There is a debate about whether taxes should be raised on the mega-rich.
Media outlets that cater to the business and investment communities worry about how taxing billionaires is unfair or will unleash Armageddon (Economist, 11/9/19, page 68). Billionaires are lamenting that they may not be allowed to control or keep their wealth, or distribute it as they see fit. But taken to its extreme, none of us should be paying taxes. We should all be able to target our money to our favorite causes.
I think the debate has been poorly framed. The question we should ask ourselves is whether we should preserve wealth or create wealth. If our goal is to increase our standard of living, creating more unicorns helps. Can we create more unicorns with higher taxes on those who have most benefited from America and target them to create the next generation of American unicorns to keep America great? And create more successful businesses? And wealth? And jobs?
I am sure most of us will agree that we need more unicorn ventures to create wealth and jobs. To do so, we need more unicorn-entrepreneurs who can capitalize on emerging industries and emerging trends to create the next generation of unicorns. They will need leading-edge technical skills and education to jump on emerging trends and dominate them. Unicorn-entrepreneurs need to bring the venture from idea to Aha, when potential is evident, because VCs invest after Aha. This means unicorn-entrepreneurs need to know how to grow from idea to Aha – without VC.
It is not possible to look at their eyes to predict which entrepreneur will succeed. Hopefully Adam Neumann (WeWork) and Elizabeth Holmes (Theranos) have put this belief to rest. No one knows where the next generation of unicorn-entrepreneurs will come from. This means we need to train everyone and see who emerges to create unicorns.
Unicorn-entrepreneurs like Steve Jobs, Jeff Bezos, Niraj Shah, Thai Lee, and Glen Taylor have done us all a great service by building unicorns. If you look at their backgrounds, they all had the right level of education to succeed, the technical skills in the latest emerging technologies to find the right opportunities, and the business skills to develop the right strategies to succeed.
These entrepreneurs came from various strata of society, but most were from the lower-middle-class to middle-class –not from the privileged class. Few were born in the manor. But they were born in the strata of society that could afford to give them a good education. This meant that they could use their talents and skills to the maximum. And having been born in the strata of society where they did not inherit a fortune meant that they had to seek their own fortune – if they wanted one.
So they had the motivation to succeed and the skills to do so in emerging industries, where new fortunes are created. Will a higher tax on the mega-rich suggest to poor but talented youngsters not to pursue their dreams of success? I don’t think so. We worry about the wealth tax after we have made our fortune – not before. And if we are worried about capital formation for new ventures, most unicorn-entrepreneurs took off without VC.
If we want to create the next generation of unicorn-entrepreneurs in America, we will have to make leading-edge technology skills available to everyone in every segment of society, especially in the lower- and middle-income strata. The hope is that some of these students will start and build the next generation of unicorns.
This means that funds, i.e. taxes, need to be targeted to give a great education to the strata of society that cannot afford one. Since no one can predict potential successes, offering excellent education to everyone from the all levels of society is the best way to get the next generation of unicorn-entrepreneurs. Without tapping the hunger of America’s motivated classes, the next emerging industries may be in China or India – not here.
The mega-rich may want to focus on their own goals. But the rest of us need to focus on America’s goals. And hope that we make the next generation rich rather than just keeping the last one rich.
MY TAKE: To build the next generation of unicorn-entrepreneurs, we need highly motivated, hungry, and educated entrepreneurs who are experts in emerging technologies and industries. This means educating everyone with the best education – especially the children of the motivated classes. Educating everyone needs money. Taxes. That’s how we can keep the American dream alive for all.