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May 1, 2004
NYT on Google: induldges envy, misses story
Can someone tell me exactly what the point of this fatuous piece by Gary Rivlin in The New York Times called "Google Goes Public? The Rich Get Richer" is? Thanks Gary for the sparkling insight that the Google IPO may in fact make some people "richer." The article is dripping with the implication, though never has the courage to actually say, that this is in fact not a good thing. Class warfare by headline, with a wink to those who want to stew in the fact that they are on the outside looking in. There they go again, those rich getting richer--what is to be done?
Since this article was totally devoid of any, I feel some perspective is needed. First, there are a lot more people getting richer from Google than the previously rich. In fact, while a relatively small number of wealthy people will increase their wealth by a small percentage (and a few will increase it by a huge percentage) many previously non-rich will now enter that category. In addition to the employees, investors, and partners who will benefit, communities and customers will also benefit. In fact, perhaps the greatest value from Google will not be directly from the company but from the productivity that a successful approach to organizing the Internet brings to countless enterprises around the world.
"Productivity" is not a sexy term to most folks, but it's productivity that prevents life in this world from being a zero-sum proposition. It's why the rich can get richer by not taking from the poor, but with the poor getting richer themselves. So let's remember, that the rich may be getting richer from Google, but the non-rich will undoubtedly, as a percentage of their means, become richer still.
So if the wealth creation will be far more extensive and far more meaningful for the non-rich than for the rich, what's the point of this article? Indulging envy, perhaps? There seems to be a large trade in that these days, especially in various political campaigns and the national media. But the problem is that inevitably when people explain away their own envy the bogeyman emerges: greed. How else to defeat the uncomfortable impulse that makes us envious of others’ success than by condemning the successful for being greedy? What are those rich people doing making even MORE money? Shouldn’t they be doing something useful?
And this gets to the point: while it's not politically correct to say it, it's good for all of us for the rich to get richer. We should want as a society for resources to be put to their highest use, and we are all better off when savvy investors effectively bet on risky ventures that create wealth. Let's say it again: we are not in a zero-sum game—the pie can get bigger. The uncomfortable reality is that many of the folks who are best able to evaluate smart risks are not poor and are not in the government. It may be more personally gratifying, and socially acceptable, for the rich to "give back" rather than invest, but this may not lead to the most productive outcome for society. Many investors lost a lot of money in recent years, let’s remember that the Google success was the result of folks risking wealth—the rich aren’t getting richer for free.
Finally, let me make a point that few realize: it was basically illegal for the non-rich to have invested in Google. Through a perverse, paternalistic rational the state "protects" the non-wealthy from making investments in private companies like Google, lest they do so imprudently. That’s right, many legal and regulatory hurdles have been constructed for your protection making it very difficult for private companies to let anyone other than "accredited" (i.e. rich) investors make these bets. While it is undoubtedly true that if the average Joe were able to invest in private companies then the average Joe would often get fleeced, but these rules that protect the irresponsible while inhibiting the responsible only nurture a society in which we get more of the former and fewer of the latter. The point it this: the very class warriors who make political hay out of "rich getting richer" rhetoric are the same ones who have made it virtually impossible for the non-rich to play in the same sandbox. So perhaps Mr. Rivlin could have stopped to ask the question why so many "rich" invested in Google -- it may have been more useful to have explored who was denied this opportunity than who may profit from it.
wow. . .seems as if the NYtimes article hit a bit too close to home for comfort. Im a bit confused about your arguments; can you move a bit beyond the apologetic screed for more Reaganomics and Bush-deficit-tax-cut-spending-social-service-cutting and get at what is really bothering you?
So. . .increasing the disparities in wealth in the country with the greatest disparity of wealth between rich and poor is somehow good for society? It really doesn't matter that much anyway as having IPO stock is mostly part and parcel of being in an exclusive club anyway, regardless of your so-called State barriers to having the 'common-person' access these stocks, right? or is there something special about the Google stock?
Part of the problem, is that you may have to move beyond the rather mistaken (and rather offensive) notion that:
The uncomfortable reality is that many of the folks who are best able to evaluate smart risks are not poor and are not in the government
as you so eloquently put it. My question to you is the following: what are the historic economic and social forces that have allowed you to make this overly-flippant statement? I could go on much more here, but I am frankly getting rather nauseous reading the statement about the knowledge of the rich and how you position them as saviours of society. If anything, it is those that work for the rich that get things done and build wealth. where would Silicon Valley be without cheap imported labour to build semi-conductors and chips? I leave it at that. . .
Ahh, Mike. You come, as usual, to my blog with heaping amounts of righteous indignation ever at the ready to distort, mischaracterize, and misrepresent what I write. What draws you to me so? While I have no aspirations of changing your mind, I think I have to set the record straight.
First, there's no need to make apologies for free market economics and I'm not making any here. Socialists will continue to be frustrated by reading my blog, which, after all, has as its core premise that freedom, including economic freedom, works--and works better than the alternatives. So perhaps you shouldn't read this and go write your own blog if you don't like what I have to say.
Second, nowhere do I suggest that the “disparity of wealth between rich and poor" is "good for society" and in fact one of may main points is that the Google IPO will NOT increase the gap--and it is one of my primary complaints with the NYT piece that it seems to suggest otherwise. If you are going to debate me, why not debate the points I’m actually making?
Third, as for the “offensive” point that there may be a correlation between the ability to make prudent investment decisions and wealth, well perhaps the ability to judge investment risk is a skill that every human shares equally, regardless of nature or nurture, but I suspect not. And, that being the case, those more adept at creating wealth in a free society will become wealthier, just as those adept at playing basketball have a better shot at the NBA. I’m not suggesting for a moment that the non-rich can't make good investment decisions and properly analyze risk--in fact I’m arguing that there should be greater opportunities to do so--but I am suggesting that the people who tend to be very good at this also tend to be wealthy (because they have the skills to be wealthy).
See, I think wealth can be created. I don’t think it is a matter of one group hording it and keeping it from another group, but rather that with economic freedom and with a system that encouraged prosperity we can create more of it. Sadly there are many parts around the globe where this is not the case and in fact the wealthy prevent the poor from succeeding--in great part by limiting economic freedom, but I don’t think the US is one of them.
If you are really concerned about “disparity of wealth between rich and poor” then why are you quibbling with me in this post rather than embracing my point that ANYONE, not just the rich, should be legally allowed to invest in private companies? Don’t you want to make the poor richer? Or is it that you just want to make the rich pooer?
Ahh, as usual, your measured responses are to the point and as elucidating as they can be.
why am I drawn to the blog: a number of reasons: not many other folks seem drawn to the blog (often I am the only person making comments that are, in my opinion, overly-sarcastic and not full of 'rightous indignation' as you put it) so there is space to discuss issues and ideas; your often simplified and one-sided takes on important issues need a bit of correction and 'muddying up' as it were; and, primarily, to suggest that 'freedom' does 'work' but it works in particular contexts for particular reasons, namely based on social and economic position, and I think that is useful to keep in mind.
As for your response to my post: your points are well taken but even if the pie is made larger through wealth creation, isn't it a fact that the average salary has been stuck in the 1970s in terms of real purchase power or am I just making this up? Thus, over time, while the pie has gotten larger the amount going to the rich as gotten disproportionately larger than that going to the rest of society. A reward for their risks? maybe. A reward for their greater knowledge? maybe. But again I think the question has to fall on why are particular people able to make those risks and have that knowledge over time and are we talking about the same people (or similar family members) and same class of folks reaping the rewards? My point: political economy is entrenched, no where more than in the States (and as you point out even more accentuated in the Third World, often a result of direct US policy/political connections, I might add), and harping on economic 'freedoms' is a start, but must contain real economic and social policies to back these up (educational opportunities, minimum wages that facilitate real livelihoods and not a permanent underclass (i.e. lumpenproletariat) to facilitate further wealth creation amongst those that have economic and social power (i.e. knowledge)).
Sure letting the common folk profit off of Google is a start, but come on, how often does that happen and how will it happen in the future? And, really and truely, does it matter that much with something like 5% hold 60 % of the wealth in the US (1998) and the top 5% have 75% of the stocks in the US. Google ownership is a start, but a tiny tiny tiny one compared to the real situation of wealth and stock ownership in the States.
anyway, I enjoy our postings: I'm rightous, you are measured, but in some senses we are both right. Freedom works, but the question is for whom and what does that mean? now on the the post about climate change. . .
I enjoy them too, which means there must be something wrong with me.
I don't think your data is correct in terms of our purchasing power. In fact, I think it is quite stunning how much more we can buy today vs. what we could in the 1970s, or anytime before. (Thank you WalMart.) And the data supports this: Average house sizes, per capita number of TVs, phones, cars, even calories have all gone way up and this trend show no signs of abating.
In terms of concentrations of wealth, I suggest there is a strong correlation between economic freedom and how polarized wealth is as well as how much economic moblity there is--which is to say, rich getting richer and staying richer issues are much more pronounced in less free societies. Just look at Brazil, or Saudi Arabia, or Egypt, or countless other places that are less free, or not free at all, economically. Rules, regulations, corruption, and laws against the freedom to transact and to own property are the primary culprits in those societies, fixing the classes and exacerbating economic disparities. I'm not a fan of the "gap," I think the solution is more freedom, not less.
On the Google issue, you miss the point. Just because Google is a special case, doesn't mean that there aren't thousands of opportunities in private companies that are closed off to the non-rich. Remedying this would have a far greater impact on the "fairer" distribution of wealth than you are giving it credit.
I enjoyed reading your comments. Actually, the thing which I think is most interesting about Google is that this is a case of technologists winning, and that doesn't happen as often as I wish it did!
Two guys, techies, came up with a great idea before anyone else did. They figured out how to make a product out of that, and then a business out of that. Thats cool!
Often times, when a new technology company goes public, the innovators, the creators, the builders, the dreamers aren't the ones cashing in. Its the guys that knew how to take it to the bank. Thats when the "rich get richer". Google is not a case of that.
I can't think of a type of entrepreneur I'd rather see get rich. They're smart, they work hard, and they're finally getting paid.
You can argue all kinds of things about whether google has the best technology today or not, or whether the valuation is real or whatever. I don't care. I'm just glad to see two guys passionate about their work reap the rewards. And for these guys, I bet the money is about 4th or 5th on the list of rewards that they value from their google success so far. This story is definitely not as simple as the 'rich getting richer'.