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The Refragmentation

852 pointsby ursover 9 years ago

103 comments

gotchangeover 9 years ago
A very fascinating article that I have truly enjoyed reading minus the last 10 or so paragraphs where Paul expressed it unequivocally that he&#x27;s a status-quo warrior and that nothing can be done to remedy the problem of the ever widening gap of income inequality in the global economy and more specifically in the US and that it&#x27;s a &quot;natural&quot; product of the state of affairs in our world. A classical example of « the naturalistic fallacy » [0].<p>Also, it&#x27;s also worrying the degree of infatuation or affection for the early 20th century years with central planning of the economy, crony capitalism, robber barons, an all-powerful big government, centralization and concentration of power at the hands of a few, regimented and uniformed society ...etc.<p>No leftie is arguing or longing for any of these policies. What we&#x27;re looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.<p>That&#x27;s how we envision the solution to fix this problem of &quot;fragmentation&quot; as he put when it exactly is more like a &quot;segregation&quot; problem but not based on racial or cultural factors but on economic one into two completely separate societies between the haves and have-nots, between the 1% and the 99% of the population and it&#x27;s getting worse and uglier by the day.<p>[0]: <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Naturalistic_fallacy" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Naturalistic_fallacy</a>
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rsyncover 9 years ago
&quot;Obviously the spread of computing power was a precondition for the rise of startups.&quot;<p>If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.[1]<p>One thing I think you will notice is the manufacturers plaques attached to every little piece of equipment in the submarine ... every one of them the plaque of some tiny little supplier that you have <i>never heard of</i>. Some little Detroit Turbine Supply Company or American Radio Corporation of Maryland ...<p>Seriously - every single component has a label on it from a firm you have never, ever heard of.<p>I guess I don&#x27;t have a deep knowledge of military procurement and supply circa 1942 (or whenever) but it sure looks like startups to me ...<p>[1] <a href="http:&#x2F;&#x2F;www.maritime.org&#x2F;tour&#x2F;index.php" rel="nofollow">http:&#x2F;&#x2F;www.maritime.org&#x2F;tour&#x2F;index.php</a>
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jusben1369over 9 years ago
The thing to me is Silicon Valley is the place in the US that still looks like that post WWII America. Large monopolies like Google, Apple and FB utilizing fantastic profits and paying amazing perks to employees. Everyone working in and on the same mission acting as a social fabric tying people together. Glass Door and the Internet in general replacing trade unions by helping balance a knowledge imbalance so that workers can maximize their benefits.<p>The irony of regularly lecturing the rest of the country and world about what the future holds from the position as a final bastion on unassailable US hegemony of last century (2nd only to Hollywood?) perplexes me.
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pcmaffeyover 9 years ago
&quot;And as long as it&#x27;s possible to get rich by creating wealth, the default tendency will be for economic inequality to increase.&quot;<p>This seems to be the ontological point of his essay, which reads as a loosey historical narrative manufactured to defend his belief that the fight against &quot;economic inequality&quot; will undermine innovation by disincentivizing the next Zuckerberg.<p>But it misses the underlying point of wealth creation: if more people create more wealth, then naturally, there should be less poverty. Adding value to the world makes the pie bigger. The real issue is distribution. Our current economic model distributes wealth as a factor of capital, which is hoarded at the top and systematically protected. It would be silly to say that the top 1% of the population, which owns more than the rest of the 99% combined, creates more wealth or is more productive than everyone else on the planet. They just have a monopoly on capital.
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msvanover 9 years ago
I think this is one of the most interesting essays he&#x27;s written in a while, and it echoes many of my own thoughts better than I could express them.<p>PG seems to argue that the fragmentation of society is a question of efficiency. A natural effect of this is that the world will become more cut-throat. Efficient systems turn hyper-competitive, as seen in university admissions, startups, financial markets. It seems to me that too much &quot;liquidity&quot; mostly causes burnout, depression, dumb risk-taking, and a few really successful winners. Tech is really guilty of this phenomenon by tending to produce one winner for every thousand losers.<p>In many ways the 20th century was an anomaly -- the wars were more violent, the rate of growth was faster, the cultural shifts were huge and multifaceted -- but we still use tend to see it as a normal state of things. A hundred years into the future we&#x27;ll be looking at an entirely different world and consider it normal.
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wblover 9 years ago
I think this essay ignores the impact of the Civil Rights Movement and feminism in undermining the 1950s. The world of the 1950&#x27;s wasn&#x27;t one where women could work, despite that having been the case since the 1920&#x27;s. It was also the world in which Brown v. Board of Ed. lead to federal troops being deployed in the south to safeguard the rights of citizens, and ultimately lead to the Freedom Summer which radicalized a lot of New Leftists. So perhaps the 1950&#x27;s was a world based on certain kinds of exclusions, that once removed, broke down.
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rmasonover 9 years ago
PG you may want to rethink the idea of networks of cooperating companies work better than a single big company. Just finished reading Ashlee Vance&#x27;s biography of Elon Musk.<p>Real revelation for this Michigan boy was that at both Tesla and SpaceX Musk had failures trying to use existing supplier networks. By doing a lot of manufacturing in house Musk not only realized cost and time savings but gained an agility and nimbleness that blew away his competitors. Granted Musk didn&#x27;t need to manufacture his own raw materials. But in doing his own manufacturing he was able to gain a further competitive edge by making his products better. For example the Big 3&#x27;s supplier networks add to their sloth and look-alike products.
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Alex3917over 9 years ago
Great essay. I would quibble with the following though:<p>&gt; [Technology] means the variation in the amount of wealth people can create has not only been increasing, but accelerating.<p>The problem with this is that success = ability * motivation * opportunity. There&#x27;s no question that technology is increasing ability. But it&#x27;s less clear what&#x27;s happening with opportunity.<p>Networks tend to be winner-take-all, which means that technology actually depletes opportunity at the same time as it increase ability. Which I think means that we&#x27;re actually going toward integration, not fragmentation. Only this time we don&#x27;t need another WWII to integrate society because it&#x27;s already happening, it&#x27;s just less visible.<p>E.g. the vast majority of the traditional media is controlled by the same six corporations. And to quote Fred Wilson&#x27;s 2015 wrap up, &quot;10 of the top 12 mobile apps are owned by Apple, Facebook, and Google.&quot;<p>There&#x27;s no question that individuals are way more free than they were in 1950 or whatever. But I think it&#x27;s more analogous to free-as-in-beer, as opposed to free-as-in-speech.
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lscover 9 years ago
&gt;The ultimate way to get market price is to work for yourself, by starting your own company.<p>see... this (and the implication that people working at large companies get less than market rate) doesn&#x27;t ring true for me. The real &quot;free markets&quot; of labor, like craigslist and the rent-a-coder marketplaces pay about 20% of what you get if you go through a recruiter who has &quot;a relationship&quot; with a large company... for doing essentially the same thing, and from what I&#x27;ve seen, contractor pay (after the middleman takes his cut) is about the same as base pay (for the same work) at a large company.<p>Now, when I started contracting in the early aughts, base pay was basically the same as total comp, and so I subtracted the payroll taxes and health insurance and could pretty much directly compare contract vs salary wages. In the early aughts, it was pretty unusual for individual contributors to get big bonuses or even stock refreshes (or that was my perception; I was considerably less senor at the time.)<p>But, from what I&#x27;ve seen, if you are full-time at a big company here, you get a pretty significant bump now, in terms of bonuses and stock.<p>My point here is just that my experience has been that when I&#x27;m selling my labor, the further I move away from &quot;the free market for labor&quot; and the closer I get to a system of rank and privilege as pg describes 20th century corporations, the more I get paid.
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three14over 9 years ago
One taboo on HN is pointing out that even though software <i>is</i> a huge lever, there&#x27;s no sign of the end of raw human labor. In every industry you can point to jobs being lost to automation, yet you still need many, many people in health care, or construction, or manufacturing, or police, or teaching, or mining, or working for utilities, etc. It&#x27;s <i>complete speculation</i> to suggest that jobs are disappearing faster than they could be replaced. It&#x27;s not surprising that people who used to work for big auto manufacturers can&#x27;t continue to work for those same manufacturers, and that says nothing about whether those same people could find low-skill jobs in other industries, nor whether investment in sectors other than GM or Ford could create more unskilled jobs.<p>If there was a larger market for unskilled labor, the competition for workers would tend to drive up wages and lower inequality.
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dkuralover 9 years ago
A counter-example, and a different framework to think about equality: Most of Scandinavia has fragmentation, freedom of expression, and genuine diversity of choice, diversity of lifestyle, of opinion, but it also has more equality. One can have a more equal society without raising taxes or massive wealth distribution. This is possible if a society ensures that its children receive adequate and equal access to healthcare and education in their earliest years, in other words, an equal start. This is where the US fails the most compared to Europe. Property taxes are the levers through the poor are priced out of good school districts. It acts as the algorithm through which self-segregation is made possible, often resulting in racial segregation as well. Education being a local affair ensures the wealthy and the educated have no incentive to fight for the rights of the poor and the ignorant, since they can get their fix via simply moving to a better neighborhood, leaving the others behind. Not so in Europe. The leaders of the community put pressure on officials and the system, and as the one system improves, so does the lot of all.A similar dynamic is true in healthcare as well, in Europe: A single-payer system ensures all get the same healthcare, and suddenly fixing it becomes a problem of upper-classes as well, but the entire society benefits from the improved system.<p>PG&#x27;s post is self-justifying and self-interested.<p>Here&#x27;s an alternative explanation of fragmentation: It is the sign of a new industry. It&#x27;ll consolidate once it matures. Look at semiconductor &amp; hardware consolidation. Google, Amazon, Apple, MSFT, Intel, Oracle etc. absorb a lot of software biz over time. There used to be hundreds of car companies, dozens of aircraft manufacturers.
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apiover 9 years ago
I think there&#x27;s a fascinating flip side to what PG calls the refragmentation: the decline of counterculture both materially and in terms of relevance.<p>PG talks about his yearning for something outside the mainstream bubble. For decades the major source for that was the various mostly youth oriented subcultures that made up what we called the counterculture. Hippies, punks, goths, 80s rockers, hip hop, ravers, geek fandom, and a dozen smaller variants provided something that... well... wasn&#x27;t &quot;red delicious.&quot;<p>Those things still exist but today they feel more like just another culture in the marketplace. They no longer seem to have such potency or power. Maybe I&#x27;m just old but I get the strong sense this is true for young people too. Today young people might visit these little subcultures as tourists, but when I grew up they were a much bigger deal. They became your identity. They were almost religious, like modern mystery cults.<p>Rave was probably the last great youth counterculture. I haven&#x27;t noticed another one unless you count the &quot;hipster&quot; artisan living thing and that seems more like a lifestyle brand than a true counterculture of the postwar music+fashion+drugs+ideas mold.<p>In retrospect those subcultures were more like alternative conformity molds. They didn&#x27;t really alter the underlying zeitgeist of conformity but just provided another channel on the cultural TV dial. Still I do mourn them a bit. Their greatest legacy was as artistic and musical crucibles and nothing has really replaced them. I don&#x27;t think it&#x27;s a coincidence that there has been no major musical innovation since the 90s. There has been good music but it all follows stylistic currents set down before 2000. Rave gave us techno and all its various sub-forms and... that&#x27;s apparently the end of history music-wise.<p>Edit: would be curious to hear a counterpoint on the last item. Show me a musical style that is as much of a step change today as hip hop and electro in the 80s or drum and bass in the 90s or acid rock in the 60s.
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bitwizeover 9 years ago
Graham leaves out one crucial thing:<p>A more equal society is a better society. Always. This was borne out in the work of Wilkinson and Pickett for their book <i>The Spirit Level</i>.<p>You may have less technology. You may have less innovation. Tough. Creating more of what Earl Dunovant called &quot;cute and useful monkey tricks with energy and matter&quot; at the expense of your fellow man and the planet does not put you ahead, and societies should not seek to optimize for monkey tricks over the betterment of their fellow man.<p>Inequality (along with the environment) may be <i>the</i> defining issue of the twenty-first century, and once recognition of inequality and its consequences goes mainstream, laissez-faire capitalism will join royalism in the dustbin of discredited political philosophies.
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jakozaurover 9 years ago
Great article, but it misses two triggers:<p>1. Globalization. A lot of manual labour was tied to USA, not so ago to local labour. In last 20-30 years a lot of things get imported from China or outsourced to India.<p>2. Software (briefly mentioned in original article). Previous technology advancement can give someone leverage, but software got probably the largest leverage in humankind history. Single program can automate what used to do an army of employees. Natural monopolies are common thanks to network effect, economy of scale or technological advances.<p>Winner takes all market (e.g. Apple has almost all profits in smartphone market, Android got some market share, alternatives are niches).
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chrispeelover 9 years ago
It seems to me that much of the fragmentation that the post discusses is just economic specialization, which we should encourage (see Adam Smith). I do think it is reasonable that one limits the &#x27;fragmentation&#x27;, i.e. that one puts negative feedback in the economic loop in the form of a progressive tax. Negative feedback is used everywhere in electronics and even sometimes by the Fed to control interest rates. Even so, many economists [1] throw up their hand and say macro economics is too tough and we just can&#x27;t predict how it will work. This seems like nonsense to my engineer brain; I think that a sharply progressive tax with an accompanying universal basic income is the right way to <i>encourage</i> economic diversity.<p>[1] I get my impression of economists from EconTalk by Russ Roberts.
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AstroChimpHamover 9 years ago
PG started off talking about the fragmentation in politics, and I wish he would have wrapped that back in at the end. It feels to me like the two party system in the US is dying now as the oligopolistic system of just a few big companies began dying in the 90s.<p>The two party political system is more unnatural than the few-big-companies system. Libertarians and Evangelicals agree on very little yet they&#x27;ve been voting for the same party for years. Proponents of extreme reform on the other side don&#x27;t want to vote for a moderate candidate. A Trump vs Clinton election is going to leave too many people without a candidate and force the beginning of the end of the two party system.
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sceover 9 years ago
Regarding income inequality, I recommend listening to some of the speeches&#x2F;debates with Bernie Sanders.<p>E.g. he argues that the greatest receiver of welfare in the US is the wal-Mart family, because they get even richer paying their workers so little that the workers have to live on welfare. (In other words the welfare is &quot;paying&quot; the workers so that Wal-Mart don&#x27;t have to.) He proposes to rise the minimum wage.<p><a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=eYFueqv0iIQ" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=eYFueqv0iIQ</a>
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r2dnbover 9 years ago
Interesting article, the insight of PG is much valuable but I find his attempt to depict a fragmentation model unconvincing. While this model captures the dynamics at play, it fails to explain them and to introduce an easier way to act on them while this is the point of a model. This sums up an extensive feeling about this article.<p>I&#x27;d like to react to three of my picks. First of all PG conveys with its fragmentation model that long careers in the same company are a thing of the past. I explain an opposite view and support that new companies will have people work longer for them (10 to 20 years) by hiring them much earlier, for much cheaper. This challenges the dynamics presented by PG.<p><a href="http:&#x2F;&#x2F;read.reddy.today&#x2F;read&#x2F;7&#x2F;hire-high-school-graduates-instead-of-college-graduates" rel="nofollow">http:&#x2F;&#x2F;read.reddy.today&#x2F;read&#x2F;7&#x2F;hire-high-school-graduates-in...</a><p>The second thing is that I found intriguing that PG write &quot;Your prestige was the prestige of the institution you belonged to&quot; talking about college graduates, as if it was a thing of the past and thus presenting himself as a hacker of this system while YC overly represents Stanford alumnis. But this is a paradox that I found with YC in general. They position themselves as a hacker of the system while they really are a cornerstone of this system in many regards.<p>Therefore - third thing - it wasn&#x27;t a surprise for me to find in the last paragraph that PG envisages centralization as a better alternative and with a certain nostalgy thinks that the effects of this &quot;defragmentation&quot; need to be contained. Overall, PG thinks like a wealthy man who made his fortune in the late 90s and who has the graduate syndrom - about which I will write momentarily. His insight is certainly valuable but his proposition isn&#x27;t disruptive.
cronjobberover 9 years ago
He takes the easy way out on the war theory: It would be awful, of course, so let&#x27;s not think about it.<p>But think about it. Would historical WWII be possible in today&#x27;s United States? Introduce the draft and send current US population off to die in Europe? I think you&#x27;d see intense levels of political resistance, draft dodging and desertion in the field. Fragmentation means you probably can&#x27;t unite the whole country to die for... whatever anymore.
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coldteaover 9 years ago
Amazing how he can describe the post-war era (an era, including the 50s and 60s remembered as a period of ever increasing prosperity, integration, intellectual achievements, scientific and technical progress, powerful movements of social change, job security, every generation having it better than before, etc.) as some kind of &quot;equality disaster&quot;.<p>Yeah, we&#x27;re moving past it now, but towards something that resembles the pre-war years of robber barons, crony capitalism, and maybe even share-cropping (in modern form) more than some glorious future.
markbnjover 9 years ago
I&#x27;m older than Mr. Graham, and grew up in the heart of the period he focuses on. I think this is one of the smartest essays about the economic and cultural after-effects of the great wars of the 20th century, and all the accompanying and related social phenomena, that I have ever read.
Animatsover 9 years ago
He quotes Rockefeller in 1989: <i>&quot;The day of combination is here to stay.&quot;</i><p>The amusing thing is that he writes this just as the era of fragmentation in the US is coming to a close. We have one winner in search - Google. We have one winner in social - Facebook. We&#x27;re down to a few retail Internet providers, a few big banks, a few big airlines, a few telecom companies, and a few commercial real estate owners per city. There would be more concentration in those sectors without regulatory pushback.
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Zigurdover 9 years ago
It&#x27;s a very American take on fragmentation and cohesion. The idea of wars creating cohesion is only valid in big, powerful, victorious nations. In Germany, defeat resulted in the rejection of nationalism. If you don&#x27;t live in a great and powerful nation, or if you don&#x27;t think your nation is as great as advertised, you might not miss cohesion on national lines.<p>Good thing PG is a realist: <i>&quot;we&#x27;d be better off thinking about how to mitigate its consequences.&quot;</i><p>But even that point of view is reactionary. What mitigation is good? The kind that preserves mass-market politics as practiced in America? The kind that can take us to war with some distant threat that is not even a blip in terms of national survival? The kind that tells us cops and doctors and uniformly good and competent? Surely not the kind that says &quot;What&#x27;s good for GM (or Disney, or Goldman Sachs) is good for America.&quot;<p>Skeptical, questioning, objective people with loyalty only to those we can personally qualify will be people less likely to be taken for a ride by the kinds of cynical mass-market charlatans it takes to harness national cohesion.<p>The weakest part of this article is about taxation and the wealth gap: If taxes rates are weakly related to wealth creation, the spectre of wealth-destroying taxation remains a boogie man, if a popular one these days.
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harryhover 9 years ago
This essay is excellent, but I wonder a bit about the fact that it focused on the US only. On a global scale I think that experiences are continuing to compress and will continue to do so for at least a few generations.<p>If this is true, does it invalidate pg&#x27;s overall thesis? I&#x27;m not sure. Interesting to think about though.
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bawanaover 9 years ago
Refragmentation is the result of the fungibility of money. When we wanted to make things (stuff people could use to make war or make a better life) money was spent to make those things. Like the water cycle, money would be transformed from one phase into another so that work could be accomplished that directly impacted humanity. But we have short circuited that cycle. Now money is being used directly to make more money through financial instruments. People and the stuff that people want are excluded from this new cycle. (Most people anyway) Money goes directly from its production right back into wagers on the production of more money. For example, the currency markets dwarf the actual gdp of the planet.<p>To restore balance to the ecology of our civilization, we need to make money a tool for humans. By requiring the use of money only for investment in real stuff, we will deflate the artificial valuations that dwarf the real value of human labor. We will necessarily find ways to restore value to human endeavors and new ways to measure the value of human efforts. More people will thus have value to our civilization on this planet. Otherwise, the refragmentation will continue until it reaches its logical conclusion - a scary picture for humanity.
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csenseover 9 years ago
Interesting to see that PG agrees with something I&#x27;ve been saying here for a long time, about the role of globalization in economic inequality [1] [2] [3].<p>Of course I grew up in the Rust Belt, where the average person used to be able to make a good living with a high school education in the steel or automotive industry, but now most of the factories are idle, rusting eye-sores, most of the ambitious, talented kids want to go somewhere else -- <i>anywhere</i> else -- and the closest thing to a growth industry is health care for the folks who earned a good retirement during the glory days and are starting to get old.<p>[1] <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9868017" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9868017</a><p>[2] <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9560872" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9560872</a><p>[3] <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=7152378" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=7152378</a>
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CloudYellerover 9 years ago
I think Paul missed an opportunity to identify economies of <i>scope</i>, not scale, as a major lever in advancement.<p>He says:<p>&gt; Incumbents faced new competitors as (a) markets went global and (b) technical innovation started to trump economies of scale, turning size from an asset into a liability<p>It&#x27;s true that innovation trumps economy of scale, but that&#x27;s because economy of scale doesn&#x27;t really apply to software; all software is instantly scalable to 100% of humans at virtually 0 cost, more or less.<p>But the software giants have something up their sleeve that no startups have: economies of <i>scope</i>. Look at Shazam&#x2F;SoundHound. Google has released Play SoundSearch which leverages all of their internal AI research + advanced computational and human resources that aren&#x27;t available to the public. In effect, a megacorp can replace an entire <i>company</i> by saying &quot;Let&#x27;s throw 15 engineers on it for a year and see what happens.&quot; And if a startup pops up that seems promising? They buy it out, adding it to their trophy wall of innovations they can leverage. And megacorp employees can easily stand on the shoulders of giants; instead of stackoverflow, megacorp employees can search through massive archives of top-notch, fully-working code that was designed by some of the best engineers on Earth.<p>More and more, it takes something truly amazing for a startup to grow enough to compete with a megacorp. Not only does your technology have to be profound, but you need to withstand aggressive buyout deals from several megacorps.
leotover 9 years ago
&quot;A physicist who chose physics over Wall Street in 1990 was making a sacrifice that a physicist in 1960 wasn&#x27;t.&quot;<p>The trouble is the proportion of those who have the highest technological leverage and are engaged in rent-seeking rather than wealth creation. The 1960s physicist was creating wealth they couldn&#x27;t capture, while the 1990s physicist was capturing wealth they didn&#x27;t create. If physicists (and other Ivey grads) all only chose wealth-creation, we&#x27;d see far less inequality (at least outside the Bay Area). The trouble is the pull of the largely zero-sum (or negative-sum) world of finance, which more than startups has increased the pressure to &quot;make your fortune&quot;. Inequality begets more inequality, because when half my cohort is suddenly making 10x more than me, there are real consequences to my own social, personal, and civic life.<p>This is all on top of the relatively novel wealth imperative introduced by the progress of biotech. It used to be that, beyond a certain point, money only really conferred social status (and even then, only within a certain peer group): if I don&#x27;t care about status within that particular group, then why should I care about making more than (say) $200k&#x2F;year? Except now, with the rapid development of fancy unaffordable therapies and med-tech devices, having an extra 10 million $ lying around can have a much larger impact on quality of life than it did even a couple decades ago. And then there&#x27;s the significant (if small) possibility that, if Kurzweil + co. end up being right, a bit more wealth might mean being able to &quot;live long enough to live forever&quot;.<p>Current tax policy is heavily skewed in favor of the already wealthy, and wealth inequality is currently orders of magnitude worse than income inequality. So rather than just asking everyone to get comfortable with it, why not do something to actually address it? We need to make significant adjustments to (a) strongly discourage rent-seeking, (b) encourage those with the highest technological leverage to make the most of their talents, knowledge, and access, and (c) greatly increase everyone&#x27;s ability to create, capture, and save wealth.
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basicplus2over 9 years ago
Imagine a society of four people, one grows rice for four, one grows chickens for four one grows vegetables for four, one builds and maintains houses for four there is no profit and there is equality.<p>If one person is profiting... or in our world a person is profiting more than the others it is inequality in action.<p>Progressive tax rates are the simplest solution.<p>The thinking that one persons work is more important than another&#x27;s is a dangerous and slippery slope.
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h2077545over 9 years ago
&gt; The effects of World War II were both economic and social. Economically, it decreased variation in income. Like all modern armed forces, America&#x27;s were socialist economically. From each according to his ability, to each according to his need. More or less. Higher ranking members of the military got more (as higher ranking members of socialist societies always do), but what they got was fixed according to their rank. And the flattening effect wasn&#x27;t limited to those under arms, because the US economy was conscripted too. Between 1942 and 1945 all wages were set by the National War Labor Board. Like the military, they defaulted to flatness. And this national standardization of wages was so pervasive that its effects could still be seen years after the war ended. [1]<p>Just another article by a hypocrite capitalist talking about &quot;socialism&quot; without a clue.
skybrianover 9 years ago
This history is pretty well-written as far as it goes, but it&#x27;s centered on the white American male worker&#x27;s experience, and particularly on the sort of person who had a chance at being a manager.<p>It barely mentions women and doesn&#x27;t mention the civil rights movement at all. A majority of Americans living at the time had no chance at being an executive at a large corporation.<p>There has never been a time when all workers were treated equally.
dreamdu5tover 9 years ago
Unlike Paul&#x27;s other essays, this one did not offer me any insight. WWII bringing the country together, America becoming less culturally conformative since WWII, etc... these are obvious trends that most everyone is aware of, and which people talk about quite often.
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mbrockover 9 years ago
David Chapman wrote an interesting set of posts about fragmentation from the perspective of culture, counterculture, and subcultures.<p><a href="http:&#x2F;&#x2F;meaningness.com&#x2F;meaningness-history" rel="nofollow">http:&#x2F;&#x2F;meaningness.com&#x2F;meaningness-history</a><p>That&#x27;s the intro for a series of posts listed at the bottom.<p>Here&#x27;s a &quot;gigantic chart that explains everything&quot;: <a href="http:&#x2F;&#x2F;meaningness.com&#x2F;modes-chart" rel="nofollow">http:&#x2F;&#x2F;meaningness.com&#x2F;modes-chart</a><p>Here&#x27;s &quot;systems of meaning all in flames&quot;: <a href="http:&#x2F;&#x2F;meaningness.com&#x2F;systems-crisis-breakdown" rel="nofollow">http:&#x2F;&#x2F;meaningness.com&#x2F;systems-crisis-breakdown</a>
vasilipupkinover 9 years ago
I enjoyed the essay, but I completely disagree that the 1945-2000 represented years when America was most cohesive. That seems like a perfunctory reading of history. American history of mid 20th century is that of strife, disagreement, political battles, fights for race and gender equality, etc. America today seems much more cohesive to me than ever before. Does a New Yorker today have more or less in common with someone from Texas or Alabama than 50 years ago ? I think way more. So, I think the rest of the esay falls down like a colossus with feet of clay, once you demolish the central thesis of cohesion
wtbobover 9 years ago
Very interesting, particularly the idea that the rise in inequality is a ntural consequence of fairness. I wonder, then, if those opposing the rise in inequality aren&#x27;t like King Canute ordering the tide to recede.
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WoodenChairover 9 years ago
&gt; It would be insane to go to war just to induce more national unity.<p>It&#x27;s probably out of the scope of this essay, but we have in fact been at war for 14 years. It&#x27;s not at the scale of WW2, but it&#x27;s war none the less. I think it has not induced national unity due to precisely what Graham describes - fragmentation in society.
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roemeover 9 years ago
If this piqued your interest; or left you wondering, I&#x27;d recommend reading Piketty&#x27;s &quot;Capital in the twenty-first Century&quot;.<p>As Graham&#x27;s piece concludes; if we don&#x27;t do <i>something</i>, we&#x27;ll get into trouble.<p>- <i>« Terrific work causes us to think of additional questions. »</i>
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orthoganolover 9 years ago
If people enjoy reading history like this, I highly recommend Jeffrey Frieden&#x27;s &quot;Global Capitalism: It&#x27;s Fall and Rise in the Twentieth Century.&quot;<p>Overall, I think a dimension perhaps lacking in PG&#x27;s otherwise fantastic writeup is that this &#x27;fragmentation&#x27; opens up a space of freedom. I mean, our society basically interpolates individuals (younger generations at least) as existential subjects - no set path on what we should do with our lives, no God, no religion, we have to make our own meaning. Painful and difficult, but a source of freedom either way. Today I can travel as a digital nomad, found a startup, work for a rocketship, work for a stable, high paying company, freelance, or switch careers altogether. I get to choose who I associate with and date and marry (and it&#x27;s even acceptable to not marry), while choosing from a much larger, more open pool, and for the most part, I get to choose who I am. Not everyone has access to this freedom, but it&#x27;s still the point in human history when the largest number of people have ever had access to this freedom.
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twelvechairsover 9 years ago
This is a great article which raises many important issues, but I&#x27;d like to offer a couple of criticisms.<p>I&#x27;m not convinced &#x27;fragmentation&#x27; is the best way to summarise these trends. Small businesses are in fact still losing ground and importance to larger businesses (see for example <a href="http:&#x2F;&#x2F;www.businessweek.com&#x2F;smallbiz&#x2F;running_small_business&#x2F;Small%20Business%20GDP.png" rel="nofollow">http:&#x2F;&#x2F;www.businessweek.com&#x2F;smallbiz&#x2F;running_small_business&#x2F;...</a>). What definitely is happening compared to the mid 20th C is that the economy is more complex and thus there are more diverse industries represented in government, and also the lifespan of large companies is reduced, particularly as technology advances faster now than ever before. Jobs are also becoming ever more centralised in cities due to their increased need for direct communication which hasn&#x27;t been countered by technology yet (despite a minor trend for remote work). These are the major trends for me.<p>I&#x27;d also add that while networks of smaller companies may have some innovation advantage over large companies (depending on the industry and innovation), many are focussed on industries where they can reduce labour rights, safety standards, avoid tax and lower wages e.g. in construction industry subcontracting, clothing manufacturing, hardware manufacturing, etc.)<p>Whats also glossed over here is the advances to society made through mechanisms which aren&#x27;t people trying to get rich, or seek a &#x27;market price&#x27; for their &#x27;wealth creation&#x27;. Lets not forget that most of the true computer pioneers were people in the corner of some university or military institution somewhere. Similarly in medicine and most sciences, research which is not profit-driven has been core to much of the &#x27;wealth&#x27; of the 20th century across the world.
tloganover 9 years ago
&gt; A lot of the change I&#x27;ve seen is fragmentation. US politics is much more polarized<p>&gt; than it used to be.<p>I really do not want to be jerk here but this is &#x27;white guy point of view&#x27;. The US politics is more polarized than it used to be because black, latinos, women, gays, socialists, etc. have some voice in politics now. Before they had absolutely no voice or very little.
tdaltoncover 9 years ago
&gt; Globally the trend has been in the other direction.<p>I think that this is misleading. Every global culture is fragmenting, but the biggest fragments within countries tend to get along much better then they used to. There is a &quot;global culture&quot; now that contains a bigger share of humanity then ever before, but inside each nation it still looks like fragmentation.
riffraffover 9 years ago
I am unconvinced that fragmentation actually happened.<p>Sure, maybe there are more airlines, but are there more airplane-making companies or car companies now then in the &#x27;60s?<p>Or consider this:<p>&gt; Kids who went to private schools or wished they did started to dress &quot;preppy,&quot; and kids who wanted to seem rebellious made a conscious effort to look disreputable<p>How didn&#x27;t this happen in the 50s too? &quot;Greasers&quot; are _the epitome_ of rebellious kids.<p>Or consider politics: I have no idea what politicians said in the US at the time, but back in western europe we had a political spectrum that went from &quot;fascism is okaish&quot; to &quot;praise lenin&quot;. At least, didn&#x27;t the US had basically everyone on the same side regarding abortion and divorce, compared to now?<p>Looks to me the essay suffers from sampling bias, even if most likely unintentional. Sure a few things are examples of increased &quot;refragmentation&quot; but I am unconvinced this is a general, uniform, and strong trend.
neelmover 9 years ago
&quot;The Big Sort&quot; by Bill Bishop is a well researched book that explains the political fracturing of America.<p>The topic is explains is expressed visually in these two maps, which shows county election results from 1976 to 2004. <a href="http:&#x2F;&#x2F;www.thebigsort.com&#x2F;maps.php" rel="nofollow">http:&#x2F;&#x2F;www.thebigsort.com&#x2F;maps.php</a><p>One of the point is that due to economy, mobility and choice, Americans decide to settle where people are like them the most, and that this results in deeper political boundaries, especially in the context of our electoral system.<p>One takeaway is that individually we are not all different, and a single Democrat and Republican in a room would likely come up with compromises on differing issues. However when on Democrat&#x2F;Republican is in a group of many like themselves, they tend to take the most extreme view, on average.<p>The other is that there used to be more friendly relationships between senior senators on both sides of the aisle. They would gather regularly to have a few cocktails even if they have strongly differing views. These bonds made it possible for them to work as a bi-partisan team to get legislation passed. These relationships no longer exist the way they used to, and many politicians are much more transient in the time they spend in DC.
mwcampbellover 9 years ago
&gt; The creative class flocks to a handful of happy cities, abandoning the rest<p>At least this trend is one that individual programmers can choose to resist, assuming we don&#x27;t have to move to Silicon Valley or Seattle to get good jobs. I, for one, don&#x27;t have any desire to leave my home town of Wichita, Kansas.
anoncoderover 9 years ago
It&#x27;s tax policy, plain and simple. Stop paying taxes and you&#x27;ll get richer, relative to those paying taxes. All the communication and technology changes have made it much easier to evade taxes. That and government complicity.<p>For the last 40 years, we were promised a better living standard in exchange for lower taxes. It backfired. We forgot about the vice that has no bounds - greed. That&#x27;s why we have to set limits. Paul alludes to the correct and only solution - make tax rates so high to discourage accumulating wealth beyond a certain point.<p>It&#x27;s a wave, but the wave has crested. Tax rates will rise, the loopholes will be removed, and the existing tax laws will start to get enforced. Too bad, it could have been different.
ThomPeteover 9 years ago
I have one word. Technology.<p>Think about technology as outsourcing and you realize what the problem is because you are realizing the trend;<p>Technology will compete with higher and higher levels of abstraction and so you either have to be really skilled in an increasingly competitive space or you need to accept taking jobs at wages that are as low as they are because of the increased competition from technology.<p>And until economist stop treating technology as an externality they wont understand whats going on and we will keep debating this as if its a political problem. In my opinion its not.<p>And so because technology ends up favoring the one winner paradigm it pushes wealth into the hands of very few.
marincountyover 9 years ago
Wow!<p>He&#x27;s seems a little self-aware of his own wealth, and what exactly he&#x27;s given society?<p>Sorry--I read this bloated, post holiday, thesis, and was not impressed. Why take so long to say a few thoughts? The&#x27;re just thoughts?<p>Yes, we rebelled, or &quot;fragmented&quot;.<p>Yes, unions are not perfect. (Good luck getting rid of certain unions, like any Union San Franciso. I have seen entire buildings go dim when the painter&#x27;s Union went on strike.)<p>If I were a psychologist looking for a theme to his writing it would be basically two thing; He is one percenter--trying to rationalize his own wealth? He trying to look for flaws in society that makes it o.k. to be very wealthy?<p>Paul--take a basic writing class. You need to funnel your thoughts. You could take out 3&#x2F;4 of your sentences, and your readers would have a better grasp of what you are trying to convey.<p>Paul--certain unions will never go away.<p>Paul--this is the downside to being very wealthy. You are living the &quot;dream&quot;?<p>I wasen&#x27;t going to read that essay another time. I think we are about to see a lot of tech billionaries wondering if they ultimately ruined the party, or helped it?<p>Let&#x27;s get real. In the U.S.--a lot of us didn&#x27;t have to worry about missing out on the party. All we had to do was try. Now--it&#x27;s not as easy.<p>Do I fear the future. Yes--I do. Do I think tech will make things better. No--I don&#x27;t. That is unless we get serious about overpopulation.<p>I have a question to any developer here. We are constantly trying to make tech easier. We all know, and like DRY. What&#x27;s going to happen in a few years when our skills are no longer needed? Even local politians are writing our obituaries. Willie Brown said, &#x27;I&#x27;m wondering what we are going to do with all the future homeless tech people.&#x27; It&#x27;s not an exact quote, but it was said in retort to a complaint about all the homeless we step over every day.<p>My hope is we don&#x27;t turn into Mexico. A country where someone like Paul couldn&#x27;t take a leisurely walk in the park?
MichaelMoser123over 9 years ago
&gt;Not everyone who gets rich now does it by creating wealth, certainly. But a significant number do, and the Baumol Effect means all their peers get dragged along too. [23] And as long as it&#x27;s possible to get rich by creating wealth, the default tendency will be for economic inequality to increase<p>My question is: significantly more wealth seems to be generated by big corporations by means of financial &#x27;instruments&#x27; rather than by value creation; is that correct?<p>Also this lecture [1] says that scientific and technological breatkhroughs are much harder to achieve these days - because all the shallow fruit is already taken and it costs more to digg deep. Now doesn&#x27;t that make value creation harder for the coming decades? (for example the PC revolution was based on breakthroughs in physics&#x2F;semiconductors&#x2F;electronics - these will be harder and harder to achieve)<p>So it is hard to tell which one will dominate for the near future: value extraction by means of financial trickery (my guess is that this makes society more hierarchical, and the top of the hierarchy will try to enforce equal standing for the lower ranks) or the possibility of real value creation (this one would create a chance for a wider audience) ?<p>[1] Collapse of Complex Societies by Dr. Joseph Tainter <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=G0R09YzyuCI" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=G0R09YzyuCI</a>
Wissmaniaover 9 years ago
I don&#x27;t see how someone can credibly argue that raising income tax rates discourages innovation. As if Zuck or Gates wouldn&#x27;t have started their companies if they only would have made $25 billion instead of $50 billion.<p>He even argues in earlier writing that most of the innovation comes from genuine passion for solving a problem, rather than profit motive.<p>People who have worked a lot to increase their wealth understandably don&#x27;t want a portion of it taken away, even if it probably won&#x27;t make them less happy, or motivate people less in the future.
Mindphreakerover 9 years ago
Very interesting article. I mostly agree with the idea of social fragmentation. I think it is no coincidence that we like to call ourselves &quot;individuals&quot;. Maybe the thought reflects our current zeitgeist but it seems almost natural (nowadays) for humans to emphasize our differences &#x2F; our individualism. However, it seems very interesting, that as much as we like to differentiate ourselves we also tend to some kind of collectivism (e.g. trending sports, technology (iPhone&#x2F;Android), etc.), even working for the same corporations (Google&#x2F;Facebook&#x2F;Apple...) which also appears contrary to the article. It may be true that the speed of change is accelerating but I can&#x27;t agree with the idea that we already reached a fully fragmented society (yet) which is here to stay.<p>Another interesting part was the analogy to Ford&#x27;s vertical integration. The trend definitely went from fully integrated mega corps to fragmented networks of corporations. The car industry is a perfect example. It would be exciting to know if PG thought about Tesla&#x2F;SpaceX and it&#x27;s current move towards a higher level of integration (producing more and more parts by themselves) in order to control the quality of their products. It may be sign that we are on the edge or maximum of fragmentation and there are trends emerging which pull us back into consolidation (maybe in another form than it used to).
Pyxl101over 9 years ago
Other recent Paul Graham writings on inequality that I thought were interesting reads:<p><a href="http:&#x2F;&#x2F;paulgraham.com&#x2F;inequality.html" rel="nofollow">http:&#x2F;&#x2F;paulgraham.com&#x2F;inequality.html</a> (Inequality and Risk, 2005) - economic inequality goes hand-in-hand with risk. If you remove the payoff rewards of risky bets like founding companies, then you remove the incentive to do those things in the first place.<p><a href="http:&#x2F;&#x2F;paulgraham.com&#x2F;ineq.html" rel="nofollow">http:&#x2F;&#x2F;paulgraham.com&#x2F;ineq.html</a> (more on Economic Inequality)
paulpauperover 9 years ago
In the early 20th century, big companies were synonymous with efficiency. In the late 20th century they were synonymous with inefficiency. To some extent this was because the companies themselves had become sclerotic. But it was also because our standards were higher.<p>------------------------------------<p>Huh? His memory must have stopped in 2000 at the peak of the dotcom bubble. Everything has become much more efficient (both in the stock market and in corporate america) and competitive, with droves of college graduates applying for jobs that can be completed by a high-school dropout.
jcfreiover 9 years ago
While the article is rather long and touches on many subjects, I believe I agree with the underlying sentiment. Namely, that income inequality is rising and social cohesion is eroding (whereby the former is largely responsible for the latter in my opinion). Looking at historical income inequality in the US, we see that it&#x27;s just returning to pre 20th century levels. This is not surprising, since the 20th appears to be at odds in many ways with other centuries. Especially the rise of the middle-class (which quickly was understood as a society&#x27;s default state) seems like a purely 20th century phenomenon. The real question is whether societies in developed countries will accept a return back to more divisive wealth distributions (where people are either clearly upper or clearly lower class).<p>Furthermore I think it&#x27;s very important to differentiate between total wealth and wealth distribution. Some (probably rather right-wing politicians) advocate total wealth creation and others (rather left-wing politicians) promote (equal) wealth distribution. Economically speaking the former is clearly preferable, while for social cohesion the later is clearly preferable. Which way we go is (hopefully) up to the democratic electorate (ie. you). And should that not be the case, then at the very least we can all agree that fixing the democratic (legislative) process must be our very first priority - no matter if you seek more or less taxation.
spopejoyover 9 years ago
Nice read, but completely oblivious to the central role of FIRE (finance&#x2F;insurance&#x2F;real estate) industries, plus industrial stagnation, that has obtained since the 70s in creating today&#x27;s ridiculous wealth gap. I don&#x27;t have the exact statistics on hand but finance represented something like 16% of GDP in the 70s compared to now around 40%.<p>PG&#x27;s a techno-capitalist and he wants to say that somehow technology has created all this wealth, but it&#x27;s simply false. Tech has only been able to &quot;create wealth&quot; because of the overheated financial forces behind ridiculous valuations, stock prices unhinged from any fiscal reality, etc. If we were to actually price tech on the money it makes it would pale in comparison to the giants of yesteryear.<p>There&#x27;s an interesting, but now practically unknown, marxist economist named Paul Sweezy who correctly predicted in the early 70s that the monopoly capitalism of the time would fade into permanent stagnation -- closing factories etc -- with increasing financialization of the economy. Pretty much nailed it.
kmonsenover 9 years ago
&quot;The ultimate way to get market price is to work for yourself, by starting your own company.&quot; This seems to be one of his main points here, and for me it is not true at all.<p>There are many people that bring real value, even if they would not be good founders (and maybe not even good as first 1-10 employees). That is just one specific set of skills (in addition to common skills), a person can bring a lot of value without being a good founder.
Tychoover 9 years ago
Terrific essay. It&#x27;s really impressive how much of the world it explained and tied in with history.<p>One thing I would like to discuss though is this line:<p><i>The creative class flocks to a handful of happy cities, abandoning the rest.</i><p>This suggests that there are entire <i>cities</i>, even <i>states</i>, lacking in creative people. Now I&#x27;m sure PG was consciously generalizing, or else referring to the <i>extraordinarily</i> creative entrepreneurs like Musk, Dorsey etc. (creative in the business sense), so I don&#x27;t want to nitpick.<p>But what do people <i>think</i> about this? Everywhere I&#x27;ve gone in life I&#x27;ve found creative, dynamic people somewhere in my midst. I know a frequent complaint from the Left is the slightly galling idea that if the capitalists abandoned us, society wouldn&#x27;t be able to fill the ranks of the managerial positions and keep things going. What do other people think? Have you lived in (developed world) cities which felt entirely stultified and lacking the human capital to make things better?
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Typhonover 9 years ago
I remember when Paul Graham pointed out that, « internally, most companies are run like communist states » (in <a href="http:&#x2F;&#x2F;paulgraham.com&#x2F;opensource.html" rel="nofollow">http:&#x2F;&#x2F;paulgraham.com&#x2F;opensource.html</a> )<p>The picture he paints here of postwar-America as a bland, uniform country dominated by a few mega-institutions reminds me of the USSR.<p>How ironic.
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netcanover 9 years ago
Great essay. Though obviously, such a big hypothesis is very speculative.<p>I think the use of the &quot;market price&quot; concept so heavily here might be taking away a little. It sort of assumes some objective (if unknowable) value to human contribution or achievement. I think in the labour market in general, and specifically the components that he&#x27;s talking about in the lang term, are hard to describe well this way. Between the difficulty to evaluating labour quality, the variability in &quot;quality&quot; depending on specific circumstances, the bargaining&#x2F;liquidity issues and other problems, I think we enter a (Ronald) Coase-esqu problem where markets do not play out efficiently enough to reveal an information rich market price.<p>I wonder if this essay would be much different without market price.
golergkaover 9 years ago
&gt; Version 1 of the national economy consisted of a few big blocks whose relationships were negotiated in back rooms by a handful of executives, politicians, regulators, and labor leaders. Version 2 was higher resolution: there were more companies, of more different sizes, making more different things, and their relationships changed faster. In this world there were still plenty of back room negotiations, but more was left to market forces. Which further accelerated the fragmentation.<p>I find this curiously close to a description given by a late-soviet economist who was working on economic reforms in the 80s: he described soviet economy as a bunch of heavy hard rocks, incredibly powerful, but without any flexibility and connection to each other, and small new cooperative movement as a sand that should&#x27;ve taken all the space in between.
bhugaover 9 years ago
Interesting piece. It will take some time to digest.<p>I wonder about the arrow of causation for conformity back in the 40&#x27;s. This essay describes WWII as a spark of a generation of conformity (preceded by the New Deal for some). But it&#x27;s really hard to imagine modern society signing on to a world war. What&#x27;s to stop parents afraid of vaccinations from taking their draft-age children to New Zealand?<p>Was there something else that was already more conformist? Or was there another proximate cause, maybe even one as simple as a perceived global threat (communism, fascism) combined with a lack of individual physical mobility?<p>The essay is good and makes a strong point in and of itself, but I wonder if there&#x27;s other variables it (and I) are missing.<p>If pg is reading, one piece of concrete feedback:<p>&gt; the LBO wave?<p>LBO wasn&#x27;t defined in the text previously and I had to google it (it&#x27;s leveraged buy-out).
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ZenoArrowover 9 years ago
I enjoyed the article, and found it an interesting point of view for the most part. However, I don&#x27;t agree with this...<p>&gt; &quot;The form of fragmentation people worry most about lately is economic inequality, and if you want to eliminate that you&#x27;re up against a truly formidable headwind—one that has been in operation since the stone age: technology. Technology is a lever. It magnifies work. And the lever not only grows increasingly long, but the rate at which it grows is itself increasing.&quot;<p>Tackling inequality has nothing to do with technology. Let&#x27;s put it like this, we have a minimum wage already, the balancing force with regards to economic inequality would be a maximum wage. There are no technological issues blocking a maximum wage, it&#x27;s just a matter of political will.
djyaz1200over 9 years ago
The book &quot;Coming Apart&quot; by Charles Murray is a thoughtful read on this topic.
justinhjover 9 years ago
Consider one ycombinator company,Uber. Do they generate wealth? From the point of view of a NYC taxi driver they are directly taking both the customers and the value of the drivers medallions. In return,uber drivers work giving 1&#x2F;3 of their earnings to a company because that company built the software and lobbied the governments (presumably eventually) to allow this new form of public transport. It doesn&#x27;t seem any different to the past. Those with the connections, capital and technology take a large share of the wealth being generated by the actual workers.
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ams6110over 9 years ago
I like PGs essays normally, but he didn&#x27;t address two huge societal changes since WWII, that is the rise in welfare and single-parent families. More people than ever are being paid to be non-productive and to procreate without any means or even real chance of supporting their offspring (a single parent poor household has significantly less opportunity to move up in income compared to a two-parent poor household).<p>This can&#x27;t not have an impact on the social order. Perhaps he implies or assumes that this is an effect rather than a cause but to leave it unmentioned seems like a big omission.
echocharover 9 years ago
A phrase used repeatedly throughout is &quot;creating wealth&quot;. This is contrasted with &quot;zero-sum game&quot; to get rich. Does anyone have a precise definition of &quot;creating wealth&quot;?
auferstehungover 9 years ago
And the cycle continues swinging back and forth. &quot;Let them eat cake&quot; is not sustainable either. It usually ends in violence despite the rationalizations of the elite.
cafover 9 years ago
<i>And the second reason is that if you want to solve a problem using a network of cooperating companies, you have to be able to coordinate their efforts, and you can do that much better with computers. Computers reduce the transaction costs that Coase argued are the raison d&#x27;etre of corporations. That is a fundamental change.</i><p>I wonder if the same is true of coordinating efforts in a centrally planned economy - would computers be the same kind of fundamental change there?
paulpauperover 9 years ago
Small observation: why title the file re.html? Why not just spell fragmentation? Is there a reason to do it this way? Why .html? Doesn&#x27;t that make it hard to update all the pages at once such as menus and footers? The design is very minimalist, but it&#x27;s effective.<p>We&#x27;re definitely in a winner-take-all economy, whether it&#x27;s real estate, stocks, the dominance of companies like Google, amazon, and amazon, or web 2.0 valuations.
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graycatover 9 years ago
Very nicely done. Awash in insight about the past and likely also about the future.<p>Should connect with the role of <i>social media</i>.<p>In particular, explains much of why the heck I, first, got a technical Ph.D. and then became an entrepreneur.<p>Did I mention very nicely done and full of good insight.<p>Gee, all that time people spent in courses in history, economics, political science, B-school, and STEM field education, and the really good stuff is right there in PG&#x27;s essay!
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andrewjlover 9 years ago
I wonder if multinational corporations are the last bastion of 20th century centralization.<p>In a power law driven world, players that make better long term decisions will ultimately rise to the top and dominate their markets. This is not something most multinationals are known for. (If so, then this process would likely play out over several decades.)
marshrayover 9 years ago
Seems I was born around the same time and this is how I remember it too.<p>Another major economic factor he seems to have left out is government policies encouraging (sometimes actively) the US manufacturing base to leave to other countries. This utterly destroyed the formerly thriving US manufacturing-based small businesses, eliminating a huge percentage of semi-skilled jobs in the process.
stevefoltaover 9 years ago
&gt; But once it became possible to make one&#x27;s fortune, the ambitious had to decide whether or not to. A physicist who chose physics over Wall Street in 1990 was making a sacrifice that a physicist in 1960 wasn&#x27;t.<p>This is perhaps not the best example, as a physicist in 1960 might&#x27;ve faced a choice between academia and Fairchild Semiconductor.
huuuover 9 years ago
Imho it&#x27;s much simpler than PG explains. If we feel more or if we feel less than someone else we create separation.<p>Ofcourse there are forces that stimulate this separation (like PG says) but in the end it&#x27;s just us.<p>The solution it to listen to yourself. Am I feeling less than this person? Am I feeling more than this person? If so: stop that thought.
ivorasover 9 years ago
Simply as a reference to how biology supports the human society and how biological signals can be gamed for short term benefit, this lecture was an eye opener for me: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=ReRcHdeUG9Y" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=ReRcHdeUG9Y</a>
bsderover 9 years ago
What people forget is that what the big, old, sclerotic, 20th century companies did well was provide a functional wage for the 50% of people who were <i>below average</i>.<p>It&#x27;s lovely that the 1% are paid what they are worth. It&#x27;s not so lovely that 50% are now paid minimum wage or, worse, zero.
drewm1980over 9 years ago
His distinction between &quot;wealth generating&quot; and &quot;rent seeking&quot; behavior isn&#x27;t obvious to me. Is investing in a start-up (so that you hopefully get a cut of the wealth generated by thousands of people and machines) a form of rent seeking?
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rdiddlyover 9 years ago
I&#x27;m old too, and I think the issue is quite a bit simpler than this rather sprawling essay makes out. The &quot;two forces&quot; (WWII and large corporations) that are now receding in memory, that supposedly used to push us all together, were actually both manifestations of a single force, which is the &quot;growth phase&quot; of fossil-fuel energy production. This has been a boon to economies the world over for the past 100, 150 years or so.<p>When the world is a place where an ever-increasing amount of energy is available to drive an economy, the best way to exploit resources (energy, labor, materials) is by doing it &quot;at scale&quot; i.e. big corporations. And the best way for Hitler to create Lebensraum and accomplish all his other now-familiar goals is by using that selfsame large-scale industrial infrastructure. And the best way for the Allies to fight against it, was more of the same. It&#x27;s all the same thing.<p>But economic activity grows and shrinks hand-in-hand with energy availability. And when your energy source goes through a growth phase, hits a peak and stops growing, the &quot;large-scale&quot; strategy slowly starts to become unviable. So a given corporation, suddenly finds itself resource-constrained, and has to find some way to reorganize itself and reconcile itself to the new paradigm, or face becoming less and less profitable.<p>PG correctly pegs the timing of when the &quot;disintegration&quot; and &quot;fragmentation&quot; starts to make itself evident in the US - the 1970s. By no coincidence that is also the time when America reached and passed its domestic petroeum-production peak. Then came all the economic stagnation, hyperinflation, factories closing (offshoring), etc. And on the social side there was pervasive unease... the &quot;ennui&quot; of the like-named Carter speech. Many subcultures came out of the woodwork then, because it becomes less desirable to fit into and conform to a system that seems to be faltering and becoming unstable, no longer gives you any upward mobility, and might even be rigged against you.<p>In fact, for the people against whom it truly is rigged, why not outwardly display symbols proudly showing just how thoroughly &quot;outside the system&quot; one is? Hence the baggy pants of the prison parolee (who upon release gets back the same pants he was arrested in, but finds he&#x27;s lost 30 lbs eating prison food) that became the stylistic signature of gangsters. Hence all the tattoos, formerly the symbol of exotic and unseemly characters, now sort of the neutered and ubiquitous symbol of wannabe unseemly characters.<p>Anyway it took a great pretender to hide the obvious, and that guy&#x27;s name was Reagan. Luckily for him, people were all-too-willing to get on-board and believe a pleasant lie, rather than face a bunch of hard work.<p>Computers were a great invention but it&#x27;s no coincidence that anything that &quot;gets done&quot; and any wealth that gets created in the US today is by doing &quot;more with less&quot; in the digital realm, and not by doing &quot;more with more&quot; in the physical. All the physical stuff has been offshored to take advantage of labor arbitrage and, ironically enough, cheaper energy. (Because of course there are still countries that export energy.)<p>Anyone looking for why &quot;we once were cohesive and now we&#x27;re not&quot; should be looking at this, as the transition is a crisis-level problem. But PG seems to have a persistent blind spot about it. The same blind spot is common among optimistic tech-minded people because they&#x27;re used to thinking &quot;anything is possible,&quot; and I imagine &quot;startup people&quot; all the more so.<p>I hope that can-do spirit is able to make renewables replace the orgy, the buffet, the glut of energy we use and deploy today. An honest look at the problem might be a prerequisite to tackling it though. Look at the numbers (something measured in joules or watts) and it may give you pause. And given that the initiative depends so heavily on the continued existence of the current interconnected and fossil-fuel-powered industrial infrastructure, I would say, better get a move on.<p>Tangent&#x2F;epilogue: And obviously, fucking autonomous cars are not going to fix anything, nor is any kind of car. Who fantasizes about autonomous cars when ordinary passenger rail has so much room for improvement? Californians, that&#x27;s who. Hyperloop is closer to the mark, but suffers from Musk&#x27;s attention-whoring narcissism and is likely to be egregiously energy-inefficient. (Since speed, not efficiency, seems to be the main design criterion.) That&#x27;s enough for you to think about, I know I&#x27;m not making any friends but that&#x27;s not what challenging ideas (an endangered species) are for.
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SeaDudeover 9 years ago
We are at war remember...with terror.<p>And winner-still-takes-all... some extremely large corporations were made in the last 15 years.<p>Sorry, don&#x27;t see the difference between then and now.<p>I appreciate you attempting to identify the cause of our current crisis, but alas, I believe you may be too entrenched to find it.
jgalt212over 9 years ago
His arguments on taxes simply don&#x27;t hold water. Income inequality is expanding because those at the very top either pay taxes much lower than all others (HF, PE, VC) or just don&#x27;t pay taxes at all (AAPL).<p>The other problem with income inequality is simply interest rate related. If you look at all asset classes over the last 30 years, real estate gains have far outpaces every other asset class. Real estate prices are very sensitive to interest rates.<p>If the Fed keeps raising rates, the value of these real estate holdings will go down and well inequality will reverse itself somewhat. To do that significantly, I think we need Fed Funds at 5-6%. I don&#x27;t see that happening for a long time, though.<p>Another longer term trend which may help wealth inequality reverse itself is global warming. The global elite own a disproportionate portion of coastal real estate. With rising ocean levels these assets will be wiped out.
Gravitylossover 9 years ago
Well, we have things like access to education and access to capital, in contrast to a nebulous &quot;ability to create wealth&quot;. I think the former two are more fruitful ways of thinking towards fixing the worst aspects of income inequality.
mhbover 9 years ago
For those (few?) of us who read the endnotes at the end, it would be nice for the endnote numbers at the end to link back to the text. (In addition to the normal link from the text to the endnote)
Simorghover 9 years ago
PG writes that the 20th Century was &quot;a world in which it was socially acceptable to work for Henry Ford, but not to be Henry Ford&quot;.<p>I feel that this viewpoint is still common today. Success is often glamourised, far more than hard work.
tammerover 9 years ago
Some interesting theories - at first appears quite reductionist but I think succeeds in highlighting something very symbolic.<p>Odd, though, that pg can write an entire essay about identity politics without naming it.
abalashovover 9 years ago
It&#x27;s an insightful perspective and, along with PG&#x27;s stance on the essence of economic inequality per se, a welcome antidote to the populist outrage machine, which does indeed the frame issue largely in zero-sum terms.<p>However, there are some counterpoints that don&#x27;t receive adequate representation in this account, in my opinion:<p>One is the size and scale to which rent-seeking behaviour dominate the American economy. PG does acknowledge here and elsewhere that rent-seeking behaviour accounts for the wealth of many, but dismisses it relatively quickly as a seemingly self-evident byproduct of the expected variance in a society that permits economic opportunity. I think the situation is a lot worse than that; the amount of such parasitism, in the form of regulatory capture, lobbyist influence, outright Gilded Age-style purchase of legislation, revolving-door career paths, etc. account for an extremely significant percentage of US economic output and the unequal concentration of wealth. Consider for example how our healthcare system works (even post-ACA), Big Pharma, the military-industrial complex, intellectual property law and software patents, etc. A great deal of our government is for sale, and the sole purpose of a lot of our legislative projects is to route money into private hands, with the support of the government&#x27;s monopoly on force, while socialising risks and losses onto the taxpayer. In my specialisation of telecom, I have seen this at work with the hundreds of billions in effective subsidies given to the AT&amp;Ts and Verizons of the world, ostensibly to support the build-out of competitive next-generation broadband infrastructure but in fact to line their own pockets. All in all, the total dimensions of corruption at the top of the economic food chain are in the trillions of dollars, and I feel this insight is not given a fair shake with the same diligence as other aspects of corporate-industrial history of which PG treats.<p>The second issue relates to the optimal amount of economic inequality we can sustain while maintaining social order and an environment conducive to ongoing innovation. Many revolutions and upheaveals in modern history attest to the fact that when a sufficiently large class of poor and disefranchised people arises and is left to twist in the wind, at some point &quot;radical discontinuities&quot; will occur. Pervasive, festering social ills don&#x27;t serve the self-interest of the wealthy and the middle class, either; they ultimately impact the security of their lives and their property, requiring them to resort to increasingly drastic measures to keep what&#x27;s theirs. The market for mass-market and&#x2F;or consumer products--on which a lot of startup business models depend--is inevitably limited or shrinks when large segments of society see eroding disposable incomes. Instability also negatively impacts the transaction of business by making the outer world less predictable and dependable; lopsided opportunity in savage inequality leads to lopsided and inconsistent educational outcomes and, ultimately, a more heterogenous and troublesome work force.<p>As other countries around the world periodically assert, there may be a formula for state economic involvement, taxation and social programmes that better maximises more desirable social outcomes, even if it comes at the expense of bridling notional economic opportunity and the smoothing out of some peaks. Is it not true, for example, that much of the significant innovation in computing and networking from which we benefit today came out of Bell Labs, a quasi-governmental institution whose decidedly mid-20th century model of economic existence created the right incentives for long-tail R&amp;D?<p>The work done in such places, as in the pharmaceutical industry for example, is now fiercely subordinated to narrow, short-horizon commercialisation objectives, and while that may be a better way for some actors to get rich faster, is it really where we want to go? It seems to me one can raise the same kind of objection about the incentives set up by unicorn-seeking VC funding and California startup capitalism.<p>All this leads me to say that perhaps these issues need to be considered in a more global, integrated, and holistic way, rather than narrowly construed as problems of economics. If we want to evolve toward a better future, we may need to take up more thinking from the &quot;normative&quot; sphere, which economists hate.
Thomas_Lordover 9 years ago
A lot of this essay seems pretty fast and loose with history to me. I hope nobody passively accepts this as an accurate account of social, economic, or governmental history from the Great Depression, through WWII, the mid-20th century, through to today.<p>Perhaps a ycombinator readership can appreciate a telling example of the problems is in Graham&#x27;s account of IBM&#x27;s decision not to exclusively license PC-DOS. Per Graham, this &quot;must have seemed a safe move at the time. No other computer manufacturer had ever been able to outsell them. What difference did it make if other manufacturers could offer DOS too? The result of that miscalculation was an explosion of inexpensive PC clones. Microsoft now owned the PC standard, and the customer. And the microcomputer business ended up being Apple vs Microsoft.&quot;<p>OK, first, every indication is that IBM sought to deliberately create an explosion of inexpensive PC clones -- and that they were better off for it.<p>Briefly, IBM made a strategic decision that their position would be better if personal computers were a commodity with competitive suppliers rather than an artificial monopoly like Apple products. IBM achieved this aim. Competition meant that PC hardware margins were low, therefore IBM was ultimately better off letting other people make sell them. For years, this was a harsh blow to Apple which thrashed badly after the PC took off.<p>Second, it is misleading to say that &quot;Microsoft now owned the PC standard, and the customer.&quot;<p>Microsoft has heavyweight influence but does not quite own &quot;the PC standard&quot;. More to the point, figurative &quot;ownership&quot; of that standard is not a particularly valuable asset. The &quot;standard&quot; is the definition of a competitive commodity. Competition is hot. Therefore nobody &quot;owns&quot; the standard enough to exclude competing manufacturers in any significant way. Nobody &quot;owns&quot; the standard enough to extract significant rent on it.<p>Microsoft <i>did</i> gain a monopoly on DOS (then Windows) rents in the deal but (a) There does not seem to be any way IBM itself could have kept those rents while still making the PC a commodity; (b) Microsoft&#x27;s rents on DOS and its control of what is in DOS have never once hurt IBM. (c) Microsoft&#x27;s creation of a vast market of developers targeting DOS then Windows platforms has only helped IBM.<p>In short, Graham&#x27;s snapshot of that bit of history is just plain counter-factual. I hope careful readers will look pretty skeptically on his accounts of &quot;socialism&quot;, economic management during WWII (which was widely understood at the time to be fascist, not socialist), the typical experience of 20th century employment (not nearly as described), his armchair sociology....
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unusximmortalisover 9 years ago
This is a great sign, to see so many comments on the topics this article is reaching. It shows a lot to me at least. Thank you all for giving your honest and insightful opinions.
pravdaover 9 years ago
What does &quot;Duplo&quot; mean?<p>&quot;the Duplo economy&quot; &quot;Duplo world&quot;
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return0over 9 years ago
This was very insightful. One thing he doesn&#x27;t tackle though, is how this re-fragmentation affects the idea of the national state itself.
frikover 9 years ago
On the one side we have very huge corporations that have a (near) monopoly on a sector (big, small or niche). On the other side we have many small players &quot;fighting&quot; [not the best word] for the remaining niches ...the rest. And they dream to be the next big player by betting on a raising sector (new technology) and sometimes disrupt old players that are too slow to adapt. Or they fix it with cash. Absolute monopoly is often bad (for everyone except a few (shareholders)), so anything else (fragmention) is better.
hoodoofover 9 years ago
&gt;&gt; With the centripetal forces of total war and 20th century oligopoly mostly gone, what will happen next?<p>Or I could just read The Atlantic.....
MBCookover 9 years ago
Click the link (I&#x27;m on an iPhone), see a few lines as a &#x27;read more&#x27; link.<p>All apparently so I can see the &#x27;sidebar&#x27; menu below the content?<p>When I follow a link to an article why should I have to press a button to <i>read the article</i>?<p>I&#x27;m getting so tired of this crap on so many sites. I&#x27;m really disappointed to see it here.<p>2nd big story in two days that I found unreadable due to poor web design on someone&#x27;s relatively simple site (i.e. not crammed with junk like Bloomberg).
matchagauchoover 9 years ago
Finally, a PG essay returning to true form.
unimpressiveover 9 years ago
&gt;If total war was the big political story of the 20th century, the big economic story was the rise of new kind of company.<p>Typo.
venomsnakeover 9 years ago
I think that the field in US in urgent need of refragmentation is the political systems. The two parties are oligopol that don&#x27;t care about their customers and they don&#x27;t deliver enough political product to the people. We need more smaller parties that could represent the increasing diversity of opinions.
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lifeisstillgoodover 9 years ago
weirdly this is the most useful insight to me of a insightful article<p>[6] I wonder how much of the decline in families eating together was due to the decline in families watching TV together afterward
theszover 9 years ago
<i>From each according to his ability, to each according to his need</i><p>It is a <i>communism</i> motto, not socialism (from each according to his ability, to each according to his work).<p>And this shows how little PG knows about socialism.
thaddover 9 years ago
Good read. Not sure if I agree with everything, but fascinating.
jzdover 9 years ago
The inequality gap is the direct result of an education gap
tmalyover 9 years ago
something not touched upon,<p>1 the huge pension liabilities that have been accumulated by states<p>2 the excess credit&#x2F;currency devaluation and excesses risk taking created by central banks.
clamprechtover 9 years ago
I love that <i>The Refragmentation</i> references <i>Economic Inequality</i>, and <i>Economic Inequality</i> references <i>The Refragmentation</i>.
jgalt212over 9 years ago
Paul Graham used to be one of my heroes, now I just see him as just another fat cat apologist in the vein of Ken Langone.
be21over 9 years ago
not even wrong :)
kenjacksonover 9 years ago
A tldr on this one would actually be appreciated. :-)
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