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The Ups are Ups and The Downs are Down

Oct
11
2004

The L.A. Times ran a very good story over the weekend about the rising volatility of household incomes. Americans are making more when they earn but their incomes can vary wildly from year to year. It’s a nice thorough bit of reporting and it raises – or it should raise – a lot of questions about public policy.
But I’m betting it won’t. Politicians don’t have volatile incomes. Republicans are too busy rewarding corporations without regard for employees. Democrats are too hooked up with what unions want and unions are having a very hard time with all this self-employed new economy stuff. They can’t see the relationship between the lack of sympathy their getting, Wal-mart’s triumphs and the rise of the self-employed workforce. Even the people profiled in the Times story – and the reporter – didn’t seem to know what to do about this new fact of economic life: There are big dry spells between pay days and everybody’s got to look out, first and foremost, for themselves. ’cause no one else will.


Here on the edge of Silicon Valley these sorts of up and downs are taken as part of the inevitable boom and bust that characterizes the tech economy. We’re at the beginning of an upswing right now but for many it’s been a long dry spell between pay-outs. Notice that I didn’t say “jobs.” There are a lot of ways to get paid around here. Salary is considered the least attractive.
The valley deals with volatility by granting equity. No, it doesn’t give stock to everyone. And yes, that’s not fair. But it distributes enough to the well-connected, the clever, the smart, and the fast to keep things humming along. That’s why the stock options fight in Congress has been so important to Silicon Valley a point that’s underlined by Paul Graham’s marvelous and smart essay “What the Bubble Got Right.”
Now, Silicon Valley isn’t known for its sympathy or social services. It’s pretty much run by the well-off children of America’s better neighborhoods and suburbs and their feel for the repercussions of tough economic choices is blunted by their prosperity. These are the people I call “Progressive Libertarians” and as the architects of this new economy – the one with the big surges in income – they have benefited disproportionately. The guy who goes without a salary for two years while he builds a company – a company he then sells for an amount equal to five year’s salary – has little feel for folks who can’t get funded, don’t have the resources to go without, or simply think that such a way of life is too risky.
Many of these people are shocked to see this sort of stuff said about them; it makes them sound callous and uncaring. That’s not the case. But many are, particularly when it comes to the economic consequences at work now in this country, coldly inconsiderate. It’s not inconsideration in the social sense, of course. It’s a business decision. But that makes it no warmer. And that’s a problem.
There seems to be lots of evidence that this on and off prosperity is here to stay and that “brand of you” idea touted through the Tech Bubble has a dark and scary side. Clearly something has to be done to help folks who don’t have a venture capitalist in their pocket to help weather the hard times. What to do? Tax and other sorts of economic reforms should be put in place not just to let employees keep benefits – not just retirement funds and medical insurance but equity, distributed equally – and find ways of building safety nets for the downturns.
That’s not easy and it’s not something that our current spate of politicians is going to want to think about, not clearly. The creeping business-oriented moderation that espoused by many Progressive Libertarians doesn’t lay enough stress on the “taking care” part of social services. Regardless, their time is coming. Fast. Silicon Valley prides itself on innovation. With good reason. But it’s time the economic change embraced and fostered here is treated not as some sort of quirky fad factory that can be dismissed out of hand.

Share  Posted by Chris Nolan at 1:31 PM | Permalink

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