet of fancy cars. That created value.
I think solving small problems across a large number of people is fine. Look at entertainment. There are plenty of video games that created value one quarter at a time. Or today, $0.99 per. It's not like it cures cancer, but as long as people end up having fun and are happier, that seems fine to me. However, in my view that excludes operations like Las Vegas and Zynga, which create very little fun and a lot of compulsion, which they then use to extract cash.
I think the hypothesis that rich people generate more value given more time is... unproven. There are plenty of people who are rich because of their cash-extraction skills, not their value-generation skills. Many of them do it in ways that are negative sum. For those people, the best thing you could do for the world is to waste their time.
Sweetch and Money Parking induce their users to violate San Francisco's Police Code, which forbids the buying and selling of public on-street parking. The city says it will pursue Sweetch and Money Parking under California's Unfair Competition Law for facilitating these violations.
In the case of ReservationHop, I'm not an attorney but I'd venture a guess that there are a number of potential causes of action that a restaurant might be able to claim, including violations of unfair competition law.
Now, a lot of folks will complain that many of these laws and regulations are counterproductive and stifle innovation. They may be right, but a point that is often overlooked in discussions about startups that are intentionally violating the law is that you can be against foolish laws and regulations without being for the willful violation of them.
Yes, while it would shift the value to rich people, it also free up the rich people's time, so they (rich people) can create more value.
Have trickle down economics ever been proven to actually work?
Either way, my problem is this: millionaires don't care about running one-off, unique restaurants. They'd want to set up a chain, or something similarly profitable. So if we go with this "redirecting money to rich people" idea, all the restaurants that struggle to get by close and get replaced with McDonalds. Great.
McDonalds doesn't require reservation and nobody would pay for a reservation to McDonalds. In order for the scheme to work, you need to have restaurant that is so popular that people would pay premium just to get a reservation there. That's not McDonalds, that's usually the same one-off, unique restaurant, and rich people would seem to care well enough for it if they agree to pay just to get into the door. So there's no threat to such restaurants in it, and it mere existence denies such threat.
Now, I think it's a very dick move for other reasons - because if it succeeds it would actually make the world a worse place - restaurants just start charging for reservations or stop taking ones remotely. They make a couple of bucks but everybody else suffers a lot. It's despicable.
I don't mean that as anything to do with reservations. Just that because there are savings to be made in an industry doesn't mean they should be. The result for the restaurant industry would be endless identical restaurants with the same ingredients.
That conclusion appears to be wrong, as there is a very large and consistent demand for non-identical restaurants with varied ingredients. Of course, investing in McDonalds or even Subway would probably be safer than in an unique restaurant, but that did not lead to the extinction of varied unique restaurants and probably never will.
"in the true spirit of capitalism. Yes, while it would shift the value to rich people, it also free up the rich people's time, so they (rich people) can create more value."
"Stones were made to be hewn and to construct castles; therefore my lord has a magnificent castle; for the greatest baron in the province ought to be the best lodged."
"Assuming that rich people is richer because society decides that their time is more valuable, they can create more value in the same amount of times of some other poorer people."
are you fucking kidding me? why would you assume that?
Economic theory. A rich person earns more money per hour than a poor person (by definition). Money is a representation of value (by definition). In Economics, value earned is at least proportional (if not equal) to value created. So a rich person creates more value in the same amount of time than a poor person. Their time is literally more valuable.
In theory there's no difference between theory and practice. In practice, there is.
Naive theory is the worst kind. The behavioural assumptions of NC econ are naive in this dimension. Infinite rationality is easily affordable in theory. In reality, both the approximation of it is expensive, and the hack/exploitation of its failure to materialize are profound.
A rich person earns more money per hour than a poor person (by definition).
No, that's a person with "high hourly earned income".
Making wealth is not the only way to get rich. For most of human history it has not even been the most common. Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation. Naturally wealth had a bad reputation. - Paul Graham
We're not living "a few centuries ago", however. And there is also an important qualifying word "rapidly". One doesn't have to become rich overnight to be rich now.
As for the "bad reputation", given that most things that were written and otherwise arrived to us were composed by people of some means at least (excluding monks, etc. which are harder to classify by modern standards) - really poor folks had high illiteracy rates, little spare time to create records that we could read, and not many people that cared for their opinions enough to create permanent record of them. So, given that, how exactly Paul Graham knows what reputation the wealth had amongst folks who weren't wealthy?
One study says that only a third of the Forbes 400 started from a middle-class background or lower. [1] A third of them had purely inherited wealth. [2] And when I look around at the rich people I'm familiar with, they aren't enormously more productive than their peers. Often it was a right-place, right-time thing. If Bill Gates had been born 50 years earlier, for example, it's hard to imagine him becoming a zillionaire.
So I think it's an enormous error to confuse wealth with creating lots of value per hour. Wealthy just means you control a lot of capital.
The third is not a majority. The first link says 57% were not born wealthy.
>>> And when I look around at the rich people I'm familiar with
Anecdote is not data. I don't know where you live, but depending on it and your social circle, the minuscule number (compared to the whole nation) of people you can observe personally would be very different.
>>> Often it was a right-place, right-time thing.
It was. So what? Nobody claims billionaires are superhuman. The claim is only they deliver (or delivered) value. Did they come into position of being able to deliver the value by luck? Maybe. So what? If you per chance found a deposit of gold or discovered very valuable technology - they fact chance played role in it does not change the price of gold or the usability of technology.
>>> If Bill Gates had been born 50 years earlier, for example, it's hard to imagine him becoming a zillionaire.
Sure, so that guy everybody mentions would be called "John Walles" instead, it's no different.
So maybe you should read all the way to the the last line of my post, which explains my exact point: someone currently being a billionaire doesn't mean that they will make the world much better if they spend an hour on one thing versus another.
Ergo, kourt's point stands: somebody being wealthy is not any sort of proof that they can create more value per hour. Which is the (wrong) notion that NhanN was promoting.
If you're going to jump into a conversation in the middle, please try to pay attention to what's going on. It's frustrating to have to connect the dots for you.
>>> somebody being wealthy is not any sort of proof
It's not a proof, but it's higher probability, by the virtue that in majority of cases being reach means producing value (at least in the past, as your own links prove) - and if the person produced a lot of value in the past, there's a big chance he'll continue doing that.
As for the question if it makes the world better - it's a very subjective matter, everybody has their own "better". I think it'd be better if Uber would disrupt taxi cartels, but taxi cartels and medallion investors think it'd be worse.
>>> It's frustrating to have to connect the dots for you.
That may be because the dots are connected by non-sequiturs. E.g., the question if somebody was lucky or not bears no relation to the question if he produces or ever produced value. A quote of how one could rapidly become rich three hundred years ago has little connection to how the majority of rich people slowly become rich now. Etc, etc.
You have demonstrated no such probability. You're just assuming your conclusion.
> That may be because the dots are connected by non-sequiturs.
That you don't understand something doesn't mean it doesn't make sense.
You seem to be going out of your way here to be an argumentative dick, so unless you've got some actual contribution to make, I think you've passed my tolerance for JGGIFT discussion.
Economic theory. A rich person earns more money per hour than a poor person (by definition). Money is a representation of value (by definition). In Economics, value earned is at least proportional (if not equal) to value created. So a rich person creates more value in the same amount of time than a poor person. Their time is literally more valuable.
The assumption of a rich person being rich because of the value created may sound plausible, but is empirically falsified for at least the USA and Germany. Statistically, a rich person is rich because she inherited.
Sorry for the late reply, I didn't recognize your answer earlier. Is there some comment notification option on hn that I missed?
The forbes article you quoted is a bit problematic because the data given are voluntary answers. In studies like these there always is the problem of a potentially skewed return rate: Given a return rate of 30%, what is the wealth inheritance quota of the other 70%? My speculation would be that someone who is proud of the fruit of his own hard work (the quoted local business owner) is more likely to answer such a survey. On the other hand some rich person who found a clever way to unofficially inherit parts of the own wealth while avoiding the correlating taxes won't answer such a survey.
At least the second of the blogs.wsj.com studies is self-selected, too. I couldn't find the papers for the two other quotes because the sources were too vague.
It's better to use data sources like tax income of states. IMHO even better is the concept of social mobility (the wikipedia article is quite good: http://en.wikipedia.org/wiki/Social_mobility), as it also encompasses factors like the parents' social contacts and educational chances. The studies cited there all use official, non-self-selected data and sometimes even proper longitudinal studies. In the results presented there the USA has the the lowest intergenerational vertical social mobility of all researched OECD countries (i.v.s.m. means the probability of a child to get into a higher (or lower) class than its parents live in).
Yes, social mobility is not the same as inherited wealth, because it's a result of a combination of inheritance and other factors. On the plus side, the empirical data it's based on is of comparibly high quality. The problem is that monetary (as opposed to social etc.) wealth is pretty hard to measure even given government data. In Germany for example the data for people having income is more or less 100% available. But the richer you are, the less probable it is for you to have income: The money then comes from capital gains, rent etc. These are way harder to measure, e.g. the capital gains could get collected by a corporation and not an individual. The corporations money only gets tapped on demand (=saved inside the corporation hull until retirement). And the child of the owner has a counsulting contract with that company. Legally, thats not inheritance at all, but practically it pretty much is.
Actually it doesn't matter how they became rich. A rich person creates value by investing their wealth in economic activity, which generates interest as a payment back to them "earned" by their investment.
If our example rich person does absolutely nothing except put their money in a bank, and yet earns more per hour in interest payments than our poor person, that rich person is still creating more value in the same amount of time.
Like I said, this is just the theory. One reason why we should never allow ourselves to be governed by economists ;)
For the purposes of the question, which is about the economic effects of saving rich people time, I believe that's incorrect. Rich people leaving money in the bank are creating more wealth (for them), but they are not applying their time in a way that creates value. Thus there's no economic benefit in saving the time of the idle rich.
I just wanted to highlight the theory that a sufficiently rich person sitting on their arse picking their nose is (in economic theory) generating more economic value than (for instance) a medical professional saving people's lives all day.
I first bumped into the absurdity of this when working on a coding contract in 1998. The project was doomed and would never complete let alone achieve its goals, we all knew it, but we'd all turn up, write our middle-layer business functions according to the project plan, and got paid a fortune for it because Y2K had pushed prices up. I met a nurse who had spent her day elbow-deep in other people's misfortune and was earning about 1/10th of what I was. The stark comparison made me rethink a lot of economics 101.
I'm really curious how you think this will solve anything. Children of wealthy parents don't have to inherit anything to have advantages that most poor children could only dream of. That is, unless you somehow abolish parents using their wealth to give their kids access to better healthcare, higher-quality and healthier foods, better educations, opportunities for travel, exposure to culture, and on and on. And if you say that yes, that is what you mean and all those things are to be taken care of by the state, then you've moved beyond even the socialized policies of the Nordic countries. Not that that's a bad thing, but it would be a little disingenuous to call it capitalism.
If you abolished inheritance (that is, taxed it at 100%) you would certainly reduce a number of capitalism's structural problems. That's why even many wealthy people are in favor of large inheritance taxes. [1]
That would also provide you a lot of tax revenue for improving education and social services. Or you could just pay it out as a negative income tax or a basic income.
That wouldn't solve every problem of capitalism, but so what? No improvement makes everything perfect, but that's not a reason to argue against improvements.
Unlikely. Most people are solidly in adulthood before their parents die; at that point, their economic destiny is generally fixed. A high inheritance tax won't harm the kids' middle-class status.
really are you sure a few years ago my parents worked out that in the UK my sister and I would have to immediately find over $130,000 in cash to pay for death duty.
We could just do it but we have far more savings than the majority of the uk population.
I don't know how death duty works there, but if it's like here, I presume that means you would be inheriting something asset worth a lot more than $130,000 but didn't want to sell it. Thus you would end up richer than before, just with an illiquid asset. In which case it would not harm your middle-class status.
Often the illiquid assets being inherited have great sentimental value to the inheritor. Also, inheritees would get around the tax by hiding assets, gifting them before death, putting them in holding companies, etc. After all, what's the worst the government can do if they're caught?
I believe that's a reasonable assumption for this discussion (that's not my personal opinion, btw). But trying to justify that statement will start a flame war and distract from the topic, so let me try to say that sentence in another way:
Parking spot is a commodity. And just like other commodity in life, everyone values it differently. What's wrong in letting people paying for what they think it's worth for? The rich will always have advantage in buying commodity, and that's a fundamental issue in our society, but that's an entirely separate problem to fix, and the solution isn't telling people to stop producing commodity.
In this specific case of parking lot, it's bad either way because a private company is skimming profit from public space.
"The rich will always have advantage in buying commodity, and that's a fundamental issue in our society, but that's an entirely separate problem to fix"
its not at all an entirely separate problem to fix. society should not be structured so that rich people are always, fundamentally advantaged in every dimension. we should not commoditize everything.
Indeed we should not commoditize everything, but parking spots and restaurant reservations don't seem to me like great examples of things so important or fundamental that we should try hard to decouple them from money.
public parking spaces on city-owned land are part of the commons and are supplied as a public benefit by the city to the whole community. that is very much an example of things that should not be commoditized, or else we end up with yet another tragedy of the commons.
restaurant reservations are not a public benefit, and I think its fine to commoditize them IF AND ONLY IF it can be done in a way that is fair to the restaurants and the customers. we shouldn't tolerate a service that is based on lying to restaurants.
However, is it that simple to qualify when you're creating value? If I had read the article before HN's comments, I'd have thought the startup is cool (admittedly trivial and silly, but we have a lot of those nowadays), rather than parasitic. I'd have thought it's just a clever hack in helping more efficient distribution - in the true spirit of capitalism. Yes, while it would shift the value to rich people, it also free up the rich people's time, so they (rich people) can create more value. Assuming that rich people is richer because society decides that their time is more valuable, they can create more value in the same amount of times of some other poorer people.
Of course, that might be not morally justifiable. But creating value and being morally correct is orthogonal.
I'm not living in SF the SV area, but I've a few friends there. Every time they talked to me about startup ideas, I've always felt off about those ideas. I kept telling myself that trivial value is still value, and potentially if it can help many people, the net gain would still be large. How do I know where to draw the line?
Edit: it seems like quite a few people have problem with my post, so let me rephrase the middle paragraph a bit:
Ignoring the mentioning of rich/ poor, parking spot is a commodity. And just like other commodity in life, everyone values it differently. What's wrong in letting people paying for what they think it's worth for? The rich will always have advantage in buying commodity, and that's a fundamental issue in our society, but that's an entirely separate problem to fix, and the solution isn't telling people to stop producing commodity, or distributing them. In this specific case of parking lot, it's bad either way because a private company is skimming profit from public space.