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Google Chairman on WhatsApp: $19 Bn For 50 People? Good For Them!
theodp writes "Speaking at an SXSW panel, Google executive chairman Eric Schmidt emphasized that Google is 'very, very worried' about the class tensions that underlie recent Bay Area protests, where high-salaried techies have driven up rents. 'Ninety-nine percent of people have seen no economic improvement over the last decade,' he said, adding that 'the data suggest that the problem gets worse' and will become the 'number one issue in democracies around the world.' Schmidt's solution to this displacement? Foster conditions — e.g., better education, looser immigration laws, and deregulation in strictly-controlled areas like energy and telecommunications — that encourage the creation of fast-growing startups ('gazelles') that generate lots of jobs. When interviewer Steven Levy noted 'gazelles' like the 50-employee WhatsApp which was acquired by Facebook for a reported $19 billion seem to lead to more inequality, Schmidt brushed aside the apparent contradiction. 'Let us celebrate capitalism,' the tax-us-if-you-can Schmidt said, opening his arms. '$19 billion for 50 people? Good for them.' Eric, meet Tom."
Tech startups don't create the kinds of jobs that the 99% actually need. Oh, sure, many of them will eventually hire one secretary, and will pay into their building's contract for one part-time janitor.
As pointed out in the WhatsApp example, most tech startups employ a dozen or so high-skill kids at low wages. In most cases they then work for 5 years and lose their jobs, not having really made much of anything. The ones that make the papers are the ones where the kids become millionaires. They then grow into 20-50 person firms that never really hire anybody who isn't technically skilled. As modern companies they don't have the kinds of legacy processes that involve heavy manpower. If they sell widgets then they do the design with a few local employees, send the manufacture to Asia, and then warehouse the goods in some 3PL company that puts part-timers lacking benefits through a meat grinder to get packages shipped (those companies create jobs for sure, but as few as they can possibly manage at low pay and they're anything but desirable jobs).
I think startups are important for the economy, but not because they create jobs.
I think we need to get past the model where the typical person is employed by a private company. Private companies just don't need the sorts of skills that the typical person has. Nobody wants to hire an average programmer (at least, not at US wages), or an average marketer, etc. Today we have hyper-specialization and if you're in the top 1% of whatever you do you'll have a job for life, and if not you'll be lucky to ever have a job. We're still in transition, but all the trends are there.
We life in a country which has a huge economy, and yet tons of people who are unemployed. And yet, our roads and bridges are falling apart. Just tax a small bit of the wealth flowing through the country and give people part-time jobs fixing potholes or whatever. When we run out of those they can fix bridges, dig trenches for municipal broadband, and so on.
You'll never hear businesses lobbying for that, however, because then they might actually have to pay their janitors a living wage to keep them. I'm not suggesting private enterprise is evil/bad/etc, but ultimately these companies are not stewards of the public interest. Let's run the economy in a way that actually allows people who are unemployable to survive, and which helps the private economy as well. After all, wouldn't better transportation in the Bay Area help companies like Google?
You say this like it's a problem.
When my grandmother's grandfather first came to this country, they lived in a section of the city that was so heavily associated with immigrants from their part of the world that the main boulevard was nicknamed after one of their more disgusting habits. The immigrants had their own churches, frequently with non-English records. They had their own newspapers, frequently in their native language. They kept their own food, their own culture. They even had their own colleges.
Now that section of the city is home to another large immigrant community, complete with their own newspapers, religious institutions, restaurants, etc. There's a different derogatory nickname for that same section of town, but the name is still a dig at the immigrants.
The more things change, the more they stay the same...
I see no cause for concern that the latest round of immigration will turn out any differently.
Someone just spent $850 Billion on shovel ready jobs. We were told it was to fix bridges, fix unemployment, and give jobs to people filling pot holes. In addition we just bumped up the top tax rate, removed the 2% tax cut on SS wages, and tossed on about 17 tax increases on healthcare. (Bonus, that $850 billion became part of the base budget so has been spent for 5 years now making this year's budge $3.9 Trillion)
The result of all that is you saying unemployment is too high, the roads and bridges are falling apart, and we need to raise taxes again.
How much complete failure of the Federal Government doing EXACTLY what you are wanting them to do must you witness before you realize they are corrupt to the point they are completely unable to help anyone and they just destroy lives instead?
'Ninety-nine percent of people have seen no economic improvement over the last decade,' he said ...
I'd like to see an authoritative reference for this statement.
...
I see no cause for concern that the latest round of immigration will turn out any differently.
I do.
Now we don't expect immigrants to respect US culture or learn English, to the point of forcing students to remove shirts with US flags on them simply because such shirts would cause immigrant children or children of immigrants to resort to violence.
Here's how I read that:
>> "$19 billion for 50 people? Good for them."
Which really means: "If Facebook wants to eliminate themselves as a threat to Google (and Google+) by peeing away mound of cash on stupid deals, I'm all for it. Meh heh heh heh ha!'
He's not looking for generalized education. He's looking for "high school/college graduates with job skills". More and more coding jobs are essentially clerical: here's a spec, generate code that executes this spec using the algorithms you've been given. This is recognized by the non-exempt nature of entry level programming jobs. I'm not talking here about "architect" or enterprise data store design, I'm talking about "here's a screen layout for each of the 50 states, we need them all coded up by a month from now, so we can roll out the new application" or "here's a document describing the workflow and business rules, implement SQL stored procedures for this"
Right now, a lot of that kind of work gets offshored, but that's getting expensive. They'd MUCH rather have $15/hr high school grads cranking out the code, particularly if they can collect various subsidies for hiring young people or prisoners or whoever.
"Turn your schools into training camps for us"
"I know I will be modded down for this": where's the option '-1, Asking for it'?
It's French for "we need more workers that come pre-equipped with a huge debt so they're more obedient". Clear enough? School = scam. Education is free, we have libraries and the web now.
I don't know why this myth persists, it's such a pathetic populist simplification.
Consider this scenario. Your company has an idea for a new product, but it requires an AI expert. There are other AI experts with the required skillset in the country getting paid on average $200k a year. You can poach one by paying $250k a year and in doing so increase the average salary for that skillset but that then deprives another company of one which means they have to shut their project down, and people lose their jobs as the project cannot continue. The loss of jobs means instead average salaries decline because whilst one guy is getting paid $50k more, a bunch of others are going from $80k to $0k.
So instead you bring in someone from overseas for $200k, this lets the other company keep going, and sure it doesn't increase the average salary for that profession, but then you need to hire some additional devs to help your expert, you hire three more great programmers at $100k each - that's $30k above the average and so guess what? you just increased average salaries by hiring someone that enabled this.
Of course your next argument, the next argument used by populist immigrant haters will of course be "well train someone up in the country" - great, train them up how? if we're talking cutting edge or highly advanced stuff who is going to train them? Even if you can and do train them then this puts your project back years and when that happens what if another country develops your idea? They get the wealth and jobs from it instead.
So no, if you supply more labour that doesn't inherently mean that salaries will decrease. The problem is entirely about what types of labour you let in. Done right, it can increase average salaries.
I've pointed it out before, the list of H1-B hires by the likes of Facebook, Google, Microsoft, Apple and so forth shows salaries far above the national average salaries and so you simply cannot accuse big tech companies of having an agenda to drag salaries down with immigrants - the very fact their immigrant hires are paid more on average by definition means that these companies are increasing average salaries by bringing in these people and paying them what they do.
The immigration issue isn't as simplistic as people like you seem to think, it can be a massively important tool in driving growth and increasing salaries, and certainly the major tech companies are using it in a way that they're increasing average salaries.
As an aside, FWIW, the reason salaries have stagnated in the first place is actually mostly because of the work of indigenous American bankers and has absolutely nothing to do with immigration - immigration was still happening even pre-recession and wages were still going up. It actually declined slightly when the recession hit and wages also declined, they certainly didn't go up when there were less immigrants arriving.
What you are talking about is essentially a subsidy to labor
Just as the limited liability aspect of incorporation is a subsidy to capital. Stop pretending that we live in, or ever will live in, a global libertopia. All government policy creates "distortions", and the big question is who those distortions benefit. The only alternative to having any such policies is anarchy.
What you are forgetting is that we are in a GLOBAL economy.
Where is that line from, the Thomas Friedman school of sycophancy? The global aspect of the economy is very selective. For example, offshoring is considered wonderful, but little mention is made of region pricing. Our so-called "free trade" agreements include lots of things that are very much anti-free trade, like requirements for the greater enforcement of government monopolies called "intellectual property". I'm not opposed to IP, for the reasons stated in the Constitution, but they're anathema to free trade, and the original free trade proponents said so. Odd how that aspect of "free trade" seems to have been forgotten. It's interesting how some government distortions are considered desirable.
Not that your suggestions are terribly unreasonable but you are kind of taking an axe (or chainsaw) to the USA's "Nation of immigrants" founding epic.
I don't see it that way at all. What he's complaining about is not immigrants coming to the US, it's the new phenomenon where they come here and isolate themselves instead of becoming part of the great Melting Pot. Immigrants are a wonderful boon to the US in general, but when they isolate themselves and refuse to assimilate with the US culture, they end up nothing more than a slice of their origin country on a carved-out section of US soil. And that creates conflicts. There have even been stories of "honor killings" by father's whose children simply tried to live like mainstream Americans.
"Somebody has to do something. It's just incredibly pathetic it has to be us."
--- Jerry Garcia
"...where high-salaried techies have driven up rents" The "techies" didn't drive up the rent, the landlords drove up the rent because they could. Who the hell says, "Hmm, this is a nice place for $XX but I'd really rather pay $XXX for it"?
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