Robert 3rd Reich no fan of Horatio Alger

[DarrinS]

I like the idea that a person can go from food stamps to billionaire. Not everyone agrees.


http://www.huffingtonpost.com/robert-reich/inequality-productivity-a_b_4826143.html







Inequality, Productivity, and WhatsApp


If you ever wonder what's fueling America's staggering inequality, ponder Facebook's acquisition of the mobile messaging company WhatsApp .

According to news reports today, Facebook has agreed to buy WhatsApp for $19 billion.

That's the highest price paid for a startup in history. It's $3 billion more than Facebook raised when it was first listed, and more than twice what Microsoft paid for Skype.

(To be precise, $12 billion of the $19 billion will be in the form of shares in Facebook, $4 billion will be in cash, and $3 billion in restricted stock to WhatsApp staff, which will vest in four years.)

Given that gargantuan amount, you might think WhatsApp is a big company. You'd be wrong. It has 55 employees, including its two young founders, Jan Koum and Brian Acton.

Whatsapp's value doesn't come from making anything. It doesn't need a large organization to distribute its services or implement its strategy.

It value comes instead from two other things that require only a handful of people. First is its technology -- a simple but powerful app that allows users to send and receive text, image, audio and video messages through the Internet.

The second is its network effect: The more people use it, the more other people want and need to use it in order to be connected. To that extent, it's like Facebook -- driven by connectivity.

Whatsapp's worldwide usage has more than doubled in the past nine months, to 450 million people -- and it's growing by around a million users every day. On December 31, 2013, it handled 54 billion messages (making its service more popular than Twitter, now valued at about $30 billion).

How does it make money? The first year of usage is free. After that, customers pay a small fee. At the scale it's already achieved, even a small fee generates big bucks. And if it gets into advertising it could reach more eyeballs than any other medium in history. It already has a database that could be mined in ways that reveal huge amounts of information about a significant percentage of the world's population.

The winners here are truly big winners. WhatsApp's fifty-five employees are now enormously rich. Its two founders are now billionaires. And the partners of the venture capital firm that financed it have also reaped a fortune.

And the rest of us? We're winners in the sense that we have an even more efficient way to connect with each other.

But we're not getting more jobs.

In the emerging economy, there's no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp's 55 employees are all its 450 million customers need).

Meanwhile, the ranks of postal workers, call-center operators, telephone installers, the people who lay and service miles of cable, and the millions of other communication workers, are dwindling -- just as retail workers are succumbing to Amazon, office clerks and secretaries to Microsoft, and librarians and encyclopedia editors to Google.

Productivity keeps growing, as do corporate profits. But jobs and wages are not growing. Unless we figure out how to bring all of them back into line -- or spread the gains more widely -- our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together.

[Winehole23]

Doesn't seem to me that Reich is disparaging social mobility, quite the reverse: he's disparaging the lack of it. Many losers, a few big winners.

The middle class is getting squeezed and there's really no argument that productivity is delinked from wages.

[boutons_deux]

almost NOBODY goes from food stamps to billionaire

try it yourself, and let us know how it goes

[Winehole23]

Even if you strip away the philosophical underpinning (distributive justice,) a political one remains: a society that is perceived to be grossly unfair can lose legitimacy with the people and become grossly insecure.

[AntiChrist]

Doesn't seem to me that Reich is disparaging social mobility, quite the reverse: he's disparaging the lack of it. Many losers, a few big winners.

The middle class is getting squeezed and there's really no argument that productivity is delinked from wages.



"Whatsapp's value doesn't come from making anything. It doesn't need a large organization to distribute its services or implement its strategy."


Well, they did make something (special FU to Elizabeth Warren here) -- it's called software.


A small group of people just made a buttload of money and that seems to piss off Mr. Reich. :cry

[boutons_deux]

Even if you strip away the philosophical underpinning (distributive justice,) a political one remains: a society that is perceived to be grossly unfair can lose legitimacy with the people and become grossly insecure.

legitimacy?

red state politicians, Confederates, nullificationists, "Christian" supremacists, tea baggers, "sovereign persons", militiamen, gun fellators, etc already deny the legitimacy of the federal govt (when Dems and n!gg@s are in power) and their denial is not because of inequality or fairness.

[DarrinS]

legitimacy?

red state politicians, Confederates, nullificationists, "Christian" supremacists, tea baggers, "sovereign persons", militiamen, gun fellators, etc already deny the legitimacy of the federal govt (when Dems and n!gg@s are in power) and their denial is not because of inequality or fairness.



You are the WWE of political posters.

[Winehole23]

in your zeal to ridicule Reich's hand-wringing you seem to have misunderstood what he's wringing them about.

discussing the underlying issues takes a back seat to scoffing at someone you disagree with, as usual.

[DarrinS]

in your zeal to ridicule Reich's hand-wringing you seem to have misunderstood what he's wringing them about.

discussing the underlying issues takes a back seat to scoffing at someone you disagree with, as usual.


If Mr. Reich is really concerned about jobs, perhaps he should be go where large numbers of jobs are actually being created and learn something.

[Winehole23]

where would that be?

[Winehole23]

and what would he learn?

[Th'Pusher]

"Whatsapp's value doesn't come from making anything. It doesn't need a large organization to distribute its services or implement its strategy."


Well, they did make something (special FU to Elizabeth Warren here) -- it's called software.


A small group of people just made a buttload of money and that seems to piss off Mr. Reich. :cry


That's what you take issue with? That he called software nothing? He goes on to say the service adds value. "And the rest of us, we win because...

Is there anything else non factual you take issue with?

He simply seems to be pointing out a reality to me. I think your perception of the world is fucked tbh.

[RandomGuy]

I like the idea that a person can go from food stamps to billionaire. Not everyone agrees.


http://www.huffingtonpost.com/robert-reich/inequality-productivity-a_b_4826143.html

DarrinS with the strawman about someone he doesn't like.

SOSDD

The only thing missing is a smiley.

You're slipping.

[boutons_deux]

Low-Wage Workers Have Experienced Wage Erosion in Nearly Every State

http://s3.epi.org/files/2014/snapshot-wage-stagnation-by-state-02-18-2014.png.608

http://www.epi.org/publication/wage-workers-experienced-wage-erosion-state/

[DarrinS]

That's what you take issue with? That he called software nothing?



"If you ever wonder what's fueling America's staggering inequality, ponder Facebook's acquisition of the mobile messaging company WhatsApp ."


False premise, tbh

[Th'Pusher]

"If you ever wonder what's fueling America's staggering inequality, ponder Facebook's acquisition of the mobile messaging company WhatsApp ."


False premise, tbh

Explain how that statement is a false premise.

[Winehole23]

DarrinS does drive bys. Sustained conversation isn't his thing.

[ChumpDumper]

If Mr. Reich is really concerned about jobs, perhaps he should be go where large numbers of jobs are actually being created and learn something.


where would that be?Texas.


and what would he learn?Governments give millions in cash and benefits to companies to subsidize the salaries of professionals who already make more than poor people who do not get such breaks.

Those companies already want to be here, if they aren't here already.

Those professionals already want to be here.

And toll roads. He would find toll roads.

[DarrinS]

Explain how that statement is a false premise.


I don't think anyone doubts there is income inequality, perhaps even "staggering" inequality, but I don't think it's these rare acquisitions of small, start-up companies that are "fueling" it.

[Th'Pusher]

I don't think anyone doubts there is income inequality, perhaps even "staggering" inequality, but I don't think it's these rare acquisitions of small, start-up companies that are "fueling" it.

So you take issue with the word fueling? He simply states a fact then provides a perfectly legitamate example of how lean technology firms contribute to inequality (you seem to miss the bigger metaphor).

Meh. You have your panties in a wad because you don't like the message.

[Winehole23]

I don't think anyone doubts there is income inequality, perhaps even "staggering" inequality, but I don't think it's these rare acquisitions of small, start-up companies that are "fueling" it.Neither does Reich, nor does he say it does.

[DarrinS]

So you take issue with the word fueling? He simply states a fact then provides a perfectly legitamate example of how lean technology firms contribute to inequality (you seem to miss the bigger metaphor).

Meh. You have your panties in a wad because you don't like the message.


'In the emerging economy, there's no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp's 55 employees are all its 450 million customers need). "


So, because they don't require thousands of employees to service their customers, they're contributing to inequality? Pretty weak stuff.

[DarrinS]

Oh noes, HuffPo now reporting that WhatsApp employees celebrated with <gasp> Cristal Champagne!

http://www.huffingtonpost.co.uk/2014/02/21/whatsapp-facebook-champagne_n_4829510.html


http://i.huffpost.com/gen/1636332/thumbs/o-WHATSAPPCRISTAL-570.jpg



One comment: (probably Reich)

"Very Vulgar Indeed

Little b*stards"

[ElNono]

Facebook is a giant bubble, IMO. I don't buy they're worth $1B themselves, much less they can be purchasing other companies for that kind of money.

[DarrinS]

Facebook is a giant bubble, IMO. I don't buy they're worth $1B themselves, much less they can be purchasing other companies for that kind of money.


That's probably a more legitimate debate.

[ElNono]

This is just a by-product of the services economy, which is why I was never a big fan of putting it front and center.

Companies like Facebook, ebay, etc, are just giant marketing platforms whose perceived value is largely guesstimated based on how many people peek through their virtual window. They sell no actual product, and there's near zero innovation on the tech aspects of their platforms. Most of them weren't even making money before filing for an IPO. It's even worse than the dot-com bubble, because during that bubble, there were some actual innovation and companies selling products.

IMO, some of these companies are going to pop just like MySpace popped, and it's going to get real ugly real quick. They're also extremely risky and damaging to the economy, especially when you get to these billion dollar amounts.

[DarrinS]

This is just a by-product of the services economy, which is why I was never a big fan of putting it front and center.

Companies like Facebook, ebay, etc, are just giant marketing platforms whose perceived value is largely guesstimated based on how many people peek through their virtual window. They sell no actual product, and there's near zero innovation on the tech aspects of their platforms. Most of them weren't even making money before filing for an IPO. It's even worse than the dot-com bubble, because during that bubble, there were some actual innovation and companies selling products.

IMO, some of these companies are going to pop just like MySpace popped, and it's going to get real ugly real quick. They're also extremely risky and damaging to the economy, especially when you get to these billion dollar amounts.



I mostly agree with that.


Good article, btw --> http://www.forbes.com/sites/parmyolson/2014/02/19/exclusive-inside-story-how-jan-koum-built-whatsapp-into-facebooks-new-19-billion-baby/

[ElNono]

^ thanks

[boutons_deux]

Return on liquid capital far exceeds return on return on building stuff

Jack Welch fired 1000s of GE engineers and spent their salaries in the wall st casino

[Th'Pusher]

'In the emerging economy, there's no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp's 55 employees are all its 450 million customers need). "


So, because they don't require thousands of employees to service their customers, they're contributing to inequality? Pretty weak stuff.
Can you not do basic math? Which one has a more equitable distribution? $19b divided by 55 (I realize these are not the actual figures) or $19b divided by 55k? It's basic math. It's not a bad thing in and of itself, it's just a reality of the current economy.

[scott]

'In the emerging economy, there's no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp's 55 employees are all its 450 million customers need). "


So, because they don't require thousands of employees to service their customers, they're contributing to inequality? Pretty weak stuff.

Actually, yes. There is a disconnect between labor inputs and real product, thus resulting in real wage inequality. This isn't an indictment of the software company, merely an observation of reality.

Take the example to its end: Richie Rich develops technology that allows the production of all his products to occur without any employees, and sheds $6B of payroll which now goes straight into his pocket as incremental revenue. The result is increased inequality between Mr Rich and the now unemployed RichCorp expats.

This is not a difficult concept to grasp.

[scott]

Can you not do basic math? Which one has a more equitable distribution? $19b divided by 55 (I realize these are not the actual figures) or $19b divided by 55k? It's basic math. It's not a bad thing in and of itself, it's just a reality of the current economy.

Beat me to it