[p2p-research] big does not necessarily innovate: the current VC model is broken
Paul D. Fernhout
pdfernhout at kurtz-fernhout.com
Sat Nov 7 17:08:02 CET 2009
While I like what you said about isolation and poverty, and generally agree
as far as material wealth and accumulation of ration units (assuming one is
on the top half of the social scale), consider this point, which both agrees
"The Original Affluent Society"
"The world's most primitive people have few possessions. but they are not
poor. Poverty is not a certain small amount of goods, nor is it just a
relation between means and ends; above all it is a relation between people.
Poverty is a social status. As such it is the invention of civilisation. It
has grown with civilisation, at once as an invidious distinction between
classes and more importantly as a tributary relation that can render
agrarian peasants more susceptible to natural catastrophes than any winter
camp of Alaskan Eskimo."
So, there are different ways to look at poverty. The USA is one of the
riches countries materially in the world, but has over a million children
now homeless, double the number a year or two ago:
"Over One Million of Our Schoolchildren Are Homeless. Meanwhile, Bankers
Moan About Their Bonuses. Crazy!"
"ASHEVILLE, N.C. — In the small trailer her family rented over the summer,
9-year-old Charity Crowell picked out the green and purple outfit she would
wear on the first day of school. She vowed to try harder and bring her
grades back up from the C’s she got last spring — a dismal semester when her
parents lost their jobs and car and the family was evicted and migrated
through friends’ houses and a motel."
I don' think one can just handwave away the possibility the two are
connected, and that those on the bottom of the US social ladder are getting
hit hard, even as they try to be connected, and most of them really have
tried to play by the rules. The rules are just messed up:
"Families in financial trouble are working hard and playing by the rules --
but the game is stacked against them."
Also, is it better to have a happy and free-er if materially poor
subsistence life than to live in a gilded cage under someone else's rules?
That is a perennial social question. I even ask it here:
in the section: "PU as an internment camp?", excerpt:
Thinking of Princeton University as an internment camp may seem odd, but let
me repeat something referenced earlier from a review of a Yale PhD thesis:
"[Joel Allen's] pursuit of the hostage as a "type" renders irrelevant
whether an individual is legally a hostage, i.e., delivered by treaty or
held as surety to another form of agreement, or voluntarily in Rome for an
education. For [Joel Allen], the fact that Roman political superiority
fostered a desire to learn Latin and Roman customs constituted a form of
I feel (or assume?) Michel has a general sense that p2p will make the world
a better place by helping create information commons that produce abundance
for everyone, as people use the programs and content in them to build better
local circumstances. So, I don't see the theoretical problem that you point
to. It seems pretty straightforward, at least, as much as the Norwegian
example you gave, of "health, wealth and well-being". Are we (almost) all
not healthier, wealthier, and better off because of peer production related
to Wikipedia, Debian GNU/Linux, and the larger collective web? Example: :-)
Ryan Lanham wrote:
> Hi Michel,
> The point I was trying to make (and Stan too) is that innovation is ill
> defined. Therefore it is impossible to know what you are talking about.
> Innovation is an operator...a cause of something. It isn't an outcome. That
> is, I can't measure innovation separate from its consequences.
> As an aside, if big concentrations of wealth slowed growth, then New York,
> San Francisco, Singapore and Tokyo would not function as magnets for
> talent. They do so function. Wealth HAS concentrated in the last 50
> years...greatly. It has urbanized and regionalized.
> Indeed poor places fail in large part for lack of talent and useful
> interchange. That was the basis of Paul Krugman's Nobel Prize winning
> work. We know pretty definitively that the best way to become poor is to
> isolate yourself socially and economically.
> Thus, speaking of innovation without having a theory of desirability (as
> expressed in economic growth or by some other means--e.g. energy efficiency)
> is, at best, heuristic. At worst, it is nonsensical. Where J. Andrew wins
> the discussion with you, in my opinion, is that you have not clearly
> stipulated the end measure of innovation in a non-market sense. He didn't
> state it in any positive sense either, but the tradition of innovation
> thought ties to economic growth. I suspect you don't see that as the
> positive end-point to be sought.
> As usual, my point is that P2P has few if any clear goal sets. Consequently
> it tends to borrow goal sets from communism or socialism...which turns off
> about 97% of the civilized world. As a Norwegian said to me the other day
> in the Cayman Islands... "You call us socialist?" "We are far more market
> driven than the Cayman Islands!" Their goal is health, wealth and
> well-being for Norwegians. P2P doesn't have a political goal set.
> Therefore it is difficult to say what it is. I think that lack of
> definition is now starting to become destructive to the movement as it
> searches for a point.
> On Sat, Nov 7, 2009 at 1:06 AM, Michel Bauwens <michelsub2004 at gmail.com>wrote:
>> Hi Ryan,
>> the key background to this whole debate is the key hypothesis of J. Andrew,
>> that 'big concentrations of wealth are needed for innovation' to occur. To
>> counter this, I simply stress that innovation is a pluralistic mechanism,
>> that big concentrations of wealth have big downsides and anti-innovation
>> effects, and that a pluralist approach to innovation which would include
>> distributed funding mechanisms, would be better, rather than simply
>> accepting the above anti-P2P premise,
>> that's all, there is no more to it than that. I would react the same if
>> someone would say, 'males are inherently superior innovators than females'.
>> I don't think elitist and purely scarcity based opinions should go
>> unchallenged in a p2p forum, it's an important boundary issue,
>> On Sat, Nov 7, 2009 at 6:31 AM, Ryan Lanham <rlanham1963 at gmail.com> wrote:
>>> What is the desired end for this VC argument? I simply don't see the
>>> point being made on either side. Is it me being thick? What do we want the
>>> answer to be?
>>> What measure is there of innovation that doesn't tie to some economic
>>> score or social value? Whatever it might be, we must be moving faster than
>>> ever before. I know of no business persons, economists, scientists or even
>>> artists who do not believe we are in an Age of incredible change. Most want
>>> to slow it down. I personally have had several discussions with
>>> scientists--easily had on the web--who say it is moving so fast no one can
>>> be certain of the current. Whole sets of institutions including academia
>>> seem plausibly in doubt by smart people--Stephen Downes, for example, who we
>>> both respect. There is obviously a crisis in government...in the arts, in
>>> political and economic philosophy. Heck, economics is completely in
>>> disarray from the perspective of its own deans.
>>> If innovation is productivity, the economy is again growing in GDP terms.
>>> If it is employment, we would agree there is a great crisis...but employment
>>> has never been much of a measure of innovation, change or transformation.
>>> What outcome do you or J. Andrew want? Most argue against research
>>> investment by government because it is not economic...which I take to me a
>>> driver of GDP growth. At some point, there must be a point. What is it?
>>> I have become confused by what you hope for from VCs. At some level there
>>> must be a point...get more X or less Y. The measures and goals tie to
>>> those values. Without some value parameter at bottom, what is the point?
>>> On Fri, Nov 6, 2009 at 4:00 PM, Michel Bauwens <michelsub2004 at gmail.com>wrote:
>>>> This goes against the argument that 'big concentrations of capital' are
>>>> necessarily more innovative
>>>> research points to the absolute opposite: the growth of vc sizes has been
>>>> detrimental to innovation:
>>>> see http://redeye.firstround.com/2009/10/company-math-vs-vc-math.html
>>>> note that this research and debates come from within the vc community
>>>> itself, not from some wild-eyed social-democratic economist:
>>>> in fact, research shows the exact opposite of what was argued here
>>>> These "requirements" are a direct result of the mathematical model that
>>>> venture funds are optimized for. And as fund's have gotten larger, their
>>>> math has gotten more difficult. We're now witnessing the conclusion of a
>>>> "10 year experiment" where money invested in venture funds has exploded and
>>>> fund sizes have more than tripled in size. A decade ago, 75% of all venture
>>>> funds raised were under $100 million. In 2007, fewer than 25% of all
>>>> venture funds raised were under $100M. And I don't think it's a
>>>> co-incidence that *VC performance has fallen off a cliff during this
>>>> time period*. Indeed, we're approaching a point where *the 10-year
>>>> return in venture capital is negative*. Paul Kedrosky recently authored
>>>> a paper<http://www.pehub.com/wordpress/wp-content/uploads//usventcap061009202.pdf>for the Kauffman Foundation which discusses this in great detail and
>>>> proposes that the venture industry needs to be "rightsized" -- and suggests
>>>> a 50% reduction<http://paul.kedrosky.com/archives/2009/06/right-sizing_ve.html>.
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