We can have entrepreneurship without extreme wealth

April 24, 2019 (997 words) :: (continued from day 113) Contesting the idea that you need the promise of massive financial reward to spur socially-useful entrepreneurship.
Tags: inequality, startups

This post is day 114 of a personal challenge to write every day in 2019. See the other fragments, or sign up for my weekly newsletter.

Continued from day 113. Part 2 of a 3-part series that attempts to explain why economic inequality is bad.

The idea that we need inequality (i.e., the possiblity of getting rich) as a driver of innovation seems like it’s partly a case of confusing correlation with causation. The most well-known “innovators” got rich through their efforts, ergo, they were driven by the promise of financial reward, and if they didn’t have the possibility of becoming billionaires, they never would have created the products or services we’ve since come to rely on. Sure, there may occasionally be some downsides (like inequality), but at least this way we’re growing the pie.

To be fair, there may be some merit in this, albeit only if you work within a narrow definition of what counts as “innovation”. Jeff Bezos, for example, worked for a hedge fund before he started Amazon, and it’s entirely plausible that his primary motivation was financial, rather than purely because he was passionate about logistics. Maybe all the technical innovations we associate with Amazon today would not exist if Bezos had known that he would never become a billionaire through his efforts. In that case, an economic landscape that allows certain people to amass extreme wealth is optimal - in the Pareto sense - because that’s the best way to improve the well-being of society as a whole. Reward those who “create” wealth (or at least, those who come up with the organisational structures for stewarding its creation), and that wealth will trickle down (through better technology) to everybody else.

Here’s my problem with this idea: it seems stupid to look at the system we have now and posit that it is the best we could do. Yes, sure, there are probably some founders/investors/etc who are primarily motivated by the promise of extravagant riches. Take that promise away (e.g., through high taxes on wealth or income) and their motivation will disappear, and so instead of starting the next big billion-dollar company they’ll just work regular jobs and hang out at the beach or whatever.

This is only a bad thing if you think that the people who are currently motivated by wealth are the only people who would work hard enough to create what society needs. Now, this is not an irrational belief, in the sense that this is the message that is supported by the system at large. Capitalism is predicated on the idea that money drives innovation, and accordingly its ideological apparatuses strive to inculculate such a worldview into its subjects, so that we all become good little entrepreneurs-of-the-self attempting to maximise financial returns. It’s not surprising that many people are motivated primarily by money, when the system is so good at convincing us that such a motivation is natural.

But it’s not natural. Such a pecuniary subjective is the product of material conditions (thanks to 40+ years of neoliberal policy that promotes returns to capital through the guise of “innovation” while disparaging organised labour) as well as the cultural conventions that have arisen as a result of the material conditions. People can be taught to be good capitalists, which means that they can also be taught otherwise. They don’t have to motivated to work hard or come up with new ideas solely through the dangled carrot of immense wealth; we could create an entrepreneurial culture that encourages social entrepreneurship, in the sense of creating something that priotises public good over personal gain. We could ensure that the (currently acceptable) drive to hoard wealth is both socially stigmatised and legally obstructed. This would also have the effect of encouraging a very different type of entrepreneurship, with very different results: fewer companies whose main technological innovation is a new way to exploit workers in order to make a few investors and executives richer; and more companies that focus on solving the pressing (ecological, social, etc) problems that we face collectively. Putting people over profit, in other words.

The way the entrepreneurial engine works under capitalism (especially in its modern-day variant), it filters for the wrong kind of people. Even today, there are would-be entrepreneurs and inventors who don’t get funding because their ideas are not predatory enough. What’s more, it’s indirectly creating the wrong kinds of people. After all, no one’s worldview is made in a vacuum; we are all shaped by what we see around us, what we learn in school, what we absorb through popular culture, etc. At the moment, the reigning model of entrepreneurship is a winner-takes-all model with a “scorched earth” mentality, which derives from the extremely lopsided distribution of rewards for your typical tech startup. (Uber is a case in point: if it goes public at $100 billion, its founders will probably walk away with around $10 billion, while drivers can expect to receive a comparatively miniscule $300 million - split among more than a million drivers.) Silicon Valley loves to talk about metrics, and how you can’t optimise for what you can’t measure: well, if you’re optimising for the financial well-being of a few at the very top, then why on earth should we believe that would benefit society at large?

To sum up this section: our current startup lottery system is a terrible way of funding entrepreneurship, because it attracts the wrong kinds of people, and encourages them to make decisions that prioritise their own financial bottom line rather than taking the welfare of other stakeholders into account. On a small enough scale, maybe the market could somehow correct for this (I’m not exactly sure how, but I’m open to the possibility that it might); when you get to Apple- or Amazon-scale, the need to maintain extreme wealth at the top clearly diverges from the needs of society at large. Instead, we should reconfigure the political/economic terrain such that entrepreneurship becomes a public service, where those interested are empowered to pursue ideas aligned with society’s needs. Like the Silicon Valley Basic Income, but for good.

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