[questerzen]

There are two separate issues here and it is important to distinguish them clearly. PG is correct that there are two basic strategies for making money: rent and productivity. 1) rent, although it has a positive aspect (it helps to efficiently allocate scarce resources to where they are most valuable and provides an incentive to add scarce resources to the economy), provides an inherent redistribution of wealth which makes owners of capital richer at the expense of non-owners. Piketty etc. have noticed that capital owners have recently been able to gain a greater share of wealth. This is socially and morally a bad thing, especially when it keeps non-capital owners in a state of relative poverty. 2) productivity, in general, is more positive because it provides a net gain to the whole economy as PG points out. If the incentives to a small number of people are very high for adding productivity, then there is no particular problem with this. So in this sense PG is correct. However, this is largely irrelevant as the main problem is that productivity gains are predominantly going to NEITHER workers NOR entrepreneurs. Rather they are going to existing owners of capital. The biggest problem with massive wealth accumulation by founders isn't whether it was deserved, but that when people stop being productivity enhancers they become capital owners and CONTINUE to earn wealth excessively not due to further productivity gains but through rent. There are many solutions possible, but none of the sensible ones would affect new founders very much. PG can sleep easily on this account. The reason PG should feel "hunted" is not that he is a founder enjoying the rewards for benefits he has provided to society, but that as a successful former founder and now capital owner he is continuing to gain excessive wealth by extracting rent from his YC investments such as AirBnB, and even worse, helping PASSIVE YC investors to capture that rent also.

[tdaltonc]

As he pointed out in the article though, capital is playing less and less of a role in startups. Terms in SV have never been as "entrepreneur friendly" as they are right now.

[karmacondon]

The hell are you talking about? The argument could easily be made that AirBnB exists because of the efforts of the YCombinator team. It's not like Paul Graham is personally just sitting back and collecting money. He works hard to advise and provide seed capital to hundreds of startups at year, at a stage when their success is far from guaranteed.

For whatever you think about his views on income inequality, it's difficult to make the case that he's rent seeking.

[questerzen]

PG does appear to want to do a better job than the rest of his industry and he should be applauded for that.

But there is very little evidence that PE or VC funding adds much value to a company through advice or services: the poor performance of post-boom PE funds and their companies, for example, suggests that such claims are vastly exaggerated. I recently had a conversation with the head of a very successful fund who, reflecting on the aftermath of the financial crisis, openly expressed his doubt that his fund had really helped the companies they bought stakes in. He, of course, became exceedingly rich and the steady stream of inflated IPOs produced healthy returns for the funds investors (at least until they didn't.) A large part of the problem is that the compensation model (the traditional "2 and 20") is geared towards the capital providers not the entrepreneurs or indeed to social benefits. Funds are incentivised to raise huge sums of capital from sources who offer nothing but cash and a healthy appetite for risk and over-capitalise the companies they fund (the fund earns 2% on invested external capital regardless of how it performs). To compensate the investors, the funds rely almost exclusively on extracting a very large profit from the few "unicorns" that succeed outrageously (of which the fund gets to keep 20%, or sometimes more). Taking $100 million from a single company is hard to justify, however greatly you value the advice and support you got. And the many worthy productivity-enhancing near-successes are left to flounder. PG may like to focus on the positive impact he is having helping founders succeed, but the reality of his business model is strongly skewed to financial rent extraction.