Is losing an investment like losing a limb?

May 8, 2019 (1458 words) :: Nassim Nicholas Taleb seems to think so.
Tags: working-in-tech, startups, gig-economy, big-tech

This post is day 128 of a personal challenge to write every day in 2019. See the other fragments, or sign up for my weekly newsletter.

Today’s fragment will be a brief response to this tweet:

(Nassim Nicholas Taleb is the author of the popular book The Black Swan, on risk & probability. He occasionally has good takes, but this is not one of them.)

First of all, capitalism does not need your gratitude. Anyone who tells you otherwise is peddling a narrative of control, meant to shape you into an obedient capitalist subject.

In any case, who are these entrepreneurs to whom Taleb refers? He clarifies in a later tweet that the entrepreneurs with real skin in the game are not CEOs, so I assume he means investors. But investors rarely have actual skin in the game in the sense that they’re investing primarily their own money - it’s way more common to be investing other people’s money, and to have enough of it under management that you don’t really care if you have some losses in one place. Still, let’s be generous and assume the most charitable interpretation of “entrepreneur” here: someone who is staking their own money on a potentially risky-idea.

And, you know, he’s right in a sense: there is no logic in shaming entrepreneurs for losing money. But Taleb’s point goes horribly awry when he brings up this limb-losing analogy. The implication is that the money that an entrepreneur takes “risks” with is equivalent to a limb: the sole possession of the entrepreneur, and also, traumatic to lose.

But like … you can’t regrow a limb. You can make your money back, though. In fact, it’s probably easier to make back the money if you can prove that you’ve been trusted with money before, especially money on a large-enough scale to start a business. (Think of all the VCs who are lining up to invest in founders who’ve previously failed, under the assumption that they’ve learned from the experience. Think of Donald Trump, who constantly declares bankruptcy with seemingly no negative consequences for his financial health.)

The real effect of this analogy extends beyond glorifying entrepreneurship - the point is to naturalise control over money in toto. Obviously your own limbs are your own, and should be under your control. So, too, your money is your own, and should be under your control.

But the former is a biological necessity, because we are all, for better or worse, only bodies. It is natural, which means that there is a limit to what can be changed (like regrowing lost limbs), at least until we have achieved greater mastery over nature. The latter, on the other hand, is not natural; it is the result of a social system that is designed to direct capital according to certain rules, and not always in a way that’s efficient or reasonable.

What this means is that the current distribution of money does not entirely hold up to external justification, because it is the product of various weird internal laws, rather than principles like fairness or efficacy. There is, of course, a spectrum of what constitutes ‘earned’ wealth and what constitutes merely ‘accidental’ or ‘unfair’ wealth - everyone draws their threshold differently, but inherited wealth usually counts as the latter, and many would see the absurd amounts of money in Silicon Valley in a similar light (the upcoming Uber IPO being a timely case in point). So this raises the question: is it fair that some people (these apparently heroic entrepreneurs, “risking” some extra zillions they don’t even really need) have so much control over where large amounts of money gets invested? What’s more, is it desirable?

After all, wealth is a social product. Why is it fair that a few people at the top are able to capture so much of the value created by those at the bottom? Why is the the system so skewed that it concentrates wealth at the top rather than distributing it in a way that’s more useful, not to mention more reflective of the origins of that wealth? Without the workers who are actually doing the work (in return for what Taleb derisively calls a “guaranteed monthly paycheck”), these “entrepreneurs” would not make any return on their investment.

Going back to Taleb’s argument: I think what is really missing is the fundamental, qualitative difference being capital and labour-power. When you are “risking” your capital, you are doing it in the pursuit of something better: fame, wealth, greatness, being on the Forbes 30 Under 30 list, whatever. If you fail, sure, it might suck to lose a million dollars, but at the end of the day, you still have the ability to sell your labour. You are never risking your ability to survive. What you have lost is something most people would never even have in the first place.

On the other hand, when you are selling your labour-power because you don’t have any capital (i.e., you have no other way to survive in this marketised hellscape), you are selling your last resort. You are selling your time: the most precious, finite resource of all. You are giving 8, 10, 12 hours of most of your limited number of days left on this planet over to an employer who doesn’t give a shit about you.

Some people have the privilege of working for companies that at least appear to give a shit about them, companies that provide healthcare and sick pay and room for career progressive. Some people have to sleep in their car because the company they work for refuses to pay them a living wage under the excuse that its workers are free to go elsewhere. (As if workers who had a legitimate alternative would drive for an app that pays them $8.55 an hour without any benefits or real control over their working conditions …)

The point is that entrepreneurship - in the best possible sense of the word - should be seen as an utmost privilege, awarded only to those who have both the vision to create something worthwhile, and the empathy to carefully guide the workers who help them achieve this vision. It is such an enormous honour to be able to direct other people’s time toward what you see as a more productive endeavour. Anyone who is in a position of power in this sense should, really, be obscenely grateful for all their employees who give up their finite time on this planet to help them build their company.

Unfortunately, very few entrepreneurs actually behave this way. You can’t really blame them, either: they are fully accustomed to being on top of a power structure which naturalises their control over other people’s time. They don’t see it as an unfair system that gives some people the right to command other people’s time simply because they had more access to money (because of inherited wealth, or previous corporate success, or just being especially talented at creating pitch decks). They see it as legitimate, efficient, good.

But it’s not, and a cursory glance at the start-up ecosystem, or the dysfunctional power struggles within big tech companies, will reveal many of the failures of the current system. In light of this, maybe we are in dire need of a moment of gratitude: not in the sense of workers being grateful for entrepreneurs, but rather entrepreneurs being grateful for the workers who toil on their behalf while receiving such a tiny portion of the potential reward.

More broadly, the wealthy should be grateful for their place in a system that has granted them so much control over the lives of others with such limited oversight, and so few penalties for failing. They should recognise that they do not deserve this level of control, because it is tantamount to suppressing both individual freedom and democratic control over the way people spend their time, and they should thank their lucky stars every day they wake up without being surrounded by pitchforks.

To conclude: It’s true that it’s silly to shame “risk-takers” for losing money. You shame the system that gives them sole control over so much money in the first place. Your limbs may be your own, but your money - which represents a claim to a certain share of social product - should be thought of as a collective endeavour. If someone happens to have control over substantially more money than others, then there is probably something going wrong there.

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