Closing the gap between the rich and poor = no startups?

Great article given to me by Jay. (If you don’t know who Jay is, start reading my comments!) It’s an essay about the connection between economic inequality (the gap between the rich and poor) and taking risks (i.e. the startup/Venture Capital world). Slightly on the long side but highly worth reading.

To give you a quick synopsis on the author’s (Paul Graham) argument:

Giving to the poor decreases people’s appetite for risk (creating/investing in new businesses) because we get lower rewards if we’re giving our money away. Essentially, economic inequality drives people to start businesses because people want to be richer than they are now and/or richer than other people.   BUT… we can still help the poor become more productive. His argument is that the rich still get richer by doing this so it’s not a shift of money from the rich to the poor (i.e. not closing the gap between rich and poor.)

Ok…perhaps it’s better if you read the whole article. It makes more sense that this little bit here.Here’s why I liked it.

It attacks one of my “on the fence” issues : I’m a socialist capitalist

  • socialist:
    • I care about people. I care that people are dying of starvation, disease, natural disasters etc. If you don’t, then I suggest you take a course in empathy;)
    • I think that we need to give back to those that are in need. I understand that we weren’t all born with the same opportunities. I think that it’s important that for those of us who are more fortunate to assist the developing world in improving their welfare. (Also to note: we created a lot of their problems)

BUT…

  • Capitalist
    • I equally agree with the economics of capitalism not just because it drives the economy, but because it can drive the economy, society and the environment (mind you…it has also destroyed all three too)
      • we need incentive, innovation, entrepreneurship, competition to thrive
      • we need to have ownership (tragedy of the commons)
      • we can’t all be equal (umm… communism – great in theory (somewhat…) and awful in practice)

I loved it when he says:

If I’d been forbidden to make enough from a startup to do this, I would have sought security by some other means: for example, by going to work for a big, stable organization from which it would be hard to get fired. Instead of busting my ass in a startup, I would have tried to get a nice, low-stress job at a big research lab, or tenure at a university.

I completely agree. Why put down the people who are working hard?  And…. government jobs? I lived in Ottawa. Enough said.

I have more thoughts on this so stay tuned for the next post. (I hate writing lengthy posts.)

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