Sounding off on the Silicon Valley inequality debate

Silicon Valley inequality debate

Why we believe in value-creators and job-makers

Weeks after Y Combinator and Silicon Valley legend Paul Graham published a controversial post titled “Economic Inequality” on his notorious blog, Silicon Valley remains embroiled in debate (one unlikely to die down anytime soon) over the role of startups in exacerbating inequality in the Bay Area.

Given our history in San Francisco and our deep ties with Silicon Valley’s startup and investor community, we feel it’s appropriate for us chime in with our two cents, too (if you disagree, you can keep the change). And given our global presence, we believe the developments taking shape in Silicon Valley’s ecosystem can provide useful lessons for Europe, as investors are (slowly, but surely) pouring more capital into startups and scaleups with the hope of backing Europe’s future unicorns. (Our Chairman Alberto Onetti recently commented on the subject in Italy’s national daily, Corriere della Sera).

The tech/income inequality debate goes like this: According to Graham, on the one hand, there are the startup crusaders, those who scapegoat Silicon Valley’s vibrant startup ecosystem, its ‘useless’ startups and its billionaire VCs for all the problems that are associated with economic inequality in the Bay Area, and across the United States, and even globally. On the other side are the defenders of the tech industry and startups more specifically, including Graham, who claim that the wealth created by startups, and funneled back to its investors, is not the product of a zero-sum game.

Okay, so that’s an incredibly simplified version of the debate.

The trends occurring are more complex, and in reality we need a room full of economists to truly explain the forces at play here. But to give you quick snapshot of the reality on the ground, according to a recent report from the Joint Venture Silicon Valley, Silicon Valley added approximately 58,000 jobs in 2014, a 4.1% increase year-over-year (by comparison, the US’ national job growth rate was 1.8% that year). Yet, distressingly, as the numbers of jobs increased, so too did the wage gap. In 2014, the difference between high-wage and low-wage workers’ median income was an astounding $92,000.

Obviously this job growth (and consequently growth in population in a small 1500 square miles), coupled with a widening wage gap has tremendous implications for the area’s housing situation.

We are by no means claiming to be economists, but one thing we can say with certainty, is that regardless of whether they create millionaire or billionaire founders or not, many of the startups we have had the pleasure of working with are most definitely creating societal value. We agree with Graham in his assertion that many startups don’t just play the zero-sum game, but instead the most successful ones offer innovative solutions to real human and consumer issues, inherently playing a positive-sum game.

Of course this belief does not offer a solution to the worsening housing crisis, nor the increasing wage gap, and that’s why the debate won’t end now. But we also wouldn’t be crazy to think that it’s very possible that one of the thousands of startups in Silicon Valley today are actually working tirelessly to find an innovative solution to the very crisis that they may have helped to start.

It’s true, some of the 400+ graduates of our Startup School may admit that yes, they want to get rich. But if they are indeed successful in their quest to make it big, chances are it’s because they’ve built a great team that’s been behind them (1 – they’ve created jobs), and because they’ve created a new and unique product or solution to an existing problem (2 – value to society). And yes, we also know they’ve been successful in part because of the education we’ve provided them with in our Startup School!

We firmly believe (and also embody it in our MTB Inspiring Principles) that the goal of business, from startup to enterprise, is to create meaningful value for a better world. If we can support startups to do this across the world – from Silicon Valley to Silicon Allee – then surely the world is better off for it.