dce/davideisinger.com
1
0
Fork 0
Code Issues Pull Requests Actions Packages Projects Releases Wiki Activity

Finish may dispatch

Browse Source
This commit is contained in:
David Eisinger
2024-05-07 23:21:25 -04:00
parent 887aed039f
commit f22a68690f
3 changed files with 940 additions and 29 deletions
Download Patch File Download Diff File Expand all files Collapse all files

384
static/archive/davekarpf-substack-com-yferui.txt Normal file
View File

@@ -0,0 +1,384 @@
[1][https]
[2]The Future, Now and Then
SubscribeSign in
Share this post
[https]
On giant piles of cash, and their origins
davekarpf.substack.com
Copy link
Facebook
Email
Note
Other
On giant piles of cash, and their origins
The trouble with venture capital is that it has gotten too big.
[12][https]
[13]Dave Karpf
Apr 19, 2024
66
Share this post
[https]
On giant piles of cash, and their origins
davekarpf.substack.com
Copy link
Facebook
Email
Note
Other
[20]
13
[21]
Share
[22]
[https]
source: Unsplash https://unsplash.com/photos/100-us-dollar-bill-BRl69uNXr7g
Technological innovation requires capital. A lot of capital. A giant pile of
cash.
There are, to a first approximation, only three places you can find of a giant
pile of cash. There’s government money. There’s venture capital. And there’s
big corporate R&D.
Thanks for reading The Future, Now and Then! Subscribe for free to receive new
posts and support my work.
[31][ ]
Subscribe
Of the three, I would argue that government is clearly the best. The reason is
simple: government funding doesn’t come attached to some rich asshole who
inevitably screws things up later.
Venture capital, for this same reason, is quite clearly the worst. Andy Baio’s,
“[33]The Quiet Death of Ello’s Big Dream” is worth reading on this point. VC
funding comes attached to VC revenue expectations. It makes unreasonable
demands. Sometimes they work out for the investors. They very rarely work out
for everyone else.
Big corporate money is somewhere in the middle. I’d classify it as eh, fine I
guess, so long as the marketplace is otherwise well-regulated and those large
corporations are constrained. (Which, heh, ofcoursewedon’thaverightnow.)
The examples of big corporate money that spring immediately to mind are [34]
Bell Labs and [35]Xerox PARC. There was indeed a time when big companies
invested a ton in basic science and R&D, with no immediate plans to turn the
results into products. And, as [36]Ian Betteridge pointed out last month, this
was because the big companies were rightly concerned about the antitrust cops.
[37]A nervous monopolist is a (relatively) well-behaved monopolist.
Still, there’s a bit of elegance to the big-pile-of-government-money approach.
I first took notice of this with the passage of the Inflation Reduction Act
(IRA). Fifteen years ago, everyone kind of thought that the only way to
jumpstart the clean energy transition was to institute a carbon tax or
cap-and-trade/cap-and-dividend system. (Basically, do some fancy tricks that
the economists suggested, then let the market work its magic.) Cap-and-Trade
failed for a whole lot of reasons, but one of the biggest was that the proposal
was complex and boring in a way that appealed to the economists but were
impossible to message. Most people were left thinking “this is probably gonna
turn into weird corporate bullshit, right?”
The IRA, by contrast, was just a big pile of money attached to industrial
policy — directional instructions for how to spend the pile. That’s effectively
all it could be, because of some vagaries in the Senate rules that let you
avoid the filibuster and pass budget bills with a 51-vote majority. And while
that big pile of money isn’t perfect, it is funding a lot of good things.
And of course we can scan back in history for plenty of other examples. [38]The
semiconductor industry and the internet were both built out of government
grants and defense contracts. We have sputnik and the space race to thank for
the computer age. The Human Genome Project was government funding. So was the
National Nanotechnology Initiative. Some of these were big hits, some were
glancing misses. But the general model of promising avenue —> government sets
up a big pile of money —> research and development flourishes in that area is
pretty well established. It works.
The are, as far as I can tell, only three downsides to the
government-pile-of-money approach:
1. You’ll need to make the money back through taxes on the industries that
develop as a result. And they won’t want to pay those taxes. And these
industries will be popular, with a lot of capital to spend on pressuring
government to give them special deals and tax breaks. So maintaining the
equilibrium of establish big pile of government money —> industries
flourish —> they pay taxes, which lets you set up the next big pile of
government money is going to take constant effort to maintain. (This is an
abbreviated version of Marianna Mazzucato’s [39]The Entrepreneurial State.
Her book is excellent, btw.)
2. The big pile of government money is tied up in bureaucracy, which means it
isn’t especially nimble or responsive. This can be fixed through
public-private partnerships and other administrative design choices. But
it’s bound to be frustrating and sometimes wasteful. (Imagine if, circa
2022, the Biden administration had set up a $30 billion fund for, like,
metaverse research.) And that waste and frustration will be fodder for
ideological opponents to the whole endeavor.
3. The big pile of government money doesn’t glorify entrepreneurs and
innovators as the very-special-boys who are heroically building the future.
And that doesn’t feel very gratifying. They would much prefer an
equilibrium where government provides the big pile of money, but then no
one talks about it. Or gives the government any credit. Or taxes the
windfall profits. It is not, in other words, a story that plays well at
Davos. If those entrepreneurs get rich enough, [40]they’ll develop
elaborate philosophical justifications for why the most important cause in
the world is that everyone clap louder for them.
But those three downsides just mean that the system will require political
maintenance. It works quite well, but it isn’t self-sustaining. And this
observation extends beyond science and technology. The
big-pile-of-government-money is a return to how we approached public problems
through much of the 20th century, before it was rejected as “tax-and-spend”
liberalism and replaced by neoliberalism’s faith-based market fundamentalism.
The basic proposition is as follows: we should provide public funding for
public goods. Those public goods will make us a better, more productive
society. And then we refill the public coffers through a system of taxation.
The same approach can be applied to other public goods:
• [41]There is no magic-unicorn funding model that will save journalism. It’s
going to require public subsidy.
• The crises facing the U.S. education system can mostly be reduced to the
simple fact that we no longer fund public education like we used to. The
idea that we are going to somehow innovate our way into a system that is
both higher-quality and cheaper is as fantastical as it is flawed.
• Ditto for higher education. If you think higher education is a public good,
then you should demand public subsidy of higher ed. (Including, but not
limited to, student debt cancellation.) If you do not think higher eduction
is a public good, then that’s fine too. But you ought to go ahead and say
as much.
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
The VC approach is the prevailing model today. And I have become increasingly
convinced that many of the problems with the current state of Silicon Valley
are rooted in the venture capital-class simply acquiring too much capital. VC
is fine (good, even!) when it is relatively small. But when VC is the primary
source of funding new science and technology breakthroughs, the whole system
gets skewed.
As it stands today, the primary direction-setter for new advances in science
and technology is “what do folks like Marc Andreessen and Peter Thiel and Gary
Tan and Sam Altman find exciting?”
The problem isn’t just that these guys are ideological fellow-travelers, hell
bent on a shared political project that socializes all risk while privatizing
all gain. (though, I mean… that would kinda be enough of a problem on its own.)
It’s also that their eye for science, technology, and even consumer products
just kinda sucks. Building toward their vision of the future means we’re going
to end up with a lot of [42]silly investments in pretend-cities and [43]
eugenics vaporware. It means we’ll have abundant funding for hail-mary attempts
at developing cold fusion and geo-engineering, and practically nothing for
helping cities remain habitable under extreme weather conditions.
(Read Karen Hao, I’m begging you!: We’re [44]sapping all the remaining water
from the desert to cool AI data centers. It’s good for Microsoft’s stock
performance. It is counterproductive to the climate emergency.)
This kind of VC-thinking works fine under limited conditions, and pretty
terribly everywhere else.
Take Sam Altman. Altman is not an engineer. He is not a scientist. He has no
real training in either. He is an entrepreneur, with a flair for optimistic
tech futurism. He places bets on where technology is headed, and then attempts
to bend society in a direction that makes those bets pay off.
The previous generation of venture capitalists were, for the most part, actual
engineers and scientists. They had spent time in the lab. They had experience
being “close to the metal.” They made some real money early, then started to
point that money in the direction of funding audacious high-risk/high-reward
projects that didn’t fit anywhere else. The sector was small, compared to
government money and corporate R&D money.
Folks like Altman approach the future much like bad sci-fi. They begin from a
prediction of where they’d like to end up, and then work backwards. Altman has
faith that we’re going to end up at world-changing Artificial General
Intelligence. That means we’ll need transformative breakthroughs in chip
production and energy production. Ergo, he invests in cold fusion companies and
sets out to raise $7 trillion to build his own manufacturing empire.
That’s actually a fine approach, as private investment strategies go. (Hey,
you’ve got a prediction for where the world is heading, and you want to make a
bunch of correlated bets that support the prediction? Go ahead and spend your
own money that way. God bless.) But when it becomes the primary source of
funding for basic science and/or applied technologies, then the whole system
gets warped in the direction of a few billionaires’ speculative fantasies.
Venture Capital is not inherently better than government funding. That’s a myth
that was popularized during the neoliberal era. It has now become impossible to
sustain. (Just look at all the [45]stupid bullshit they fund and all the nice
things that they ruin!)
Big Tech only got so big because we stopped enforcing antitrust 20+ years ago.
If the current reemergence of antitrust enforcement has staying power, that
will be good for society and also good for Big tech funding of basic research.
But, most of all, we should get back to enthusiastically celebrating large
piles of government money, paired with substantial taxes on the companies that
flourish as a result. Government money isn’t perfect. It can be slow and
inefficient. But nothing is perfect. And of all the potential big-pile-of-money
sources, it is the one that does the most good, while putting power in the
hands of people who are at least supposed to have the best interests of the
public in mind.
Thanks for reading The Future, Now and Then! Subscribe for free to receive new
posts and support my work.
[54][ ]
Subscribe
66
Share this post
[https]
On giant piles of cash, and their origins
davekarpf.substack.com
Copy link
Facebook
Email
Note
Other
[62]
13
[63]
Share
13 Comments
[https]
[ ]
[66]
Kaleberg
[67]Kaleberg’s Substack
[68]Apr 19Liked by Dave Karpf
There's an old saying, "The customer is always right about what they
wish to purchase." That is, people know their own needs. Being a
[65] customer requires money. When the US had a growing middle class, they
[https] were the customers individually and collectively. We were able to buy
all kinds of nice things. Now, the wealthy have all the money, and
they're the customers for symbolic stuff, not physical stuff. So, we
have a crappy consumer market and a wasteful efflourescence of venture
capital backed crazes.
Expand full comment
Reply
Share
[71]
Ralph Haygood
[72]Apr 20·edited Apr 20Liked by Dave Karpf
"The basic proposition is as follows: we should provide public funding
for public goods." However, public funding tends to involve taxation,
and the rotten core of "conservatism" is myopic selfishness, so denying
public goods even exist is typical of "conservatives". Moreover, the
USA is so collectively brainwashed in this regard that even ostensible
liberals often fall into thinking of public goods as if they weren't.
For example, it's common to say things like "higher education is the
single best investment that you can make in yourselves and your
future"*, which may be correct as far as it goes, but it leaves out
that education is foremost a public good, something we the people fund
because it benefits all of us to live in a society where most people
are well educated, to whatever level suits their talents and interests.
So as a matter of realpolitik in the USA, good luck getting much
traction with the eminently reasonable arguments you've presented here.
"It's also that their eye for science, technology, and even consumer
[70] products just kinda sucks." I'll be blunter: the guys you've mentioned
[https] are just kinda dumb. For example, Peter Thiel famously cheered for
Candidate Trump but was disappointed with President Trump, declaring
the latter and his shambolic administration "incompetent"**. Um, yeah,
no shit, Sherlock. But the way Cheetolini governed, if you call it
that, was perfectly consistent with his public conduct for decades
prior. Only dullards were surprised. Evidently, Thiel is one of them.
"The big pile of government money is tied up in bureaucracy, which
means it isn't especially nimble or responsive.": Often but not always.
In my experience, DARPA and NSF have been fairly nimble and responsive.
It can be done!
*[73]https://obamawhitehouse.archives.gov/the-press-office/2014/06/09/
remarks-president-opportunity-all-making-college-more-affordable
**[74]https://www.buzzfeednews.com/article/ryanmac/
peter-thiel-and-donald-trump
Expand full comment
Reply
Share
[76]11 more comments...
Top
Latest
Discussions
No posts
Ready for more?
[89][ ]
Subscribe
© 2024 Dave Karpf
[91]Privacy ∙ [92]Terms ∙ [93]Collection notice
[94] Start Writing[95]Get the app
[96]Substack is the home for great culture
Share
Copy link
Facebook
Email
Note
Other
This site requires JavaScript to run correctly. Please [103]turn on JavaScript
or unblock scripts
References:
[1] https://davekarpf.substack.com/
[2] https://davekarpf.substack.com/
[12] https://substack.com/profile/672568-dave-karpf
[13] https://substack.com/@davekarpf
[20] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comments
[21] javascript:void(0)
[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
[33] https://waxy.org/2024/01/the-quiet-death-of-ellos-big-dreams/
[34] https://www.amazon.com/Idea-Factory-Great-American-Innovation/dp/0143122797
[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
[36] https://ianbetteridge.com/2024/03/22/a-few-thoughts-on-the-apple-doj-antitrust-case-from-someone-who-isnt-riding-his-first-rodeo/
[37] https://medium.com/@davekarpf/the-infowars-purge-and-life-among-responsible-information-monopolies-ddaa14f6cf0
[38] https://www.penguinrandomhouse.com/books/534709/the-code-by-margaret-omara/
[39] https://marianamazzucato.com/books/the-entrepreneurial-state/
[40] https://davekarpf.substack.com/p/why-cant-our-tech-billionaires-learn
[41] https://mattdpearce.substack.com/p/we-cant-save-journalism-by-just-begging
[42] https://www.theatlantic.com/magazine/archive/2024/03/silicon-valley-billionaires-building-cities/677173/
[43] https://www.wired.com/story/this-woman-will-decide-which-babies-are-born-noor-siddiqui-orchid/
[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
[45] https://davekarpf.substack.com/p/the-money-has-to-come-from-somewhere
[62] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comments
[63] javascript:void(0)
[65] https://substack.com/profile/9557634-kaleberg
[66] https://substack.com/profile/9557634-kaleberg
[67] https://writtenstuff.substack.com/?utm_source=substack&utm_medium=web&utm_content=comment_metadata
[68] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comment/54340792
[70] https://substack.com/profile/58303485-ralph-haygood
[71] https://substack.com/profile/58303485-ralph-haygood
[72] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comment/54384920
[73] https://obamawhitehouse.archives.gov/the-press-office/2014/06/09/remarks-president-opportunity-all-making-college-more-affordable
[74] https://www.buzzfeednews.com/article/ryanmac/peter-thiel-and-donald-trump
[76] https://davekarpf.substack.com/p/on-giant-piles-of-cash-and-their/comments
[91] https://substack.com/privacy
[92] https://substack.com/tos
[93] https://substack.com/ccpa#personal-data-collected
[94] https://substack.com/signup?utm_source=substack&utm_medium=web&utm_content=footer
[95] https://substack.com/app/app-store-redirect?utm_campaign=app-marketing&utm_content=web-footer-button
[96] https://substack.com/
[103] https://enable-javascript.com/