Paul Graham recently wrote an essay about what makes for a successful pitch at Y Combinator. He also used this essay as an opportunity to discuss why political arguments that billionaires exploit people are incorrect.
A few caveats: Graham’s essay is useful and well-argued. It provides a window into a world I have zero access to, so has a whole lot of value. Further, I think it is important for folks to not fall into a dystopian view of an unchanging world driven exclusively by intentional cruelty and evil. We don’t live in a kid’s movie with a villain who is a heartless corporate overlord, doesn’t listen to his daughter, tries to hostilely purchase the happy bakery, and wears a top hat. Many arguments in the social sciences select nearly exclusively on critical and negative arguments when discussing the billionaire class. Graham provides a cogent argument of the benefits of contemporary billionaire creation that merits serious consideration. Graham is also vastly more successful and worldly than me. He makes me look like a bowl of potato soup … or maybe a bowl of potato soup’s bowl of potato soup. Keep these caveats in mind as you read my concerns below.
With the above in mind, I think he fundamentally misses the point of the criticism of billionaires, or maybe more generally, the contemporary economic system that enables the creation of our current crop of billionaires. He ends his essay by arguing that such criticism is primarily rooted in resentment of the large gap between billionaire worth and the rest of us. I’m not totally convinced by this.
Graham uses AirBnB as the primary example to illustrate his point. And on its face, this case makes a lot of sense. He argues that billionaires aren’t guided by the desire to exploit people, but rather to help people and fulfill needs through market mechanisms. The pitch people want to hear at YC is “what do people want to use?” or something like that. AirBnB was driven to build the best hotel substitute possible, Zuckerberg to build the best social network possible, the Google fellows to search the internet in the best way possible, etc. This isn’t a desire to exploit people. Successful billionaires also need to identify a need that people want to be fulfilled. The need can partially exist — Apple began with some people wanting computers, and now everybody wants one. But billionaires are generated by meeting needs effectively. This all makes a lot of sense, and it is quite a benign and optimistic view of the capitalistic system.
OK. But such a focus is exclusively on the billionaire-consumer relationship. Workers, work conditions, and working relations are not mentioned once in the essay. And that’s … totally normal for our time. Workers, unless they’re the ones in the cluster that contributes venture capitalist pitch meetings, are mostly forgotten, ground, down, and exploited. The common person (or the gendered traditional phrase, common man) is mostly ignored and forgotten (see Putnam’s new book The Upswing for some loose evidence of this point). Working conditions aren’t exactly optimal for ordinary Americans these days. If you just read his essay and knew nothing else about the world, you’d be deeply surprised to learn that companies hire workers to build and do their things. You’d also be very surprised to learn that the relationship between employee and employer is an important location of the exploitation that publics criticize and that drives history.
Marx didn’t develop his critique of capitalism lamenting a market’s ability to satiate human desires. He emphasized the conditions of exploitation between employer and employee. The triangle shirtwaist factory was making really awesome shirts, I’m sure, that consumers genuinely wanted to wear. It’s just that the awful working conditions resulted in total disaster when the fire hit. Andrew Carnegie is remembered not only for his views in the Gospel of Wealth, of the philanthropic duties billionaires have for society, but also for the slaughter of union members. Higher education is genuinely trying to entrepreneurial and develop innovation and moonshots and whatever. It just so happens to also be grinding down its faculty and doing its damndest to develop as maximal a contingent and exploited faculty base as possible.
These two ideas, that businesses can achieve their goals and meet consumer demands at the same time that worker conditions deteriorate or stagnate, are not totally orthogonal. Shooting for the moon and grinding down the common person: it’s a class argument adjacent to the great Gil-Scott Heron’s “Whitey on the Moon.”
Then look at some of the Y Combinator funded companies they list as successes. Many are really, truly great, but let me cherry-pick three: Instacart, Door Dash, and Checkr. The first two are consumer-facing and you probably are already aware of them. Checkr, from what I read, smooths and automates background checks for employment—does this applicant have a criminal record, for example. For their consumers, these services are very convenient, this is totally true. But the people on the ground floor of these delivery services have some pretty serious problems with their working conditions, their pay, their job security, etc. Read Hustle and Gig for more, or talk to people who work these jobs. Everything I have read about restaurant delivery services begs folks to do self pick up or work through the actual restaurant’s website because of the egregious fees taken by companies like Door Dash (e.g. the delivery person and the restaurant itself are put in negative positions). Background check software shows that markets can happily satiate mechanisms of pretty serious and arbitrary exclusion, like drug background checks (you should check out the video at this link: it’s super bizarre to hear the happy ukulele music behind a walkthrough of how to ensure no person’s drug test slips through the cracks through SSN linkages).
More seriously, from my point of view, is that many of these companies that Y Combinator funds and holds up as successes appear to be largely labor-saving tools. Scroll through their list of companies, and many appear to be guided by a logic not only of “cut out the middleman” but also “cut out the employee.” Read Jerry Davis’ work about the vanishing corporation to get a sense of why this is viewed as a broad social problem. Read David Weil’s work about the contemporary grind of core competency. For better or worse, many of these companies appear to be attempting to “solve” problems associated with bureaucracy and large companies with lots of employees and employee security. Large corporations, for better or worse, were the place where American society primarily unloaded the business of low inequality, of upward mobility, and of social safety nets like pensions and health care. Yes, new billionaires are building things and driving profits and making nice new software that satiates consumer demands partially through pushing low paid workers around the city delivering groceries or ensuring their history sticks with them with greater permanence than the previous system provided. But one could argue that these new systems are also partially responsible for undermining the mechanisms that provided a safety net for ordinary workers. Both can be true. I think people’s concerns about undermining middle-class quality of life to expand top-end riches are genuine and not fully reducible to resentment. (note: these problems aren’t just generated by new start ups. They’re also generated by power brokers across the political, social, and economic board. But I don’t think tech start up billionaires are fully exempt).
Put another way, imagine that a person who works at a US medical school makes the following claim: “I teach doctors how to practice medicine every darned day. I watch the most talented, passionate, competent people come through our halls and go on to do extraordinary work. I’m like the scout, coach, and general manager of a sports team, all of whom are extraordinarily talented at identifying and cultivating talent. I have a special insight into healthcare. People who criticize healthcare are simply anti-science conspiracy theorists or resent the meritocratic excellence of modern-day medical workers because from my vantage point, I only see the passion, talent and advancement creating our system.” I think it’s pretty easy to see how this medical school instructor completely misses the point of healthcare critiques. Yes, you’re an insider who makes the sausage. And yes, you see genuinely compassionate and extraordinarily talented physicians pass through your halls. But it’s the broader system of healthcare provision that is an unjust nightmare, not the individuals fulfilling the roles in the system. You’re not talking, for example, about the distribution of health care and its basis in a nightmare insurance cartel. An insider doesn’t necessarily provide greater insight when the points of interaction between ordinary people and the system are ignored or hand waved away.
Ignore workers, ok. But you’re ignoring why negative views towards billionaires exist. It isn’t simply resentment. It’s not just a trendy topic. There are real questions of exploitation and injustice. Feel free to ignore, but that won’t go away. Reading Graham’s essay, one would think that if only the common person could more fully rally behind our happy utopian billionaire nerds, society could finally move forward. Behind the curtain, I think there are a sufficient amount of very real negative and potentially needless consequences for ordinary people’s quality of life to make his argument at minimum in need of alternative perspectives.
If you’ll grant me extreme criticism about his conclusion: Graham ends by asking: “Can you imagine a better way to destroy social mobility than by telling poor kids that the way to get rich is by exploiting people, while the rich kids know, from having watched the preceding generation do it, how it's really done?” Well, the current system seems pretty good at stratifying opportunity independent of the rhetoric involved. Raj Chetty shows inequality is really bad for upward mobility of the poor. Chetty and his team also studied patent holdings and have found that it is those born into extreme privilege who are more likely to develop patents. I remember attending a PSID workshop in 2016 and some great economists from Wisconsin were studying self-employment, and found that the lucrative form of self-employment was nearly exclusively concentrated among those born into the top income bracket. Anecdotally, I remember reading a New Yorker article about Go Pro. The founder was a beach bum who had the opportunity to repeatedly fail in business adventures and then surf it out for year through intrafamily financing, until he hit the GoPro. I am very skeptical that messaging is primarily responsible for what we observe. Perhaps lower income kids aren’t being told about exploitation and unequal opportunity. Perhaps they observe it. Graham considers himself an NFL scout observing those who are more or less talented. But perhaps he’s doing so when the dependent variable has already been highly selected on. I’d argue that living on the margins of a rich society is a damned good reason to feel resentment. Further, I am very skeptical that it is the negative views of billionaires that inhibit mobility and entrepreneurship of lower-income Americans, at least more than the negative working conditions and economic prospects that contemporary entrepreneurship is at least partially contributing to.
To pull everything back together: social scientists like myself need to take very seriously the benefits and progress that occurs through the work of modern billionaires. I am sympathetic to the idea that this perspective is ignored by too many social scientists and commentators. But the view provided by Graham is, in my opinion, too optimistic and really misses the point of where and why people have concerns about modern-day inequality. These views are genuine. They’re not solely the grumbles of jealous onlookers.