Jones Beene wrote:
Venture capital is the life blood of Capitalism.
Yes, but it has nothing to do with fundamental innovation or basic research. People such as Einstein, Dirac, Mizuno, Miles or Oriani are not motivated by money, and their work seldom yields any direct profits.
I have nothing against capitalism. But cold fusion is still at the fundamental research level, and there is no way a venture capitalist can invest in it.
It is the "spark"... the one economic factor that distinguishes the USA from other competing free market countries in being able to move innovation out of the lab and into the market place at top speed.
The US has not done anything at top speed since Boeing developed jet aircraft! After 1975, the Japanese and European manufactures have beat the US to market with everything from diesel engine automobiles to consumer electronics and computers. The US had a brief lead in personal computers in the early 1980s, and companies like Dell still make a great deal of money in that field, but nearly all of the equipment is manufactured in Japan, Korea, Taiwan, Ireland and elsewhere. In my computers, the only thing made in the US is the power supply and the CPU, which account for roughly a tenth of the value of the equipment (including the screen).
The only industry in which the US still has a decisive lead is weapons manufacturing, because that is the only industry which the government is still heavily investing in.
Countries like Japan try to do this all-important task, not with private VC, but instead out of a government bureaucracy.
This description is about 45 years out of date. The Japanese government has not played a significant role in shaping the market or promoting innovation since the early 1960s. The last important decision it made was to try to prevent Sony from investing in transistors.
The Japanese government is the lapdog of industry. Within Japan, uninhibited, unregulated, 19th century-style dog-eat-dog competition rules. Compared to the U.S. or Europe, regulatory agencies are toothless jokes. They have no staff, no funding, and no legal leverage to enforce decisions. For example, as of 1997 dioxin was totally unregulated. I mean there were no standards for dealing with it and no central monitoring or computerized database anywhere in the country showing how much was being released into the environment. Alex Kerr described the situation:
One of the myths of the financial world is that the United States is a model of laissez-faire capitalism and Japan is highly, even overly regulated. Nothing could be further from the truth. In the United States, regulations elaborated and enforced by legions of busy lawyers hem in transactions on every side, with rules punishing insider trading and mandating disclosure, liability laws protecting investors, and myriad other devices functioning to make the market more transparent and efficient (and at the same time, of course, enriching the lawyers). It is Japan that is unregulated. Where the Federal Reserve has between 7,000 and 8,000 banking inspectors, the Ministry of Finance had only 400 to 600, and, according to Richard Koo, a senior economist at the Nomura Research Institute, "Of that, only 200 are considered any good." Lack of financial supervision became such a scandal that the Diet removed this function from the Ministry of Finance in the late 1990s, creating a new Financial Supervisory Agency (to become the Financial Services Agency in January 2001). The new agency, however, has only 310 inspectors, most of whom hail from its inept predecessors. The U.S. Securities and Exchange Commission employs 3,000 inspectors, versus about 200 in Tokyo and Osaka, whose work is mostly perfunctory. In Japan's financial world, gangster payoffs, insider trading, juggled books, defrauding of old people by insurance companies and banks, under-the-table payments to bureaucrats, usurious interest, special accounts for officials and politicians at securities houses�anything goes. It's wild and woolly out there.
"Dogs and Demons," p. 274
- Jed
