Owning equity in your company should be as common as owning equity in your home

What belongs in common to the most people is accorded the least care: they take thought for their own things above all, and less about things common, or only so much as falls to each individually. – Aristotle *

A major policy goal of capitalist countries in the 20th century was to encourage home ownership. It is widely believed that owners take better care of their homes than renters as they have much more at stake financially. There is also evidence that home owners are happier, healthier, and participate more in civic and political life.

The desire to create an “ownership society” led to some smart policy decisions like the mortgage tax deduction and some bad decisions like hazardously low interest rates that contributed to the housing bubble. Home ownership is a noble goal even if home ownership fueled by excessive debt can be disastrous.

Entrepreneurs figured out a long time ago that the benefits of having equity in your company are similar to the benefits of having equity in your house. Silicon Valley expanded this concept by making it standard to grant equity to non-founder employees. It’s no coincidence that Silicon Valley continues to innovate and create jobs while the rest of the economy is stagnant.

Some people think we are in a startup bubble, and that once the bubble bursts people will run back to the supposed safety of non-startup jobs. I’d prefer to think we are at the beginning of a movement to create a true ownership society, where people own stakes not just in their space but also in their time.

It’s not East Coast vs West Coast, it’s about making more places like the Valley

I’ve written a few times about what seems to be an exploding tech scene in NYC.  This is sometimes interpreted as arguing that NYC is a better place to start a company than the Valley. Most recently, Matt Mireles seems to be addressing people like me with his critique of the NYC startup scene (he makes some good points as does Caterina Fake in her response).

I’ve never meant my arguments to be about where it is better to start a company. California is a phenomenal place to start a tech company. NYC is a great place as well. (Note to Matt – it’s hard for first time founders everywhere). To me, the important question isn’t which place is better, but rather how we import the things that make the Valley great into NYC. As I said last year:

New York City has many of the same strengths as Silicon Valley – merit-driven capitalism, the embrace of newcomers and particularly immigrants, and a consistent willingness to reinvent itself.   Silicon Valley will always be the mecca of technology, but now that people here are getting back to, as Obama says, making things, New York City has a shot at becoming relevant again in the tech world.

I spent the past week in California and had the honor of meeting some legendary venture investors. I was deeply impressed: they are legends for a reason. Of course, they are incredibly smart and hard working and all of that, but most impressively, it was clear that they truly believe in making big bets on ambitious, seemingly wacky ideas to try to change the world. Every VC has this rhetoric on their website, but – at least in my experience – most just want to make incremental money on incremental technologies. (Side note: I noticed that the more powerful the VC, the more likely they were to pay close attention, show up on time, and not bring phones/computers into meetings.  I guess when you are changing the world, emails can wait an hour for a response).

California should be NYC’s role model and ally. The enemy should be people and institutions who make money but don’t actually create anything useful. In NYC, this mostly means Wall Street, along with the Wall Street mindset that sometimes infects East Coast VC’s (emphasis on financial engineering, needing to see metrics & “traction” vs betting on people and ideas, etc).

Matt should do what’s best for his company. God knows it’s hard enough doing a startup – you don’t need to carry the weight of reinvigorating a region on your back as well. That might mean moving to California. Meanwhile, forward-thinking investors and founders in NYC will continue trying to make things that change the world – in other words, trying to make NYC more like the Valley.