[p2p-research] Building Alliances (basic income and entrepreneurship)

Paul D. Fernhout pdfernhout at kurtz-fernhout.com
Fri Nov 6 22:53:02 CET 2009

J. Andrew Rogers 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.)
> 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. 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.
> 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.

Something I wrote here:
About two to three billion people on the planet live in technological 
societies out of approaching seven billion people. That's a lot of capacity, 
even if the other half of the planet may have more social capital and 
ecological capital than industrial capital.

In the dollars everyone wants to talk about, the global economy is about 
US$60 trillion annually as a gross world product (GWP).

There are naturally problems focusing on money -- this is one alternative view:
     "Redefining Progress"

Or, per capita:
     "Gross world product (GWP) is the total gross national product of all 
the countries in the world. This also equals the total gross domestic 
product. See measures of national income and output for more details. The 
per capita GWP in 2000 was approximately $7,200 US dollars (USD). The 
Intergovernmental Panel on Climate Change (IPCC), in their Third Assessment 
Report (TAR), predicts a maximum per-capita gross world product in 2100 of 
approximately $140,000 (in year 2000 dollars). The IPCC reports a survey of 
"economic literature" as providing a maximum value of approximately $110,000 
(2000 USD)."

That's a lot of per-capita income projected ninety years from now. :-) But 
let's ignore it as "speculation" even if it is what this essay is about in 
some sense. That would make things too easy. Also it would be misleading, as 
it assumes our current economic structure would persist when everyone on the 
planet could essentially be a millionaire by today's standards. So, let's 
stick with the current GWP of US$60 trillion and assume in rises only slowly.

On that scale of a US$60 trillion annual GWP, none of the costs for the four 
projects above, even billions to operate Google per year, are even barely 
noticeable. That's all part of this issue of post-scarcity -- the costs to 
do big public digital works whether Google, WordNet, Mammalian Genetics 
Simulation, or anything else likely to be of breakthrough value are so 
trivial as to not be noticed. One billion dollars is 0.002% (rounded up) of 
GWP. Trivial. The entire venture capital sector in the USA is a laughable 
0.06% of GWP.
     "A recent National Venture Capital Association survey found that 
majority (69%) of venture capitalists predict that VC investments in U.S. 
will level between $20-29 billion in 2007."

So, do we need to structure our *entire* global economy a certain way 
because Princetonians and others strongly control 0.06% of the money flow?

That makes no sense as a big picture. That's not even the tail wagging the 
dog. That's a flea wagging the dog. Naturally, it's still a flea that is a 
lot bigger than my own personal net worth. :-) Unless I count differently, 
like measured in free time. :-)

OK, the global equity market is a big thing too.
     "Estimates of the size of the world's capital market vary; the average 
of figures compiled by the McKinsey Global Institute, Goldman Sachs, and 
Merrill Lynch place the total stock of global equities at roughly $33 
trillion; global government bonds - $21 trillion; private sector bonds - $24 

That's US$78 trillion for all three together. But, that is still only a 
little over one year's global spending. So, while that is not a flea, it is 
still a tail wagging the dog if you consider global spending over twenty years.

As long as investors think in terms of private gain, not public gain, they 
will emphasize investments that can be the best guarded, not investments 
that maximize social returns they do not see on their balance sheet. 
Sometimes, as with Google, they can still make a lot of money, because the 
trillions in annual saving from Google (for time saved searching, and 
improved quality of results) leaves a lot of money falling off the table to 
grab some of somehow.

>> 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.
> 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.

There's truth to that, but a basic income bypasses most of that. Most 
inventors are just struggling to pay living expenses. And if they don't have 
to have a standard job to do that, they can live where rents are cheap and 
land wide open and unzoned.

Very few big ideas need much funding these days beyond living expenses for 
the developers. Some do, but not most.

>> 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 don't see that. And I say that from years around universities and 
industrial research labs.

Can you name any such "non trival" innovations?

Very few innovations require much materials. Maybe making new desktop CPU 

How much is work on solar panel design really costing? In general, our 
society has favored "big science" over "little science". But it is ofter 
from little science where the really new ideas come.

And those ideas that do require big resources can generally gain occasional 
access through places like university labs or incubators. Not *all*. But by 
far the vast majority. Anything software these days. Anything working with 
basic materials. Even a lot of biotech research. Again, not everything. But 
a lot.

And, if people had a basic income, then they might start demanding bigger 
resource centers locally. Like I proposed here:
The USA needs more large neighborhood shops with a lot of flexible machine 
tools. The US government should fund the construction of 21,000 flexible 
fabrication facilities across the USA at a cost of US$50 billion, places 
where any American can go to learn about and use CNC equipment like mills 
and lathes and a variety of other advanced tools and processes including 
biotech ones. That is one for every town and county in the USA. These shops 
might be seen as public extensions of local schools, essentially turning the 
shops of public schools into more like a public library of tools. A few 
variations have been developed in that direction (Men's Shed, FabLab, 
TechShop, or in books like David Morris' "Neighborhood Power: The New 

> 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.

I just don't see it. Almost all those "millions" you talk about are going to 
salary, or they are paying for fancy equipment instead of hiring more people 
or having more patience. So, a loose confederation of free individuals all 
with a basic income could do the same. And small amounts of materials would 
be purchased or scrounged second hand. When you have a lot of time, you 
don't need the latest and best and easiest to use. You can do a lot with 
last year's model, or something borrowed, or something you cobbled together 
from other's junked parts.

At the very least, the entire balance of power would change. No longer would 
companies be able to say we will make proprietary everything you produce or 
you will starve (which is essentially the deal now for most people).

--Paul Fernhout

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