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

Sat Nov 7 15:11:43 CET 2009

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.

Ryan

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,
>
> Michel
>
> On Sat, Nov 7, 2009 at 6:31 AM, Ryan Lanham <rlanham1963 at gmail.com> wrote:
>
>> Michel,
>>
>> 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?
>>
>> Ryan
>>
>>
>>  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
>>> recently:
>>>
>>>
>>> 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>.
>>>
>>>
>>> --
>>> Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University -
>>> Research: http://www.dpu.ac.th/dpuic/info/Research.html - Think thank:
>>> http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>>>
>>> P2P Foundation: http://p2pfoundation.net  -
>>> http://blog.p2pfoundation.net
>>>
>>> Connect: http://p2pfoundation.ning.com; Discuss:
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>>>
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>>>
>>>
>>>
>>>
>>>
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>>>
>>
>>
>> --
>> Ryan Lanham
>> rlanham1963 at gmail.com
>> Facebook: Ryan_Lanham
>> P.O. Box 633
>> Grand Cayman, KY1-1303
>> Cayman Islands
>> (345) 916-1712
>>
>>
>>
>>
>
>
> --
> Work: http://en.wikipedia.org/wiki/Dhurakij_Pundit_University - Research:
> http://www.dpu.ac.th/dpuic/info/Research.html - Think thank:
> http://www.asianforesightinstitute.org/index.php/eng/The-AFI
>
> P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net
>
> Connect: http://p2pfoundation.ning.com; Discuss:
> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org
>
> Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
> http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
>
>
>
>
>

-- 
Ryan Lanham
rlanham1963 at gmail.com
Facebook: Ryan_Lanham
P.O. Box 633
Grand Cayman, KY1-1303
Cayman Islands
(345) 916-1712
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