Inequality and Risk

Paul Graham’s essay Inequality and Risk argues that reducing economic inequality necessarily suppresses entrepreneurial risk-taking.

The Core Connection

“Risk and reward have to be proportionate.”

Lowering maximum potential rewards decreases willingness to take risks. Policies targeting inequality reduction directly undermine financial incentives driving startup creation.

Why Startups Matter

Startups are intrinsically risky—approximately 1 in 10 succeed. They generate disproportionate technological innovation and job creation.

Founders pursue startups primarily to achieve financial security, not luxury consumption. Without substantial wealth prospects, ambitious individuals would seek stable positions instead.

The Irreplaceability Problem

While venture capital could theoretically come from government, bureaucrats naturally avoid risk and favor “safe” choices. More critically, founders cannot be replaced—they contribute irreplaceable ideas and time.

A Better Alternative

Rather than attacking wealth directly, target corruption instead. The real problem is wealth translating into political power. Advocate for “transparency” to sever the wealth-power connection while preserving entrepreneurial incentives.

My Takeaway

Suppressing inequality means accepting slower technological development.