The Cutting Edge of Waste
by Sam Pizzigati
Ultra-wealthy financiers have hoarded far more cash than they can responsibly invest.
Lots of folks in America today really need more money.
Our kids, for starters. We ought to be investing in their futures, not stuffing them in overcrowded classrooms or forcing them to graduate from college with tens of thousands of dollars in debt.
And plenty of working people need more money, too. Wages for average Americans, after you take inflation into account, have sunk below what workers were making four decades ago.
I could go on.
But not everyone’s feeling the pinch. Take Stewart Butterfield, the CEO of Slack -- a tech start-up whose corporate messaging app just might, some experts believe, one day replace email.
The year-old Slack, in other words, may prove to be quite a big deal. Or the company might crash, as so many start-ups inevitably do. But that risk hasn't stopped the heavyweights of American high finance from rushing to invest in Butterfield's fledgling operation.
By this past March, those investments had jacked up Slack's market value to a stunning $1 billion. Then, in April, investors injected an additional $160 million for a mere 5 percent stake in Butterfield's company. That brought the start-up's total market value to just about $3 billion.
The strangest part of all this? Butterfield's company didn't ask for that latest $160 million -- and doesn't need it either.
“We don't have an immediate use for that money,” Butterfield openly acknowledged in a recent interview.
“Eventually,” he added, “we will find a use for it, at least I hope we do.”
Wait, this story gets stranger still.
What's happening with Slack turns out to be happening all across America's economic cutting edge. The nation's high-finance chiefs -- the exceedingly deep pockets who run hedge funds and the like -- are dumping cash into start-ups at a dizzying pace.
Back in the old days -- say, six years ago -- hot start-ups would raise a pile of cash from investors, digest that money into their ongoing operations, then come back a year or so later and ask investors for more. Another year would typically pass before a third round of financing.
This wait-and-see financing has gone by the boards. Since early 2013, The New York Times reports, more than 20 tech start-ups have swallowed three rounds of financing in less than 18 months. One of these, the anonymous messaging start-up Yik Yak, completed three rounds in just seven months.
What's going on here? In a word: inequality.
The “winners” in America's contemporary economy are now holding phenomenally more money than they can prudently invest. So they're not making rational investments. They're speculating, racing to place mammoth bets on start-ups that may become the “next big thing.”
Slack CEO Butterfield seems a bit bemused, but not bothered. Yes, he candidly admits, we have in America right now “a lot of investors who have a lot of money.”
“But,” he adds, “it's not like if they hadn't given the money to us, they would have given to a homeless person instead.”
That's true, of course. The super-rich now awash with cash aren't choosing between bankrolling start-ups and making sure that kids in poor neighborhoods get three squares a day. They're choosing between speculative options they think will make them even richer.
Well, the rest of us need to choose, too.
We can continue to accept an economy where fabulously rich people dump fabulously huge sums on people and enterprises who don't need the money. Or we can try to forge a new and different economy -- where investments actually make sense.
- Calling Working People of All Colors
- Exploding Inequality is Killing Democracy
- Reducing Inequality in the Trump Era
- Obama's Legacy: Growth, Debt & Employment
- Only 5 Countries Have A Bigger GDP Than California
- Global Political Economy
- How The Global Millionaire Club Is Changing
- Plenty of Dough in Online Food Delivery
- The Most Expensive Metro Areas to Live In
- Cities With the Lowest Gas Prices
- The Cost of a Beer: Then and Now
- The Cost of a Cup of Coffee: Then and Now
- Cities Where Coffee Costs the Most
- America's Decreasing Fertility Rate Could Spell Economic Trouble
- The Least Affordable Places for Single Parents
- How the Cost of a Movie Ticket Has Changed Over Time
- The Cost of a Trip to the Emergency Room Since 1940
- Gagging on the Gig Economy
- How Falling Oil Prices Have Changed the Economy
- The Economics of Brexit
- Making China Great Again
- States with the Lowest Unemployment Rates
- Oil's Downfall Aided by Rise of Fracking
- Counties Where Medicare Spends the Most per Patient
- Inequality Will Get Worse Until There's a Revolution
- States with the Highest Unemployment Rates
- The Richest Banks
- Cost Of a Car Since 1967
- Cost of Car Insurance In Every State
- The Most Fuel Efficient Cars
- Zombie Ideas and the Death of Ethics in Economics
- What Really Caused the Eurozone Crisis?
- Is GDP Over?
- Pay Fair or Pay Up
- Global Capitalism's Latest Crisis
- Gross National Happiness Catches On
- The Cutting Edge of Waste
- Subsidizing the Idle Rich While Poor Kids Go Hungry
- Lending Dreams
- Venture Capitalists Rule the World
- National Debt Over $18 Trillion
- Will ECB Quantitative Easing Work?
- NYC Mayor for Pay at $13 an Hour
- U.S. Banks Pass Stress Test
- Vanguard's 2015 Global Economic Outlook
- Wal-Mart Does Something Right
- The Perils of America's Hard-Charging Capitalism
- Freedom Summer II
- Economy Looking Up, But Politics Stuck in Neutral
- Money and Morality: The Parallel Between Energy and Slavery
- The Four Biggest Right-Wing Lies About Inequality
- Proposal to Keep CEO Pay in Check
- Antitrust Laws Potentially Useful in New Gilded Age
- If We Raise Minimum Wage, Why Stop at $10 an Hour?
- The 'You're Paid What You're Worth' Myth
- The Great U-turn
- 'The Grapes of Wrath' Resonates 75 Years Later
- International Money Is International Politics
- The New Politics of International Currencies
- The Real Job Killers: Lousy Jobs, Lousy Wages
- Take Tax Compromise with a Grain of Salt
- WhatsApp Deal Shines Light on Our Economic Problems
- Why Did We Forget Important Economic Lessons?
- Why There's No Outcry Over Economic Inequality
- The Year of the Great Wealth Redistribution
- Fear is Why Workers Vote Against Their Economic Self-Interest
- Free the Keystone XL Pipeline, Mr. President
- Gender Pay Equity: Yeah, It's Still A Problem
- Income 'Inequality'
- Why the Right Should Support Boosting Minimum Wage, Too
- Coming to Grips with Rise of the Machines
- Detroit's Decline Did Not Have to Happen
- The Roaring Twenties Are Back
- Predistribute the Wealth
- Global Shipping Contends with Oversupply Problems
- Runaway CEO Pay Gets a Free Pass
- Exceptionally Mediocre on a Global Scale
- A More Perfect Union
- Economic Strategy for Better Jobs, Not Just Higher Profits
- Fast-food Workers Echo Occupy Spirit
- Inside the Superstar Economy of America's Big Thinkers
- The Real Economy: The Weather is Still Stormy
- Family Values and the New Economy
- The Nation-State and the Global Corporation
- A Good-Paying Job More Effective than a Lecture
- The Rich Life or the Good Life?
- The Economic Elephant in the Room: Widening Inequality
Article: Copyright © 2016
"The Cutting Edge of Waste"