clock menu more-arrow no yes mobile

Filed under:

I quizzed dozens of Silicon Valley elites about inequality. Here's what they told me.

Paul Graham, founder of Y Combinator, started a contentious discussion of inequality with an essay earlier this week. Here he is being interviewed by Charlie Rose in 2011.
Paul Graham, founder of Y Combinator, started a contentious discussion of inequality with an essay earlier this week. Here he is being interviewed by Charlie Rose in 2011.
Joe Corrigan/Getty Images for AOL

Inequality is perhaps my favorite interview topic in Silicon Valley: It's fascinating to watch ordinarily confident titans of industry squirm in their seats before offering a conspicuously measured response. But occasionally a leader in the community breaks an unspoken rule by being brutally honest in public.

The tech world encountered one of these deliciously informative moments earlier this week, when a well-known startup investor and mentor, Paul Graham, admitted that he was personally (and unabashedly) responsible for rising inequality.

"I've become an expert on how to increase economic inequality, and I've spent the past decade working hard to do it," Graham wrote. "Eliminating great variations in wealth would mean eliminating startups."

In response, friends carefully avoided denouncing Graham or his core beliefs, but disagreed with his approach.

"Yes, income inequality exists and yes it’s a natural consequence of capitalism and other forms of government are decidedly worse than capitalism because they inefficiently create and allocate resources," wrote fellow investor Mark Suster. "But the celebratory nature of today’s conversation felt tone deaf."

Of course, it’s hard to know whether a handful of blog posts really represent the views of Graham's fellow technology moguls. The plural of anecdote is not data. But for the past five years, I've been systematically collecting data on what Silicon Valley believes through interviews with CEOs, including Graham's colleagues in the startup world.

After dozens of interviews with new and big-name tech startup founders, I designed a structured battery of political and philosophical questions and randomly selected people from an exhaustive database of funded companies (more details on the methods here).

What emerged from my interviews and survey results was a set of views that are somewhat more nuanced than Graham’s, but also in agreement with his fundamental view of the world. Founders believe that equality of opportunity is crucial to a fair and healthy economy, while equality of outcome is economically paralyzing.

They believe that a relatively small slice of geniuses advance humanity more than the combined efforts of everyone else, and that economic growth is better at improving the overall quality of life than burdensome redistribution schemes.

And many believe that the best long-term solution to inequality may be a guaranteed basic minimum income, which minimizes regulation on innovation but ensures that the masses are well-off.

Tech elites believe that capitalism works

Peter Thiel
PayPal co-founder and billionaire Peter Thiel.
Neilson Barnard/Getty Images for New York Times

It’s little surprise that a group of people who grew wealthy building successful businesses have a positive view of the economic system that made that success possible. And they see more growth as the solution to broader social problems.

"If we have 4 percent a year of GDP growth, all these problems would get solved," PayPal billionaire Peter Thiel told me when I quizzed him about inequality.

A plurality of founders agree: Among 33 founders I surveyed, 48 percent said that mediocre growth was more problematic than financial inequality, while 42 percent believed the opposite. Among the general population (as represented by 595 people polled on SurveyMonkey), 59 percent of people believe inequality is more important.

Silicon Valley is an optimistic crowd. In my survey, 80 percent of the 129 startup founders I surveyed told me "almost all change is good over the long run," compared with just 48 percent of the general public.

And it’s not as though Valley folks are tone deaf to the problems of inequality. I asked tech founders and members of the public to tell me which of four goals is the best way to improve the world: reducing inequality, addressing threats to national security, reducing government intervention, or getting citizens more active.

Interestingly, founders were more likely than the general public to choose inequality as their top issue (37 percent to 32 percent). They were less likely to say that cutting government (47 percent to 38 percent) or beefing up national security (17 percent to 9 percent) was of paramount importance.

But the biggest difference was on citizen involvement. Twenty-four percent of startup founders saw that as the most important issue, compared with just 11 percent of the general public. Founders have a unique optimism that having an active and informed citizenry can make the world a better place.

The talented few and the hidden meaning of "equality of opportunity"

So far, this might give you the impression that startup founders have garden-variety liberal politics. And it’s true that many Silicon Valley moguls lean to the left. But there’s one big way that Silicon Valley’s elite see the world differently than a lot of others on the political left.

For tech CEOs, the most comfortable response to the growing economic gap is to support "equality of opportunity, not equality of outcome." At some point in my research process, I got tired of hearing this response. Who isn’t in favor of equal opportunity? But over time I came to realize that Silicon Valley elites view issues of opportunity and accomplishment differently than most people.

Toward the end of my research, I asked tech CEOs to tell me how equal or unequal an economy would be in a perfectly meritocratic society where everyone's income was precisely proportional to their productivity. I asked this question of 14 tech founders (including one billionaire), and all predicted that a meritocracy would lead to a very unequal economy. Most said that the top 10 percent of talent would naturally earn more than 50 percent of the nation's wealth.

"An uninspired population is a stagnant population. Inequality breeds creativity, and fosters motivation to change one's situation," wrote Byron Morgan, founder of the music startup Vinylmint. "Mass change starts with one person inspiring another."

This is perhaps a more artful way to articulate the point Graham was trying to make when he wrote, "Most people who get rich tend to be fairly driven. Whatever their other flaws, laziness is usually not one of them."

Gregory Ferenstein

The idea that workers have radically different levels of productivity is so commonplace in the Bay Area that Red Bull even referenced it in an ad, cheekily suggesting that drinking its product would transform a 10Xer — someone who was 10 times as productive as the average programmer — into a hyperproductive 100Xer.

This also helps explain Silicon Valley's continued obsession with Massive Open Online Courses, which have been repeatedly shown to be much worse for low-income students. In a moment of rare honesty, MIT's Andrew McAfee told a crowd in San Francisco that MOOCs' actual promise is to be "diamond finders" — large nets that give opportunity to the rare geniuses born into poor circumstances.

"Very few are contributing enormous amounts to the greater good, be it by starting important companies or leading important causes," one of my survey respondents wrote.

A solution

During a Twitter discussion of Graham's essay, one billionaire pointed me toward an essay that Graham's colleague, Sam Altman, had penned on the same subject. It's a more compassionate version of the same arguments, and Altman floats an idea that is increasingly popular among his elite friends: a basic minimum income, paid for by heavily taxing the rich.

If not everyone can contribute to the economy, the best-case scenario is to just subsidize the entire world with a respectable quality of life (what is lovingly known as "automated luxury communism"). In the kind of healthy, fast-growing economy Thiel and others envision, the economic pie would be growing quickly and there would be plenty of wealth to go around.

But fundamentally, Paul Graham is not much of an outlier among Silicon Valley’s elites when it comes to the relationship between ability and financial rewards. Most successful technology moguls know better than to be as blunt as Graham, but deep down a lot of them believe that a small minority — like them — create a hugely disproportionate share of the world’s wealth.