davekarpf-substack-com-yferui.txt (18904B)
1 [1][https] 2 3 [2]The Future, Now and Then 4 5 SubscribeSign in 6 Share this post 7 [https] 8 9 On giant piles of cash, and their origins 10 11 davekarpf.substack.com 12 Copy link 13 Facebook 14 Email 15 Note 16 Other 17 18 On giant piles of cash, and their origins 19 20 The trouble with venture capital is that it has gotten too big. 21 22 [12][https] 23 [13]Dave Karpf 24 Apr 19, 2024 25 66 26 Share this post 27 [https] 28 29 On giant piles of cash, and their origins 30 31 davekarpf.substack.com 32 Copy link 33 Facebook 34 Email 35 Note 36 Other 37 [20] 38 13 39 [21] 40 Share 41 [22] 42 [https] 43 source: Unsplash https://unsplash.com/photos/100-us-dollar-bill-BRl69uNXr7g 44 45 Technological innovation requires capital. A lot of capital. A giant pile of 46 cash. 47 48 There are, to a first approximation, only three places you can find of a giant 49 pile of cash. There’s government money. There’s venture capital. And there’s 50 big corporate R&D. 51 52 Thanks for reading The Future, Now and Then! Subscribe for free to receive new 53 posts and support my work. 54 55 [31][ ] 56 Subscribe 57 Of the three, I would argue that government is clearly the best. The reason is 58 simple: government funding doesn’t come attached to some rich asshole who 59 inevitably screws things up later. 60 61 Venture capital, for this same reason, is quite clearly the worst. Andy Baio’s, 62 “[33]The Quiet Death of Ello’s Big Dream” is worth reading on this point. VC 63 funding comes attached to VC revenue expectations. It makes unreasonable 64 demands. Sometimes they work out for the investors. They very rarely work out 65 for everyone else. 66 67 Big corporate money is somewhere in the middle. I’d classify it as eh, fine I 68 guess, so long as the marketplace is otherwise well-regulated and those large 69 corporations are constrained. (Which, heh, ofcoursewedon’thaverightnow.) 70 71 The examples of big corporate money that spring immediately to mind are [34] 72 Bell Labs and [35]Xerox PARC. There was indeed a time when big companies 73 invested a ton in basic science and R&D, with no immediate plans to turn the 74 results into products. And, as [36]Ian Betteridge pointed out last month, this 75 was because the big companies were rightly concerned about the antitrust cops. 76 [37]A nervous monopolist is a (relatively) well-behaved monopolist. 77 78 Still, there’s a bit of elegance to the big-pile-of-government-money approach. 79 I first took notice of this with the passage of the Inflation Reduction Act 80 (IRA). Fifteen years ago, everyone kind of thought that the only way to 81 jumpstart the clean energy transition was to institute a carbon tax or 82 cap-and-trade/cap-and-dividend system. (Basically, do some fancy tricks that 83 the economists suggested, then let the market work its magic.) Cap-and-Trade 84 failed for a whole lot of reasons, but one of the biggest was that the proposal 85 was complex and boring in a way that appealed to the economists but were 86 impossible to message. Most people were left thinking “this is probably gonna 87 turn into weird corporate bullshit, right?” 88 89 The IRA, by contrast, was just a big pile of money attached to industrial 90 policy — directional instructions for how to spend the pile. That’s effectively 91 all it could be, because of some vagaries in the Senate rules that let you 92 avoid the filibuster and pass budget bills with a 51-vote majority. And while 93 that big pile of money isn’t perfect, it is funding a lot of good things. 94 95 And of course we can scan back in history for plenty of other examples. [38]The 96 semiconductor industry and the internet were both built out of government 97 grants and defense contracts. We have sputnik and the space race to thank for 98 the computer age. The Human Genome Project was government funding. So was the 99 National Nanotechnology Initiative. Some of these were big hits, some were 100 glancing misses. But the general model of promising avenue —> government sets 101 up a big pile of money —> research and development flourishes in that area is 102 pretty well established. It works. 103 104 The are, as far as I can tell, only three downsides to the 105 government-pile-of-money approach: 106 107 1. You’ll need to make the money back through taxes on the industries that 108 develop as a result. And they won’t want to pay those taxes. And these 109 industries will be popular, with a lot of capital to spend on pressuring 110 government to give them special deals and tax breaks. So maintaining the 111 equilibrium of establish big pile of government money —> industries 112 flourish —> they pay taxes, which lets you set up the next big pile of 113 government money is going to take constant effort to maintain. (This is an 114 abbreviated version of Marianna Mazzucato’s [39]The Entrepreneurial State. 115 Her book is excellent, btw.) 116 117 2. The big pile of government money is tied up in bureaucracy, which means it 118 isn’t especially nimble or responsive. This can be fixed through 119 public-private partnerships and other administrative design choices. But 120 it’s bound to be frustrating and sometimes wasteful. (Imagine if, circa 121 2022, the Biden administration had set up a $30 billion fund for, like, 122 metaverse research.) And that waste and frustration will be fodder for 123 ideological opponents to the whole endeavor. 124 125 3. The big pile of government money doesn’t glorify entrepreneurs and 126 innovators as the very-special-boys who are heroically building the future. 127 And that doesn’t feel very gratifying. They would much prefer an 128 equilibrium where government provides the big pile of money, but then no 129 one talks about it. Or gives the government any credit. Or taxes the 130 windfall profits. It is not, in other words, a story that plays well at 131 Davos. If those entrepreneurs get rich enough, [40]they’ll develop 132 elaborate philosophical justifications for why the most important cause in 133 the world is that everyone clap louder for them. 134 135 But those three downsides just mean that the system will require political 136 maintenance. It works quite well, but it isn’t self-sustaining. And this 137 observation extends beyond science and technology. The 138 big-pile-of-government-money is a return to how we approached public problems 139 through much of the 20th century, before it was rejected as “tax-and-spend” 140 liberalism and replaced by neoliberalism’s faith-based market fundamentalism. 141 142 The basic proposition is as follows: we should provide public funding for 143 public goods. Those public goods will make us a better, more productive 144 society. And then we refill the public coffers through a system of taxation. 145 The same approach can be applied to other public goods: 146 147 • [41]There is no magic-unicorn funding model that will save journalism. It’s 148 going to require public subsidy. 149 150 • The crises facing the U.S. education system can mostly be reduced to the 151 simple fact that we no longer fund public education like we used to. The 152 idea that we are going to somehow innovate our way into a system that is 153 both higher-quality and cheaper is as fantastical as it is flawed. 154 155 • Ditto for higher education. If you think higher education is a public good, 156 then you should demand public subsidy of higher ed. (Including, but not 157 limited to, student debt cancellation.) If you do not think higher eduction 158 is a public good, then that’s fine too. But you ought to go ahead and say 159 as much. 160 161 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ 162 163 The VC approach is the prevailing model today. And I have become increasingly 164 convinced that many of the problems with the current state of Silicon Valley 165 are rooted in the venture capital-class simply acquiring too much capital. VC 166 is fine (good, even!) when it is relatively small. But when VC is the primary 167 source of funding new science and technology breakthroughs, the whole system 168 gets skewed. 169 170 As it stands today, the primary direction-setter for new advances in science 171 and technology is “what do folks like Marc Andreessen and Peter Thiel and Gary 172 Tan and Sam Altman find exciting?” 173 174 The problem isn’t just that these guys are ideological fellow-travelers, hell 175 bent on a shared political project that socializes all risk while privatizing 176 all gain. (though, I mean… that would kinda be enough of a problem on its own.) 177 178 It’s also that their eye for science, technology, and even consumer products 179 just kinda sucks. Building toward their vision of the future means we’re going 180 to end up with a lot of [42]silly investments in pretend-cities and [43] 181 eugenics vaporware. It means we’ll have abundant funding for hail-mary attempts 182 at developing cold fusion and geo-engineering, and practically nothing for 183 helping cities remain habitable under extreme weather conditions. 184 185 (Read Karen Hao, I’m begging you!: We’re [44]sapping all the remaining water 186 from the desert to cool AI data centers. It’s good for Microsoft’s stock 187 performance. It is counterproductive to the climate emergency.) 188 189 This kind of VC-thinking works fine under limited conditions, and pretty 190 terribly everywhere else. 191 192 Take Sam Altman. Altman is not an engineer. He is not a scientist. He has no 193 real training in either. He is an entrepreneur, with a flair for optimistic 194 tech futurism. He places bets on where technology is headed, and then attempts 195 to bend society in a direction that makes those bets pay off. 196 197 The previous generation of venture capitalists were, for the most part, actual 198 engineers and scientists. They had spent time in the lab. They had experience 199 being “close to the metal.” They made some real money early, then started to 200 point that money in the direction of funding audacious high-risk/high-reward 201 projects that didn’t fit anywhere else. The sector was small, compared to 202 government money and corporate R&D money. 203 204 Folks like Altman approach the future much like bad sci-fi. They begin from a 205 prediction of where they’d like to end up, and then work backwards. Altman has 206 faith that we’re going to end up at world-changing Artificial General 207 Intelligence. That means we’ll need transformative breakthroughs in chip 208 production and energy production. Ergo, he invests in cold fusion companies and 209 sets out to raise $7 trillion to build his own manufacturing empire. 210 211 That’s actually a fine approach, as private investment strategies go. (Hey, 212 you’ve got a prediction for where the world is heading, and you want to make a 213 bunch of correlated bets that support the prediction? Go ahead and spend your 214 own money that way. God bless.) But when it becomes the primary source of 215 funding for basic science and/or applied technologies, then the whole system 216 gets warped in the direction of a few billionaires’ speculative fantasies. 217 218 Venture Capital is not inherently better than government funding. That’s a myth 219 that was popularized during the neoliberal era. It has now become impossible to 220 sustain. (Just look at all the [45]stupid bullshit they fund and all the nice 221 things that they ruin!) 222 223 Big Tech only got so big because we stopped enforcing antitrust 20+ years ago. 224 If the current reemergence of antitrust enforcement has staying power, that 225 will be good for society and also good for Big tech funding of basic research. 226 227 But, most of all, we should get back to enthusiastically celebrating large 228 piles of government money, paired with substantial taxes on the companies that 229 flourish as a result. Government money isn’t perfect. It can be slow and 230 inefficient. But nothing is perfect. And of all the potential big-pile-of-money 231 sources, it is the one that does the most good, while putting power in the 232 hands of people who are at least supposed to have the best interests of the 233 public in mind. 234 235 Thanks for reading The Future, Now and Then! Subscribe for free to receive new 236 posts and support my work. 237 238 [54][ ] 239 Subscribe 240 66 241 Share this post 242 [https] 243 244 On giant piles of cash, and their origins 245 246 davekarpf.substack.com 247 Copy link 248 Facebook 249 Email 250 Note 251 Other 252 [62] 253 13 254 [63] 255 Share 256 13 Comments 257 [https] 258 [ ] 259 [66] 260 Kaleberg 261 [67]Kaleberg’s Substack 262 [68]Apr 19Liked by Dave Karpf 263 264 There's an old saying, "The customer is always right about what they 265 wish to purchase." That is, people know their own needs. Being a 266 [65] customer requires money. When the US had a growing middle class, they 267 [https] were the customers individually and collectively. We were able to buy 268 all kinds of nice things. Now, the wealthy have all the money, and 269 they're the customers for symbolic stuff, not physical stuff. So, we 270 have a crappy consumer market and a wasteful efflourescence of venture 271 capital backed crazes. 272 273 Expand full comment 274 Reply 275 Share 276 277 [71] 278 Ralph Haygood 279 [72]Apr 20·edited Apr 20Liked by Dave Karpf 280 281 "The basic proposition is as follows: we should provide public funding 282 for public goods." However, public funding tends to involve taxation, 283 and the rotten core of "conservatism" is myopic selfishness, so denying 284 public goods even exist is typical of "conservatives". Moreover, the 285 USA is so collectively brainwashed in this regard that even ostensible 286 liberals often fall into thinking of public goods as if they weren't. 287 For example, it's common to say things like "higher education is the 288 single best investment that you can make in yourselves and your 289 future"*, which may be correct as far as it goes, but it leaves out 290 that education is foremost a public good, something we the people fund 291 because it benefits all of us to live in a society where most people 292 are well educated, to whatever level suits their talents and interests. 293 So as a matter of realpolitik in the USA, good luck getting much 294 traction with the eminently reasonable arguments you've presented here. 295 296 "It's also that their eye for science, technology, and even consumer 297 [70] products just kinda sucks." I'll be blunter: the guys you've mentioned 298 [https] are just kinda dumb. For example, Peter Thiel famously cheered for 299 Candidate Trump but was disappointed with President Trump, declaring 300 the latter and his shambolic administration "incompetent"**. Um, yeah, 301 no shit, Sherlock. But the way Cheetolini governed, if you call it 302 that, was perfectly consistent with his public conduct for decades 303 prior. Only dullards were surprised. Evidently, Thiel is one of them. 304 305 "The big pile of government money is tied up in bureaucracy, which 306 means it isn't especially nimble or responsive.": Often but not always. 307 In my experience, DARPA and NSF have been fairly nimble and responsive. 308 It can be done! 309 310 *[73]https://obamawhitehouse.archives.gov/the-press-office/2014/06/09/ 311 remarks-president-opportunity-all-making-college-more-affordable 312 313 **[74]https://www.buzzfeednews.com/article/ryanmac/ 314 peter-thiel-and-donald-trump 315 316 Expand full comment 317 Reply 318 Share 319 320 [76]11 more comments... 321 Top 322 Latest 323 Discussions 324 325 No posts 326 327 Ready for more? 328 329 [89][ ] 330 Subscribe 331 © 2024 Dave Karpf 332 [91]Privacy ∙ [92]Terms ∙ [93]Collection notice 333 [94] Start Writing[95]Get the app 334 [96]Substack is the home for great culture 335 Share 336 Copy link 337 Facebook 338 Email 339 Note 340 Other 341 This site requires JavaScript to run correctly. Please [103]turn on JavaScript 342 or unblock scripts 343 344 References: 345 346 [1] https://davekarpf.substack.com/ 347 [2] https://davekarpf.substack.com/ 348 [12] https://substack.com/profile/672568-dave-karpf 349 [13] https://substack.com/@davekarpf 350 [20] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comments 351 [21] javascript:void(0) 352 [22] https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff0a27821-16b9-4428-9fbd-2b827c0b4a04_5274x3516.jpeg 353 [33] https://waxy.org/2024/01/the-quiet-death-of-ellos-big-dreams/ 354 [34] https://www.amazon.com/Idea-Factory-Great-American-Innovation/dp/0143122797 355 [35] https://www.amazon.com/Dealers-Lightning-Xerox-PARC-Computer/dp/0887309895/ref=pd_lpo_sccl_1/130-4281032-0312943?pd_rd_w=bQShS&content-id=amzn1.sym.1ad2066f-97d2-4731-9356-36b3edf1ae04&pf_rd_p=1ad2066f-97d2-4731-9356-36b3edf1ae04&pf_rd_r=QQW6HS3GCGN3TEE8NT7X&pd_rd_wg=wlvhQ&pd_rd_r=82c1a85f-ab39-40d4-b2bf-189e1644f181&pd_rd_i=0887309895&psc=1 356 [36] https://ianbetteridge.com/2024/03/22/a-few-thoughts-on-the-apple-doj-antitrust-case-from-someone-who-isnt-riding-his-first-rodeo/ 357 [37] https://medium.com/@davekarpf/the-infowars-purge-and-life-among-responsible-information-monopolies-ddaa14f6cf0 358 [38] https://www.penguinrandomhouse.com/books/534709/the-code-by-margaret-omara/ 359 [39] https://marianamazzucato.com/books/the-entrepreneurial-state/ 360 [40] https://davekarpf.substack.com/p/why-cant-our-tech-billionaires-learn 361 [41] https://mattdpearce.substack.com/p/we-cant-save-journalism-by-just-begging 362 [42] https://www.theatlantic.com/magazine/archive/2024/03/silicon-valley-billionaires-building-cities/677173/ 363 [43] https://www.wired.com/story/this-woman-will-decide-which-babies-are-born-noor-siddiqui-orchid/ 364 [44] https://www.theatlantic.com/technology/archive/2024/03/ai-water-climate-microsoft/677602/?utm_campaign=weekly-planet&utm_source=newsletter&utm_medium=email&utm_content=20240301&utm_term=The+Weekly+Planet 365 [45] https://davekarpf.substack.com/p/the-money-has-to-come-from-somewhere 366 [62] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comments 367 [63] javascript:void(0) 368 [65] https://substack.com/profile/9557634-kaleberg 369 [66] https://substack.com/profile/9557634-kaleberg 370 [67] https://writtenstuff.substack.com/?utm_source=substack&utm_medium=web&utm_content=comment_metadata 371 [68] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comment/54340792 372 [70] https://substack.com/profile/58303485-ralph-haygood 373 [71] https://substack.com/profile/58303485-ralph-haygood 374 [72] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comment/54384920 375 [73] https://obamawhitehouse.archives.gov/the-press-office/2014/06/09/remarks-president-opportunity-all-making-college-more-affordable 376 [74] https://www.buzzfeednews.com/article/ryanmac/peter-thiel-and-donald-trump 377 [76] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comments 378 [91] https://substack.com/privacy 379 [92] https://substack.com/tos 380 [93] https://substack.com/ccpa#personal-data-collected 381 [94] https://substack.com/signup?utm_source=substack&utm_medium=web&utm_content=footer 382 [95] https://substack.com/app/app-store-redirect?utm_campaign=app-marketing&utm_content=web-footer-button 383 [96] https://substack.com/ 384 [103] https://enable-javascript.com/