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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."
Their solutions are not focused on getting higher paying jobs for the "99%." They are focused on lowering the amount they have to pay for their own talent.
Any time a company starts talking about deregulation and loosening immigration laws, it's french for "make our labor cheaper."
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.
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.
50 people getting a split of $19b is seen as a bad thing because it "increases inequality". Why? Would the rest of the area be better off if those 50 people were still poor? It was a transfer of wealth from Facebook's war chest to 50 individuals - the money wasn't taken from the rest of the population. Surely the measure of increasing prosperity should be how much your buying power has grown, rather than the fact that someone down the street's buying power increased more than yours.
Just because you're paranoid doesn't mean there isn't an invisible demon about to eat your face
"looser immigration laws"
No you clown, that's most of the reason wages in the US have stagnated in the first place. Supply and demand. If you supply more labor the equilibrium price will fall.
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.
you only allow immigrants with provable skills to immigrate
Which provable skills? In terms of guest workers or even real immigrants, the problem is that which skills are "critically needed" are determined by politics, money (oops, redundant) and myth, rather than anything silly like objective facts. TPTB have been pushing the idea of a STEM shortage for decades, despite a complete lack of objective evidence. The obviously unbiased claims of tech CEO's and academicians are the only "evidence". The objective statistics say otherwise (that was even the conclusion of a study commissioned by congress during the tech boom - which of course did nothing to stop raising H-1B quotas).
It's well-established by now that one of the most significant factors in destroying the lives of the unskilled and semi-skilled workers across the country has been the influx of similar immigrants from around the world.
Bullshit it's "well-established". What you are talking about is essentially a subsidy to labor by limiting the size of the labor pool. Limit supply and prices for the labor and every product that labor produces has to rise. Make labor cost more and you will pay more for the results of that labor. What you are forgetting is that we are in a GLOBAL economy. There are very few unskilled jobs that cannot be done elsewhere. Limit the supply of labor in the domestic market and much of that production will migrate elsewhere. If labor costs are too high relative to those available elsewhere then labor-intensive work will migrate to areas with lower labor costs like osmosis. Try to stop it and you will only drive prices higher and hurt the economy in the long run.
Here's how you enact a sensible immigration policy. You crack down on the employers of illegals such that no one will hire them.
You think that is the basis for a "sensible" immigration policy? You think a police state is somehow a good thing? It's unenforceable at any reasonable economic or humanitarian cost. It drives up costs making it harder to compete globally. Furthermore it doesn't address why they are coming into the country in the first place. They come because there is work available. What you should worry about is not whether people are coming into the US illegally. What you should worry about is if they STOP coming to the US because that means there are some serious economic problems.
hen, you only allow immigrants with provable skills to immigrate as singles or with their immediate family if they're married with children.
How does this work with unskilled workers? You think those crops are going to pick themselves? There is lots of vital work that does not depend on skilled labor. Furthermore if a family wants to migrate to the US then that is not a bad thing. Who the hell are you to tell them they cannot come?
That's just a recipe for waking up one day and finding a large ethnic enclave in an American city
Oh so it's really about race. I get it. You don't want those brown people who don't speak English immigrating to the US. Never mind that your ancestors were immigrants too and probably came here illegally as well and probably lived in "a large ethnic enclave in an American city". It's not as if we asked the Native American population if it was ok if we moved in.
http://bit.ly/1dI04fH
Just like Google bought Youtube for its userbase. They could have made Google Videos a lot better than Youtube, but the userbase would have taken years to migrate (if at all). The point is, being the first person in the party is a very good thing if you are a startup.
Here's how you enact a sensible immigration policy. You crack down on the employers of illegals such that no one will hire them. You then offer a contingent amnesty to the illegals that allows them to come forward and face no charges if they leave the country of their own volition, and you even let them keep all of the money and property they've earned if they self-deport. Then, you only allow immigrants with provable skills to immigrate as singles or with their immediate family if they're married with children. None of this "let's bring the whole extended family" over. Grandma, the aunts and uncles and cousins have no business piggybacking on that green card. That's just a recipe for waking up one day and finding a large ethnic enclave in an American city (oh wait, that's precisely what's happened in many areas because of this, silly me).
How's that Tea Party Kool Aid taste? Self-deporting will never work. I'll explain why. Some years ago I had a girlfriend who lived in a country that is not part of the Visa Waiver group of countries that don't need visas to come to the USA. I applied for a fiancee visa for her. I have some insight into how immigration really works in this country, although I do have to say that we ended up breaking up after my application was approved and she did not ever come to the USA. I've read stories about how legal immigrants can't get visas for family members to visit them because the truth is that at the consulates where US employees make the decisions, many applications get denied. The system is set up so that if visitors overstay a visa, the person who approved it gets held accountable and they may not be able to get promoted if it happens enough. There is no appeal process if your application is denied, so it's just easier in many cases to deny a request than to gamble that the person who gets the visa won't overstay. I've even heard of parents of legal immigrants where one got a visa to visit their legal immigrant child and one did not simply because they applied on different days and each parent talked to a different worker at the same US consulate. Also, the whole process of legally immigrating is ridiculously long. If anyone self-deports, they know that they may not ever be allowed back in. If the person who works on their case just doesn't like them, they can deny or delay the application and the applicant can do nothing (they have no rights as they are not US citizens).
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"?
Warning! Keep Out of Eyes! Wash Out with Water! Don't Drink Soap! Dilute! Dilute!
You are right.
He wants highly skilled cheap people, as many I.T. companies business people.
But, there is a problem, I.T. jobs, specially programming, ARE NOT FACTORY jobs, altought many CEO's want to treat it, lik that.
The "here's a spec, generate code that executes this spec using the algorithms you've been given" talk given from architects, or project managers to coders, doesn't work well. I known it, because I did tried, and went back to the good old Analyst-Programmer way of solving problems.
The funny thing, is that I have worked with I.T. students or undergraduates, and there are situations where they worked well, but, usually, this scenario works well when playing "fair":
Been directed by unleast one patient senior developer ...
Not expecting to do the whole project by themselves, without supervision
Teaching stuff the students don't know, and not expecting them to learn by themselves
Don't expect they
Provide some payment, tuition, food, school,
There are situations when taking undergraduates, or students instead of senior developers work well, and viceversa, taking senior developers instead of junior developers.
But, not because ageism, or looking an excuse for paying less.
Something similar happens with offshoring, I have met companies that has offshore offices or factories, and sometimes, a branch has problems because they have to wait the main company to deliver some software or hardware, instead of having their own I.T. people doing the job.
Just my 2 spartan silver coins (2 cents)
It's about blaming income inequality on teachers and schools rather than the 1%.
Blaming a specific group of people for income inequality kind of misses the point. That's just scapegoating. Just because someone was fortunate enough to gain a lot of wealth doesn't mean they are responsible for others not being so fortunate. Economic growth is not a zero sum game except in the short run. In the long run it is possible for economic rewards to be shared and everyone to benefit. The top 1% of the population does not have the power by themselves (in a democracy) to dictate income inequality. That can only happen if a very large portion of the remaining 99% permits it to happen. People regularly support policies that are demonstrably not in their best interest or that of society if they were deciding rationally.
Too many people have bought into the notion that social structures that keep the playing field relatively level are somehow a bad thing. Everyone should have the chance to become rich but after a certain point some have more money than they could ever possibly need. More accumulation by one person at that point does not benefit society. Nobody likes paying taxes but a sensible progressive tax policy (or a flat tax with a floor) can have the side effect of minimizing income disparity. Healthcare is a cost that everyone experiences but in the US we historically have forced low income people to pay a disproportionate share of their income on it. We subsidize large corporations (oil companies, big agriculture firms, etc) that don't need the help. We refuse to balance our taxation levels with our expenditures. We spend a disproportionate amount of our tax revenue on maintaining an overly large military rather than on economic growth, research and jobs. These are choices we have made as a society and they aren't just the fault of the so-called 1%.
And also about washing one's hands of any social responsibility for the well-being of the roughly 70% of Americans who don't have a college degree.
Approximately 40% of Americans have at least an Associates degree and over 50% have at least some college education. Your point is valid but the data isn't correct.
(Not that a college degree guarantees middle-class success these days.)
No degree ever guaranteed success.