grellas

After being one of the top-rated commenters on HN for some years, I have not commented in a long while. For what it is worth, here is my two cents on a topic - a wealth tax - that may seem on the surface to be benign but that is in fact just the opposite.

Silicon Valley was founded in a spirit of freedom and flexibility but that spirit is clearly and dangerously on the wane insofar as the political environment surrounding the Valley is concerned.

By the 1970s, American enterprise was in decline, a victim of the "big government/big business/big labor" trends glamorized by establishment types of that day. What this did was take away choice and flexibility.

Tech changed all that and it did so from the heart of Silicon Valley. Tech arose from a spirit of freedom and flexibility. Founders would get an idea and would have countless ways of experimenting with what they could do with it with the aim of building a venture. Many of the most wildly successful ventures came out of nowhere. No central committee could have planned for them. No overlords of big business could have had the imagination or risk-taking fortitude to push them at the expense of their established cash cows of that day. No union could comfortably impose rigid work rules onto such amorphous ventures (the first thing Intel workers did even after the company succeeded was to reject unionization). No minimum wage or overtime rules applied. Benefits packages of the type widely deployed in the analog-based large businesses of that day were unheard of.

Regulators and taxers of that era continually tried to realize their vision of locking people into situations by which they would have guaranteed security, ossifying the mature businesses over which they had control, but tech simply outran them through innovation. And, in time, upended them by disrupting their industries through innovation and risk-taking.

Today, the spirit of Silicon Valley has changed and is yielding to a belief system by which the overlords of politics believe they can dictate outcomes that will give people locked-in security forever. Want to do something as an independent to earn a livelihood? Sorry, AB5 forbids that and will penalize the hell out of any venture that seeks to use fleelancing and flexibility as a foundation for innovation and growth. Your choice to act an an independent is frozen out by dictates that, if you act at all to make a living, you must do it within rigid systems that guarantee minimum compensation, regulate overtime, prescribe minimum guaranteed benefits, and the like. If this kills opportunities, no problem: there will be other rules that guarantee basic income, limit the rent you have to pay, and otherwise regulate society such that people are guaranteed a risk-free existence courtesy of decrees enacted by political proclamation.

This new mindset is precisely the one of the 1970s-era leaders who managed to choke off innovation and growth in old-line businesses and gave a massive opening to tech innovators, particularly those in Silicon Valley.

pg's modeling of the effects of a wealth tax is spot on. And it confirms that such a tax is an innovation-killing idea that would destroy the spirit of Silicon Valley. Of course, tech innovation will not cease. It will just move elsewhere to escape the tax. Europe in the 1990s had a couple of dozen or more countries that imposed wealth taxes. Today it has three, if I recall. There is a reason for that. It is a highly pernicious tax that kills enterprise and that veers from a capitalist (even progressive) philosophy into one that is directly of a Marxist/communist variety that has left so many nations in rubble once fully implemented. Smart, innovative people are not going to stick around for the con game. They will leave.

I have watched Silicon Valley grow and flourish for decades now and have been directly involved in working with thousands of entrepreneurs who have been a part of it. There have been a lot of political changes over those decades but one thing remained constant: the foundational thinking in California always assumed a capitalistic structure. Once that is abandoned, Silicon Valley will be no more.

I know that the vast majority of HN'ers are progressive in their thinking and we all can have our own ideas about what makes for a good and just society. I am not commenting on that here.

There is a line that cannot be crossed, however, without killing the Valley itself and all that it stands for. The wealth tax clearly crosses that line and, if things are allowed to go that way, the consequences may not be what you expect them to be. It doesn't take much to switch from a tax of .4% on assets over $30M (bad as that is in itself) to a tax of a much higher rate on a much lower threshold of assets. Once that monster is unleased, who knows where it will go. It will be fundamental transformation of the Valley, and not a good one.

As I said, just my two cents.

Excellent additions - thanks for supplementing/clarifying!

Another note or two:

1. Damages might be reduced on appeal but, if not, this will really sting for Oberlin. Why?

2. Its insurer apparently is denying coverage because the wrongs committed were intentional and that removes them from coverage.

3. The legal fee award approved by the jury is likely tied to a contingent fee arrangement and will likely add as much as $10 million to the final price tag.

Bottom line for the risk to Oberlin: $11.4 million compensatory damages; $22.8 million punitive damages; $10 million attorneys' fees = $44.2 million judgment, an astounding number for something the college could easily have quelled at or near inception for almost nothing. Again, this could be reversed or modified on appeal but who in the world would want to be fighting from that position?

This site has followed the case closely and goes through a lot of the evidence in the linked items. In general, the defendants appeared to go over a line by asserting that the arrest of a shoplifter was based on racial profiling when there was utterly no evidence that the bakery had profiled anybody and when the evidence appeared open-and-shut that shoplifting had occurred (as the guilty pleas eventually confirmed). The other potentially inflammatory element is the huge impact the protests/boycott had on the bakery, essentially almost destroying its business. When you put it all together, it becomes a hard case to defend and the verdict reflects that. At the same time, this is a preliminary report on the verdict and I am sure more details/analysis will follow.

A potentially explosive case in which protests/boycotts by college students/administrators based on claims of alleged racial profiling by a local business appear to have backfired in a big way - at least in the first big legal phase.

'Big Tech', unlike Telecom, has made itself friendless, having alienated pretty much everybody along the political spectrum, and that is a dangerous place to me with a field subject to such legal vagaries as antitrust law is. I am not talking here about lobbyists or about legal technicalities but rather about the visceral reaction we all can have as human beings to the basic question: do I sympathize or even relate to these people? At inception, Google, FB, et al. were seen as innovative, dynamic, helpful to average people and the like. Sadly, those days are long past and all too many people are instead inclined to reach for the nearest garlic clove in hopes of warding them off.

When a lot of money is at stake, it is no surprise that litigants abuse the legal system.

Uber is contractually required to pay the up-front arbitration fees so that the JAMS arbitrations can move forward. I super-slow-walks the process. What is the remedy?

Well, JAMS itself does not really have a remedy. It is a private organization that moves forward with the arbitration process as its rules are complied with and as it gets paid.

Nor is there an obvious remedy in the courts for individual failings in this or that arbitration procedure. Courts normally are not even involved in such processes.

Only when a clear pattern emerges (as it now has) can a court intervene to remedy a problem such as this.

In the meantime, what has happened? A lot of time has passed. A lot of the claimants (I am sure) have become discouraged and have possibly lost their motivation to move forward with their claims. And Uber has moved well along the path toward ultimate success in winning it all in its market, currently resting on a valuation of $120B.

Is any of this defensible? No. Will Uber try to defend it? Yes, through double-talk and prevarication. Will it be doing so in good faith? Not at all. Will the aggrieved drivers be able to overcome it? Perhaps, but they will likely get too little, too late. And, for Uber, it will be a historic liability that vanishes into the ether as it looks backwards on eventually settling the claims while basking in its massive success.

In a just world, things like this should not happen and perhaps Uber will be upended by something or other along the way anyway. But this sort of cynical abuse of legal processes in neither rare nor the exception in cases where modern litigants have the means and opportunity to gain massively from the abuses. It is not the exception but the rule.

And this in turn illustrates the obvious limits of using law as a solution for society's problems. The law can and does help solve problems to a point. But it is always subject to abuse and, in the end, money, power, and corrupt motives often work to undercut its effectiveness. This sort of case is Exhibit A to prove the point.

Non-competes under U.S. law are neither all good nor all bad. They have their legitimate uses but these are the narrow cases and not the norm.

For example, you sell a business to someone who pays you a big premium for your goodwill value usually tied to the value of the customer base. It is entirely fair that, having taken the money in exchange for the sale of your goodwill interest, you not be able to turn around the day after the close and effectively steal it back from your buyer by setting up a competing business and conducting raids to get back your old customers. A reasonable restriction on your ability to compete in that case makes eminent sense and is not in any way unfair.

So too if you exit a professional practice and get bought out. Same principle. You get paid for the goodwill value and you should not be able to capitalize on the payment and simultaneously raid the goodwill of your former practice by competing against it. Fair and reasonable even though it restricts you in your livelihood.

Thus, even states like California, which basically ban the use of non-competes in an employment context, will fully enforce them in the situations noted above.

On the bad side, non-competes tend to operate unfairly and to burden ex-employees by preventing them from engaging in their normal livelihood even when they have been paid nothing for the privilege. Many jurisdictions do enforce them in that context and the only way to challenge them is to argue that they are unreasonably broad, which (if fought out) takes a tidy six-figure sum to prove in court.

So, yeah, all jurisdictions should adopt the California rule that largely bans non-competes in an employment context. But I don't see this happening anytime soon.

In the meantime, as an employee, you should try to avoid these if you can, negotiate to be paid for any non-compete if you have the leverage, or, if you have no choice, live with them as best you can until the law comes to a better place. As long as the law enforces them, you are sometimes just stuck.