Someone commented this but deleted it because they were getting downvoted:
Land ownership, intellectual property and limited liability ownership of companies by individuals are the basic building blocks of capitalism. I.e., property forms guaranteed by the government. Which one of these are being challenged by unicorn startups, again?
I think this is spot on and deserves repeating.
Unicorn startups are changing the way we utilize capital (Uber=cars and labor, Airbnb=property) but they are not changing the fundamental fabric of capitalism. Our legal framework forms the backbone of our society, and regulation/policy is the tool we use to adjust that foundation. Entrepreneurs and investors respond accordingly.
Uber and AirBNB might hire some lobbyists to change a few minor rules in the hoteling/taxi industry, but the really important variables are the distribution of government spending, scope of and resources committed to regulatory oversight, and the tax code.
The article lacks a comprehensive review of the data and its arguments come across as surface level speculation.
If anyone is changing the fundamental fabric of capitalism then it's the Chinese. They are ignoring intellectual property, the government prints its own money and hands it directly to the the banks that operate as partially privatized central planning with heavy political control.
Some people argue that Uber and AirBNB are not actually changing the way we use capital on a fundamental economic level, but are instead using new channels in a way, and with a magnitude, never used before.
IMHO I tend not to agree with the hole "Sharing Economy is The Next Capitalist Revolution" thesis.
Nor are they addressing the reproduction of the classes shown by historical materialism to be just as fundamental a building block as the legalistic ones.
Not a great article, and I think it misses the one big thing that is genuinely revolutionary about the Silicon Valley form of entrepreneurship. And that's that venture-backed entrepreneurial companies are, by and large, the new Research & Development Departments. Acquihires can in fact be great deals for VCs, founders, employees, and acquirers. Many companies are curtailing their own research agendas and relying upon smart technology investments to position them for the 5-10-15 year time horizon. I suspect we will ultimately consider this a vastly more efficient form of capital allocation than the old-fashioned "R&D Department" at IBM, GE, DuPont, AT&T, etc.
Which Silicon Valley companies are pursuing the high risk R&D these days? I can only think of a few that are building high risk hardware (Theranos, some of the small photonics shops), and even many of those have proof-of-concepts already built in academia. Many of the medtech startups I've seen revolve around algorithms, which is kind of hard to compare in terms of risk profile to Bell Labs putting a bunch of researchers in a room to figure out how semiconductors work or needing a couple million to build a prototype.
When I think of R&D departments these day I think of non-silicon/non-electronic computing, lab-on-a-chip, and maybe some other medtech stuff. I'm under the impression that companies doing these sorts of things are currently a minority of "Silicon Valley entreprenuership".
By which metric would you measure this "efficiency"?
The difference between VC-backed-startups vs traditional R&D departments is that the first one seems more short sighted, and with a tendency towards a narrow subset of IT problems with high scalability and disruptive potential, while the second one works on a wide array of industries and applications where the parent company already has the benefits of economies of scale.
I generally agree with your statement but personally I'd pull back on calling start-ups as R&D replacements. There are certainly a few start-ups taking big R&D-type gambles, but I think most people are working in some sort of technology-applied-to-old-industry role.
Therefore I'd liken start-ups to product team replacements or consulting + validation as seen from a big company's perspective.
What is so genuinely revolutionary about that form?
A large land owner could raise a small army and supporting farms, then join the local nobility. The land owner and his tenants could then enjoy the benefits of being part of the larger realm.
Maybe the current set of unicorn startups are just very clever financial inventions to get returns in todays crazy financial world of ZIRP and never ending QE.
This article tries to refute two different types of arguments, and in the process confuses them. The empirical arguments ("this isn't happening!") it refutes quite well.
The normative argument ("this is a bad thing!") it does less well at. Ownership in these companies is cut off from the rest of the economy, but the Economist seems to think that this trend is only worth reporting if the social issues can be brushed off. They cannot. SeedInvest is not a substantial source of capital on the same level as privately VC funds. Mutual funds, maybe.
But VCs are funds, not long term owners. Their goal is an exit, so they can pay off their investors in cash. Their goal is not to become conglomerates or zaibatsu or chaebol. YCombinator is not in the business of becoming the next Samsung.
I don't think the article was claiming that this is an innovation outside of the capitalist box - just that it's a form of capitalism that's different from the way it's been practiced in past decades.
roymurdock|10 years ago
Land ownership, intellectual property and limited liability ownership of companies by individuals are the basic building blocks of capitalism. I.e., property forms guaranteed by the government. Which one of these are being challenged by unicorn startups, again?
I think this is spot on and deserves repeating.
Unicorn startups are changing the way we utilize capital (Uber=cars and labor, Airbnb=property) but they are not changing the fundamental fabric of capitalism. Our legal framework forms the backbone of our society, and regulation/policy is the tool we use to adjust that foundation. Entrepreneurs and investors respond accordingly.
Uber and AirBNB might hire some lobbyists to change a few minor rules in the hoteling/taxi industry, but the really important variables are the distribution of government spending, scope of and resources committed to regulatory oversight, and the tax code.
The article lacks a comprehensive review of the data and its arguments come across as surface level speculation.
narrator|10 years ago
demian|10 years ago
IMHO I tend not to agree with the hole "Sharing Economy is The Next Capitalist Revolution" thesis.
thwest|10 years ago
malchow|10 years ago
TTPrograms|10 years ago
When I think of R&D departments these day I think of non-silicon/non-electronic computing, lab-on-a-chip, and maybe some other medtech stuff. I'm under the impression that companies doing these sorts of things are currently a minority of "Silicon Valley entreprenuership".
demian|10 years ago
The difference between VC-backed-startups vs traditional R&D departments is that the first one seems more short sighted, and with a tendency towards a narrow subset of IT problems with high scalability and disruptive potential, while the second one works on a wide array of industries and applications where the parent company already has the benefits of economies of scale.
Dwolb|10 years ago
Therefore I'd liken start-ups to product team replacements or consulting + validation as seen from a big company's perspective.
jsprogrammer|10 years ago
A large land owner could raise a small army and supporting farms, then join the local nobility. The land owner and his tenants could then enjoy the benefits of being part of the larger realm.
dismal2|10 years ago
TTPrograms|10 years ago
azernik|10 years ago
The normative argument ("this is a bad thing!") it does less well at. Ownership in these companies is cut off from the rest of the economy, but the Economist seems to think that this trend is only worth reporting if the social issues can be brushed off. They cannot. SeedInvest is not a substantial source of capital on the same level as privately VC funds. Mutual funds, maybe.
Animats|10 years ago
tonomics|10 years ago
These innovations are just a child of capitalism, not something unexpectedly changing it.
azernik|10 years ago
unknown|10 years ago
[deleted]
chrismealy|10 years ago
oluwie|10 years ago
unknown|10 years ago
[deleted]