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0 pointsabalone12y ago0 comments

That's a bit of a different issue. To be clear what I was referring to is direct public investment in high tech development. Agencies like DARPA and billions more in government procurement of nascent commercial tech.

Tax breaks can certainly be seen as a form of public investment. But the $22M figure for the Twitter tax break is a bit of a fantasy.

That was supposed to be a break on local payroll tax to the city of SF. Think about that.. I doubt any company in the history of SF has paid $22M in local payroll tax. That would be absurd. So where did the $22M figure come from?

Turns out there was a change passed a few years ago in between the dotcom booms that added stock option gains to the definition of "payroll". Since there were no startups happening at that time, nobody paid attention to this obscure change in local SF law. And it was never enforced and to my knowledge has no corollary in any startup-rich city. (Because it would be insane and drive out all startups.) So that's where someone came up with a "$22M" calculation.. by taxing the gains on early stage employee stock options. Even though the city bears no risk like early stage employees do.

If you were to just look at paycheck amounts as "payroll", Twitter's tax break would be valued at far less than that.

To be clear I don't think Twitter should have gotten a total tax holiday and anyone who thinks they would've moved to Brisbane is a fool. I think the city should have just un-done that dumb stock option tax.

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erichocean12y ago

Agencies like DARPA and billions more in government procurement of nascent commercial tech.

While this is true, it has nothing to do with supporting commercial enterprise. Not even a little bit.

DARPA funds stuff because it costs the military less money in the long run to do so. That's it, nothing more. It's the military, and they want advanced stuff. So they pay for it, and they do so as economically as they can. That means funding research.

FWIW Every last penny DARPA had spent on research until then was more than paid back during the first gulf war due to the logistics improvements that came from software. DARPA has (and continues to have) enormous success relatively to the money it spends. It is absolutely not some form of corporate welfare, as you seem to imply.

Same with the Internet. DARPA does what they do for themselves, i.e. for the military. That private enterprise takes what they learn doing research projects for the military and runs with it doesn't even enter into the calculation of whether DARPA would do what it does. It's not some kind of benevolent tech incubator spending Uncle Sam's dough on worthy commercial causes.

I guess what I'm saying is that "government" doesn't do anything to help the technology sector, and whatever help they do get is completely inadvertent. The government wants the best military they can get for the money, and that means that agencies like DARPA fund research, because it achieves that goal.

Furthermore, it's not government at large, it's the military, and its entirely so that the military can do a better job with the funding citizens are giving them. I, for one, think they're doing reasonably well and specifically believe that the money DARPA spends is very well spent, and would still be well spent even if generated $0 in secondary economic activity.

abaloneOP12y ago

What you're saying is true except for the claim that it has "nothing to do" with supporting commercial enterprise. The fact remains that Silicon Valley is a product of these billions in government spending and wouldn't exist in anything like its current form without it.

What we're both describing is the Pentagon system. The pretext for investment in high tech is that we need it for defense. And then we can just give it away to the private sector because, hey, it's like military surplus.

But it's highly unlikely Silicon Valley would exist without the hundreds of billions in government investment in core high tech. The government invests in nascent tech at a much earlier and riskier stage than venture capital, often billions over a period of a decade or more. There's also the critical role of (usually military) procurement in creating a market for early tech. This is orders of magnitude riskier and broader scale than any private VC fund.

You're biggest error I think is in missing the bigger picture of how this creates a (rather disturbing) feedback loop into war policy. Doing this all through the pretext of military spending means that the public has less control over how taxpayer funds are invested in the economy and the private sector can capture all the profits, using the logic that you articulate. But it also means that we have to keep finding new enemies and waging wars to keep the Pentagon system running.

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