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Silicon Valley's Big Lie
HughPickens.com writes: Danny Crichton writes at TechCrunch that startups in Silicon Valley run on an alchemy of ignorance and amnesia and that lying is a requisite and daily part of being a founder, the grease that keeps the startup flywheel running. Most startups fail. The vast, vast majority of startup employees will never exercise their options, let alone become millionaires while doing it. But founders have little choice as they sell their company to everyone, whether investors, employees, potential employees, or clients. "Founders have to tell the lie – that everything is fine, that a feature is going to launch even though the engineer for that feature hasn't been hired yet, that payroll will run even though the VC dollars are still nowhere on the horizon," writes Crichton. "For one of the most hyper-rational populations in the world, Silicon Valley runs off a myth about startup success, of the lowly founder conquering the world."
The graveyard from Santa Cruz, San Jose, all the way to Sacramento is huge, but this isn't amnesia. This is hope, and hope sells, and occasionally, hope pays off in huge ways. On the way through the graveyard, you get to learn what worked and what didn't.
Eventually, a handful get to the Holy Gates of IPOs, and maybe things go well from there. Slashdot, financially, is a mirror of being a member of this very set, a long ago huge IPO that kept becoming sold off in hopes of future success, but now itself is on the block.
---- Teach Peace. It's Cheaper Than War.
Nonsense. We will mine asteroids and colonise space.
"For one of the most hyper-rational populations in the world"
That's part of the Big Lie, isn't it? Those greedy men who have least to offer will do their best to paint themselves as having the most to offer, and what better weapon has there been since the Renaissance than sophistry disguised as science, pulling those in just clever enough to know what they should be looking for, but too stupid to know whether they're witnessing it? It's the way of every salesman.
The rational man learns hard, finds an honest job, works hard, saves up, buys a home, keeps his skills up to date, remaining ambitious but staying true to himself (don't pretend you do what you can't, and don't get involved with anything that you know is too good to be true). This is harder than it once was, thanks to the overarching influence of Big Liars who enjoy the revolving door, but it's still the safest way to get along, assuming you're not due to inherit a fortune.
Value needs to be extracted somewhere and if you're not the extractor then chances are you're the chump. The responsibility of not being exploited is mine, and if I drank the koolaid I know who the chump who did the drinking was. Maybe next time I'll learn that my l33t risk analysis skills needs a bit of tweaking, or even better, give up on the self-gaslighting.
People often refer to "Silicon Valley" as if it were a place, but it's more like a term for a generation of individuals and companies, rather than just a place. Confusingly, there have been 4 distinct generations of "Silicon Valley", all using the same name.
The First Silicon Valley was from the time of WWII to around 1980. This was the pre-Internet Silicon Valley, which was dominated by the defense industry, heavy manufacturing, and the electronics industry. Lockheed, Shockley, Fairchild, Intel and Hewlett-Packard were some of the companies from this time.
1980 proved to be a turning point. At this point we saw the rise of personal computing and networking. Computing was going mainstream. Defense and heavy industry gave way to light computer hardware and software. This was the Second Silicon Valley. Apple, Sun, SCO, Oracle, Cisco and NeXT made their names known.
Around 1995, at the dawn of the World Wide Web, we saw another transition take place. This was when Yahoo, Netscape, eBay, PayPal and other Web-related properties, whose main focus was software, took off. This was the Third Silicon Valley generation.
The Third Silicon Valley generation was pretty much destroyed by the tech stock market collapse in early 2000. For several years people were unsure if there would even be another generation of Silicon Valley.
Much later, around 2005, we saw the rise of the Fourth Silicon Valley. This is when companies like the revived Apple, Google, Facebook, and Twitter really started making themselves known. They aren't about software so much as they are about advertising and the collection of personal data, with computing merely a tool to enable this on a massive scale.
The Fourth Silicon Valley also corresponds to the influx of "Hipsters" into the industry. The focus of software and service shifted from being useful to the consumer toward being "pretty" and otherwise satiating the Hipsters' desire for "creativity". We all know the trouble this has caused, from Windows 8's awful user experience to the destruction of Firefox's UI, through to the utter decimation of GNOME.
With any luck, the Fourth Silicon Valley will be coming to an end soon. It has proven itself to be the worst so far, in terms of what it has produced, and the harm it has caused. Every industry needs a renewal periodically, and the Fourth Silicon Valley is due for one.
The Fifth Silicon Valley will likely be made up of companies like Tesla, who are trying to provide useful and innovative products to the masses. It should be noted that many of the people behind such ventures are from the Third Silicon Valley. Not being Hipsters, these are people who knew how to make a real difference, not just take the hard work of others and ruin it.
No, Fourth Silicon Valley, which is rife with Hipsters and social rejects, will not mine asteroids. But I think that the Fifth Silicon Valley very well could! Unlike the Fourth Silicon Valley, the Fifth Silicon Valley will likely be made up of people who truly are gifted, and who will bring improvements, rather than the devastation of computer hardware, software, privacy and usability that the Fourth Silicon Valley's Hipsters have subjected us to.
Sure the chances are, as you say, low that the company you join will IPO and/or make it big.
That doesn't mea it doesn't happen though, and that the company you are joining might have an idea you like enough that you want to push to make it succeeded.
But even if you are just being cynical, there are still a lot of rewards to be had from joining a startup as (at least in CA) the pay is still really, really good thanks to large pools of VC money sloshing all over the place. There's a lot of room to navigate there in ways that mean your own personal success even if the company never hits it big.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
If you believe in the product you are creating, don't build it at a company whose vision is to build the company just to sell it or to IPO it. They don't care about the product, only selling the company. They will shortchange everywhere they can, cut corners, not test or QA, and eventually, once you have the product built, they will let you go before you get a chance to cash in.
If you are not allowed to question your government then the government has answered your question.
It's really the same sort of proselytizing that churches do to get followers. Without any tangible "earthly" benefits, the only option is to offer everlasting life beyond the pearly gates of the IPO and draw in the young wide-eyed dreamers. As they get old and embittered, they get tossed for the next wide-eyed dreamer. Lather, rinse, repeat until A) profit! or B) buyout or C) federal indictment occurs.
Left MS Windows for Linux Mint and never looked back!
Vote for Bernie in 2016!
Big secret: companies run like this even after going public, even after getting large and mature.
Wow.... why don't you believe that? Just because its not going to be as easy as you'd like ?
I guess he believes that the same way some believe the Red Sea was splitted in two by Moses and Jesus actually existed, died, resurrected and flew back to his Dad. In fact, the idea we will actually colonize space has its root from the same religious beliefs we inherited the world and must conquer it. At least from the protestant's view of the world. The man is created to engineer the world. It is just an extension of religion.
Achille Talon
Hop!
There are a lot of reasons to criticize Silicon Valley, but being positive about a plan and having to deal with difficult term sheets are hollow complaints.
When you start ANY new project, there is a period of time when the project is not funded and does not have the necessary people to get it done. Startups are no different in selling a dream than any university professor, large company project lead, or government program manager.
The main point of TFA is that startup employees are starting to get more sophisticated in evaluating stock options coming from the common pool compared to investors' preferred shares. Preferred shares and liquidation preferences are tools investors use to reduce risk, and they are detrimental to employees (and founders) of a startup... except that without those investors, nothing could happen. Investors are going to get leverage somehow, and if you're smart, these clauses are not a problem.
Inflated valuations compound these issues. It should be obvious that early high valuations are bad for employees. Potential startup employees SHOULD understand that going to work for a company that is highly valued and has large investments offers much less financial growth opportunity than working for a company with a low valuation and small investment.
If you're a founder, keeping your valuation low during early stages of a startup company is much, MUCH smarter than arguing for a high valuation. This push for early high valuations is driven by lots of money sloshing around looking for a place to sit. That is a legitimate problem in Silicon Valley. As a founder, it may sound great to take in an extra $10 million, but if you don't need that money and can't actually justify that valuation, you've limited your company's future options (no IPO for you) and made it much harder to hire smart employees.
I guess he believes that the same way some believe the Red Sea was splitted in two by Moses and Jesus actually existed, died, resurrected and flew back to his Dad. In fact, the idea we will actually colonize America has its root from the same religious beliefs we inherited the world and must conquer it. At least from the protestant's view of the world. The man is created to engineer the world. It is just an extension of religion.
Contrary to what the article says VCs and employees are very much aware that 1-in-100 startups make it and the rest don't. VCs invest in 100 companies to mitigate the risk, developers keep an eye in other companies in the valley that seem to be well in their way to IPO and switch over. A ton of my friends moved to Facebook and Twitter about a year or two before IPO.
Really which idiot wouldn't be aware of this... ah the article was written by Hugh Pickens... Never mind.
This time it WILL work! The mantra of the developer.
So is it that difficult to translate the same ethos into business: this time I will make it big! Whether there is any cold, hard, lying involved or whether the person touting for a VC payout truly believes what they are saying - that doesn't matter. A VC would have to be a particular kind of fool to be dragged in by the enthusiasm or "irrational exuberance" (to use a term that described the financial crash) and to simply hand out megabucks because one particular presenter waved their arms about more than another. You'd kinda hope the VC people would know the market, assess the chances of success, weigh the probability of failure and then - cautiously - extend a small seed-corn payment to see if there was any chance of success.
But since the VCs are often playing with other people's money, they probably don't care - and are as guilty of promoting their on successes and masking their own failures as the businesses they finance are.
politicians are like babies' nappies: they should both be changed regularly and for the same reasons
Well, he seems to be saying a lot here The myth of startup success is just that: a myth. Declining infrastructure, a confluence of events, absolutely requiring the Big Lie merely for Silicon Valley to function. His conclusion is devastating and disheartening. So, seeing that he has proven his point, why don't we just give up? Silicon Valley is a failure. We need to change to a sustainable, workable system that provides benefits to everyone over the long run, instead of enriching a few people. Let's start turning the lights off and winding things down, everyone. It's over.
Shutting down free speech with violence isn't fighting fascism. It IS fascism!
The job of executive leadership is to tell a nice story and not let facts get in the way. The job of engineering is make factual decisions without letting the nice story get in the way. It's much easier to get people to believe things they *want* to believe. Yeah a lot of the stories are thin and many people see right through them. But remember, in corporate communications, you have four groups of people. Those who want to know the truth and have the acumen to figure it out. Nothing to say to them as they already know. Those who don't want to know the truth but could figure it out. They aren't going to listen. Those who want the truth but don't have the skills to unearth it. They will hang on your every word. Those who have neither the skills nor the desire. I have no idea hos they manage to keep getting paid. Engineers and programmers aren't good at saying yes until they know how, often to our own detriment. I may not know *how* I'm going to meet payroll (Said in the first person, but I've never had one to meet) but that doesn't mean I'm not determined and confident that I will find a way.
...and while it has significantly better odds than the actual lottery, it's much the same thing. Part of what drives the Valley -- and the IT startup industry in general -- is that it's very easy to track down large numbers of people who have, in fact, become millionaires (or better) through stock options and buy outs. It is a siren song that occasionally pays off.
The problem since the late 1990s is that vast amounts of capital have distorted the natural harsh realities of running a business, not to mention Economics 101. Too many tech startup business plans are, in effect, "Get funding. Create buzz. Get more funding. Sell out to a firm that actually makes money or go public." It occasionally works -- and all you have to do is read the industry press to see the multi-billion-dollar IPOs/acquisitions that never panned out.
Now, excuse me while I go back to work on my indie game and my graphic novel. :-) ..bruce..
Bruce F. Webster (brucefwebster.com)
Sure things have low profit margins. Things that could turn you into a billionaire or whatever are going to be long shots.
Ideally what you want to do is hedge. This is not really possible in employment because time is time. But with investments you want to have the bulk of your capital in a sure thing and a reasonable amount in speculative investments.
As regards employment in a start up the way to manage this is with the ratio of pay versus stock options.
To the extent that you judge your start up to be a sure thing or a risky proposition... you are going to want to adjust the balance of stock options versus salary. Riskier jobs should have more upfront salary where as more certain enterprises can have more stock options. Obviously it is in the interest of either organization to sell you the opposite.
A risky venture's interests are in selling you options because if everything goes wrong they paid you with monopoly money. And the reliable entity is effectively paying you more with stock options than with salary so they're going to be inclined to pay you with just straight money instead.
Part of negotiating for pay is understanding what is in your interests and leveraging your value to get what you want.
A company that is going down in flames should pay you in cash... even checks bounce. This was something that was going on with General Motors before their last default. They were paying their suppliers with IOUs. That's entirely unacceptable. A company with shaky financials hands you an IOU and you respond with "no sale".
If the company has solid financials then you say "I'll give this to you on credit"... and then set the interest rate to whatever the banks say is correct... have the bank finance it on the other company's credit rating.
Anyway... point is... if you're being paid mostly in stock options in a start up in SV... the only companies you want to accept that from are sure things.
Sure sure... you can win the lottery. Just know that's what you're doing.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Just another gold rush, with all the same hustlers you see everywhere else. The Big Lie always works on virtually everybody. Everybody go home now, nothing to see here, *everything is fine*
“He’s not deformed, he’s just drunk!”
One thing that humans have been very good at over the last 200 years has been finding new sources of energy. At times this quest has meant gross pollution, but there have been developments, that when not let to get out of control, have produced vast amounts of energy without much more pollution than waste-heat.
If further energy production technologies are developed that continue to produce less and less pollution, and if humanity eventually concludes that it wants to stop mining Earth for whatever reason, there may come a tipping point where it makes sense to start mining extraterrestrial sources for our raw materials, especially if normally-polluting means to refine those materials into products en-route from the source to delivery.
I do not expect this to happen quickly, it'll be on a hundreds-of-years timescale. We will have to continue to pollute, then continue to engage in destructive forms of mining, and continue to grow as a population all while continuing to develop new space technology and new means of energy production, such that the population gets fed-up and either governments or companies decide to try it. It might also have to wait for space-based outposts to exist and for those outposts to work toward self-sufficiency and away from being entirely dependent on Earth-based supply, such that material refining tech that works off-Earth is developed. Regardless it won't happen in our lifetimes, our childrens' lifetimes, and probably not their childrens' lifetimes, so long as it's still not cost-effective and there's not enough will to do it.
Do not look into laser with remaining eye.
capitalism in which the cost of protecting property rights is paid for by taxing economic activity rather than the property rights themselves.
How do you tax property rights?
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
That's exactly right. The great companies stay private as long as possible. What has happened in SV is that the dogs are over-valued and then dumped on the public via an IPO - IPOs are used as exit strategies instead of a way of getting capital.
A perfect example is FitBit. There was no real reason for them to go public. They had enough working capital and investors to do anything they wanted. But they IPO'd at a ridiculous price and considering that the fitness band market is starting to slow down, there is no way that the issuing price is justified - let alone what it's trading at now. What I'm saying is that all of the large upside is over with (and went to the principles) and now to get more money, the company was sold to the public.
This is why I never - ever - touch an IPO these days; especially ones from Silicon Valley because it's a sure way to get burned.
They fight to be the early investors, prime the founder/execs to keep pumping, go through rounds 1, 2, & 3 and keep pumping everyone.
Standard operating procedure.
Perhaps it's because you are looking to become rich beyond the dreams of avarice selling people an address book, to-do lists and email mass marketing, using a splashy website with big excited-looking people from stock photography. I see that
By using the Site and Application, you agree to comply with and be legally bound by the terms and conditions of these Terms of Service ("Terms"), whether or not you become a registered user of the Services.
and further that
YOU ACKNOWLEDGE AND AGREE THAT, BY ACCESSING OR USING THE SITE, APPLICATION OR SERVICES OR BY DOWNLOADING OR POSTING ANY CONTENT FROM OR ON THE SITE, VIA THE APPLICATION OR THROUGH THE SERVICES, OR BY PARTICIPATING IN THE REFERRAL PROGRAM, YOU ARE INDICATING THAT YOU HAVE READ, AND THAT YOU UNDERSTAND AND AGREE TO BE BOUND BY THESE TERMS, WHETHER OR NOT YOU HAVE REGISTERED WITH THE SITE AND APPLICATION. IF YOU DO NOT AGREE TO THESE TERMS, THEN YOU HAVE NO RIGHT TO ACCESS OR USE THE SITE, APPLICATION, SERVICES, OR COLLECTIVE CONTENT OR TO PARTICIPATE IN THE REFERRAL PROGRAM.
I'm looking for content-acquiring behaviors but mostly what I'm seeing is a pattern where your company connects a service with a customer and is then paid instead of paying the service provider: plus if there are disputes, the service provider can skip arbitration or legal process and make the customer pay, not them for the damages, but pay your company instead. I guess that might be a hook for service providers, especially if they intend to file fraudulent damage reports. I'm not sure what you do about things like chargebacks: in my business I've found I'm relatively helpless against the things as credit card companies will do as they please.
Oh wait, I found the boilerplate:
you hereby grant to Bizlifter a worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license, with the right to sublicense, to use, view, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content on, through, or by means of the Site, Application and Services.
Transferable, huh? Sublicense, adapt?
Me, I just code DSP plugins for people. I don't advertise and my approach is rather the opposite of yours: far from jockeying into position for an IPO, I think mostly in terms of cash flow and living frugally so I can continue while living up to my principles. I don't need to recruit anybody and in fact it's sort of useful for me to fly under the radar: I've even been shouted out as a 'great small plugin developer' by a Massive Corporate Industry Leader (who disguises himself as another indie, but he's definitely playing your game and not mine) because I'm unthreatening, too small to be a serious rival in IPO World.
I figure if you have an Evil Hollywood CEO archetype, it's for a reason. And if there's negative GDP this quarter, it's because there are too many of you people doing what you do. You are NOT advancing human civilization. And to the extent that you're trying to paint your Bizlifter business as something Facebook/LinkedIn etc. aren't already doing, you're lying. What you're proposing is not only already happening, it may not be a great thing to be happening.
In that light, the fact that the lie of Silicon Valley is failing, is a good thing.
I do understand the defensive nature of all that legalese: it's actually dangerous for me to mouth off against you because I'm somewhat vulnerable against incurring the wrath of some internet jerkwad who'll botnet me to death or sink me with massive fraudulent sales and chargebacks. That's the internet for you. That's Silicon Valley for you. The idea is to be not only the biggest jerk on the block, but so aggressive that other sociopaths can't damage you. It doesn't leave a lot of room for little Vermont craftsmen hacker types such as myself (original context for hacker, not 'script kiddy tyra
Hyper-rational? Just because the business is computer software and hardware related? I don't think that necessarily follows.
I'd worked at nine different startups until I finally got reasonably lucky. Seriously, that is roughly the odds. Somewhere around ten percent of them are really successful. And that is honestly all you need. Is it really any worse than working as second assistant icon bezel engineer at some giant company on a project that you know will get killed anyway in the next reorg? The pay is roughly the same and the frustration and alienation level are comparable, if for different reasons.
Startups can be a lot of fun, especially if you don't get too emotionally attached or take it too seriously. And all you need is to be in the right place at the right time once and you can retire to a monastery in Bhutan or go fly-fishing in Montana. That isn't too bad a deal.
As for the lying part, I'd more accurately describe it as a kind of self-delusion or cognitive dissonance. One of the hard parts about being the founder of a company is that 24/7 you need to be positive and upbeat. My own experience in the founders seat and getting a great many doors slammed in my face by VCs is that if you don't believe in what you are doing, no one else will. Rejection can only make you stronger.
It is just an extension of religion.
Just? Just? You really don't want to be on the wrong side of a religious pogrom. Religion has changed the world, and changed it again, for good or ill, since time immemorial.
The man is created to engineer the world.
Well no. Just us engineers. Most men aren't really capable of re-engineering the world. But some of us truly are. Edison. Bell. Marconi. Savery. Wright and Wright.
I do not expect this to happen quickly, it'll be on a hundreds-of-years timescale.
Which rather underscores the point that idiots investing dollars today in pie-in-the-sky schemes like asteroid mining are most assuredly throwing their money away.
I think the better way of saying this is that it underscores the point that obstructionist idiots have held back progress substantially because they are incredibly short sighted, and we should have been to that point decades ago.
We went from cars to landing on the moon in less than 60 years.
It's now been almost another 60 years. What significant progress has been made, while you idiots are all wasting time oppressing and shooting at each other?
Exactly.
Only a small fraction of startups succeed. Obviously, if yours doesn't, your options won't be worth anything.
And, yeah, planning to launch features that you haven't hired the engineers for yet isn't a lie, it's planning.
This is mostly true; I work for a IT outsource company and almost all of our customers are startups that cannot afford to hire a full time IT person. They are constantly going through periods where they need to get funding and when you hit that period everything spending wise stops; You know things are going really bad when they stop filling the break room with soda and snacks; But for every 10 that have failed; 1 has gone on spectacularly. 2 Of the companies we have been supporting will be going IPO in the next 6 months. They both have solid products and should do well on their own or as a take over. The innovation that used to come out of NASA has now been replaced with Stanford. The chip foundries have been replaced by Medical Labs. The new Silicon Valley is DNA Valley because all of the technology firms are being replaced by bio-tech. Rich people are getting old, and they want to live, so there is plenty VC money if you can find the next cure for cancer. So when they say that this place will bust, its because they dont live here. Unlike Detroit, the industry here has evolved from Ag, to manufacturing, to tech, to bio tech, and lets face it, we have WAY better weather.
Don't be silly. We went from cars to the moon because two of the richest and most powerful countries funneled a significant part of their money, talent, and resorces to make it happen. And had deep pockets to survive multiple failures and ability to spend zillions of dollars.
Compare this to a startup that seems to have equally grandiose ambition but a fraction of the ability and resources.
Nobody is pulling you down from trying any of these moonshot ideas. But if you want people to really believe that you have a good chance of succeeding, you need to do more than have fancy ambitions. Especially if you are asking people to i vest their money and their careers on your dreams.
Too many people are drinking the bay area koolade.
capitalism in which the cost of protecting property rights is paid for by taxing economic activity rather than the property rights themselves.
How do you tax property rights?
Have you ever owned property? It is quite simple and called property tax.
capitalism in which the cost of protecting property rights is paid for by taxing economic activity rather than the property rights themselves.
How do you tax property rights?
Have you ever owned property? It is quite simple and called property tax.
I wondered if that's what he was proposing, that all defense of property be funded by property taxes. Property tax isn't really a tax on property rights, though. And in any case property tax does end up being a tax on economic activity also, or at least on economic value, which is determined by economic activity. So I don't see the point.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
Not off topic! It used to be cows and still has cows or it did the last time I was there. I admit that was ages ago.
"So long and thanks for all the fish."
When it comes to the F-35, mildly impressive is not an understatement.
Talking about big lie, from what I've read, the F-35 seems more like a marketing victory.
It's pretty much not stealthy but still is sold as stealthy like if it was the F-22 little brother. And let's not talk about some of the claims of its effectiveness against projected opponents.
The only "mildly impressive" thing about it is its helmet-mounted display system, still being improved. If well designed, it can vastly improve the ergonomics of the F-35 compared to other aircrafts. Much like when the head-up display and the multi-function display were introduced, since the helmet-mounted display system replaces the HUD and could replace the multi-function display for some functions.
However, it seems that the F-35 is already lagging in some areas (by example its electro-optical targeting system) when compared to older aircrafts like the Rafale [disclaimer: I'm not French]. And an Achilles heel of the F-35 is the difficulty to upgrade its systems.
Attack drones and unmanned ground combat vehicles are much more impressive, are having and will have a real impact in my opinion.
All legitimate government is a mutual insurance company.
One may ask what it is legitimate for a government to insure and that is a good question but if one posits "capitalism" and does not start with property rights, what does the government insure and what is the basis for underwriting hence charging insurance premiums?
The insurance premium one pays on a property right is going to be actuarially calculated based on multiple factors, one of which is the value of the property. This is the case with _all_ property insurance. That ends up looking a lot like a flat tax on the liquidation value of net assets.
Seastead this.
And lots of high rent to suck it up
The extra among you can earn there more than makes up for the increased rent - I don't live there myself, but I have lots of friends that do.
Fuck you.
You don't have to live there you know, I don't. It is possible to work in the tech industry elsewhere, and if that's the kind of reactions you have to postings on an internet board you may want to strongly consider it.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
And in any case property tax does end up being a tax on economic activity also, or at least on economic value, which is determined by economic activity.
The Broken Window Fallacy is the classic counterexample. Among other things, it's a means to disengage (and of course, tax) economic activity from the value of property.
Tricky one. A property has intrinsic value due to benefits that could be derived from it. If you're not deriving those benefits the property doesn't lose its value.
And in any case property tax does end up being a tax on economic activity also, or at least on economic value, which is determined by economic activity.
The Broken Window Fallacy is the classic counterexample. Among other things, it's a means to disengage (and of course, tax) economic activity from the value of property.
I agree that the Broken Window Fallacy is a fallacy. I don't see how it's a counterexample to the claim that property tax is a tax on economic activity. Can you elaborate?
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
While I admit things have changed in the past twenty years, my time in Si Valley wasn't all about working for cynical manipulators. As one poster mentioned, the Valley went through various phases. I had the opportunity to work for several companies circa 1980 to 2008. Some were better than others. Some succeeded; others failed in interesting ways -- occasionally snatching defeat from the jaws of victory.
But in a couple of the cases I saw first hand, the founders had great ideas. And some of them were brilliant people who worked long hours to bring their dreams into the world as products. In a couple of cases, people pretty far down the food chain were able to share in the founders' success to a credible degree. Sure, the people at the top made a ton of money, but in most cases, I thought they deserved to.
Anyway, while I expect there were examples of smoke-and-mirrors, hype, or whatever you want to call it, the headline to this thread paints negativity with a pretty broad brush. I don't think it's that simple... unless it's changed a lot in the past decade. Has it?
I don't see how it's a counterexample to the claim that property tax is a tax on economic activity. Can you elaborate?
Well, first, there is the obvious. Property taxes don't tax economic activity. If I don't own property, I can still generate economic activity, but economic activity that isn't taxed. Conversely, I can own land which is left fallow. The land would have inherent value, despite my lack of use of it, because of potential economic activity and such. So I would pay a tax on something that doesn't actually generate economic activity.
Second, once a government entity collects taxes via one of these particular means (but not the other), they have considerable incentive to introduce policies to increase the revenue from one means while not impairing the other. For example, they can choose to spur economic activity in order to increase taxes from economic activity (such as income taxes).
The actual example of the broken window fallacy is a case of deliberately breaking windows along streets of a city in order to spur economic activity. It doesn't affect someone who either doesn't own a window or doesn't have their windows right next to the street where they can be broken. The very poor and the very rich are unaffected by this particular approach.
Also, if one pursues strategies for increasing property values rather than increasing economic activity, then breaking windows runs counter to the goal.
We went from cars to landing on the moon in less than 60 years.
It's now been almost another 60 years. What significant progress has been made
We invented the internet instead. You young people can't even begin to imagine what life was like before unlimited free porn.
To have a right to do a thing is not at all the same as to be right in doing it
Property tax is still an indirect tax on economic activity, as I pointed out above, since the value of property is defined by economic activity (whether the property is actually used or not), and since property tax directly affects the cost of all economic activity involving property which, ultimately, is all economic activity or so close to all as makes no difference. There may be some business, somewhere, which requires no capital expenditures and takes place entirely on public land, but it certainly isn't the norm. It's true that some economic activity is more capital intensive than other economic activity, but I don't see how that implies that economic activity which is less capital-intensive necessarily makes fewer claims on government or should be taxed less.
And I still don't see that the Broken Window Fallacy is a counterexample. Perhaps I'm dense. Or perhaps we disagree on the meaning of "counterexamples". At best it seems to highlight that economic activity and property value aren't the same thing, but I don't think that was ever in dispute.
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since the value of property is defined by economic activity
It's not. For example, a fancy mansion is quite expensive, but it doesn't generate or represent economic activity. Instead it is contrary status signaling - namely, I've expended a considerable amount of wealth to build and maintain this mansion.
You keep focusing on the corner cases and implying that they're all that matters.
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Corner cases rebut general claims.