Results tagged “economics”

Silicon Valley on the Middle Class and Unions

July 10, 2013

Paul Graham on Unions:

I wouldn't quite call the high-paying union job a myth, but I think people who dwell on it are reading too much into it. The era of labor unions seems to have been the same kind of aberration, just spread over a longer period, and mixed together with a lot of ideology that prevents people from viewing it with as cold an eye as they would something like consulting during the Bubble.

Sarah Lacy on Unions:

People in the tech industry feel like life is a meritocracy. You work really hard, you build something and you create something, which is sort of directly opposite to unions.

Marc Andreessen on the Middle Class:

“The idea of the middle class itself is a myth.” Andreessen argued that the middle class is an “artifact” of America’s post-World-War-II role as the last standing industrial power—that the term describes people with a high-school education earning college-level wages, who after the war worked in the firms that built modern America’s industrial base. That view might surprise all the war veterans who got college educations thanks to the GI Bill. “That experiment has been run and it was a catastrophic failure,” he says, arguing that Americans today without college degrees or an engineering background are doomed to a future of shoe sales. Maybe his idea of “middle class” is a bit strange, but on one thing we can agree: If you do get that college degree, you might want to consider computer languages over English degrees.

Scott Kupor, in a guest post on Andreessen's blog, on the middle class:

We are holding back the middle class in America. But it’s not for the reasons you think, and the culprits are not those most people think of. Rather, the US government has systematically cut the middle class out of the most important wealth creation opportunity for the next 50 years. Through a series of byzantine regulations, the government has made it virtually impossible for working Americans to enjoy the fruits of America’s greatest strength: innovation.

So, the way for the middle class to thrive is not for workers to organize for their own benefit, but for the middle class to be able to buy more Zynga stock.

The Daily Opportunity Index

March 6, 2013

Every single day, almost every mainstream news source in America offers live updates throughout the day on a few metrics which have almost no meaning for most Americans. Whether it's a radio broadcast, a local TV station going to commercials, or the homepage of most big news sites, you'll see a nod to how the stock market is doing, despite the fact that stocks exist as, at best, an abstraction having to do with a theoretical future retirement for all but the wealthiest in the United States.

Covering the Dow in every news update is like reporting on the price of a Mercedes daily. tweet this It's information only of actual use to the richest extreme of people in America. Yet we act as if it's information so central to our economic well-being that we talk about it as often as the weather. We evaluate presidents during our elections based upon stock performance during their tenures, without having any other long-term indices used in the conversation.

We can do better, by creating and discussing a daily economic index that has to do with the economic lives of regular people. The importance of understanding these concepts is illustrated perfectly by this brief video that's becoming extremely popular:

What Would an Opportunity Index Look Like?

I should be clear: While I am versed in the cultural impacts that this kind of index could have, I am nowhere near literate enough in economics to actually offer meaningful advice on how to construct it. But I can offer a broad view of the way it could come together, to inspire a useful conversation by those who are experts.

Let's look a few key traits a meaningful opportunity index would have to include:

  • Opportunity: The first, and most important principle of creating a meaningful economic index would be to have it attempt to measure or represent the potential opportunity for everyone in the economy, not just the wealthy. Income inequality must be a significant part of this metric, but so too should straightforward factors like the minimum wage, the regressiveness of tax code, and other structural barriers to opportunity for everyone. The key thing to understand is that such an index does not have to be a perfect representation of these concerns; Indeed, nobody would argue that the DJIA or NASDAQ function as even rudimentary measurements of the real economy. Instead, they're useful as detailed measures of a tiny number of variables that are considered important as indicators, and an opportunity index should be similarly narrow in scope but broad in possible interpretations.
  • Daily: This is one of the most contentious aspects of such an index, from the perspective of those concerned about data quality and relevance. While we're used to the stock market trading at light speed (literally!) with the backing of some of the riches and most powerful companies in the world, our measurements of real people's financial lives are typically done by small, underfunded non-profit organizations and government agencies, with results coming out monthly or even annually. It will take both a cultural change from those institutions and the use of smarter, faster data to power a meaningful measure of opportunity. For this reason, it may make sense to base some parts of the measure on very dynamic existing metrics like the markets for financial instruments, but to consider them through an algorithm that's weighted by relevance to average people's economic concerns.
  • A simple number: One of the oldest, and most valid, criticisms of the big market index numbers is that they're such blunt instruments that they don't actually represent anything useful. But the very simplicity of the indices is what makes them so powerful in our culture. I'd reckon that most folks don't actually understand what makes up that "Dow" number they hear about on the news, or that its components change, or that almost all of the new entrants to the index are not "industrial" in any recognizable classic interpretation of the term. But that one number people hear about? It goes up or down. It can be charted and tracked. For all the murkiness of what it's actually measuring, its role in society is clear. And an index that tracks measurements which represent ordinary concerns could be even more powerful.

Who Can Do This?

There's been interesting precedent around private companies defining these sorts of measures, especially in media. Though broad, slowly-measured statistics about these sorts of things are usually the domain of government agencies, the example set by everything from Twitter showing follower counts to the Weather Channel deciding to name winter storms shows that there are media-ready messages that can be created as a proprietary marketing exercise, yet come to represent much bigger concepts in culture. And of course, the Dow average itself is a perfect example of this.

I can imagine a useful combination of a major traditional media organization (New York Times, CNN) along with a respected non-partisan non-profit with data experience (Sunlight Foundation, Pew Research) and a tech industry player that would be helpful in collecting and/or disseminating the data (Google, Buzzfeed, Twitter). The coordination would almost certainly have to come from the non-profit player, unless a single company could be convinced to bankroll the thing from end to end.

But the final result, if successful, could be a meaningful measure that would create a brand name mentioned millions of times a day across thousands of media outlets around the world. And not incidentally, if successful, it would become a powerful tool for treating ordinary citizen's economic concerns as being as central to the news as the daily fluctuations of the porfolios of the super rich.

Gains and Losses, 2007-2009

Related Reading

I thought this slideshow called "A Crack in the Matrix: A Financial Fable" from David Bressler did a really nice job of illustrating how communications about personal finance can really distort economic information in a way that misleads average people about their financial situation.

  • Inequality.org, from the Program on Inequality and the Common Good, is an outstanding and undersung resource for articulating many of these issues. If some of the information they're presented could be made live and more dynamic, it'd be a wonderful start toward a true opportunity index.
  • A few years ago Business Insider aggregated a broad range of infographics on income inequality that is still striking; They should post an updated version of this with newer data, to show how the current economic recovery has essentially only accrued to the wealthy.

I'm sure there are very complex issues that I'm glossing over in this brief description of the Daily Opportunity Index idea, but I'm looking forward to responses from those who are more literate in the topic to provide insights on what I've missed.

To Less Efficient Startups

September 28, 2012

Most of the technology world, especially the traditional venture funding infrastructure, is justifiably proud of the extreme efficiency of modern internet startups. It is a triumph for Craigslist to serve hundreds of millions of users with only a few dozen employees, or even for Facebook to serve a billion users with just a few thousand employees.

But we need to support and encourage another model, one that's less economically efficient.

From an economics standpoint, the hugely successful tech companies of our time are marvels of efficiency because it used to take a company with hundreds of thousands of employees to generate so much market value. Unfortunately, this "progress" in efficiency means a concentration of generated wealth among an even smaller, more exclusive cabal of winners when one of these companies succeeds.

Instead of generating tens of thousands of middle-class jobs as industrial-age titans did, these companies make a few dozen people truly extraordinarily wealthy, and then give generous payouts to a few hundred people who were already on a path to success by having been privileged enough to go to top universities and by having the identities that tech and engineering cultures are biased toward today. There is effectively no blue collar path to success, notwithstanding the much-vaunted stories of tech company chefs entering these companies in the kitchen and exiting as millionaires.

Beyond Efficiency

Some of the most interesting startups (the NYC chauvinist in me must point out that these are all New York companies) are not optimizing for raw market efficiency, but instead for opportunity for a broader community. Some examples:

  • Kickstarter is explicitly building an economy to support the work of artists and creators, disciplines that are often not favored by the attentions of the tech industry.
  • 20×200 has a complete structure of support for promotion and payment for artists, as Jen Bekman outlined at the XOXO festival.
  • Etsy perhaps illustrates this best of all; I talked about this a bit when recording Chad Dickerson's talk at XOXO, but his slides from that talk outline their commitment as a B Corporation to many of these principles of helping an entire community, not just preferred shareholders:

I should note that I'm friends with the founders and executives of all of these companies though I'm not part of the community of creators who benefit directly from these platforms. And of course, Ebay has had many of these tendencies for supporting an economy of creators for years; One could argue that Google's programs like AdSense helps publishers in a similar way. But before we go down the slippery slope of saying every small business ad on Facebook and Twitter is proof that many can benefit from efficient companies, we need to draw a line between explicit parts of a company's internal economics and the dollars that flow through their overall ecosystem. Because the players outside the company who are subject to the economics of AdSense or ads on Facebook or Twitter are the first ones to get squeezed if the company needs to optimize its revenues, aside from the fact that they never structurally benefit from an increase in the valuation of the company which provides them with their marketing platform.

How We Do It

I'm not saying existing companies necessarily need to radically change; It's great that many have succeeded with the model so far. But I'm hoping that people who are building and funding companies can put some thought into what success can look like for future tech companies if they also value creating lots of middle-class jobs and lots of opportunities to help blue collar or non-technical workers thrive with meaningful long-time work as their companies take off.

We tend not to think it's cool that Microsoft or IBM have hundreds of thousands of employees. But there's something meaningful, and important, and essential to our society for enormously valuable companies to also provide enormous value in the form of lots of jobs for regular folks. I'll be rooting for the next wave of startups to tackle this problem that has, so far, been too difficult for our biggest web companies.

Monoculture Is Bad For Business

January 5, 2009

It's been demonstrated over and over again, but businesses refuse to learn the lesson: Homogeneity is its own punishment in the world of business. From the Washington Post today:

[T]he experience of the past year suggests that we desperately need to bring more women into leadership positions on Wall Street, in politics, in regulatory bodies and in American life generally. For decades, corporations and financial firms have sponsored expensive training programs to promote more women into their ranks. They have launched much-needed maternity policies and flexible work arrangements. Most of these initiatives, however, have been pursued to make life easier for the women involved — or, more cynically, to remove the threat of lawsuit or adverse publicity for the firms.

The financial crisis has exposed a quieter but equally pressing concern: We need women in leadership positions not only because they can manage as well as men but because they manage differently than men; because they tend — over time and in the aggregate — to make different kinds of decisions and to accept and avoid different kinds of risk. We need women who will say no to bad decisions based on male-dominated rivalries and clubby golf course confidences. We need women to blow the whistle when risks explode and to challenge the presumptions that too many men, clustered too closely together and sharing a common worldview, can easily indulge.

As the constant wail from Wall Street should remind us, diversity isn't just nice in theory. It makes for better business.

There's a related question here which no one is asking, which is whether the economic catastrophe facing the global marketplace is a result of a failure of white culture in America. The media is always quick to ask whether problems like violence plaguing minority communities are symptoms of a toxic culture in that community, but I haven't seen any questions to that effect in regard to this financial meltdown.

I've written a good deal about monoculture on this site over the years; The correlation between diversity and success has been repeatedly demonstrated.

The Interesting Economy

October 25, 2005

Like many great social software applications, Flickr began its life as something else. Flickr was built on a platform for a game called Game Neverending, which had a lot of great features including an in-game economy based on exchanging various totems that had different relative values. There was really only a barter economy, which left the "innate" value of any individual item to be pretty opaque.

Today, Flickr has interestingness, which is a measure of some combination of how many times a picture has been viewed, how many comments it has, how many times it's been tagged or marked as a favorite, and some other special sauce. I suppose revealing the exact mix would encourage even more people to game the system, but the fact that it's not disclosed has led to a number of attempts to reverse-engineer the system. I doubt any of them are/will be successful (Flickr can update/evolve fast enough to change the algorithm if they figure it out) but that's probably going to be an ongoing dialogue.

When I think of things getting gamed, I think of Clay Shirky saying "social software is stuff that gets spammed". So maybe economies are things that get gamed.

What I'm wondering is, how is Flickr's interestingness different than the economy in Game Neverending? Than Second Life? (Or in Evercrack or Neverwinter or any of the other gaming platforms.) Is interestingness its own reward? Why don't I get to level up or power up when I create something interesting?

More to the point, the in-game economies of these games translate pretty cleanly into real-world cash, with eBay amplifying the efficiency of the currency conversion. And interestingness in other online media (like blogs) is rewarded by cash in a pretty straightforward way; I can sign up for TypePad, check a box to enable text ads, and pay for my account or point the proceeds to my PayPal account when I start getting lots of visitors.

But interestingness in Flickr doesn't pay. At least not yet. Non-pro users are seeing ads around my photos, but Yahoo's not sharing the wealth with me, even though I've created a draw. Flickr's plenty open, they're doing the right thing by any measure of the web as we saw it a year ago, or two years ago. Today, though, openness around value exchange is as important as openness around data exchange.

So does that mean the right answer for cashing in on my interesting work is to ask for a penny from Yahoo? Or does it mean I should just make an automated script that grabs my interesting photos and posts them to my TypePad blog so that I can put ads on them?

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