Does Mark Zuckerberg Really Deserve All That Money?
Photo Credit: cattias photos
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On Monday, Bloomberg News estimated that Mark Zuckerberg, Facebook's 27-year-old founder, will be worth about $21 billion based on his company's forthcoming initial public offering. Although he won't qualify (yet) for a slot among the planet's richest 20 people in the Bloomberg Billionaires Index, Zuckerberg will still enjoy iconic status as an entrepreneur of mythic proportions. Indeed, the Wall Street Journal credited Facebook with creating "a new way of living," and hailed the company—thought to be worth $100billion—as a "prototypical American success story, complete with technological brilliance and a fair amount of drama." Bill Keller of the New York Times similarly "marveled" at Mark Zuckerberg's "imagination and industry."
But does Zuckerberg deserve all this money? To what degree does his shrewd business idea—rather than the conditions that allowed it to happen—“deserve” credit for creating this enormous bounty? Some obvious questions: Where would he be without the Internet? Or the computer? Or all the many other publicly financed technologies that made Facebook possible? Certainly, he “deserves” something, but how do we gain perspective on the bounty created, on the one hand, by public investment; and on the other, by smart entrepreneurs who run off with the lion’s share of the benefits of such investments?
Take the Internet itself: The ﬁrst large-scale computer network, the ARPANET, was launched in the late 1960s by the Department of Defense. Between the mid-1980s and the mid-1990s the National Science Foundation spent $200 million to build and operate a network of regional supercomputing hubs called the NSFNET. Connected to the ARPANET, this network established Internet access for nearly all U.S. universities, making it a civilian network in all but name. The rest was history.
Much else of Silicon Valley's enormous wealth also originates from taxpayer investment. Indeed, the Mark Zuckerbergs of the world might still be working with vacuum tubes and punch cards were it not for critical research and technology programs created or financed by the federal government after World War II which led to semiconductors, solid-state electronic devices, integrated circuits and computers.
Even more powerful, but less often realized, is the role of socially created knowledge in general—including the long, long historical development that produced advanced mathematics, modern chemistry, physics, metallurgy and the many specialized fields that over the last century have led to the technologies and information systems that are the precondition of today’s computer and Internet realities. Mark Zuckerberg and an equally intelligent individual working 30 years ago might have the same human capital and might work with the same commitment, risk and intelligence. But the individual working 30 years ago simply did not have the fruits of society’s general, slowly built "stock of knowledge" to be able to develop and market a social-networking platform.
The popular, conventional view of technology is one in which progress is viewed as a sequence of extraordinary contributions by "great men" (occasionally "great women") and their heroic innovations. But historians of technology have carefully delineated the incremental and cumulative realities of how most technologies actually develop. In general, a speciﬁc ﬁeld of knowledge builds up slowly through diverse contributions over time until—at a particular moment when enough has been established—the next so-called "breakthrough" becomes all but inevitable.
Often, many intelligent people reach the same point at virtually the same time, for the simple reason that they all are working from the same developing information and research base. The next step commonly becomes obvious (or if not obvious, very likely to be taken within a few months or years). We tend to give credit (and often a vast fortune!) to the person who gets there ﬁrst—or rather, who gets the ﬁrst public attention, since often the "real" ﬁrst person may not be as good at public relations as the one who jumps to the front of the line and claims credit.
Thus we remember Alexander Graham Bell as the inventor of the telephone even though, among others, Elisha Gray and Antonio Meucci got there at the same time or even before him. Both Newton and Leibniz developed versions of the calculus at roughly the same time. If Bill Gates hadn’t "invented" the MS-DOS operating system, someone else would have invented a similar system—and, in fact, Gary Kildall did. Few recall that Campus Network, the social Web site of Columbia University student Adam Goldberg, predated Zuckerberg's Facebook, and in many ways was more sophisticated. Other forgotten innovations include the precursor to Siri, the latest iPhone's conversational personal assistant, CALO (Cognitive Agent that Learns and Organizes), which was developed by a California company called SRI International with a five-year, multimillion-dollar Pentagon grant.
At a broader level, "nearly 90 percent...of current GDP was contributed by innovation carried out since 1870," in the estimate of leading economist William Baumol. He points out that even "the steam engine, the railroad, and many other inventions of an earlier era still add to today’s GDP." Nobel Prize-winning economist Robert Solow has calculated that nearly 90 percent of the growth in productivity in the ﬁrst half of the 20th century can only be attributed to "technical change in the broadest sense," while the supply of labor and capital—what workers and employers contribute—appeared almost incidental to this massive technological "residual." It is clear that before anyone is a "talented" entrepreneur or a "menial" laborer, or anything in between, most of the economic gains that get distributed to individuals in a given year or period are derived from technological and other contributions inherited from the society of the past, not created by them in the present.
Put another way, the current technological contributions that produce huge rewards for the fortunate few are a mere pebble placed atop a Gibraltar of historically received science and technology that makes the modern additions possible—a mountain of knowledge often paid for by the public.
An obvious question arises from these facts: if most of what we have today is attributable to advances we inherit in common, why, specifically, should this gift of our collective history not more generously and broadly beneﬁt all members of society? Today’s distributive realities are hard to ignore: Mark Zuckerberg is already within the highest echelon of the wealthiest 400 Americans, who collectively own more wealth than the bottom 60 percent of the country combined.
Current elites, William Gates Sr. points out, disproportionately reap the harvest of what is inherently a collective investment; he urges that their estates be taxed accordingly. The late Herbert Simon, winner of the 1978 Nobel Prize in economics, similarly proposed that this sort of "patrimony" be subject to large-order taxation. Particularly appropriate uses might be to support educational and research institutions that generate and pass on knowledge at all levels; to offer tuition relief; to expand opportunities for college education; and to provide much more generous underpinnings for low- and moderate-income citizens.