"That's fine, that's capitalism - and these incremental improvements lead to slow productivity gains that at least quicken the pulse of economists. But maybe let's drop the pretense that we're curing cancer unless, you know, we're curing cancer."
Reasonable and astute point.
"An Economist article this year exploring the state of innovation noted that centuries of scientific progress means it takes ever longer for people to reach to the frontier of any field, much less push past it. It also stressed that much of the technological low-hanging fruit is long gone."
Also true, and oft-overlooked.
"Thiel is at least putting his money where his mouth is at Founders Fund, his venture capital firm making investments into robotics, artificial intelligence and biotechnology (alongside a lineup of dot-coms)."
Ironically, AI was jump-started by DOD dollars,[1] and biotechnology by NIH dollars. Robotics had substantial manufacturing implications and got money from that area, but has also benefited heavily from defense money (think UAV's, etc).
It would seem that capitalism has done a great job solving problems where value-creation yield a sustainable level of value-capture: farming, manufacturing, etc.
However, there's a lot things where there's a ton of value-creation without enough capture. This is where collective action problems must be solved. This could be a consortia like an IEEE standard, gov't funding like the NSF, or something like a city. Many options, but none purely capitalist in the traditional sense of the word.
> Only governments had the long view and available cash to fund things like supercolliders, deep space programs and - oh yeah - the development of the Internet.
The whole point of blue-sky R&D funding is that you can't plan exactly what you're going to get out of it. Today DARPA is a bit more focused on practical application than it used to be, but it's ethos is still: "let's throw $10-30 million at a bunch of smart people and see what happens." The "plan" is to fund fundamental R&D and hope something really useful comes out of it. In that sense, the development of the internet was a fulfillment of that plan.
I haven't done any kind of scientific survey, but it seems the best government projects are those without any kind of expectation of anyone profiting or making the money back.
Not that I don't like profit motives. I love them. But if there is a profit motive, you have to really really question why private industry isn't doing it instead.
Exactly! Nearly any concerted focus on a difficult engineering problem (ex: NASA) will yield positive externalities in the form of engineering improvement (manufacturing methods, chip design, solar, etc.).
If your engineering challenge is putting filters on pictures, you're probably going to have less positive spillovers - not that you wouldn't be solving a real problem, but it's a different kind of thing.
DARPA is a very interesting agency. It's got a $3.2 billion budget, but less than 250 employees and more than half are technical people. They're structured to maximize the amount of money that goes to the actual engineering teams and minimize internal inertia. The program managers get $20 million or so to throw around each year, and have tremendous authority over their projects and not a lot of oversight. They're on the younger side for people with that kind of budget authority and usually have PhD's themselves. They're limited to 4-5 year stints, so it's not a position that attracts people looking to make a career in bureaucracy.
dreamdu5t you are so wrong that you deserve to be onvoted, but I dont do that. The basic IP technology was all government funded and developed by BB&N. The original internet was ARPAnet, funded by the government to link the government, military, universities, and military contractors (.gov, .mil, .edu, and .com). The Internet itself was set up separate from DARPAnet by government legislation and funding. The whole domain registration mechanism was at one time under the ultimate control of the Commerce Department. The world wide web protocol was developed at CERN, funded by multiple governments. The browser that became Netscape was developed at the University of Illinois. It was only after the Internet was set by the government did we get the explosion of users and applications. The competitors to the the internet developed by private corporations, like MCI mail or Prodigy, are all dead now.
While there was a ton of amazing stuff going on inside Bell Labs, it really seems like progress in telecom didn't accelerate until after the ATT breakup. If you think the cell phone situation now is bad, you used to have to rent your home phone, like a cable box, from the phone company.
Can you elaborate why that is ironic? Most of the basic science is funded by governments (throughout the world, not just the US). Isn't that supposed to be the role of government (funding research that has no immediate financial prospects)?
Because Thiel is famous for his libertarian views. Though having heard him discuss his thoughts on the roles of government and private enterprise in person, I was surprised to find that he's much less ideological than he is commonly portrayed as; he expressed support for a moderate amount of regulation but preferred that it be more personal and accountable than (ie based on the judgment of experienced civil servants) than legalistic and systematized.
I think he has a good point. Japan and Europe have more 'hands on' regulatory regimes and even though regulations are stereotypically more onerous in Europe, it's arguably more results-driven and less of a procedural minefield. Of course the downside of this is that there aren't as many avenues of appeal and if the judgement of a regulatory authority goes against you then you may have to just grin and bear it; that's problematic for startups which don't have a history of successful commercial operations behind them and may find compliance more difficult and expensive.
When you're spending billions/trillions of tax dollars, you're going to have successes here and there.
There's no question that the government has some successes to point to. I actually agree that government is decent at some basic research.
Then again, the private sector has had plenty of successes as well.
My main objection is that we don't really understand the opportunity cost of having the government spend the money vs letting the private economy do so itself - yet we let the government continue to make the decisions on what's fair.
These articles are easy to write (and upvote) but such conclusions are pretty meaningless till you have a definition of what counts as innovation. That's a very interesting question, and yet just about everyone who talks about this topic ducks it and goes instead for the easy score.
Maybe we can do better here on HN. What's the right way to measure innovation? E.g. surely the 5 year old's definition (big shiny things that fly through the air are innovative, and invisible software isn't) is mistaken. But what would a good measure be?
The appeal of these articles is that they speak our unspoken thoughts. When someone tells you about the snapchat/instagram clone they are building at a startup event, you are socially obligated to smile and say something nice about it. But on the inside you wonder at an economic system that puts people through two decades of training so that they can apply their talents to such activities. Meanwhile, companies doing big things find it tough to hire as they are competing with seed funding for your own cat pictures startup.
When I moved out to Silicon Valley it was right before the Groupon IPO and hundreds of man-years were being spent on Groupon clones. Of course nobody remembers them now.
The appeal of these articles is that they speak our unspoken thoughts.
That is exactly the problem. Nothing is less the product of systematic analysis than what you call an "unspoken thought." "Speak our unspoken thoughts" is a nicer way of saying "appeal to our unexamined prejudices."
Perhaps thats part of the issue. Next time someone tells you about their Instagram clone, laugh at them. An alternative to government intervention is a cultural shift, a change in what society holds in high regards. If we all start laughing at clones, people might stop making them.
I'm not sure that's really an improvement. One of the nice things about Silicon Valley is that ideas that are laughed at elsewhere are taken seriously here. And a lot of the time, the people doing the laughing end up eating their words later.
Remember that the search engine market was crowded and considered a commodity backwater when Google entered it; all the smart money was betting on portals. The cloud storage market was crowded and considered a commodity backwater when DropBox entered it. The PC market was crowded and full of hobbyists and also-rans when Apple entered it. In each case, they did things enough better than everyone else that everyone forgot that there'd ever been competitors.
Except this time people are laughing because everyone else is doing it instead of what most of the rest of the world does, which is laugh at you because they think it's impossible or not worth trying because it's so risky.
Apple is an exception and had a clear idea of how they were going to do things differently. If you were to come up to me and say you were starting a smart phone company without a concrete idea (and the previous experience or intelligence to back it up) of how you were going to do things differently or how you were going to make an affordable phone without the scale of Apple or Motorola, I think I would laugh.
I'm talking about Apple in 1977, not Apple in 2007. At the time, most of the innovations that made them popular (Woz's wizardry with color displays, the floppy disk controller, the strategy of selling for large discounts to schools, and certainly the Xerox PARC visit) were way off in the future.
Google and DropBox were also laughed at because it was what a number of other companies were doing, not because what they were attempting was technologically impossible. Most outsiders had no idea that what Google was doing was technologically impossible, because, well, they heard "search engine" and thought "AltaVista".
It's the nature of innovation that you figure things out as you go along. If you have all the answers when you start, you're not innovating. And that implies that you have to start somewhere, usually where a bunch of other people are starting, and so of course things will be crowded when you're just a startup. It's all the stuff that happens in-between being an Instagram clone and going public with a wildly different product that matters.
I like Yvon Chouinard's definition of innovation, which I'll paraphrase as: Invention is the creation of new things, and innovation is the application of inventions to solve problems for lots of people.
I like this definition because I think it accomodates the fact that a lot of products that are obviously inventive, fail to succeed in the marketplace or change many people's lives. Examples include Google Wave, the Apple Newton, etc. It also accomodates companies like Apple today, which do succeed in the marketplace and change many people's lives, despite inventing very few things themselves.
So when we look at the state of Silicon Valley today we can see that there are companies like Apple and Facebook that are innovative despite not being inventive. And then there are initiatives like Google's glasses and self-driving car that, while incredibly inventive, can't really be considered innovative (at least not yet).
I think it's important to realize in answering that question a few things.
a) The answer to the question isn't digital (black and white) it's analog. It's a matter of degree and relative to the thing being considered. Curing cancer - say, up near 100. Cat photo app, say, down near 0. And everything in between. (Numbers arbitrary to make a point.)
b) Most people could probably have an easier time (like identifying porn) with what isn't innovation than defining what is innovation.
c) Daniel Markham's points regarding sometimes meaningless things lead to important things.
Lastly, none of this matters. If you are in high school it's a sure bet you will attract women and attention (at that age) as the high school quarterback even if you have average looks. People arguing that the system should change and the guy with glasses who will be a much better catch down the road won't get anyone anywhere. Things are the way they are for a reason.
I suspect that YC invests in the best situations they can find given a pool of applicants applying your patterns etc and knowledge of the past. Questions posed by this article (and some of the comments here) assume that markets operate together in collusion for the common good. They don't. If they did it would be relatively easy to get food companies to stop pushing valueless tasty food on the public as well.
Even this is obscuring the truth somewhat. Last year (?) an IT person in charge of xvideos.com (porn site) noted that they had deployed a technology stack further than it had been done before. This increased confidence in said stack for others, which could have all sorts of ripple effects that eventually lead to making an amazing innovation.
But the issue isn't that people are doing these incremental things. The issue is that they claim to be doing more than that, and they aren't. They're claiming to cure cancer by buying knick-knacks in Hungary which are taxed and the money used to pay for the electric grid powering the hospital where a patient with cancer is staying and occasionally gets visited by his son who happens to be researching a cure for cancer.
At some point, you can't take credit any more. Take a page out of other industries' books. Just shut up about innovation and focus on quality.
Likewise these articles are easy to dismiss if you're too far into the SV bubble. Maybe you can qualify why this article is meaningless and answer its points instead of waiving it off? Otherwise you seem to have an unexamined prejudice against criticisms of the venture capital community's funding choices.
By the very nature of innovation you can't define what it is just like you can't ever say for certain whether some abstract piece of pure mathematics will ever contribute to engineering or science (as it very often has). However, like mathematicians we can make educated guesses on what IS NOT relevant or innovative, and by extension will never be relevant or innovative. And of course we will be wrong some times.
The very fact that you think there is a "right way" to "measure" innovation makes me think this article is pretty spot on. Innovation isn't a business, it's not a product or a user base, it's not a stock ticker. More often than not, innovation is the result of thousands, if not millions, of man-hours of passionate and extremely intelligent people who care about their work and want to ACHIEVE something that is currently impossible, impractical, or even undesirable. You can't measure or predict this, all you can do is find those passionate, intelligent people (here's where the measurement part sort of comes in) and give them the resources and support to do something great.
The point of the article is that last part is not happening. There are so many passionate and intelligent people in the Valley but almost no one is giving them the chance to do something great.
I think new economies is a good proxy. The computer invented an entirely new economy. So did the automobile, computer networking, television, radio, the telegraph, electricity, air travel, moving pictures, recorded audio, the light bulb, washing machine, dishwasher, etc. All of these things created not just the immediate industry, but an entire ecosystem of products and services related to the industry.
You could probably also measure it in terms of essential inventions: we can't live without the internet, but if Instagram or Facebook went away tomorrow, we'd have lots of alternatives for sharing photos and talking to our friends. Instagram and Facebook make those things nicer, but don't allow us to do anything we weren't doing before. The internet (or, I guess, the web) allowed for entirely new forms of communication and commerce.
From my perspective, we haven't seen a new economy emerge in the last decade, at least. The internet (maybe molecular biology) was the last invention to really create a new industry, and that was the mid-90s. Maybe robotics is the next one, but it's hard to tell prospectively.
By that standard, surely Airbnb is a "new economy". And Google certainly qualifies, given the number of firms dedicated to nothing but optimizing AdWords.
I don't know about AirBnB. People have been renting rooms for as long as they've been traveling, and vacation rentals existed long before AirBnB existed -- but they certainly make things more efficient than the way they used to be. That said, if I'm counting "washing machines", then perhaps AirBnB should count, too (or anything that increases efficiency of a thing we already do by an order of magnitude; it's an interesting debate, and I'm not sure which side I'm on).
I agree with you on AdWords, though. That was really the first time advertising was made quantifiable on a large scale (the innovation), and it resulted in a new industry.
2) 10-year moving average of the duration of subsistence living expenses that can be funded from a fixed weight of gold.
Both of these are very high level measures that fold in a lot of underlying technological progress. (1) is weighted towards computation and biotech, (2) against mining and expansion into space (would have to be weighted somehow there to be useful much past the next 20 years), but both encompass far more than that.
Both incorporate advantages provided by fluff technologies such as networking tools, but so many levels removed that we don't have to stop arguing over whether they should be dropped in a well or not. This may or may not be a benefit from your point of view.
I like Clay Christensen's model for innovation [1]. He has a top level categorization of sustaining innovation and disruptive innovation.
Sustaining innovations are about making products in existing markets better and are further broken down into continuous innovation and discontinuous or radical innovations. The metrics here are about if the new innovation is improving performance within an existing market and by existing value metrics, and by how much. Continuous innovations are small improvements, radical innovations are large improvements.
Disruptive innovations are also broken down into two categories. There is the low end disruption whereby a product is competing in the same space as existing ones, but comes in from below. These are often cheaper and worse to start with, but then move up market as technology improves. There are many examples here (eg Arm coming in under x86). The other disruptive innovation is the new market innovation. In Christensen's terminology, these products compete against non-competition. There is a need, but no products fullfils that need until the disruption comes along. These products are tricky for several reasons. For one, there is no existing market and therefore traditional market research doesn't work. Instead, the execution plan needs to be focused on learning what the market is and what the customer needs are.
I want to call out how they discuss innovation: Ultimately, innovation is a means to an end — a competence for generating profitable growth opportunities and improving the organization's competitiveness. A holistic measurement system needs to have three perspectives: performance, strength of the competence, and strategic application of the competence. The performance perspectives report out the "returns" or "results" of an organization's innovation program(s) while the competence perspectives report out the ability to envision and implement innovative opportunities. The strategy perspective outlines the criticality and impact of innovation in the organization's strategic direction.
Hopefully we can get some good discussion going on this topic as in my day-to-day work, we frequently discuss with large enterprise customers how they handle change management. Frequently we discuss it in the context of IPM (innovation process management) and how to create organizations that benefit from managing innovation; and more broadly speaking, what types of software or tools they need to successfully handle this change.
It's true. But also somewhat reminiscent of the "What is a startup?" discussion a few months back which was inconclusive. It seems "everyone knows what it is but no one can explain it" But to take a stab at it I'd say the level of innovation is directly tied to the amount of economic improvement and/or life improvement that results. Internet = huge change in economic efficiencies and life improvement. ("Life improvement" would have to be related to time free'ed up to spend on other goals) Mobile the same.
I used to view innovation as: making it possible to do something that wasn't possible before (going from 0 to 1). But under that definition alone, SpaceX would not be very innovative. It's just sometimes when you go from 1 to N but the N is so large (like SpaceX case) it's probably a different kind of innovation. And by making the N that large, it's starts to look a lot like 0-1 and new opportunities arise, like the chance of getting to Mars (which is definitely 0-1)
There are certain fields where everything is pretty much 0 to 1.
Designing a nuclear reactor or an orbital rocket is an incredible feat of engineering, even if you have half a century or more of work to fall back on.
Like all attempts to objectify the subjective, the analysis usually fall short and can be easily gamed. For example, large tech firms such as SAP say they are more innovative because the amount of R&D money they spend. I don't think it's worth putting the term 'innovation' on a measuring stick.
Pick a problem that needs solving. For the
solution, use 'innovation'.
Then want the 'innovation' to be ideas, essentially
applied research, that can be presented and
evaluated usually just on paper. So, as in
peer-reviewed published papers, the ideas should be
"new, correct, and significant", and, for innovation
in business, powerful and valuable for solving the
problem. Moreover, we should be able to check these
criteria mostly just on paper.
Then we measure the innovation by the ROI of the
solution it provides.
Is that the only way to make money? No.
But this approach to innovation has one heck of a
good track record for delivering terrific solutions
for challenging problems via the US DoD since the
start of WWII, and there the batting average is much
higher than for information technology venture
capital.
Moreover, and definitely should not be lost, and for
70 years has been understood with great clarity by
both the US DoD and Congress, the real foundations
of such innovation are pure and applied research as
in our top two dozen or so US research universities
(where about 60% of the annual budget comes from NSF
and NIH for US national security and health care)
with more in Federally Funded Research and
Development Centers (the FFRDCs) and then more at
Raytheon, United Technologies, GE, Lockheed-Martin,
Boeing, General Dynamics, Hughes Electronics, etc.
In total, Congress authorizes big bucks for all that
work, and Congress 'gets it'. However, Silicon
Valley wants to laugh at research and then turn and
run away afraid of it.
US information technology (IT) venture capital has
had a 'business model': Wait for 'traction' to be
significant and growing rapidly but, still, for some
reason or other, the company still not very
profitable, and hope that then the founders will
need money for the 'big build out', hiring bizdev
and marketing people, setting up the sales force in
the 'channels', etc. for the 'execution', or be so
eager for "cash now" for 'the good life' that they
will sign a bad business deal. Alas, as reported at
AVC.COM recently, the ROI has been lower than an
index fund.
Also there is an incongruity: A small information
technology startup with traction significant and
growing rapidly is in a much better position than
millions of US Main Street entrepreneurs who make
it without an expensive 'build-out' with bizdev,
marketing, channel people, business expertise from
former management consultants, etc.
For venture partners able to evaluate innovation,
i.e., applied research, just on paper, YC is
exceptionally good. Then there's Wegner at Union
Square, Morgan at First Round, Metcalf at Polaris,
Bayless at Sevin-Rosen, and a few more. There are,
what, all together in all of the US, 20?
And then there is the list of venture partners who
prefer to invest in college dropouts.
In college, at universities, at several
laboratories, at GE, IBM, JHU/APL, and more, I have
worked with many people good at doing and evaluating
applied research. Alas in US venture capital, that
list of 20 is about all I can find that is
comparable.
With the ROI south of the index funds, it looks like
there will be some changes that Darwin would
understand.
If you want to make a difference, quit trying to cash out as a 25 year old millionaire.
Get a PhD and do research. That's the real risk in life, that you might work your ass off for little pay, spend 30 years chasing a dream, and fail in the end.
But the people who succeed change the world.
Interestingly, most Nobel Prize winners donate a large percentage of their prize money to charity or research. They weren't interested in early retirement in the first place.
Really? I think you shouldn't come up in here telling people that cashing out at 25 doesn't make a 'real' difference. There are people who prefer life experience, over work and research experience.
There are people who rather invest in other people taking that risk, than taking the risk themselves. Everybody's different.
The millionaires are the ones paying for your research work. So when someone like you spends 30 years chasing their dreams after acquiring a PhD and fail-- they have more-or-less acquired a different way of thinking about things. Right? They gain a different self, a different sense of awareness. They gain a specialization of some niche topic. I get it. Researchers change the world theoretically.
The thing is doing research and influencing others to think differently is the same thing as influencing people with products or services. They all have the same goal, to change the way people think about a topic or way of doing things. It isn't tied down to one route.
Because interestingly, MOST millionaire's become philanthropists. And they are not interested in retiring either.
And like how the top comment said, it's not one big disruption that changes things, it's the succession of little bits of implementations or modrnizations of products, services, and ideals. All in harmony. One branch isn't worth worshiping more than the other branch.
I know you were targeting the people who retire and enjoy life, without investing or donating back but there's a world out there to see and not everybody gets bored with it at the same rate as you do.
Edit: Some people like to manage and become overseers, they get the thrill of life from that, you can't tell them they're doing it wrong, that they should quit and enjoy life. That will bring anarchy and chaos. The same thing with a whole bunch of people sitting in a laboratory. I remember reading a book that went over this topic, about people being programmed to work in the laboratory. There were different levels, and Level B's worked in the lab. The book isn't coming back to me..It was where one level were giving audios while they sleep to acknowledge their inferiority. What a book, if I find out what it was I have to re-read it.
Is this the only way to make a big difference? I would love to see something like a guide to making a difference in the world. What are the major archetypes of such people?
For instance, what of the managers who brought together the teams of PhD's to do the work – are they not just as important as the Nobel winners? And how does one become such a manager?
But if you drop the pretense, how will you continue to convince everyone that SV is the center of the tech universe and that everything worthwhile that happens must originate or migrate to those few square miles on the planet?
I like his analysis, but particularly liked this interesting bit:
'Consider a 2011 survey by a British insurance company in which 11 percent of respondents claimed to have seen an incident but chose not to report it, worried that higher crime statistics for their neighborhood would significantly reduce the value of their properties. In this case, the quality of future data is intricately dependent on how much of the current data is disclosed; unconditional “openness” is the wrong move here—precisely because of feedback loops.'
This is basically David Simon's journalism in a nutshell as formulated by Campbell:
The more any quantitative social indicator is use for
social decision-making, the more subject it will be to
corruption pressures and the more apt it will be to
distort and corrupt the social processes it is intended
to monitor.
Michelle Rhee's tenure is a cautionary tale that people insist to not learn anything from.
Yes, only here the "corruption pressure" is applied by the "free market", not by a bureaucracy. This vital detail pulls the rug from under those who claim that less government would decrease these distortions.
I submitted his book review a while ago, if people want to discuss it at length. I imagine it'll ruffle the feathers of no small amount of people on HN: http://news.ycombinator.com/item?id=5346781. :)
Eddie Huang describes TED as a 'Scientology summer camp'. He's not quite as eloquent as Morozov but entertaining nonetheless with interesting details about what TED fellows get up to.
BTW the New Republic has a beautifully clean reading UI - the site has the same feel of Instapaper or ReadItLater - seems like they decided 'if you can't beat 'em, join 'em.'
Clayton Christensen was profiled in Wired recently and came to a similar conclusion:
"We’ve encouraged managers to measure profitability based on a return on net assets, or return on capital employed. That encourages companies to liberate their capital, so they invest in efficiency innovations, which means they can make more money with fewer resources. But what the economy ultimately needs are empowering innovations—like the Model T, the transistor radio. Empowering innovations require long-term investments, which tie up capital for years and years. So companies are using capital to create more capital, and consequently the world is awash in capital but the innovations we need to advance aren’t there."
There is a clear hostility toward digital products. If a physical product that shows up a screen in the air (holoscreen) to Skype another person, all people would suddenly scream: OH, that's innovation. Yet Skyping through an LCD screen gives the same result.
If BMW or Tesla design a futuristic looking key for a car, we call that innovation and cool. But a nice designed interface, is just another interface.
If some scientists burn a whole lot of money* to analyze DNA data, we call that innovation and science. However, when app ABC tries to connect people and do some social work, we call that another social app and a Facebook clone.
Please stop the hostility. Creating a new API library or writing code that does something new is indeed "Innovation". It's certainly not getting to the moon, but it's still a very little bit of innovation.
The new Internet enabled me, from a small third-world country to create a sizable income (at least comparing to my country per capita), learn a "LOT" and build a viable business.
Internet put aside, I have no chance of making even $1000/year in my country. That, and the fact that I started from exactly nothing (family computer) is for me this decade "miracle". The innovation in payments, digital products, advertising... have improved access to wealth and mobility.
I guess, the problem of the majority of people is access to wealth. There is too much wealth around (look at the majority of jobs, they are about moving wealth and not creating it e.g. doctors, lawyers, gov., traders, brokers, middle men...).
Access to wealth will improve the life of the average person more than accessing the moon. The Internet offers an unmatched opportunity to access wealth.
Please innovate in HTML, JavaScript and Servers.
* I'm not nitpicking on data scientists or any body, just to give an example.
If you are considering a new startup idea and you think "that sounds easy, I can build it in a month", then you are most likely entering a crowded market where your startup will not add much marginal value to the world. This is most consumer startups.
If instead, your idea makes you say "That sounds hard. I'm going to have to overcome technical challenges/ accumulate domain expertise/ leap regulatory hurdles" then you are most likely breaking new ground, adding significant value to society, and creating something hard to copy.
As much as I am happy for the success of the snapchats of the world (and the army of snapchat clones), I don't think the world would miss them very much if they were gone.
Edit: Seriously, I really want to know what people think about the question at the end. I worked with someone who works at cd2, and on a selfish note I'm just curious.
I'm a "pasty scientist" paid by DARPA, in biotech. I work for someone who previously founded a brain-machine-interface company that had a small IPO (cyberkinetics). I would love nothing more than to see things I work on get turned into viable products. This seems to require two things: a) public investment in vague-but-cool-sounding-what-if projects, and b) easy ways to translate them into usable products.
For (a), someone should be funding things that might be valuable "platforms" for society: the human genome project, ARPANet, basic mathematics research (Fourier analysis, instrumental in many, many commercial products, was one such basic mathematical result for a long time). The value of these platforms may take a long time to pan out (if ever), so it makes sense to fund them as a society. Perhaps government per se isn't required - it could be done by some collection of nonprofits - but the funding won't come from many private firms. Further, if we want these platforms to be of use to many companies, perhaps they shouldn't come from private firms.
I think about it like I think about LAPACK. LAPACK is used by almost every scientific computing library for matrix multiplication. Now if Intel and AMD want to come along and make proprietary versions of it (e.g. Intel's Math Kernel Library), or if Matlab or Mathematica want to wrap them into an easy-to-use product, or someone needs it for a robot controller for a factory, that's awesome! The point is that there is some value in public research the market can draw on to make nice things (the ROI on LAPACK must be HUGE for whatever nominal cost + non-nominal man-hours it takes).
(b) is difficult, but there have been some efforts. One such is INVO[0], an effort at Northwestern that helps researchers develop their ideas without losing too much control in the process. They just founded cd2[1], the center for device development, that helps clinicians and engineers navigate the bureaucratic and regulatory hoops, and ultimately pitch. The key is that like YC, they have a strong network of people who understand this process, who to talk to, what you're really signing when you sign a piece of paper, etc. They pay you (for a year!) to work on your project.
My question (updated for clarity): What do potential founders of not-widget-startups want to be able to pursue the kind of innovation mentioned in the article? In particular, what would help translate academic proof-of-concept ideas into viable, fundable, products?
It would seem that asking VC's to fund cooler projects at the expense of profits is not the right way to go. Maybe a better strategy is to ease the link between cutting-edge research and consumer-facing products. What would help with that?
There are no more tech startups. There are startups that use technology, but writing CRUD apps to manage house cleaners and town cars isn't developing new technology.
That's no more true now than it was 15 years ago. There're startups doing amazing things with depth cameras, motion capture, computer vision, robotics, large-scale databases, multimedia processing, collaborative filtering, and so on. They are, of course, a tiny minority of all startups, but that's because it will always be easier to write CRUD apps to manage house cleaners and town cars than to develop genuinely new technology.
I remember a quote from Larry or Sergey back in the early days of Google (before the dot-com implosion) that was to the effect of "Do any of those other tech startups have any actual technology?" It's always been like this - wannabes hoping to get rich quickly outnumber the genuine innovators. It doesn't mean the latter group doesn't exist, only that you have to work to find them.
Your question reminds me of the article yesterday that suggested an "x prize for everything" [0]. I have heard many people say that the really hard part is the goal setting and determining which problems to solve, which you include in your question. Maybe the problem is that there is not a strong enough connection between the academic proof-of-concept ideas and the people who have the power to set the goals. In a perfect world, these proof-of-concept ideas would be the inspiration for an x-prize. The competition itself acts as a map forward which would generate a bunch of competition to tackle something, with a new industry established as the result. It seems the connection you are looking for isn't necessarily between the proof-of-concept ideas and the products, but rather the proof-of-concept ideas and the market-building-of-the-commons which benefits all participants. Once that exists, VC's can do their jobs to exploit the market.
I'll be honest: I'm not clear on what the question at the end is. Are you saying: it's not easy to turn academic research concepts into commercial products? Well this is precisely what Silicon Valley has learned to do better than anywhere else.
If you're asking how we can make the process better, doesn't it boil down to having investors who see the value of these ideas? You need to frame the business case to them in their lingo.
If they don't want to invest in you because they think the can make more money on BS web investments, then we're all losing. But ultimately there will be a shakeout in web investments...and then there will be a shift back.
Foundations are a possible answer. In the last year we've seen foundations give grants to a number of tech groups and/or platforms. iPython via Sloan and Code for America via Knight for example.
There are many areas where venture capital has not and is not well suited for various reasons, many of which you list. I think people's focus on consumer funding won't work because crowdfunding is even more driven by the allure of consumer facing products than VCs are. Foundations seem to me to be a good place for this.
One issue I have not been able to resolve in thinking about the idea of society-funded research has to do with what I'll refer to as "bad" global actors.
It is no secret that China shines for its lack of respect for intellectual property. The same is true for their willingness to steal just about anything from anyone and make it their own.
If we, as an open society, fund programs costing billions of dollars we would, in no uncertain terms, be "giving it away" to the Chinese and other bad world players.
It's the concept of unfairness when on person in a team does absolutely nothing yet benefits greatly from the work of the rest of the team members.
I know I am over-generalizing. Yet, I have to tell you, as an American citizen I despise the idea of investing my tax dollars in something and have it simply given away to other societies who have done nothing to contribute to the cause.
Would I like to invest tax dollars to find the cure for cancer and make it globally available? Absolutely.
Would I like to see the labs and companies we built as part of that process decimated and driven out of business because the Chinese take the work product we funded and drive costs so far down that our companies crumble under the pressure of our pricing models? Nope. Not interested.
Yes, society as a whole would benefit from cheap mass manufacturing of such a drug. And, while that happens, our industry will continue to be shredded by bad players such as China.
I don't have all the answers. I certainly don't know what the solution to this one might be.
I think the worry of giving away research is natural, but misguided. Consider these scenarios:
(1) If Earth's population was 1 billion, would it be worthwhile for society to fund research?
(2) If Earth's population was 7 billion, but 6 billion are freeloaders, would it still be worthwhile for the 1 billion to fund research?
The answer to number (1) is an obvious yes. Even with only 1 billion people, humanity gains when it devotes resources to research.
How about the answer to (2)? I think if you answer yes to (1) you have to answer yes to (2). The costs are the same, but the benefits are even greater. Even though freeloading isn't fair, it doesn't mean we shouldn't fund research.
What examples do you have of the Chinese (or anybody else for that matter) doing this with the innovative high-technology initiatives this article is referring to.
China's space program is fairly recent, they didn't steal from Apollo or the Shuttle program immediately and copy it. They are purchasing energy production technology from other countries (US and France if memory serves correctly).
If you want to really look at this as a global rather than a local issue, we could consider the Chinese and all other countries as partners. Illinois benefits from California, but you don't complain about state to state transfer of knowledge (or do you? I'm Canadian, I don't think we do).
In many cases American companies have labs in China, and according to a contact at Dolby, it isn't because China is cheaper any more, it's because they are good. Very good, and everybody benefits from the collaboration.
If you want to look at innovation only for the purpose of lining somebodies pockets, than their is no difference between making a hugely innovative product vs. something people just pay for.
But if you want to change the world and have an impact, might as well all be in this together. And I suspect the Chinese spending on education and research is near what the US spends in that regard.
Your comment and the dilemma you present are very interesting.
I think part of the problem is that we have reduced everything to a matter of economics and profit. It has become the measure of value for everything, so much so that intelligent, compassionate people can discuss the value of human life in terms of dollars and jobs.
So, I think the problem you suggest is the product of a false choice.
That is, IMO if we had a cure for cancer, it is not that we should find it unfair that the "wrong" people might profit. It is that we should expect that no one would profit. Some things should be done for the good of all humanity. Why need there be financial incentive in ending suffering? And, why should there be financial reward in doing so?
This is the core problem of a capitalism run amok. Governments the world over should be engaged in benevolent research as an expression of the will of the people they represent, and for the betterment of same. It is, in my view, a grievous mistake that we must always seek a way to commercialize our activity in order to justify it.
I wouldn't have a major issue with a company profitting from the cure for cancer. On the other hand, I hate to seethe senior management of said company reaping handsome profits while people without the means to pay for it die without it. And I have major issue with sick people's inability to pay when the initial research was either done by or funded by taxpayer dollars. And then apply that same principle to all the middlemen who handle the drug and add little to no value to it, but still profit handsomely. . .but that's for another thread.
I think it's a slippery slope though: exactly who should profit and how much profit is too much? Posing those kinds of questions raises the ire of the "free market/profit motive cures everything" crowd that drives our current brand of capitalism.
Once we give something over to the machine, we introduce the very problem. IMO, we need to completely rethink what should be left to the markets vs. what we produce as a society for the good of humanity.
That's a tough one because it is beyond clear that --and I am going to use that word-- innovation does not originate in government, master plans or even companies with huge funding.
Make a list of all the major products in the last fifty years, the companies they came from and how they got started to prove the point.
I can't think of a single major scientific discovery in any scientific field over the last, say, 500 years, that was originated or planned by any government or government agency in any country or culture.
Typical examples given are such things as power plants, roads, bridges, water and sewage distribution systems and such large infrastructure projects. These, I argue, have only been created at such scales mostly out of two positions: war-time strategic needs (autobahn and US highway system) and the "natural" evolution of human settlements (as they got larger the infrastructure was a must). In other words, I have never seen any proof that any government engaged in some kind of a long-range master plan to build and deploy infrastructure in support of specific future goals.
Its not always the direct innovation that government creates, is the seeding of an environment that allows the innovation or prevents the rise of extreme elements: Agricultural and mining state colleges in the US, UC system, infrastructure projects like the Hoover Dam, bringing electricity to rural areas during the Great Depression, public work projects that allowed artists to keep on producing works of art, the Space program. All these infrastructure projects and applied research projects helped lay the groundwork for innovation. Sowing seeds and letting the next generation harvest them. The supposed pay forward of Silicon Valley.
The Internet was 100% government funded at it's start. Private companies where involved in it's creation but only as what amounted to paid contractors. And yes they had a clear goal of increasing infrastructure to aid collaboration. Or if you really hate the idea that any private funding was involved at any point, just look at GPS.
More to the point, the vast majority of recent particle Physic's, Astronomy, and basic Medical findings where government funded.
PS: There are literally thousands of counter examples but I think I destroyed your point as it stands.
You are choosing to assign the entire value of the internet to government. This is folklore that is nothing less than nonsensical. If your goal is to "destroy" my argument you have to do far better than that.
The ARPANET was going to go absolutely nowhere without private enterprise rescuing it from obscurity and launching it into every-day life like a rocket.
Government did not PLAN the internet as we know it today. They didn't even have a clue.
Back before the internet got launched to the masses the masses were using services such as Compuserve, AOL and a number of others. The "internet" was going to evolve out of one of these efforts one way or another. It just so happened that industry found something that could be leveraged to make this happen and they did. In fact, I believe Compuserve was one of the first to offer it to it's millions (yes, millions) of customers.
It's almost like the idea of giving some guy credit for the invention of the wheel. What, nobody else was going to invent the wheel if he did not? Nonsense.
For every government project that resulted in a successful transfer to private industry there's probably ten or more that are still sucking money out of all of us and are useless.
Government-funded initiatives are very important, but, please, don't give them god-like attributes as if claiming that without government programs humankind would still be rubbing two sticks together to make fire.
Both IP and TCP where invented by the us government. Just fucking looking at the protocalls makes it clear they where designed for a large global network. I could continue but you sir are an idiot, who seems incapable of accepting when there ideas are clearly wrong.
Yes, GPS is one of my favorite examples, after the internet. Maybe private enterprise would have thought it first. . .maybe someone in the private sector was thinking about it at the same as the Department of Defense, but the fact is the government got it out there first.
GPS was a military technology. The program was not developed with the forward vision of what it is being used for today.
That is the case for a lot of military technology. So, I guess, if we derive such great benefits from war and killing people by the millions we should continue to fund these great government programs. Right?
At one time we believed in tariffs. If they stole it and made it, at least they would have to pay to bring it back to us. We wouldn't tariff countries/products that respected our rules.
David Wheeler has an interesting list of what he considers to be important software innovations. [1] Most of the innovations listed occurred in the 60s, 70s, 80s and 90s.
An interesting quote from an article[2] about an interview with Linus Torvalds in LWN.net:
"A member of the audience asked Linus to describe his single most memorable moment from the last 20 years. Linus responded that he didn't really have one; the kernel is the result of lots of small ideas contributed by lots of people over a long time. There has been no big "ah ha!" moment. He went on to describe a pet peeve of his with regard to the technology industry: there is a great deal of talk about "innovation" and "vision." People want to hear about the one big idea that changes the world, but that's not how the world works. It's not about visionary ideas; it's about lots of good ideas which do not seem world-changing at the time, but which turn out to be great after lots of sweat and work have been applied."
Along those lines, the BBC documentary "The Story of Science" shows over its episodes that this is true. It's really a fantastically intellectual series and well worth acquiring and watching.
"But these aren't free market aberrations brought on by regulations. They're the invisible hand of capitalism itself: reaching out for quick gains while avoiding as much downside risk as possible."
Oh boy. We've got political commentary trying to pose as analysis.
Okay, let's get this straight: capitalism drives efficiencies in markets. Efficiencies drive innovation. If you look at this only in terms of money, you're missing the point.
So you have this huge bunch of people over many decades making things just a little better than before. Another person comes along and, now that many different pieces are much more efficient than before, connects them in new and innovative ways.
You don't have a Wright Brothers without machine tools, bicycle parts, and so on -- each of which was a tiny bit better than the thing before it. You don't have a Facebook without an internet, cheap bandwidth, and ubiquitous computing. Facebook wasn't "looking for quick gains while avoiding as much downside..", it was a more efficient way to keep up to date on important social information.
Yeah, every now and then somebody does this one thing that we all think of as grand. But nine times out of ten? It's only possible because the rest of the world of mankind has evolved. This is why we see so many people discover the same thing at the same time. They're not necessarily copying, it's just that we're ready for that discovery to take place.
This is also what is wrong with VCs (and some government organizations) trying to select what sorts of technologies need more attention: it doesn't work. It's backwards. Sure, you can have a goal that you then reward enough that somebody will reach it. But you can't decide on a solution and then keep dumping money on your solution until it works. "Winning WWII" was a goal the allies had that they were prepared to spend billions on. Because of 1) their resource pool in both money and talent, 2) the desire to have a goal reached instead of a technology deployed, it worked. If they had decided to "build a ray gun" no matter how much money they dropped, it would never be enough.
I'm not crazy about the day-to-day work of innovation, the guys making the better widgets, the folks making gears turn with less friction, the folks making farts come out of your iPhone. These aren't very sexy and nobody likes writing news pieces about them. But taken altogether, it's a million of these things that lead to the next cognitive jump in mankind.
If you want to see big changes, create big rewards for solutions without constraint to how they are accpomplished. So let's see $50 Billion to anybody who can take us to a repeatable $10/kilo to low earth orbit. Or $10 Billion for the first 3D printer able to print an electric car.
If you keep thinking of the problem backwards, in terms of capitalism vs. research, not only will you not be able to solve it, you'll actively and continually destroy resources that could be used in solving it.
"Oh boy. We've got political commentary trying to pose as analysis. Okay, let's get this straight: capitalism drives efficiencies in markets. Efficiencies drive innovation. If you look at this only in terms of money, you're missing the point."
Did you read anything else before you went into Political Strike Mode, or did you just skim it? From the previous section:
"most of Silicon Valley doesn't concern itself with aiming 'almost ridiculously high.' It concerns itself primarily with getting people to click on ads or buy slightly better gadgets than the ones they got last year....that's fine, that's capitalism - and these incremental improvements lead to slow productivity gains that at least quicken the pulse of economists. But maybe let's drop the pretense that we're curing cancer unless, you know, we're curing cancer."
The commentator has no problem with efficiency gains or capitalism. He's just saying that it's hypocritical to spend your life developing sheep-throwing software, while also complaining about how nobody aims for the stars anymore.
"If you want to see big changes, create big rewards for solutions without constraint to how they are accpomplished."
Right, like what the NIH and NSF do? Handing out money for research with no immediate commercial intent? Last I checked, that money (along with military spending) built the Valley. Government spending led to innovation.
You're looking for a political fight where none exists. Other than mentioning that Thiel tends to place the blame on the government (which he does), most of the essay is about the need for funding long-term research, not politics.
Other than mentioning that Thiel tends to place the blame on the government (which he does),
Not for the lack of innovation. In fact, he specifically decries the lack of innovation by the government as well as the private sector. Thiel seems to blame it on a cultural shift - he believes the US has moved from an optimistic-deterministic viewpoint to an optimistic-stochastic viewpoint.
Go read his stanford lectures to see this expressed fairly well.
Thiel [...] believes the US has moved from an optimistic-deterministic viewpoint to an optimistic-stochastic viewpoint.
The optimistic-deterministic viewpoint is the opposite of the "lean startup" movement and the MVP approach, which is an almost completely pure expression of the optimistic-stochastic viewpoint, i.e.:
We're *optimistic* that innovation is possible,
but we also believe we can't know in advance, so
we'll use (controlled) chance to find out what
works (A/B testing, random trials, etc.).
IMO, the culture shift to an optimistic-stochastic viewpoint is also why people hate Apple -- not because Apple is unsuccessful, but precisely because Apple is successful – wildly successful – but Apple is using the wrong paradigm to achieve that success. In Thiel's terminology, Apple works from an optimistic-deterministic viewpoint, and to the culture today, that's just wrong somehow. Hence, the hate.
If you think about it, "minimum viable product" is practically the anti-thesis of innovation: let's create the least innovative thing we possibly can in the hopes that it might, someday, be successful after a lot of A/B testing to hack the buying and growth process and find a niche market. MVP is not about shooting for the stars, but it is about microscopic, incremental, improvement -- and a dramatic reduction in risk. That's the optimistic-stochastic viewpoint in action.
The problem with "deterministic optimism" (other than the obvious silliness of attributing one mindset to the entire US), is that it doesn't change the nature of reality. You can invest more in certain areas and yield a return on that investment, but you can't reliably call your shots. Life doesn't work that way.
Nearly all of the fruits of government research have been as a result of "stochastic" investment (i.e. nearly everything done by the NIH and NSF and DARPA), or second-order effects from "deterministic" investment (e.g. the space program and velcro, or radar and military spending). Other than wars and (maybe, debatably) the space program, we have a pretty spotty record of saying "we're going to do $X amazing technological feat in $Y years", and then making that happen.
Where we have successfully called our shots (and I'm thinking mainly of the space program here), it's only happened after decades of stochastic progress got us to the point where a politician could reasonably say "let's go to the moon" without sounding like a lunatic, and have some realistic hope that it would happen during a four-year term. Politics, as a societal force, is not particularly forward-thinking.
If you're looking for something governmental to blame for lack of innovation, you don't need to assign the entire political system a mindset, or compose elaborate pseudo-philosophical lectures: you need only look at the number of science PhDs who can't work in their fields, or the declining number of smart kids who go into research. When you gut government (and industrial) research, you don't get any returns.
You can try academia, but things are pretty bleak right now. There's so much competition chasing so little money that it's hard to see a path to a career for all but the luckiest few PhD graduates. And forget it if you don't have a PhD from a top school.
People put so much mental energy into pondering the lack of innovation, but we've been systematically under-funding science for more than a decade. There's not much of a puzzle here.
There's so much competition chasing so little money that it's hard to see a path to a career for all but the luckiest few PhD graduates. And forget it if you don't have a PhD from a top school.
The problem here is that academic research (at least in math+physics, what I'm familiar with) doesn't have a place for second best. Most academic research produced by people below the top tier is worthless and will never amount to anything.
It's a very different situation from technology, where yet another CRUD app can actually bring huge value to the business.
This notion that people can't pick winners is, in my opinion quite inaccurate. The need for light weight electronics for aerospace systems, and the view that semiconductors were 'the answer' to this problem led to a massive amount of government funding (50% of all R&D funding) and support (the government was far and away the largest customer for semiconductor devices) almost directly led to the creation of the Silicon Valley we are all so proud of [1].
Second, the notion that prizes can solve this problem is simply unreasonable. If a major goal (ie a cure for cancer) takes 20 years to develop, no organization can pursue the goal without intermediate funding. In order to provide intermediate funding with some semblance of accountability, you essentially create the existing R&D structure that exists in America today.
The other advantage to government funding is that with proper open access protocols, innovative ideas aren't trapped in the organizations that created them. There's no doubt that companies like SpaceX could have achieved what they have without the backbone of research done by NASA and published in NASA's amazing technical report series.
I think everyone on this thread would agree that people can pick winners, but some would argue that the government has been inefficient about picking those winners in the past. I personally think that there is a lack of scientifically literate people in our government, outside of Steven Chu, compared to the VC community who can pick winners.
While it's hard to make a data driven argument in this field, I think the US government has been incredibly successful in picking winning new technological ideas, judged by my notion that the vast majority of the scientific and technical advances in the last 60 years have occurred here in the United States. The US government has long had a tradition of picking winners in science and technology, and I don't think the fact that we are also the leader in science and technology is simply coincidental to that.
Looking for counterexamples, ie technical advances that have occurred outside of the US due to lack of government support, the only one that comes to mind is the failures in green technology, but I think that small failures there are minor compared to the other successes.
I also think looking for scientific literacy in the executive positions of government is less relevant in the highly bureaucratic world of government funded research, as there executives have less control on individual funding than they would in the private sector. As long as the the executives respect the technical expertise of their bureaucrats, (and the workforce is knowledgeable), then individual domain knowledge is less critical than it would be in the private sector.
Does the VC community actually have a better record than the government does in picking winners? A lot of VC funds do quite poorly.
Of course, you could say that good VC funds do, and choose what you count as good VC funds in hindsight, based on returns. But then you could also say that good government programs and agencies have good records, if they're also chosen in hindsight.
"If you want to see big changes, create big rewards for solutions without constraint to how they are accpomplished. So let's see $50 Billion to anybody who can take us to a repeatable $10/kilo to low earth orbit. Or $10 Billion for the first 3D printer able to print an electric car."
Arguably that's what government grants do or should do. Taking 50 billion dollars in tax money and stoking the fire in an area we are interested in WITHOUT THE EXPECTATION OF A MONETARY RETURN is the kind of thing the government can and does do. Of course, some of that 50 billion gets eaten by graft, and that's where the problem a lot of people have with government programs. Although private companies don't seem to have any better levels of control (usually much worse control) over corruption, a lot of people seem to think only 100% success demonstrates "working" government.
>Of course, some of that 50 billion gets eaten by graft, and that's where the problem a lot of people have with government programs.
That's why prizes are a good way to go. Nothing gets paid out if you don't reach your goal.
>Although private companies don't seem to have any better levels of control (usually much worse control) over corruption, a lot of people seem to think only 100% success demonstrates "working" government.
The difference is private companies are spending money provided as a result of an agreement freely entered into by all parties, while the government is spending money taken from people by force of law. The government should be held to a much higher standard.
Also: do you think that perhaps it is wasteful for society's businesses to spend hundreds of billions on marketing and advertising differentiating products like soda, fast food and alcohol? Is that a good use of resources?
They are not "society's businesses", so we don't have a say in how they spend their money. Not everything in this world has to be for some greater noble good. Sometimes we just want a burger and a beer.
I think the critique would be more pointed if he could highlight a backlog of great ideas that Silicon Valley refused to fund. The money is available if you have a big idea. There is plenty going on in Silicon Valley outside photo sharing from biotech to microfinance to clean energy.
Well, you could start (for example) with these lists of unsolved problems in physics[1] and math[2]. I'm sure similar lists exist for every science.
Of course, private industry is interested in funding research in to next to none of them (at least not nearly to the extent that it is in problems that have immediate profitable applications).
For what it's worth, in my experience the people talking about big innovation, actually ARE extremely supportive of genuine, plausible efforts at producing planetary scale improvements. In our case, we're trying to solve the economical energy storage problem (lightsail.com)
These folks put their money where their mouth is, and helped out greatly when we needed advice or funding or connections.
Particular people who helped us out and are known to publicly call for and support big innovation include:
Vinod Khosla, Peter Thiel, Luke Nosek, Ken Howery, Bruce Gibney, Patrick and John Collison, Michael Vassar, Sam Altman, Elon Musk, Eric Schmidt, Larry Page, Sergey Brin, Matthew Nordan, Nathan Myhrvold, Bill Gates
---
By contrast, most of the other VC firms, and all of the banks, were much less receptive and we did not get anywhere with them.
So I think people are at least trying to act consistent with their philosophy. Generally, these folks will try to support great groups doing potentially great things, if there is good chemistry. They can't do it all, of course. There are not that many of them. But they try!
I think more of the blame should be on entrepreneurs and scientists who can and want to work in these areas but choose not to, and instead go into the hot software field of choice, or worse, undifferentiated finance. They should be encouraged to make some attempt at making the difference in the world that they want to see. It is not someone else's duty.
If you can do something important, and you have the resources to make a good attempt, you should try, because you may be in a very unique position to do so, and it's incredibly thin on the ground in many important areas.
There are incredibly few companies genuinely trying to make energy storage economical. There's only one, that I can tell, that's trying to make reusable orbit class rockets. There are very few trying to redefine personal computing. There are very few going after cures for cancer, broadly. There are very few effectively trying to make solar economical. There are very few well managed plug-in auto companies. There are very few trying to provide clean, low cost, distributed water. The list goes on.
People working on these major problems keep bumping into each other socially. It does not take long. The population of such entrepreneurs and innovators feels like that of a small high school. This scares me, because there are many, many problems to solve, and many reasons not inherent to the problem or solution that any one company or effort could fail.
There should be more efforts, more ideas, more entrepreneurs, more competitors. That would make me much happier, and feel much safer. At the moment, it feels like if the wrong few people are depressed, sick, or distracted, major world problems are just not getting solved, and the world is set back by as many days.
Ok, so here's a fun question: where do I find a list of the Big Problems? Because when I look at the world, it seems to me as if most of the really Big Problems are not technological but social. In the end, the conversion to solar energy won't be a single man's heroic effort, it'll be the combined efforts of an entire society that finally decided to go solar.
On the other hand, technological approaches to social problems seem like an excellent idea to me.
Really? What do you wish you could do that you can't? Let's make a list of things:
* I wish my body didn't start to break down as I get older.
* Related to that there are a whole host of diseases and disorders that I'll probably get one of and die from one day.
* I wish I didn't have to spend so much money on energy (not just directly on my monthly bill, but as part of the cost of almost everything I buy).
* I wish my internet connection was 100x faster.
* I wish I could travel to California from NY without having it sit on a cramped airplane for 5-6 hours.
* I wish I had a thinking interface to computers instead of having to take my damn phone out of my pocket and peck at it to get it to work.
* I wish my memory could be augmented in some way. I'm forgetting things all the time and that's really annoying.
* I wish that learning new stuff wasn't so hard. Can someone build on of those machines they have in the matrix so I can just download up some knowledge. I want to know Kung Fu!
* I worry about global warming. If everyone was as rich as Americans and lived like we do it seems like we'd have some pretty big problems. Can we do something about that?
* I hate that when I order something from Amazon I have to wait so long for it to show up. Why can't a machine in my apartment just zap it into being instantly? They've got that in Star Trek and it looks pretty awesome.
* Speaking of Star Trek, I'm bored of living on Earth. I want to go to the moon, or mars, or another solar system! How could we possibly do that?
OK. That's just five minutes of random thinking. I'm sure that I (or you!) could come up with many many other Big Problems.
Ah, there's the thing. I've spent too long learning how to deal with Real Life.
Actually, looking at it, many of these are social problems, as I had hypothesized.
* Technical problem
* Technical
* Partially technical, partially an issue of almost deliberately building energy-intensive civilizations.
* High-megabits and gigabit connections are on their way, but come with the social problems of installing new infrastructure.
* Bullet trains, supersonic flight, and that sort of thing, but again, infrastructure and societal preferences.
* On its way right now.
* Memrise
* In the research stages right now.
* Again: social problems of Americans deliberately building energy-inefficient civilization (like suburbs, for example).
* Ok, there's an interesting notion: can we make shipping and delivery better between vastly far nodes of a graph rather than using the center/periphery model currently employed by the shipping industry? The whole reason for center/periphery is that the fixed costs of each shipping vehicle are significant, making it far cheaper to distribute them through centralized shipping and mass distribution to the periphery areas. I've heard someone wants to revive the notion of "shipping tubes" through the ground, which would function a lot like packet-switched containerized shipping, but that's another infrastructure issue and may not be the optimal solution.
* Social problems of building a carbon-nanotube-based space elevator, torus-shaped rotating space colonies, and generation ships. Well, that or teleportation, but the latter is far less likely.
All of the things you call "social problems" can be solved by disruptive technologies.
What if robots could install the fiber automatically instead of with construction crews and do it via overhead instead of underground cables? Social problem gone.
What if they could build the entire bullet train track cross country (Almost all of that multibillion dollar California train is labor)? Social problem gone.
Or how about ultra low cost solar, geothermal, and wind power, again with robots to set them up? You think the oil/coal lobby can politically compete against all of the industries they fuel? Social problem gone.
How about cheaper automated air transport that's not developed by Boeing or Airbus (monstrosities who, in my opinion, only innovate because at those scales its impossible not to)? Social problem solved.
Only on space travel can I agree with you, and just barely. Have a search through Google Scholar some time. Search for gas core (late 60's, early 70's), pulse (70s and 80s), dusty plasma (90s), and gasdynamic (00s) nuclear rockets. The technology is there, we just have to work out the details. However, the social problem we're trying to get over is the lack of FUNDING for radical (read: risky) R&D pathways.
It's of course much more complicated than that but and the end of the day the beauty of technology is that a new invention can cut through all the crap we humans have put up and it can change everyone's life for the better. (look at the internet: even with so many governments censoring it and controlling it we nevertheless are more connected than we have ever been and there is so little anyone can do to stop it)
The social problem wasn't labor at all. Workers are easy to hire if you've got the money and can make money back off the result. Hell, the economy needs more and better-paying jobs anyway, right?
The social problem is that putting in infrastructure requires making deals with property-owners and municipalities. I'm getting this from people who've worked for ISPs and other such enterprises: the biggest problem with new infrastructure businesses is getting cities and towns to agree to let you construct overhead poles (which "ruin the view") or tear up the ground under their streets (which closes whole blocks of road for a while).
In many cases, the money can be made back, the labor is workable, the invention is workable, but the right-of-way on private and public property is uneconomical to obtain.
Yes, but when I say "social problem", I mean the kind where you have to convince people with whom you're not actually doing business, and who therefore have a larger stake in their personal whims than in getting anything out of your project.
For example, with the "package tubes" idea, you have to convince either reams of individual property owners or whole municipalities and states to allow you access to the space under the roads to build your infrastructure.
A business is the solution-method with the most minimal social component possible, and it's still hugely a social solution. Any other solution that will ever exist is going to require a much larger social solution. This is part and parcel of any innovation.
If you're going to disrupt society, it will be relevant to society when you do so. You don't get to be antisocial about this unless you're a supervillain.
Ya, you're looking for something that never existis. This stuff is hard man. To do things that are hard you often have to get down in the muck and deal with shit you don't feel like dealing with. Welcome to life.
I'm sure that DaniFong has to do that all the time for her energy project.
But hey, write everything off as a social problem if that's the excuse you're looking for to let yourself off the hook. Everyone's got to come up with something.
Well thanks for being a jerk about it, but it's not like I'm doing nothing with my life. I'm just so far choosing lines of work that keep me out of infrastructure negotiations with municipalities, and I'm only 23. We'll see.
Generating power through nuclear fusion is a technological solution to a social problem. Improving desalination might be another. Arcologies might be another. Fundamental improvements in human health would be a possibility.
If we could make exercise easy/fun/cheap enough to not require lots of executive function from participants, the economic and social impact would be stratospheric. That's a hard problem that probably can't be solve incrementally because the differential between regular exercisers and the total adult population is about 5x.
The good news is it's just a short matter of time until far more entrepreneurs begin chasing the larger problems you describe. Once these more ambitious ideas have one or two XX billion dollar wins, the leaders of those companies will replace the Zuck and Dorsey as aspirational figures and both funding and talent will spill in. Musk is doing this as we speak, and there is room for another. If you look at the timescale this is all happening, it shouldn't be so depressing. It just feels slow because you're on the inside.
Lets make it illegal to start a photo/location/$%^ sharing startup. That will clear the space upto 80%. I am just kidding, please don't down vote me if you are running such startup.
> Turning terabytes of genomic knowledge into medical benefit is a lot harder than discovering and mass producing antibiotics
Incidentally, if you'd like to actually turn terabytes of genomic data into actionable medical information, Counsyl is hiring software developers https://jobs.counsyl.com
Just like Levchin, we can find this article inspiring, but neither has hard numbers to back up their claim. Sure, we see a trend that there are a lot of innovations in the ways we communicate, share, and connect, but does that necessarily mean we're lacking "deep" technological innovation?
Personally I think web & mobile startups are getting easier to create so more people are becoming entrepreneurs to take advantage of that; the pie is getting bigger. I believe there are still plenty of "deep" tech innovators out there along with investors who believe in them.
Perhaps these "deep" tech innovators don't get much media coverage because they don't need it, therefore we don't usually hear about them.
I agree with the article.True innovation is hard to find.Look at the startups promoted by incubators.Most of them are some sort of apps.We definitely need pure innovation, something so different, that will change all our lives.
And you can see here the difference between an idea-man and an innovator.Because in my opinion an idea-man can have good ideas and make some money out of them but an innovator will have brilliant ideas, passion to build something extraordinary, smart, without money being the first priority.His goal is to change the world.Now that is someone I would like to work with, not the typical I-have-an-idea-you-build-it-and-I-will-come-later-to-see-whatsup.
This whole discussion boils down to whether the 'big' ideas can be considered to come from software or not. If they only come from hardware, e.g. infrastructure/energy/poverty-changing, then sure they take longer to create, and have higher risk. But we are making progress on them.
On the software side there is of course big innovation, admittedly hard to quantify. The internet has changed the human experience in more profound ways than many physical innovations ever did.
If you want to innovate, do it. Figure it out. Stop blaming investors or the government. Blame yourself and fix yourself so you are doing the kind of innovation you want to, even it is part-time, initially.
Go be a professor at Caltech, MIT, Stanford or Berkeley and work on the hardest problems in science and technology and innovate.
Go work for Peter Thiel's Founders Fund.
Innovate yourself.
Stop trying to "kill it" as you Lean-Startup your way to a billion dollar company.
Maybe the problem is that innovation and invention are mixed up all the time. The CD was a great invention while Apple is an innovative company.
I'm not sure this is correct but I think that innovations remove risks while inventions are always risky or don't bother to think about risks.
Edit: to make myself more clear: I think that innovations are about renewal and inventions are about new.
Some examples (in my eyes): Apple is innovative, IBM is inventive.
I think another relatively recent development - last 20 years or so - hindering innovation is the proliferation of "Wall street analysts" and their quarterly projections which focus comapnies on the very short-term. . .at least publicly-traded companies. They can do well, but if they don't do as well as "the analysts" projected then they are deemed failures who must do some soul-searching, cost-cutting, etc.
Whenever fundamental innovation is successful and a huge platform is created, it is followed by the creation of companies that exploit that platform.
That may take away from more fundamental innovation in the short term but creates more resources to pursue them in the long term. Its nothing to be concerned about.
Completely agree with this. Very very rarely any real innovation happens. Most of the time financial success is viewed as innovation. It may innovation in terms of business. But hard to say they are innovation on a scale that is more universal.
Can people stop taking one data point and using that to extrapolate to a large group? This is pretty bad journalism. Sure, OK story telling but it's not exactly the truth.
Silicon Valley has shifted from hardware to software, this is the real story. New hardware matches our understanding of innovation significantly more than software.
The article points to some problems, and there are
some. But the article also has some problems.
Here is an easier explanation:
First, the entrepreneurs are not bringing the
venture partners enough projects with good,
powerful, valuable innovation.
Second, the venture partners do not want to evaluate
innovation and, instead, want to evaluate
'traction'. They want to see traction significant
and growing rapidly. This concentration on traction
may come mostly from demands of the limited
partners. A failing of the article is that it
didn't explain the crucial role of traction.
Third, as in the article, there are some cliches
about 'innovation': It's very expensive in time and
money, very risky, done for its own sake just for
the fun of seeing amazing things, is from dedication
to change the world and not for ROI, is impossible
to evaluate, is largely separated from business and
reality, etc. To save space here, I omit 1-1
pairings of each of these cliches with parts of the
article. Exercise: Do the pairings. Hint: They
all exist.
So, it is easy for the venture partners to be afraid
of innovation, to fear that it is an interest and
direction in conflict with ROI and not an advantage.
With this fear, traction and innovation are worth at
most just the traction alone and otherwise maybe
significantly less.
Fourth, information technology (IT)
entrepreneurship, from both sides of the table, has
a problem with 'patterns': There aren't useful ones
easy to see just from the past 40 years. Why? The
examples of big successes are, say, Square,
PInterest, InstaGram, Twitter, Facebook, Google,
Yahoo, HotMail, Cisco, Oracle, Seagate, HP, Dell,
..., Microsoft, Intel. So, get such a big win maybe
less than once a year; in 10 years get only a few
big wins; then in the next 10 years technology has
changed so much that the empirical patterns from the
past 10 years don't work very well.
Fifth, the cliches in the article about technology
are too pessimistic. E.g., if innovation in
technology is so risky and unpredictable, then how
come it has done so much in the last 40 years? I
mean, we're talking a 3.0 GHz 8 core processor for
less than $200, main memory for $10/GB, a 3 TB hard
disk for $135, 1 GbE on each motherboard, 100 GbE on
one wavelength on a fiber with dozens of
wavelengths, etc. No, there are some reliable
'patterns' as illustrated by the technology
advances.
The pattern? Pick a pair of a problem and a
solution. The problem should be such that a good or
much better solution will get eager users/customers
(want no doubts about 'product/market fit'). For
the crucial solution, innovate, e.g., do some
research in applied mathematics, applied science, or
engineering. How to do such research? There is
education for that, long heavily funded mostly for
US national security. The education is available at
the top two dozen or so US research universities and
is called a Ph.D.
For more on this 'pattern', look at the progress in
IT of the last 40 years, say, from when Intel got
going, along with what the US DoD has done starting
early in WWII to the present.
Risky? Not really: Mostly can eliminate nearly all
the risk with just good technical work just on
paper. And before that paper is written, one of the
lessons usually learned in a good Ph.D. program is
how to pick a suitable problem where 'suitable'
means can get results that are "new, correct, and
significant" with the meager time and other
resources available to a Ph.D. student. For the
needed innovation just want "new, correct,
significant, powerful, and valuable" for the needed
solution within the time and money available.
Expensive? Not always. DoD and NASA projects tend
to be expensive due to some heavy hardware, but not
all innovation is expensive. E.g., RSA.
But generally the crucial work should be done and on
paper in good form before allocating a lot of
resources.
The solution? IT entrepreneurs need to do better
innovation with nearly all the risk removed by work
just on paper (or in PDF). The venture partners, if
they want to invest, need to be willing to evaluate
work on paper and invest at that 'stage'.
But there is now a threat to the venture partners:
Now the computing is so cheap that by the time a
project has the traction that venture partners want
to see, there is a good chance that the project is
already nicely profitable.
E.g., suppose an entrepreneur does some innovation
to get a powerful, valuable solution to a big
problem and brings up a Web site to deliver the
solution on the Internet.
Then look at the Meeker data at KPCB and average her
CPM figures for mobile and desktop and get $2.125.
Assume the Web site gets users enough to send 2 Web
pages a second with 4 ads per page. Then in one
month the revenue would be
2.125 * 4 * 2 * 3600 * 24 * 30 / 1000 = 44,064
dollars. If each Web page sends for 400,000 bits,
the upload bandwidth needed is commonly available in
US living rooms from a cable TV company.
It is likely that a computer with less than $2000 in
parts is sufficient as a server. And can consider
using cloud servers.
So, we're looking at a project with a $2000 chunk of
hardware, an Internet connection, with phone and TV,
for less than $200 a month, one or a few founders,
and $44,064 a month in revenue.
Now why should such a project, sending 2 Web pages a
second and getting $44,064 a month in revenue. call
a venture partner or return a venture partner's call?
Yes, this scenario has not yet resulted in a lot of
big wins, but the threat to venture capital and the
opportunity to entrepreneurs is just sitting there.
Likely one good example is the romantic matchmaking
Web site in Canada, Plenty of Fish, long just one
guy, two old Dell servers, ads just from Google, and
$10 million a year in revenue.
An established pattern? No. Obvious? Yes.
Note that I am saying that the opportunity is to (1)
get a Ph.D. in applied math, applied physical
science, or engineering from a good research
university, (2) pick a pair of an important problem
and a good or much better solution where the
solution can be generated from software running on
servers and delivered to users/customers over the
Internet, (3) for the solution do some innovation,
that is, some research in applied math, applied
physical science, or engineering, (4) write the
software, plug together the server(5), bring up the
Web site, go live, get publicity, users/customers,
ads, revenue, and earnings, and grow.
For the venture partners, they can (1) stay with
their current ROI, significantly less good than an
index fund, (2) look for more mobile, social, local,
sharing apps for teenage girls to gossip and look
for boyfriends, or (3) get serious about innovation
and encouraging and evaluating it and then funding
its exploitation. No, venture partners should not
invest in research, but they likely will need to get
quite serious once the research is solid on paper
and, in particular, drop their scorn, contempt,
ridicule, and phobia about research.
Funding based just on paper? That's how nearly all
large engineering projects, DoD projects, etc. get
done. Net, for what is crucial about innovation,
paper is fine.
Silicon Valley used to be a place with cheap land where people went because the cost of living was low, and they could tinker with cool ideas whereas, in the expensive East Coast cities, they'd have to work themselves to death just to tread water. California was this place where you could come and do cool stuff and build on land the East Coast elite didn't want.
It's no longer cheap to live there. Tinkering with new ideas on some modest amount of savings and "odd jobs" or consulting is no longer possible. Expensive real estate leads to calcification and risk-aversion and cultural death. It's why urban ecosystems (including VC-istan, which is not a city per se) turn into hellholes shortly after their peak of greatness.
Enter VC, which connects people with the resources (funding) to try out their ideas and, better yet, enough resources that they have a "rocket fuel" advantage over any competitors. Over time, the VCs and "tech press" became king-makers. Then, the well-connected became a new, informal, executive suite who care more about protecting each other than genuine competition.
Hence, VC-istan. It's the first postmodern corporation, cleverly designed to look like a free market. Reputable investors are the executive suite. People with the authority to write welfare-checks-I-mean-acqhires at big companies are The Compensation Board because they decide on bonuses. "Tech press" are another part of the HR department that writes performance reviews. So-called startup "CEOs" are semi-independent PMs. Software engineers are peons who work long hours because they haven't figured out yet that they work at a big company and aren't actually going to getting investor contact and made founders in 7.35 months-- that was a degenerate empty promise.
VC-istan has clever marketing. It doesn't look like a stodgy corporate behemoth, but it is. That is why it has ceased to innovate.
This rings true and people always seem to forget that it's much easier to innovate when the cost of living is lower.
I'm currently living in Auckland, New Zealand, which by NZ (and world standards I think, though can't cite anything off hand) is quite expensive, but myself and my girlfriend have been contemplating moving to Sydney, Australia, a city which is one of most expensive in the world but where we would both be paid more. The cost of living there makes it a complete non-starter if you're not just wanting to work full time - and then trying to eek out a pleasurable life at the weekends.
I currently contract 3 days a week to support myself while working on my startup and trying to fit in some time for music as well in the other 4 days (and try to get relaxation each week too). The money I make wouldn't last very long in Sydney or any world city for that matter, I guess that's where the VC is supposed to kick in, but if it doesn't then you're in trouble.
If it's one thing I've worked out recently, full time, 40 hour week style employment is the enemy of me being able to pursue any sort of interesting side project, I'm sure it's similar for others. It's a realisation that, now I've had it, I can't imagine ever working under those conditions on anything but my own projects. High costs of living such as those in SF and Sydney (and even Auckland) can necessitate such income just to live with a modicum of dignity however, and then trap you with dining out at weekends and such, resulting in not actually achieving any progress on the projects that matter most to you. Worst of all this is the debilitating feeling that socialising and being a functional human being is preventing you from achieving your goal.
As an Aussie/Kiwi dual citizen in China, I wonder why you don't consider moving to Asia. Sydney, where I was born, is ridiculously pricey, and while the harbour is beautiful and the city fairly green (in parts), it's not really that international and the quality of life doesn't actually match the image once you start paying taxes and cost of living. That said, it's a safe choice.
Where in Asia? You might be a dual Chinese citizen, but most of us are certainly not, and the language would be another barrier. Singapore and HK have a lower language barrier but there's still the issue of visas and they are not exactly cheap. Japan is lovely but has the same issues of visa and language. You could sit on a beach in Vietnam or Thailand but if you're going to do that you may as well live in a country town here.
I'm not a Chinese citizen, I'm an anglo-Australian. I just happened to prefer living in Asia since about 12 years ago. By all means, if you don't enjoy risk taking, language learning or being in another culture, then stay in your home culture and pontificate about how great your country towns are. If you want the reward, you have to take some risk. All visas issues can be solved with persistence. Life is what you make of it.
Wow, you're reading a lot into my comment that I didn't intend. I have nothing against any of those things. I am just pointing out that you don't just "move to Asia"; there are tradeoffs to be made.
> then stay in your home culture and pontificate about how great your country towns are
Really uncalled for IMO. I have lived and worked extensively in Japan and Thailand and visit the region multiple times a year. Like most things in life there's no such thing as a free lunch and one must weigh the pros and cons of moving. My simply mentioning that there are, in fact, cons, is no cause at all for you to go on the attack.
I'm not on the attack, I'm just sayin'. For example, Singapore is a bastion of fascist conservatism, plain and simple. The fact you even mentioned it as a potential destination shows that you are either hyper-conservative or that you haven't had much long term experience in the region. Visiting and living are two different things. I agree there are pros and cons to everywhere, but comparing a beach in Asia to a country town in the west is in my opinion ridiculous. Each to their own though. IMHO, the developing world is where it's at.
You're not on the attack, you're just sayin' that I'm "either hyper-conservative or [..] haven't had much long term experience in the region". Right.
I mentioned Singapore because it's a city in Asia that speaks English, thus making it substantially more accessible. It's also a clean, modern, livable city. I probably wouldn't live there but I know plenty of people who do and it's hardly a bad place, especially for a startup.
I am just trying to point out that your views are demonstrably obtuse and your arguments absurd, given that you are claiming to have experience in the region.
The award for least Asian city in Asia certainly goes to Singapore.
My interest is in not dissuading other readers from considering moves further afield to cultures significantly distinct from their own. We are an extremely lucky group and have this option, it is a shame to see people fail to consider it. I wish you the best of luck whatever your own preferences are in life.
This rings true and people always seem to forget that it's much easier to innovate when the cost of living is lower.
The problem, or the balance that must be struck, is that it's hard to innovate without being surrounded by other innovative people. You need a city with a critical mass of innovative, talented people and a low cost-of-living. California in the 1970s had that. I don't know what the 2013 analogue is, or if it's even in the US. The Midwest would qualify, but it's hard to raise any kind of money (VC, bank loans) out there.
When real estate is expensive, money dominates peoples' lives-- even seemingly wealthy people who still don't make enough to raise a family. When it's cheap, people focus on other things and money is just one thing in it.
I'm ideologically against expensive real estate. I think that the government should buy, build and own about 60% of housing and set the prevailing rent per square foot. Rich people will still have the ability to buy property and to rent or own nicer private housing, but the basic prevailing rate will be set. This actually doesn't bring along the negatives of price ceilings (shortage) because the government can also build more housing and transportation infrastructure to increase available supply. I think we should hold the government responsible for that. No one should have to pay more than 1/4 of post-tax income to live within 20 minutes of work.
The reason New York is expensive is that people like me-- ambitious, hard-working, extremely capable-- are able to find jobs here. People like me make the fucking city great. For each person like me, there are 9999 who want to be around (or employ, or exploit) people like me and they drive up the fucking rent. Instead of benefitting from our contribution, however, we get charged for it when we pay these enormous housing costs. We should be rioting in the fucking streets over this.
Expensive real estate is a deliberate policy of the government. Local government zoning laws keep the supply tight. And low interest rates and easy credit enable people to take out huge loans to bid up the prices of real estate.
To get cheap housing, the government would just need to repeal zoning laws and limit all the size of all home mortgages from any government subsidized institution (FDIC insured banks, etc.) to a maximum of 3X median income with a 25% down payment. That would get housing prices down very fast.
The government keeps housing expensive, because older home owners are one of the most powerful voting blocks. Your average 60 year old homeowner is much more likely to vote than your 25 year old apartment dweller. Furthermore, the homeowner is going to be irate and vote against any politician who enacts policies that make their home price go down, while the 25 year old is not really paying attention.
You're committing the "deus ex machina" fallacy where by you seem to assume that the government has the incentives and institutional ability to effectively manage public housing and keep the cost of housing down. The actual experienced history of government housing in the U.S. has been positively atrocious. And in terms of cost, government housing generally costs about twice as much to build as the equivalent private sector housing.
The really hard problems are: how do you wrest political power away from middle-aged home owners? How in general do you make government work for the general interest as a whole rather than work for powerful factional interests (such as homeowners, construction unions, etc.)
Let's not use FDIC as a crowbar to micromanage consumer banking, please. There are so many better dials for the government to turn than resorting to that.
I am a U.S. citizen. But that does not mean I use the words "us" or "we" when discussing the actions of a government bureaucracy. I'm sure I have a few shares of Microsoft in some mutual fund, but that does not mean I use the word "we" when discussing the actions of Microsoft.
I find that most people who use the word "we" or "us" when talking about government actions are not being imprecise. Rather they have internalized the civics class myth that ordinary citizens have a large amount of agency over government. I like to poke at this delusion when I can.
I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct. Although I would say the cat's a little out of the bag with regards to preventing government bureaucracies from messing around with mortgage markets.... But my main point was not to make an "ought" argument, but to demonstrate to michaelchurch that if he wanted a particular "ought" outcome (lower housing prices) there are easier ways than to have the government buy 60% of all real estate. If you have even easier ways, that require even less government micromanagement, I'd be intrigued to hear them.
In any scenario in which Michael or I actually have enough power to direct the FDIC or government to carry out our madcap plans, the political situation would be so different that many current arguments against FDIC intervention would be obsolete. There might be new arguments against FDIC intervention, that would depend on the specifics of the changed political situation.
When I say "let's not do X", I don't mean it literally, it's just a way of saying "X is a bad idea". Let's just set aside that entire digression.
> I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct.
Two points:
1. If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry.
2. The federal government subsidizes mortgages in many ways. Instead of legally regulating mortgages it might be sufficient for the government to just stop doing this. For instance, there are tax incentives for having a mortgage. The government also intervenes directly in the mortgage industry in the form of Freddie Mac and Fannie Mae. When I said "there are so many better dials for the government[1] to turn than resorting to that", those are some of the things I was talking about.
[1] Note my use of the third person--are you happy with that or did "let's" derail you from reading the second sentence of my comment?
I agree that if you were trying to lower housing prices you would start by eliminating all the subsidies.
There is some chance that eliminating all subsidies would not meet whatever price goal is desired. Housing near employment is going to inevitably be scarce in some cities, and people will inevitably get in bidding wars. If people can take out the maximum mortgage that a high-earning, two income family can afford, then everyone will need two-high earning incomes to keep up (see the book The Two Income Trap).
If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry.
I think it is most reasonable to have the insurance company be the regulator. This is common in almost all other industries. If you are a landlord, the apartment insurance company will tell you to not allow smoking in the apartment or else it will not insure you or will jack up your rates. If I was czar, I would consolidate the bank regulating functionality which is now spread across a half dozen agencies all into the FDIC. If a bank refused to abide by FDIC regulations it would either face higher premiums or be expelled. If a bank was expelled, all customers would have an opportunity to transfer their deposits to another bank. The executives of the FDIC would be given a comp-plan designed to make them balance the need for expanding credit and the need for overall stability. For instance they could be comped based on overall premiums, but with clawbacks of the last decade of bonuses if the FDIC faces systemic failure and needs a bailout.
Wry reply: one thing that might help is the fact that not many Generation X (and Millennial) people are going to be cozy homeowners in their 50s and 60s...
What you say is so right that it's painful. Expensive real estate is a classic generational ripoff. These people had it easy but didn't save money, so they made up for it by rigging house prices with the post-1965 crowd paying a monstrous bill.
A real estate market separated into 60% government-owned cheap housing and 40% privately owned expensive housing strangely reminds me of NYC with its rent control/stabilization policies. Most of the current problems will not go away with government owning buildings instead of landlords. If the prevailing rate is low enough, a black rental market will soon form for government-owned units in desirable locations.
What I agree with is that somebody must build new housing. If private developers cannot/would not do it, then its a market failure and government should step in.
There is no abstract "government" doing it. It is the work of people who do not want new housing to be built for some reasons. They probably have lots of influence in local governments.
Local governments are small and arguably inefficient, it is easy for special interests such as homeowners to influence them. But there is a long tradition of local government in US and they have real power. The solution here would be for higher-level (state) government to intervene, keeping in mind interests of all state residents and not only homeowners.
Building a house is cheap, having the local infrastructure to support houses is expensive. Letting people build unlimited housing without restriction is a terrible idea.
What we need is a tax on new houses that covers local infrastructure needs. We don't do this because developers have long fed on subsidies of there external costs by local governments.
Property taxes are a poor approximation of external costs even excluding prop 30. Most obviously there paid after the fact and the county needs infrastructure up front.
Consider you add a new subway stop in an area and suddenly people want to replace single family dwellings near it with apartment buildings. The region paid for that subway expansion, but a few well connected developers stand to make a killing. When you get down to it Zoning is really an ideal way for local politicians to shift the benefits of public infrastructure into well connected private hands.
It depends on how the project is funded. Some improvements (such as bringing city water/sewer to an area on the outskirts of town or paving a dirt road) are typically funded via special assessments on the affected property. The local government can then sell bonds secured by the future revenue stream and pass along the financing cost to those who see the benefit.
Subway extensions typically distribute costs over a wider population (the regional/state/federal government paying for large chunks of it). On some level this makes sense. A special assessment on the areas within X feet of a subway station would likely be prohibitively costly for property owners, and the entire region benefits from better transportation infrastructure with more benefits. On the other hand, the person who owns the property across the street from the new subway station is benefiting much more than someone who lives on the other side of town. Perhaps a combination of special assessments and general revenue funding is more appropriate for this scenario? You're certainly correct that the current system transfers a lot of public value into private hands. The Central Subway in SF is going to make some property owners in Chinatown very wealthy.
The implicit conclusion from both of your points is that the government should be able to select fucking great people like you over others to offer affordable housing to. Sounds like a recipe to dystopia.
It's a lot easier to just have the government implement a land-value tax and repeal zoning laws than to actually administrate 60% of the "dwellable" land.
The problem, or the balance that must be struck, is that it's hard to innovate without being surrounded by other innovative people. You need a city with a critical mass of innovative, talented people and a low cost-of-living.
For a proof-of-concept early-stage lean startup, no, number of trained people you may hire around you is not a key issue. As soon as you want to move fast and hire people to help you industrialize the business model you found, having trained people of key specialties around you is going to be necessary. I think the jury's still out on whether remote work can replace this.
It's no longer cheap to live there. Tinkering with new ideas on some modest amount of savings and "odd jobs" or consulting is no longer possible. Expensive real estate leads to calcification and risk-aversion and cultural death. It's why urban ecosystems (including VC-istan, which is not a city per se) turn into hellholes shortly after their peak of greatness.
Many of the world's top cities are expensive as all hell, but in the American case at least it's largely because you're simply not allowed to build denser dwellings. Silicon Valley is stuck with huge towns full of two-story single-family housing in an area where demand can easily support multifamily apartment buildings :-/.
Expensive real estate is a symptom of one of two things:
1. A rapid upward change in desirability or job market health. In the long run, this will even out as housing is built-- it's just slower to build new houses than create new jobs or reasons for people to live somewhere. If it's demand-based, expensive housing doesn't mean that it's a good place to live; only that it became a better place to live faster than builders could react.
2. Pathology, including NIMBYism (Silicon Valley, the Village) and outright crime (New York's rent-control scams) or problems with the transportation system (again: Silicon Valley).
The dumbshits who cheer on high real estate prices think it's a demand improvement, when it's almost always (over 95%) a supply problem, that causes real estate to go up.
The most expensive city in the country is Luanda. Next is Moscow. Neither is known for a robust, healthy economy.
People tend to mistake the second for the first and assume that expensive real estate is a sign of something good. It's not, and the long-term effects of expensive real estate are extremely undesirable.
You didn't give examples for #1, but it describes NoDak and Wyoming near oil and gas finds.
#2 is classic NYC, SF, and the like.
Luanda and Moscow are in different countries. And neither is all that expensive if you're a native (neither is Tokyo); they're really expensive for expats. The most expensive cities in the world are the ones that artificially limit housing supply with mandated sprawl development laws. Those cities like SF and NYC are mostly in the USA.
Another thing: as companies get larger they will try to squeeze competitors, fire employees and do everything possible to increase their margins.
Legal, but they shouldn't brag about it.
Edited to add: Apple, Microsoft and Google alone have close to $250 Billion in the bank, $250,000,000,000 and what we hear each quarter about them? Increased margins, more and more ads, increased prices on software, anti-competitive behavior, essentially cheating on taxes, firing 20% of employees (Motorola) and holding cash overseas not to bring it to US due to taxes. It never ends, they have to be ready for the next quarter
Or my favorite, buying revenue through acquisitions and then asking existing employees to take one for the team with pay freezes and austerity measures because of the subsequent impact to margin.
Don't get me wrong, these lists contain a lot of great products that I'm happy exist - but big and world-changing they are not. The fact that the typical SV VC scene funds one or two truly disruptive, technologically groundbreaking firms in a sea of other investments doesn't seem like a "strong track record".
The way I look at it, there are three classes of companies when we talk about this issue. There's the "changes the landscape of the world" level, there's the "massive disruption to a segment", and then there's "incremental improvement on something".
None of the companies in this list are, IMO, in the first class. Self-driving cars, insulin injections, freedom from oil, eradication of common diseases, the internet, semiconductors, the smartphone, etc, IMO all fall under this category.
The second class is where I see AirBnb, Facebook, Square, and the such. They've turned their respective industries upside down with something genuinely different and new (as opposed to simply executing better at lower cost).
IMO the majority of your list belongs in the third class - they're great products, but ultimately they are incremental improvements in their field and have not shown themselves to be disruptive. How has Pinterest changed the world? Or Groupon?
Funny anecdote about Groupon - I've talked to some small business owners way back when Groupon was at the tip of everyone's tongues, and it was never perceived as a disruptive force. Business owners considered them an evolution of coupon books, and treated it as a new, alternative marketing channel - it was never truly disruptive.
The whole point of the original post is that we're funding an ocean of "class 3" companies, a small handful of "class 2" ones, and basically none in class 1.
I'm sorry, this just completely blows my mind.
I'd understand if you called git innovation (though the real innovation is distributed version control, and it existed before git, git is just a very good implementation), but calling github "innovation" seriously lowers the bar for that concept.
I mean, I love github, but come on, they aren't even the first ones to come up with the idea. SourceForge existed years before them.
While they are not equivalent, they serve to achieve similar goals, and it's fair to compare one to the other. Github may be better, but it's not the point. People will be using github to do the same stuff they used to do on SourceForge. Where's the innovation?
Sourceforge is to GitHub as Friendster is to Facebook.
Yes, they are kinda the same idea, but GitHub realized that the social element was key, and managed to create a community around open source the way that sourceforge never did (and, I would argue, didn't even know to do).
Many of these products may change the lives of a large number of people -- but not by much (though some may have a larger effect than others). So while they might be innovations, I wouldn't call them big. In fact, I think it might be a lot easier to change the lives of many by only a little, than to greatly impact the lives of even a few.
I used to feel very strongly about this issue of aiming for truly big stuff, and I agree that increased government involvement (and increased trust of government) is necessary, but I think that doing something really big is just... hard, and very few people can do that. Even large government projects require those rare visionaries. But SV and the startup ecosystem have put the power to make a small change in the hands of many people, and that's quite an achievement. Now we only have to come up with a way to find the few out of those that are truly capable of doing the big things, and help them along.
I wouldn't consider any of these "innovations." Your definition implies successful == innovative. By that standard Justin Bieber's music is innovative and modern jazz is not.
I think you're underselling twitter: its a completely new communication mechanism by which people can communicate short thoughts directly to their followers. It can be used as a better RSS, but that doesn't account for all the other ways it can be used, everything from celebrity gossip, to starting and managing violent revolutions.
Almost all the ones you listed have had a large role of the Government in play (ARPANET, DOD etc.. not to mention indirectly via research grants to universities). To claim that is all free-markets, and entirely done by 'innovative' private companies is at best a myopic view.
Just fyi, I truly believe in free-markets but I am willing to ack. that it rests on strong foundations in a 'common infrastructure', and with few exceptions, innovations entirely from private entities are limited.
Well Xerox PARC was in Palo Alto, though Xerox itself is based on Rochester, NY. And Xerox was of course not a VC-backed company. Intel, however, was founded in Santa Clara and was VC-backed. Though your point is well-taken. I think big corporate R&D labs are responsible for far more of the innovation we see in the internet sector than VC-backed Silicon Valley companies.
If we're talking about narratives, indeed, the narrative that seems more prevalent is actually a big company that has a cash cow (e.g. Xerox with copiers, AT&T with the telephone network) having money to throw around at R&D activity.
I agree, and think big innovation can result from simple goals - adjusting my lights or heating via a smartphone app is a 'small problem' but an 'internet of things', ie an ecosystem of tiny and cheap embedded computing, will be important in multiple ways, from energy efficiency to AI.
that said, there is an awful lot of wank about. I console myself with the thought that it was probably always like that; for every invention like the telegraph there were three people flogging 'galvanick spirit communicators,' questionable beauty treatments, or silly toys. For every Atari there's also a Chuck E. Cheese :-)
Reasonable and astute point.
"An Economist article this year exploring the state of innovation noted that centuries of scientific progress means it takes ever longer for people to reach to the frontier of any field, much less push past it. It also stressed that much of the technological low-hanging fruit is long gone."
Also true, and oft-overlooked.
"Thiel is at least putting his money where his mouth is at Founders Fund, his venture capital firm making investments into robotics, artificial intelligence and biotechnology (alongside a lineup of dot-coms)."
Ironically, AI was jump-started by DOD dollars,[1] and biotechnology by NIH dollars. Robotics had substantial manufacturing implications and got money from that area, but has also benefited heavily from defense money (think UAV's, etc).
[1] http://en.wikipedia.org/wiki/AI_winter#DARPA.27s_funding_cut...