[p2p-research] big does not necessarily innovate: the current VC model is broken

Paul D. Fernhout pdfernhout at kurtz-fernhout.com
Sat Nov 7 06:48:20 CET 2009


As I said in another reply, mainstream economics is confused about basic 
words like wealth and capital because it adds imaginary things (fiat 
dollars) and real things (houses, cement mixers, land).

To make progress on understanding this situation, somehow we have to 
disentangle theses issues of control system (like by fiat dollar ration 
units) and physical reality.

For example, since the USA can print as many fiat dollars as it wants, or 
even just issue them into our computers somehow as bit sequences, the nation 
as a whole is not monetary capital constrained. But, we can only get more 
houses by building them using tools and raw materials, and that takes time 
and energy and effort, so we are constrained in terms of rate of increase of 
physical infrastructure. And we're (for the most part) not getting any more 
land unless we seastead or go into outer space and build it. So, all these 
things are not as interchangeable in reality as economists like to pretend, 
even thought in practice, for one economic actor, they may all seem 
exchangeable and so equivalent in some way.

But I agree, this is part of why post-scarcity then gets talked about (or 
whatever) as the economic system fails for various reasons (and everyone has 
a part of the truth here, you, me, Andrew, Michel, others).

--Paul Fernhout

Ryan Lanham wrote:
> I suppose I am totally confused.  Innovation is a means...not an end.
> You've got to want innovation to lead to something.
> Investment...that's an economic number we can discuss.  Innovation?   It's
> an operator...not an outcome.  It so far has no economic standing except as
> a possible driver for productivity.
> In fact, productivity is climbing extremely rapidly across the globe...as
> measured in GDP per work unit.  R&D capital really has had very little to do
> with it.  Most of the growth comes from IT, low labor cost units being
> rapidly trained (e.g. in China and India), economies of scale and improved
> systems.  Is it "innovation" if a guy in Africa gets a cash register in his
> store and a cell phone on which he can make supply orders?  It greatly
> enhances his productivity.  To me it is just applied
> capital...investment.
> Even still, the simple truth is that the world is not capital constrained
> and hasn't been for a long time.  Stimulus efforts are pushing a rope.  The
> hope is that by injecting capital into economies that they will be primed
> like a pump.  It's not likely.  Demand is not stimulated without
> improvements of some sort. Better armies, better banks, better cell phones
> only help if they lead to some desired productivity gain or some life
> improvement that people will sacrifice for.  Trouble is, most people have
> entered into debt to consume other desires (like houses).  There is little
> consumer capacity to sacrifice for non-productive gains.  Banks, in short,
> don't have economic loans to make.
> Having an incrementally better cell phone isn't that great...it's just a
> cell phone.  The message of technology has been that marginal utility of
> invention is falling...rather fast.  That's the interesting crisis of
> economics now.  Intellectual property value is falling...Corry Doctorow and
> others have been discussing this for some time...as has Michel.  On the
> other hand, productivity is rapidly increasing because basic systems (e.g.
> cell phones in Africa) are applied at whole new scales.  It isn't
> "innovation" in the sense of a new idea, it is the simple application of
> capital.  Soon that will run its course as it has in the developed world.
> At that point, the question is...what do people want?  Leisure?  Security?
> Most wealth creation in the developed world is on paper...real stuff isn't
> made.  Debts expand, others obtain cash...etc.  It isn't like a new factory
> has come on line or a new widget is now producing a wudget.
> Banks have more cash than ever...their issue is that there are not
> investments that can be made that realize economic gains.  Marginal utility
> of capital is down because most production is no longer stuff.  It is
> services...ideas and the manipulation of ideas to create money.  Wealth now
> is not tangible.  Hence the whole post-scarcity discourse on this list.
> Somewhere, somehow, someone needs to do something that generates wealth if
> capitalism is to work.  Right now, that isn't happening very well.  The
> measure of it happening is GDP.  But that's a crude measure.
> On Fri, Nov 6, 2009 at 7:24 PM, J. Andrew Rogers <reality.miner at gmail.com>wrote:
>> On Fri, Nov 6, 2009 at 3:31 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:
>>> What outcome do you or J. Andrew want?
>> Speaking for myself, the outcome I want is a maximized rate of
>> innovation, with an eye toward capital efficiency since that is a
>> finite resource. Beyond that, I am pretty agnostic about how that
>> happens.
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