22 years of job creation wiped out in a day

http://www.avc.com/a_vc/2009/01/twenty-two-years-of-job-creation-wiped-out-in-one-day.html

by brlewis • 17 years ago

48 53 17 years ago

jamesfoster2• 17 years ago

This post is way off base.

The VC industry is at the heart of creative destruction. And the job creation that results goes well beyond the jobs created in the VC companies themselves. There is a trickle down effect.

jrockway• 17 years ago

Care to explain in more detail?

jamesfoster2• 17 years ago

The most sucessful VC companies are the most innovative. They produce a product or service more competitively than the alternative at a cheaper cost.

Companies which consume these products or services save money. As a result they can offer their products/services more competitively, which results in hiring (or at the very least fewer layoffs).

The bottom line is that innovation acts as a stimulus in times of recession. During times of expansion (when the economy is at full employment) it simply results in increased standards of living. I agree with barbie17 that the unemployment rate is more or less constant in the long term.

ryanwaggoner2• 17 years ago

Did you read the post? I don't think that he was limiting his context to jobs within the VC companies...quite the opposite, in fact.

barbie172• 17 years ago

Um, according to standard economic theory in the long-run equilibrium the unemployment rate is the rate of frictional unemployment and that is more-or-less of a constant. What we have is cyclical unemployment, which is temporary. http://en.wikipedia.org/wiki/Unemployment_types

Look, someone who doesn't have a job will lower his/her price until he/she gets a job. If you are really on the verge of starvation you will become willing to work for $1, and someone will probably become willing to hire you for that little. Just like any other market, price will fluctuate and equilibrate supply and demand, clearing the market. It's just that in the short run there is price inflexibility, so the market temporarily goes out of whack. In the long-run wage is only determined by worker productivity (which is function of amount of capital and technology level), and anyone who wants a job can have one, though it may not be as high paying as she wants.

aaronblohowiak6• 17 years ago

The price inflexibility is deeply ingrained in housing prices, and the regulation by the state. No matter how desperate you are, you cannot legally work for as little as someone in many foreign lands.

barbie172• 17 years ago

We are not even close to there yet. If that does become a problem, if min-wage causes 30%+ of the workforce to be unemployed, the government will lower it. They are stupid, but not that stupid. Besides, housing prices are also shaped by supply and demand. If unemployment becomes very high, housing prices will drop. Essentially what you are talking about is short-run price inflexibility.

cchooper• 17 years ago

The problem is that 'standard economic theory' is not in complete agreement here. As the article you linked says, classical economists (whose argument about the market clearing is the one you put forward) do not believe in cyclical unemployment. Those who do believe in it don't believe that the employment market clears of its own accord.

A separate issue is that people can't lower their wage demands to any level. To get a job you must have a home, a means of commuting and the basic necessities of life. There are also costs associated with employing someone, so even if someone worked for free, the employer could not necessarily justify the cost of employing them.

These are theoretical issues though. The existence of unemployment benefit means that the only people who will reach these depths are the homeless.

aaronblohowiak6• 17 years ago

The crux of the article is this: "So the bottom line for me is that the venture capital business is not going to solve this problem we are in. We are going to play a role, possibly an important role, but we'll need more forms of job creation to get everyone back to work."

That, I wholeheartedly agree with. Unfortunately, it seems that it will take a while for housing prices to deflate enough and for people's wage expectation to decrease enough that utilizing American workers becomes cost effective again. Will there be enough capital around to finance the shift of production back home? Will other countries continue to underbid domestic goods? Are we in fact heading to a more "normal" level of unemployment (we have usually had a comparatively low rate, globally speaking) ?

alecco5• 17 years ago

IMHO, solving the problem will be much harder than that. US is highly based on a plan of idealized life through media. A typical lifestyle of the suburbs:

  * Multiple cars per family and doing heavy commuting.
  * Huge houses with high bills and maintenance.
  * Consumerism based on filling those houses and cars with non-essential disposable items.

All those millions living with that mindset apply those same rules at work. There are great exceptions, but their size is not relevant to the national bottom-line.

Now apply that to venture and you get what doesn't work. PG is on this problem often. Perhaps a bit too Socratic-style for my taste. (http://en.wikipedia.org/wiki/Socratic_method)

I never understood how the economy worked in the US with so much waste. Now with this crisis I get it, it never did. US needs a culture shock urgently. (A bailout is more of the same, IMHO.)

HeyLaughingBoy• 17 years ago

Now with this crisis I get it, it never did

You're summing up 50 years of post WWII history into the last 10 years? Good luck with that. The economy works just fine with hat you call "waste." Nothing humans do will ever be close to 100% efficient for any length of time. We're messy that way! The bottom line is that most people the world over will generally live just within their means (or just over if there is sufficient credit) and you may as well get used to that. Living "efficiently" is normally done only by those who have little in the way of resources (in which case they're normally living barely within their means), or by the handwringing worriers who have plenty but feel guilty about it.

aaronblohowiak6• 17 years ago

It also isn't globally scalable -- consider the acres per person that the American lifestyle requires.

astrid• 17 years ago

Wich also means that America has a confortable margin to improve. Their own genius lies in pragmatism, I wouldn't bet against them when necessity joins the game.

helveticaman• 17 years ago

What about the jobs VCs destroy? VCs fire 2/3 of founding CEOs.

ryanwaggoner2• 17 years ago

They're not destroying jobs, as there's still a CEO position that someone has to fill.

Mistone• 17 years ago

while getting booted sucks for sure, those guys are usually in a great spot and can parlay that success into a new venture or join another successful startup / company at a C level.

brlewis• 17 years ago

He suggests at the end that we need a lot more entrepreneurship. This is similar to what PG has been saying for a long time. PG says we need startups so hackers can reach their potential. Fred says the economy needs entrepreneurship. We've talked a lot about PG's ideas, but is Fred right?

pg• 17 years ago

Fred is probably underestimating the number of jobs created by companies he funded. Companies always also create jobs in peripheral industries-- in their suppliers, for example, and in industries that use whatever tools they're building. The latter was particularly obvious to us at Viaweb. Lots of people based businesses on our software.

byrneseyeview2• 17 years ago

You can't inflate one number that way one without doing the same for the other. I suspect there are more peripheral jobs created per startup-job than are destroyed per manufacturing-layoff, though.

Dobbs• 17 years ago

Ahh the joy of manufacturing. Each manufacturing plant pays for tons of raw materials, engineers to design the product, engineers to design the machine the workers are working, security inspectors to make sure the machines are safe, government regulators, now cascade that down to the machine makers. I haven't even got to the-general public side of things (food, shopping).

I seriously doubt that more peripheral jobs are created per startup than those destroyed per manufacturing. But hey maybe I'm biased I did grow up right outside of Detroit.

ahoyhere2• 17 years ago

One of the beauties of startups, as labeled by pg, is that they can be begun with almost no capital but time -- because they don't require almost anything in the way of external equipment & services. They can be very self-contained, rather than interdependent; no supply chain needed, etc.

So I suspect that your suspicion is wrong.

ojbyrne• 17 years ago

Except it seems obvious we're seeing at least some of those peripheral jobs included in the layoff announcements.

immad• 17 years ago

There is also the pressure on the other side that many disruptive technologies require less jobs. For example when manufacturing machines took over previous manual work, or MSN Encarta and Wikipedia affecting the number of door to door encyclopedia salesman.

I think job creation/destruction should be looked at independently from innovation.

lacker• 17 years ago

He is also probably overestimating because he isn't including any competitors that were put out of business. That's okay, any estimate of a total number of jobs impacted is going to be fuzzy.

mynameishere• 17 years ago

That's the least accurate headline ever written.

fredwilson2• 17 years ago

that's doubtful. it's sensational and that's not ideal. but sensational headlines are used all the time and many are at least equally inaccurate

michaelneale2• 17 years ago

On the flip side, that is one guy that created 40 000 jobs in his career so far? that is really quite amazing. If that was me I would sleep very soundly with a smile on my face. He should just get up, and do it again.

fredwilson2• 17 years ago

i did not creat 40,000 jobs. i was at venture firms that financed roughly 200 companies over the past 22 years that created that many jobs. it's a big difference and i want to make sure people understand that

michaelneale2• 17 years ago

but there are a fair chunk of jobs that were created due to your involvement. I would feel pretty good and walk pretty tall if I was you.

noonespecial• 17 years ago

It should at least be mentioned that an out of work wal-mart greeter is not equal to an out of work surgeon. This never seems to be brought in in the "lost x jobs" debate.

dmh2000• 17 years ago

>Well, what if there are no openings come this May--literally none. No job postings. No on campus interviews. No job fairs. This isn't a fantasy. It's happening right now.

Been there when I was in school in the late 70's and early 80's. it sucks but it didn't last forever (that time anyway).

22 years of job creation wiped out in a day

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