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Nick Hanauer at the SIC conference in Seattle.
Nick Hanauer at the SIC conference in Seattle.

Seattle venture capitalist Nick Hanauer says an economic revolution is coming, and you better get ready for it. Even as the Dow surges toward 17,000 — making the rich even richer — the rabble-rousing Hanauer says that unemployment and underemployment remains “stubbornly high.”

“Your fellow citizens are starting to notice, and they are starting to get angry,” said Hanauer, speaking today at the Seattle Interactive Conference. “And this trend, unfortunately, is going to get worse before it gets better. And they are going to get angrier and angrier at me, and at you.”

hanauer-nick33That anger eventually will turn into full-scale revolt, and Hanauer notes: “Revolutions turn out to be terrible for the technology business.”

The aQuantive co-founder and early investor in Amazon.com believes that capitalism works best when it creates incentives for people to solve real human problems — not accumulate capital.

In his keynote speech today, he looked around the room of innovators and asked a series of questions.

“What if instead of a few hundred innovators in the room here today there were 1000s? What if instead of 1000s there were millions? What if every child born on this planet with the aptitude to do what we do grew up with the same opportunity to fully participate in our economy in the way that we do? How could this not be a more richer and more prosperous world”

He contends that capitalism works, but not in the way we typically think about it.

“Where we have gone wrong is misidentifying how and why capitalism works. It is this fundamental misunderstanding that have fostered the policies that have directly led to a vicious cycle of stagnant wages and stagnant demand,” Hanauer said during his keynote speech

Echoing a familiar refrain, Hanauer said that he trickle down theory—which relies on regulations to help the wealthiest retain their wealth in hope that it eventually flows to the rest of the people — does not work. The policies only create inequality, he said.

“Rising inequality is toxic to growth,” he said. “High levels of inequality exclude people — both as innovators and customers — diminishing both innovation and demand,” he said.

Hanauer argued that that polices that maximize the participation of everyone in the economy is the only way that our economy will grow — one of the reasons why a thriving middle class is so important to a prosperous capitalistic economy.

“Prosperity is not trickled down from the top,” he said. “It is built from the middle out”

Hanauer is a big supporter of Seattle’s historic $15 minimum wage, which was approved earlier in 2014. He hopes this will give more people the resources to participate more effectively in the economy.

Hanauer — who as a venture capitalist has backed companies such as Insitu, Seeq, Modumetal and Real Self— also gave a little bit of feedback to the entrepreneurs in the crowd. He noted that capital is no longer the regulating factor to innovation, pointing out that some may find the assertion “heretical.” In the 21st century, he says capital “chases innovation.”

Furthermore, it just doesn’t take as much money to fund billion-dollar ideas as it did during the steel mill era, noting that the first venture rounds for Amazon.com and aQuantive were just $1 million.

“Just look around this conference, there is no shortage of capital. The room is stuffed with it. What we have, and I hate to say it, is a shortage of talent and ideas. I could tell you as a venture capitalist — and I mean this in the nicest possible way. I can ensure you that I don’t fund your startup, it is not because I don’t have enough money. It is because you suck. That’s mean, I know. But if you put together a good enough team around a great idea, capital will beat a path toward your door.”

Austin Williams is a student at the University of Washington, contributing this piece on behalf of the News Lab program. 

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