[p2p-research] Building Alliances

Michel Bauwens michelsub2004 at gmail.com
Fri Nov 6 21:44:19 CET 2009

Well, it's interesting to see such Hayekian certitude in action, but I'll
offer a few caveats

(let me see for starters I recognize the innovation force of the California
based VC system, and the human and social networks it relies on, as well as
generous govt funding and support through military research budgets, but
what borders me is the ideological certainty expressed by the viewpoint to
the detriment of any more balanced and sophisticated truth)

On Sat, Nov 7, 2009 at 3:04 AM, J. Andrew Rogers <reality.miner at gmail.com>wrote:

> On Fri, Nov 6, 2009 at 10:53 AM, Michel Bauwens <michelsub2004 at gmail.com>
> wrote:
> > While I can see the logic of a surplus funding a creative (and
> managerial)
> > class, as well as the historical evidence for patronage, I think there is
> a
> > golden mean there, indeed, the increased inequality of the neoliberal era
> > has slowed down average growth by two-thirds in the West, and the much
> > hailed growth in east asia, happened with systems with intensive state
> > intervention (korea, china)
> Korea and China produce very little innovation in both per capita and
> per dollar terms. Growth has nothing to do with innovation,
> particularly in the developing world. (I'm not understanding why this
> is even relevant.)

they undoubtedly produce less during this catch-up phase, but that may be
temporary, as it was with Japan, which was also accused of copying early on,
and has been highly innovative, where would the U.S. be without Toyotism?

> I am talking more about the venture capital ecosystem in its various
> forms.  Very early stage venture funding has one of the highest
> long-term annualized return of any class of investments, and is
> significantly funded by private individuals who just happen to be
> wealthy.

returns does not equal innovation; and I wonder how wealthy the average VC
is compared to the top 1% of the U.S. population ... I wonder if it is not
equally valid to see it as a proof of deconcentrated capital, compared to
the really concentrated capital that gaves us the big meltdown? As far as I
know, for years, VC's want to go green, but are hampered by mainstream
concentrated financial capital, which supports forces that go against the
emergence of green capitalism

> Obviously these concentrations of capital are producing a
> considerable amount of value. There is some value in government R&D
> investment, but it is much less capital efficient for the result and
> more fickle. For example, most Americans do not realize that almost
> all Federal R&D funding has been currently suspended for months and is
> not expected to start again until 2010; unfortunately, you can't
> randomly stop funding projects for several months at a time and expect
> the people employed on those projects to stick around. Ironic, because
> you would think this would be a priority for "stimulus" funding.

The efficiency of VC is 1 to 100 I believe .. any comparable data on
government funding?

> Nonetheless, even for advanced software and computer hardware
> innovations, government funding plays an important role (usually
> military). Interestingly, it is often because military organizations
> are more technically savvy than private venture capital and can
> recognize value that the private markets are ignorant of.

well said, we would have no internet and no web and not even a browser with
commercial funding only, they only piggybacked on those major innovations
after the fact; and you are correctly pointing out to the massive role the
military is playing; in fact, I've seen different reports arguing that most
innovation, like in pharma, is really government funded, and then 'given' to
the private sector; Business Week recently argued that the privatisation of
innovation in the U.S. has led to dramatic negative results, with real
innovation slumpling, because companies only look at short term marketable

furthermore, marc dangeard and others have pointed out the weaknesses of the
current venture capital model, which leaves many good projects un or

> > I also suspect, that in an era where capital can be distributed and
> > re-aggregrated, these concentrations of wealth may be less and less
> > necessary for innovation,
> There is no evidence that this is the case. Most really great ideas
> are sufficiently obscure and poorly understood at their inception that
> you will be lucky to find even a few people willing to provide funds.
> The capital intensity of genuine innovation has not waned in any
> significant sense. The marginal cost of dissemination of the
> innovation after initial development has fallen but is irrelevant at
> this stage.

what you say here flies in the face of the enormous innovation which has
taken place through web 2. , at precisely the moment where there was capital
flight and tight venture capital; in fact, most money is needed after the
success of web 2.0 and internetworked software innovations, less at the
outset; but even before, and this is documented by Carlota Perez, most early
innovation takes place without financial capital support ...

I think that most of what you say is based on knee-jerk ideology,

> When a brilliant innovative idea is first hatched, it is almost
> impossible to find anyone willing to expend the hours of time to even
> recognize that fact. In many cases, there are but a handful of people
> even qualified to evaluate an innovative idea.  And all of this occurs
> in a sea of mediocre  "innovations" clamoring for attention.
> Multiplying the expensive level of effort required to develop funding
> in the current system by integer factors is not helpful.
> It would be a death sentence for the development of many, many
> innovations if one had to aggregate funds from a large number of
> parties.

that's your ideological view, but I'll offer the hypothesis that quite a few
of the peer-funded experiments will prove that money can come from other
sources that 'concentrated venture capital'f, as it has already proven that
it can be done with almost no capital; my view is that the best guarantee is
to have a mix of funding, good public funding for basic research, good
private funding for risky innovation; and lots of distributed funding for
socially beneficial innovations through open software/design communities;
pluralism, in politics, and funding, tends to work better than one size fits
all, and distributed financing could fund many projects that fall to the
crack of the present VC system

> > and as Kevin argues, as innovation becomes more and more immaterial, i.e.
> a
> > function of internetworked brains with access to networks, the amount of
> > capital needed to fund them decreases dramatically,
> What has happened in many cases is that we are merely replacing CapEx
> with OpEx. The total R&D costs are the same, just distributed
> differently. Yes, some classes of trivial innovation require little
> money, but that is usually because they are *trivial*. Non-trivial
> innovations usually require designing new tool chains in support of
> that innovation. One of the hallmarks of non-trivial innovation is
> that there are only a handful of experts competent enough to deliver
> the first version.  P2P and crowd-sourcing only works for things
> everyone mostly understands.

I think it is too early to say, and I've read research by for example
Lakhami that says otherwise, pointing out one study for example showing how
most innovations come from the outside, and that experiments such as
Innocentive, and the recent Netflix experiment, were quite successfull

> Even for innovative software (say, something based on some new
> computer science), you are still looking at spending a few million
> dollars to develop it into a useful innovation that someone can
> actually use. And this assumes that you are leveraging open source
> software everywhere you can.

how much million dollars were needed by brin and his friend to develop the
google algorythm? the Bittorrent software of Bram Cohen?

I'm of course not denying that some innovation may require big prior
investments, I'm only questioning your monological view. Again, I think a
pluralist view of innovation, that recognizes the distinctive advantages of
different types of funding, and the dangers to innovation and social
progress of too highly concentrated wealth, should be heeded, Again as a
reminder, growth rates for western countries where diminished by two-thirds
since the 80s, real wages have been stagnating, etc...

Take movies, according to your logic, only big star, moderately intelligent
but very expensive movies would make it and be necessary and count as
innovation, as opposed to the many fine movies that have been produced
worldwide, often through public funding. Do we really want a world with only
the Transformers, and without Fellini and the French New Wave.

> --
>  J. Andrew Rogers
> realityminer.blogspot.com
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