Silicon Valley’s Wealth Problem

I was born in Silicon Valley and have been privileged to be part of the tech revolution. I have seen the Valley go from a sleepy agriculture community to a thriving technopolis. I cut through Apricot orchards to go to grammar school, and I lived in the center of San Jose at that time. The Silicon Valley of my youth is long gone.

As I grew up, I was a beneficiary of our capitalist culture. My parents instilled in me a strong work ethic and was told that I had to earn my way in society. I started in the tech sector in 1976 and was influenced by Hewlett and Packard and many of the Valley’s tech pioneers who worked long hours and worked very smart to build strong tech companies. Silicon Valley has become one of the wealthiest areas in the US thanks to a capitalist approach to building companies and using tech to create that wealth. This area has one of the largest group of millionaires per capita than just about any other part of the country. That has been considered a good thing for the last 35 years.

But recently, here in Silicon Valley especially, that wealth growth has become a significant issue when it comes to things like affordable housing and more granular things like wealth distribution and the Valley is under greater scrutiny than ever before. I rub elbows with people in the tech world daily who have significantly benefited from tech as well as people who are not in tech or other areas like Real Estate and Finance and are struggling to get by. Across the country, the concentration of wealth around big tech companies and the fact that some of the most wealthy people in the world come from tech, has come under fire from the right and the left recently.

Although this issue of the economic haves and have nots have been around for centuries, the concentrated wealth, especially coming from the tech sector, is becoming more of an issue for many people who are left leaning and a younger generation that sees their future economic prospects challenged in new ways.

There was an important piece recently in Scientific American that lays out this issue in an article entitled “Revolt Against the Rich.”

Here is a short exert:

But a flurry of recent articles—with headlines like “Abolish Billionaires” and “The Economics of Soaking the Rich”—argues that we should be appalled by the immense gap between the poor and rich. The proliferation of billionaires shows that capitalism is malfunctioning and in need of reforms, including higher taxes on the ultra-wealthy.

One vocal billionaire-basher is Alexandria Ocasio-Cortez, a newly elected Congresswoman from New York and self-identified democratic socialist. “I’m not saying that Bill Gates or Warren Buffet are immoral,” she said recently, “but a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong.”

A report from the anti-poverty organization Oxfam provides a global, historical perspective on inequality. Maximum tax rates in the richest countries fell from an average of 62 percent in 1970 to 38 percent in 2013, and inequality has surged. The number of billionaires has doubled over the past decade to 2,208. The collective wealth of the 26 wealthiest people now equals that of the 3.8 billion poorest, whose total wealth fell last year by 11 percent.

In short, the rich are getting richer and the poor, at least lately, poorer. “We need to transform our economies to deliver universal health, education and other public services,” Oxfam states. “To make this possible, the richest people and corporations should pay their fair share of tax.”

I urge you to read the Scientific American article to get both sides of this argument, but the crux of its conclusion is that is it is time for the rich to pay higher taxes to even out the wealth distribution.

That is why the concept of socialism is gaining more attention and why a younger generation, who cannot see themselves gaining ground under our current economic system, is taking more of an interest in at least the idea of a better distribution of wealth.

As one who has been a Silicon Valley historian as well as an apologist of sorts, I hate to see the Valley seen as evil in any way. Some of the worlds greatest technologies have come from this region, and the Valley is not done innovating. It has brought great wealth to our area, but on the flips side, it has caused significant traffic issues, housing problems and many related things we have not had to deal with until the last ten years.

I share these thoughts because of what I see going on in Washington as well as around the nation. Our past economic ways are now in the crosshairs and tech firms, who are some of the biggest companies in the world, are being seen in more negative lights. I realize that this issue has come up many times in the past and Silicon Valley has weathered them. But this time around, I sense something is very different.

I am afraid that for us in tech, this will be a more significant part of our conversation going forward and dealing with this inequity in wealth distribution will be a topic we all have to be much more prepared to talk about and confront very soon.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

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