Redistribution to whom? [Updated]

5/1/2018: I've appended some additional material at the bottom of the post.

As Katherine calls our attention to Trump Administration proposals to crank up the percentage of their paltry incomes that the rent-subsidized (or, as they are more commonly known, "poor people") will have to pay for their crummy government subsidized apartments, let's glance over to see how the quintile, or decile, or maybe it's .1% (millile?), at the other end of the hope-and-prospects spectrum lives.

A few weeks ago, I started to subscribe to a daily enewsletter from Matt Levine of BloombergView, incidentally acquainting myself with the minutia that daily enewsletters still exist.  Levine is a former investment banker and lawyer, now a Bloomberg columnist.  He writes about financial doings with a dash of humor, a spackle knife full of cynicism and not a little spirit of philosophical inquiry.  He has a gift for taking the arcana of financial wheeling and dealing and explaining it in a way that dopes like me can (occasionally) understand.  Inasmuch as that arcana generates hundreds of billions of dollars of gains and losses for large companies, national governments and the rich individuals who for all intents and purposes still run the world, it seems worthwhile keeping up on puts, calls, spreads, derivatives and the like.

Among his frequent subjects/targets are Silicon Valley startups that attract mind-bending amounts of venture-capital funding - which is to say, huge infusions of cash from already-fabulously-wealthy investors who are rolling the dice, hoping that the infusion allows them to become even more fabulously wealthy.

Levine notes what I suppose most of us have noticed: whether the venture succeeds or crashes and burns spectacularly, the entrepreneurial gang somehow manages, sponge-like, to absorb what may strike those of us of more modest means as an inordinate amount of said venture-capital cash infusions into his/her personal account.   Here is Levine on what it is like when one is a denizen of Unicorn Land:

A basic law of finance is that where there is a well-known business model that reliably produces uneconomic decisions—index-fund rebalancing, or let’s say corporate buybacks—then someone will arbitrage it. And here he is:

"A new type of bargain hunter has found an Eden in the epicenter of the tech boom. The city is full of growth-hungry startups rich with venture capital, which offer consumers free trials and discounts on a scale that dwarfs the grocery-store coupon flier.

"Such profligacy helped Mr. Yu cover most of the cost of purchasing a used Mini Cooper convertible, provided months of free meals, made him bitcoin rich and landed him on charter jets free. 

"“The entire S.F. economy is V.C. subsidized,” said Mr. Yu, who last year co-founded a blockchain technology startup called Stream. “It’s a historical world of excess."

There is even an automated scalable version with a pleasingly literal name:

"Elad Ossadon and Noam Szpiro, who work in software engineering, have become referring pros. In 2016, they created a website called VC Fund My Life, which catalogs discounts and freebies. When a user signs up for the startups listed, they get a referral bonus …."

(The paragraphs here that begin with quotation marks are from a WSJ article that Levine is referencing here.  I haven't been able to figure out how to show a quote within a quote.)

Let me try to summarize this: if you wonder why housing prices in the Bay Area are so high that nobody can actually afford to live there, it's because it is so awash in venture capital cash - that either is about to be transferred to young engineers, or is in the process of being transferred to them, or already has been transferred to them - that the young engineers don't actually need to sell any products or services to become rich; they are making all the money they need from the salaries, bonuses, fees and whatever else they can think of to pay themselves from the mountains of cash that venture capitalists have dumped at their front door; and they are giving away so much of those products and services in order to demonstrate to still other venture capitalists that they are a real company with real customers, that Mssrs. Ossadon and Szpiro have set up a website to help consumers find those freebie giveaways.

So let's try for a moment to think about this from a Catholic perspective.  The situation in the United States today is that the top 1% wealthiest individuals owns about 40% of the country's aggregate wealth, which is a higher percentage than that which is owned by us poor saps who are stuck in the bottom 90%.   That is a situation in which the term "unequal distribution" is accurate if a bit mild as a descriptor.  Contrary to property law as it prevails today in the US and the rest of the world, the Catholic notion of distributive justice would state that, if basic needs (like, say, housing) aren't being met, the victims of that inequity have a moral right to support from those who have more than enough - among whom we could pretty safely list Silicon Valley venture capitalists.

I don't claim to be a subject matter expert in distributive justice, but I'm pretty sure that the Catholic authorities don't consider distributive justice to have been achieved when the top .1% redistribute to the top 1%.

The basic misalignment in all this (from the Catholic perspective) is that Silicon Valley venture capitalists don't see it as being in their self-interest to redistribute their (ridiculously) excess(ive) wealth to folks who get rent-subsidized apartments in New York or Chicago or Philadelphia.  On the other hand, they do see it as being in their self-interest to redistribute it to young masters-degree grads from top universities.  Levine, with tongue perhaps only partially in cheek, reflects on the social risk of this situation:

Is this … a … good … way to run an economy? You can imagine, if you want—and lots of techno-utopians do—that we are on the cusp of the end of scarcity, a new productivity revolution in which robots will produce everything necessary for human life, freeing us from the need to work. If that is true, or true-ish, or close to true, or possibly true in the very far future, then the big problem will be the distribution of prosperity: If robots produce abundance but eliminate jobs, the concern is that the people—tech founders and venture capitalists, probably—who own the robots will become unimaginably rich and powerful, while the people who don’t will be unemployed and dependent on those founders and VCs for their necessities. Various solutions to this (rather distant and abstract) problem have been proposed, of which two of the most prominent are (1) socialist revolution and (2) a universal basic income; Silicon Valleytypes seem to like option (2) in part because it might forestall option (1).   

But that is not the entire choice set! You could have lots of other ways to redistribute tech wealth to everyone. For instance the VCs could own the robots and just give away their services. Why would the VCs do that? Well, to forestall a socialist revolution, would be one answer. Out of the goodness of their hearts and a sense of noblesse oblige, would be another. But it is pleasing to imagine that the VCs might give away their products because they are (1) rapacious growth-hungry capitalists and (2) confused. “Please give me free food so that you can grow your daily active user base,” you’d say to the robot-farm monopoly, and its owners would reply “yes, scale, we must scale, here is your food,” and you’d be pleased to have put one over on capitalism.

Update 5/1/2018: H/T to Levine for providing another brief window into How The Other 1% Lives: this video is of Mike Coupe, CEO of British supermarket chain Sainsbury's, quietly singing "We're In The Money" to himself while patiently waiting for a television appearance to discuss his company's acquisition of a rival chain.  I will say for Coupe that (a) at least he has the good grace to not look particularly gleeful as he sings it and (b) he has a pleasant singing voice; I hope he sings in his church choir, where he may occasionally be challenged to think about distributive justice, living wages and other Marxist cant that somehow crept into the bible and church social teaching.

Levine observes that Coupe's extempore performance

is among the purest and most beautiful things I have ever seen. Just go watch it. The performance is amazing, but the greatest magic of the clip is that it gives you a tiny glimpse of an enchanted world where this stuff happens.  “I assume this is what all CEOs do all the time when they think they're not being observed,” I tweeted, and what if it was? What if Mark Zuckerberg walks around the house quietly rapping “C.R.E.A.M.” to himself? What if Elon Musk is so overcome with glee about how rich he is that he literally dances a jig between sending his tweets? What if that famous Jamie Dimon weird-indoor-tennis Christmas card is an accurate depiction of his daily life? What if the lived experience of being a wealthy successful executive consists mostly of singing show tunes about how rich you are? Isn’t that a world you want to live in? Don’t you want to believe that enough money might give you access to that sort of pure innocent delight?