Facebook IPO is the story of modern income inequality

Updated
By The Cycle Staff

COMMENTARY

Ezra Klein
Ezra Klein
on The Rachel Maddow Show

One of the distinguishing features of the Facebook IPO Friday is that the company did set aside some stock for ordinary folks to buy. With a trading account and $40 or so, you could conceivably buy a splinter of Facebook— not a sliver, but a splinter. Call it a hair.

But to have gotten a big chunk, and to have gotten it early, when Facebook wasn’t a $100 billion company, you had to be rich and well-connected. You had to have millions of dollars to start with, and you had to be the kind of guy that every entrepreneur in Silicon Valley would do backflips to take a meeting with.  

This, really, is the story of modern income inequality in America: the rich and the powerful and the well-connected getting richer and more powerful and more well-connected. You heard the line “the rich get richer”? Well, this is how they get richer.

When I say the story of Facebook is the story of modern income inequality, what I mean is that the people who got rich today on their early investments in Facebook are not necessarily smarter than the rest of the world. They don’t necessarily work harder than cops and teachers and truck drivers and doctors. Some of them don’t even code— you could lock them in a room for a year with a computer and they would never emerge with anything approaching the Facebook that launched a thousand fortunes.

 

Consider the Winklevoss twins, the ones who say Mark Zuckerberg stole their idea for Facebook. They wouldn’t be in this story at all if they hadn’t won the socio-economic lottery to land in the upper echelons of an elite school like Harvard. And now they’ve made many, many millions off settling a lawsuit over having their idea supposedly stolen. And if you haven’t checked in with them lately, they’re making even more money selling Wonderful Pistachios on TV—because they’re the really rich really famous Winklevoss-Facebook twins!

There’s no moral judgment here. It’s not a moral question to ask why it is that a wealthy musician like Bono also gets to be a technology mogul, too. That’s not a matter of right and wrong. Bono has done nothing wrong. But you and I couldn’t invest in Facebook three years ago.

That’s the thing about saying you don’t need to worry about inequality of income, you just need to worry about inequality of opportunity. With enough inequality of income, there’s nothing even approaching equality of opportunity. That’s what income does—it buys you and your children opportunities.

I don’t mean to pick on Facebook here. I should tell you I love Facebook. I use it every day. Please, “like” my page.

But today, in addition to being the site I’m stuck to, Facebook is also the ultimate metaphor for the insider-outsider dynamic at work in our economy.

You and I and millions of other people create the content that gives Facebook value when we post pictures, send messages, “like” things, share things, play games, and change our relationship statuses. Facebook gives us a way to do that, and we the public, hundreds of millions of us, give Facebook value. We make it a $100 billion company.

But it’s the insiders who get the cash-money out of that value. It’s not, in the main, your aunt or uncle who hopped on the Web and bought a couple of shares today. It’s Bono and his investment partners. It’s the Winklevoss twins with their lawsuits and their Wonderful Pistachios. It’s the rich, now getting that much richer.

And I don’t want to “like” that.

Ezra Klein

Facebook IPO is the story of modern income inequality

Updated