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‘Trickle Down Thievery (and Hoarding)’…Thank You Technology

Wikipedia tries to explain ‘Trickle Down Economics‘.

It DOES. NOT. WORK.

Luckily, 2013 has been the dawn of something I call ‘Trickle Down Thievery’. I am with Gruber and Om Malik, that 2013 was a great year for technology.

Fortune 500 Companies for the most part won’t let cash trickle down. They are hoarding it. The banks are hoarding cash as well. It is a disease with a name…called ‘Compulsive Hoarding‘.

The technology executives of Apple, Facebook, Google and Lending Club may or may not realized that hoarding is a disease that ends badly, or maybe driven by recruitment needs have been forced to be creative, but in any case, the cash is trickling down. It is not perfect, but it is starting to rain down on those positioned properly.

Technology has created such a high demand for specific talent…engineers, now designers and soon business and global growth talent that traditional ‘fat cat’ industries will have to evolve or die. Die is a harsh term as the cash will still flow, but one by one, global software and pure technology companies will replace them in the Fortune 500. As of Yesterday, 7 year old Twitter has a greater market cap than 80 percent of the S&P.

One of the big stories of 2013 and beyond is still of recruiting. Linked-In would not be worth $25 billion with their product as it is, if recruiting did not matter. In 2014 and beyond, LinkedIn will be attacked by engineers, designers and their own exiting employees. The margins and the opportunity are too good to ignore.

Cash is abundant at the moment. Of course, the poor people can’t get at it. Even if they work at Walmart or McDonald’s, the wages give them just enough cash to buy the horrid food they serve. But for a talented exiting LinkedIn engineer, cash is abundant.

The economic facts that are driving ‘Trickle Down Thievery’ are:

1. The profit gap and wage gap are the highest EVER. Corporations are raking it in and the bottom of the pile gets little. NO trickle down.

2. Mortgage applications are at 13 year lows. With rates at 3 percent, the pain of getting a loan has pushed people to rent. All of a sudden, Barney Frank has disappeared (nirvana).

As I said about Bitcoin early in the year, cash is now doing it’s own Jurassic Park. It is finding a way into the system despite the normal flows being all but shut off.

Thanks to Google, Uber, Lending Club, Dwolla, Bitcoin, Paypal, Venmo, Braintree and hundreds of financial technology ideas I am sure I am missing, the free cash the banks (the thieves) and corporations (hoarders) are supposed to be more evenly distributing is seeping elsewhere. Our government won’t change their disgusting ways, but if the could not protect the entrenched and awful taxi industry, let’s just say the ‘Velociraptors’ are over the fence.

I use Uber enough that I ask 30 drivers a month what they think. In late 2013 I have started to notice the switchover as yellow cabbies move to Uber. It is like they were living in Russia the last 18 years (their words). They are running their own businesses thanks to a basic skill (driving), Uber existing as a service and a smartphone.

In 2014, we should start seeing the underpaid from McDonald’s and WalMart to name a few, move to the Uber’s and Lyft’s of the world. I am excited to the answers I receive from drivers by late 2014.

As for home ownership, it has a bad rap. I have rented and owned, but I am a much happier owner. I have no personal need to own 2 or 5 homes with the technology at our fingertips. With banks so flush and rates so low, we should NOT have mortgage applications at 13 year lows. The system is broken.

Enter Google and Lending Club. By late 2014, three page loans from Lending Club to employees of cash rich companies will be the recruiting tool of the day and soon the norm. With rental prices rising faster than home prices, young people will once again take pride in home ownership (for more than pure financial reasons).

Uber, Google, Twitter, LinkedIN and Lending Club are more important to the US economy than anyone thinks.

  • http://www.startupmanagement.org/ William Mougayar

    Maybe not IPO ready yet, but Dwolla is also part of the future- the future of moving money.

    Basically, everything is getting re-wired, and those in the middle of the re-wiring are the beneficiaries.

  • http://www.pointsandfigures.com/ pointsnfigures

    Part of the cash hoarding has to do with economic incentives. Government tax policy creates incentives for corporations to horde cash, and if they spend it to buyback stock rather than distribute it to shareholders.

  • http://www.gordonbowman.com/ Gordon Bowman

    Can you expand on the “three page loans from Lending Club to employees of cash rich companies” as a recruiting tool? How do you see those being structured and used?

    • http://www.howardlindzon.com howardlindzon

      google has so much cash and the risk of lending it to employees is low. if the employee leaves its to raise money and start a new company which will likely be backed or they will leave for a rich competitor and they are good risks. if I can get a low interest housing loan for vcoming to google that may just make the spouse happy enough to uproot lives.

  • nhr215

    Nothing like some self-congratulatory back-slapping from the tech-industrial complex. Let’s see how Lending Club does when the next recession comes around and default rates spike…

    Also, 30 year mortgages are at 4.46% mot 3%. They are ticking higher and mortgage applications are dropping…

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