A different cluetrain
antipope.org
antipope.org
Any money in biotech goes to cancer instead of antibacterials, because the price points of cancer medicines are highest. The future was in the news last week: superbugs spread through colonoscopy procedures in LA. We'll see more of that in the coming years, but there is no alternative funding model within sight.
It's getting harder to discover new drugs and get them through the FDA gauntlet. Most of the low hanging fruit has been found, and additional fruit won't necessarily pass comparative effectiveness without huge (and expensive) trials. After it makes it to market you are subject to political risks - price controls, lawsuits over side effects too small to find in clinical trials, etc.
It's hardly clear that the valley is even a good short term investment. Most tech companies focus heavily on growth, not profits.
Why do you believe that biotech has higher long term returns than the valley?
That's precisely the problem. Within my lifetime the current antibiotics will become useless, we will be where we were before 1937 (discovery of sulfanilamide), physicians will be as good as they always were at prognosis, but helpless in the face of bacterial infections. The apocalypse is coming, and capitalism is no tool against it.
As for the rest of it, it's true that capitalism can't fix the FDA or foreign price controls. Lets hope Charlie Stross is right and the capitalists can take over the government and fix this.
The Swedes and British manage extremely well with national guidelines that physicians actually adhere too. In some disciplines there is no alternatives to the technocrats.
> ...but [capitalism does not require democracy] means that the interests of the public (labour) are ignored by states increasingly dominated by capital (because of [automation privileges capital over labour]) unless there's a threat of civil disorder. So states are tooling up for large-scale civil unrest.
Let us hope, indeed. Sounds like fun.
The specific defect here is that right now, today, a capitalist country is not, in your estimation, putting enough capital behind biotech to solve the problem of antibiotic-resistant bacterial infections. More expansively, you're saying that Capitalism is incapable of making this effort.
It sounds facile, but what's the alternative? Isn't this a defect of every economic and political system on the planet, not just capitalism? Cuban communism is not putting sufficient capital in play to solve this problem as well, you know. Nor is passive anarchy in eastern Africa putting enough capital towards solving the problem.
Even assuming that more capital would magically solve this is kind of a naive viewpoint; serendipity and advancement in parallel fields has played a much larger role in advancements in medical technology than directed research has [citation needed], and for all we know, advances in information technology could hold the answers to solving this problem in a much more effective way.
The notion that a directed, centrally planned effort can solve problems (rather than just implement those solutions) is one that is historically unsupportable in any context.
Also, bananas will be extinct by 2008, and there won't be enough oil or food.
Ah, that may explain the statistic I recently saw that Phase III trials are taking up 90% of the budget necessary to bring a new drug to market.
Yow. I thought that by Phase III safety was pretty well established and you'd be looking for efficacy endpoints, surrogate or real. Emphasis on endpoint ... but I guess not.
But ... if vague memory serves, from the overview of some Phase III trials, maybe not the first one, I remember more like hundreds of participants. Maybe not quite a thousand, but a lot.
As I understand, investment in biotech is low because the time to realize returns is long, not because the returns are low (even after adjusting for time). The time it takes to bring a product from concept to market in biotech is virtually an eternity by Silicon Valley standards.
What would that add? Civilisations don't have to innovate. In fact, the people on top may be perfectly happy with stagnation and the status quo.
have you looked at biotech IPO's as of late. I would say the complete opposite.
But capitalism is based on jam today and famine tomorrow.
This works just fine for people - as long as they're not thinking straight.
Intelligent resource allocation understands that famine ten years from now is a bad thing and should be avoided, even if it means lower short-term profits.
Any system that thinks ahead like that would be much more innovative than capitalism, because it would be able to make long term plans and invest in long term projects with pay-off times measured in decades or even centuries - something capitalism is manifestly unable to do.
It would also be better at avoiding the usual capitalist kooky idiocies like poisoned water tables, avoidable drought, accidental anti-terraforming, and the rest.
Why? Because arbitrage. If the world as a whole has a low rate of time preference and risk aversion, investments will flow towards high potential long term projects rather than short term ones.
But what if you're a greedy, myopic VC with high time preference who wants to make money now? That doesn't affect too much how you will value deals. What you care about is how much money you will make at the exit, which will depend on the equity valuation at that point. And that valuation, depends on the global investment's community risk aversion and risk preference.
Facebook trades at a P/E ratio of 71, meaning the equity is worth 71 years of current earnings. Netflix has a P/E of 116. Think that's shorts-sighted?
Ultimately, investments come from two sources, money saved and invested by individuals, and banks.
If it were only the first, you could say that the type of investments you see reflect the society you have. As a whole, society picks taxi cabs now rather than maybe some pharmaceutical product later. It's not capitalism, it's human nature.
Banks complicate the picture, since they turn their deposits into loans of various maturity. The rates on these loans are ultimately tied to central bank policies.
However, these policies generally attempt to keep rates low, so as to stimulate "productive" investments. In addition, various bail-out guarantees tend to artificially increase the amount of risk taking.
So there you have it. Capitalism by itself merely represents the time preference and risk preference of the population as a whole, and central banks tend to make it more risk taking and longer terms than investors would actually prefer.
Most humans aren't trading on earnings, but on market psychology, believing they can sell to a greater fool in the future. And most trades aren't even made by humans, but by HFT algorithms trying to win massively-leveraged short-term bets for a fraction of a percent. The Facebook and Netflix P/E ratios have very little to do with long-term earnings.
I disagree. Capitalism makes investments much more fungible than they would otherwise be, changing the incentive landscape. It can set up a prisoner's dilemma (i.e. a failure of global optimization due to induced local optimization) which preferentially allocates capital away from investments which are intrinsically difficult to value in a timely fashion or intrinsically difficult to capture value from (i.e. science).
Correct tulip speculation gets you $$$, making a correct incremental step towards curing cancer gets you nothing on the market. Nobody will be able to tell if your contribution was valuable for the next 30 years, and by then you won't have any mechanism by which you could retroactively hold back your contribution in order to obtain a fair market price for it. According to capitalism, this unfortunate (but completely incidental!) state of affairs is a good reason why investors should speculate in tulips rather than fund biotech. Yuck!
Can we do better? In the narrow sense of solving this particular problem, the answer is yes: a prestige-based economy (see: academia) is able to reward investments whose value can't be captured by a market economy, such as the "incremental progress towards cancer cure" example above. Of course, a prestige-based economy would fall flat on its face if one tried to generalize it to more mundane facets of everyday life, so it's not a satisfying solution for the general problem. But it IS a good way to get free-market drum-beaters to acknowledge their very constrictive assumptions about timely valuation and value capture :-)
You point out that capital will not flow towards investments who are difficult to value, or investments which are hard to extract value from.
I don't think the first point has merit. Any new venture is intrinsically hard to value, and even a global optimizer would be reluctant to invest in those. This is no different from risk aversion, which I've already cover. The second point on the other hand has merit. If it is difficult to extract value from an endeavor, you have an externality problem. However, this is a distinct concern than an alleged short-term bias in capitalism, an idea which I was attempting to refute.
The problem you describe exists just as much in the short run as in the long run.
As for what it is to be done, I think several things can help:
- Relax antritrust legislation: large companies who aren't threatened by competitors can capture a lot of externalities and tend to develop new science and technology. General Electric Research Laboratory, Bell Labs, Google X...
- Develop technology which lower the cost of coordination. Prisoners dilemma arise when there can be no coordination. In fact, if players can enter into arbitrary self-enforcing contracts, every game admits a strong Nash-Equilibrium, and the equilibrium is Pareto optimal! In practice, this means crowdfunding, and mechanisms like dominant insurance contracts[1]. Smart-contracts on blockchains are also interesting in that they are pretty close to the ideal "arbitrary self-enforcing contracts".
[1] mason.gmu.edu/~atabarro/PrivateProvision.pdf
> - Relax antitrust legislation
Why do you think it is better to fund labs through monopoly rent (where shareholders, administration, and inefficiency due to lack of competition all take a cut) than by simply increasing the budget funneled into the brutally competitive NSF grant process? If you assume that private labs are 10x as efficient as public labs, maybe, but I'm not convinced of 1x let alone 10x.
> Any new venture is intrinsically hard to value, and even a global optimizer would be reluctant to invest in those.
> ...
> mason.gmu.edu/~atabarro/PrivateProvision.pdf
So... crowdfund science by asking people to compute the monetary value of an "unknown unknown" (which is what science produces)? I don't think you would have trouble convincing people that the aggregate returns on science are pretty great, but I do think you would have a hard time getting the consumer excess of one of these contracts to exceed the friction induced from reasoning about unknown unknowns. A very hard time. Hell, I'd be willing to bet you that scientists figure out the secret to eternal life before bean-counters figure out how to crowdfund science at NSF scale with rational contracts.
No matter who funds science, someone, even if it is the government, has to reason about the unknown unknowns when deciding what to fund and to which extent. The amount spent by the NSF is about $7B, which is a blip on the budget, and a blip in the amount contributed to private charities. The YMCA alone gets about $5B. The problem is that people just don't care that much about scientific research, and capitalism is good at producing what people want.
Asphalt is cheap yet requires high maintenance and degrades quickly - rather than a larger initial investment in concrete which lasts 4 times as long.
- Democracy, or more generally giving political power to the people is a good thing, maybe an end in itself.
- Increases in inequalities between capital and labor are intrinsically a bad thing.
If your focus is on people being able to live happy, fulfilling lives, the whole Maslow hierarchy of need thing, it's not clear at all that these assumptions are warranted.
Edit: And if you are labor, if you are the people of the democracy, of course these things are bad. It is self-evident. It is not a hidden assumption, but rather falls out of the conclusion. No one wants to be under the finger of another's control. These things are only good for capital.
I could of course be reading Stross's intentions wrong, but given what he's written before, and given how widespread those assumptions are, I tend to think they're taken as a given.
- “Democracy is the worst form of government, except for all the others.” -- Churchill.
- technological progress is making everything cheaper except for land, labour and political influence. Having only the rich able to afford those three things is very dangerous in my opinion. Sure, the poor can afford bread and televised circuses, but I'm not sure I think that makes a good society.
The inequality problem sets in when you expel most of the labor force from the economy. The economy no longer has space for them, no longer needs them, no longer will let them in to participate. I'm sure the teeming masses of bored angry resentful aspirational young men will never respond violently like they always have in the past. Nope no demagogues will become leaders, LOL. Assuming there's no revolution, what happens to the economic refugees when the population is 99% refugee? They'll need some way to get the requirements of living, which seems to involve currency and an economy, or they'll die. But they have the perma-economic-death-penalty so they can't participate, and we'd like to think the 1% won't kill them, so immovable object meet irresistible force.
Being in the UK Charlie has absolutely weird ideas about gun ownership and rebellion. True a 18th century napoleonic war with civilian gun owners on one side and the conventional army on the other would be just a bit one sided. The actual result would look a lot more like Afghanistan or Iraq or Vietnam or Somalia, you know, the places where the army lost the war? When an angry well-enough armed population dramatically outnumbers the army, the army loses. Maybe a couple million civilians will die, but the army is still going to lose in the end. Then out come the guillotines for the 1% leaders for their war crimes or revenge or whatever. Sure would be nice to avoid this outcome, but we're not even trying, not in the least, if anything we're not steering away from the brick wall we're stomping on the accelerator. Talking about 18th century strategy being all thats possible is almost intentional disinfo, which is weird coming from Charlie.
Gonna be a fun century!
Later you imply that armed revolution would actually lead to a reasonable outcome. Clearly you have never heard the phrase "meet the new boss, same as the old boss" and are unaware of the perhaps dozens of examples throughout recent history where this fits the picture to the T. You are also ignoring the reality of the conflict in Afghanistan, where the military enjoyed remarkable success against a foe that is more resourceful, elusive and better armed than that vast majority of the even the most hardcore, gun-toting, anti-government survivalists here in the US.
I'm also sensing based on your willingness to adopt violence as a potential "solution" that you don't have the faintest clue what armed conflict, let alone combined arms warfare, is actually like. There is a reason we avoid it. This sort of sentiment is not only totally unproductive but it's possibly contributing to the problem by adding non-solutions to the noise.
Here's a question for you - can you quantify what the metaphorical brick wall we're supposedly careening towards is?
I also don't see Stross assuming that democracy is an end in itself. I think he is commenting on the projected future of existing nominally democratic systems of government.
I do agree with you that Stross assumes that increasing imbalance between labor and capital is a bad thing. I agree with Stross though. We've seen the political and economic damage that can occur under regimes with excessively high inequality. We should try and learn from history and not repeat past mistakes.
From what I've read, there are clear things that separate various civilizations. A quick list that I pulled out of the air might look like this:
- Private property - Rule of law (contracts) - Freedom of political speech - Consent of the governed - Ability to freely associate into commercial units (corporations) - Peaceful transfer of authority
Societies that have these things, on average, are able to solve more problems for more people over a longer period of time than those who do not. These problems are usually solved from the bottom-up; whether through innovation or grassroots political efforts, distributed, self-optimizing systems beat centralized ones.
The various forms of democracies that we see instantiated usually have more of these things than the other types of governments we've tried as a planet.
Capitalism refers to a very specific type of financial arrangement. It seems to map man's desire to trade with the above values -- at least as good as anything else.
To say "captialism does not require democracy", then, is true -- but it's woefully incomplete. The Chinese are getting away with rapid growth because they've met many but not all of the criteria, and that's only for the last decade or two. The problem with the statement is that it wants to form a broad conclusion about complex topics using simple language. If you do that, you miss out on the important parts. This is also the problem with the rest of the list. Do enough of this and string a thread through it, you can prove pretty much any dang thing you'd like.
Since the collapse of the USSR and the rise of post-Tiananmen China it has become glaringly obvious that capitalism does not require democracy. Or even benefit from it. Capitalism as a system may well work best in the absence of democracy.
I am also quite impressed and wonder how China got there where it is today in the absence of democracy. But I am not sure if I would agree with the OP since there many examples where states economically failed/are failing and assumingly because of the absence of democracy.
I could cherry-pick examples until the cows come home, but I suspect other factors are at work -- and not just the obvious cultural stereotypes (look at how the two Koreas diverged after 1973, for example).
> Capitalism as a system may well work best in the absence of democracy.
That's written in English, and it is reasonably interpreted to mean more than \not(capitalism-works-well \implies democracy). The author suggests capitalism-works-well \implies \not democracy.
Which is now making me think of ways in which money distorts government, i.e in which capitalism and democracy are in tension. For a prime example, "Citizens United" is clearly pro-capitalistic, and anti-democratic. http://www.newsweek.com/five-years-after-citizens-united-sig...
These are cracks in China's economic foundation that a lot of hot money foreign investment has been able to cover up over the past couple of decades. Risks due to population migration problems due to the hukou system, environmental problems stemming from short-sighted industrial investments, government corruption that grew and grew due to lack of separated oversight and his Bullet Points 4 and 5 (which only recently seems to be seriously considered an existential risk to the government's existence; but again, time will tell if this is for real), and more. The level of control of the government over the economy also goes against the tenets of free markets (although I suppose you can then get into an argument as to whether it's possible to have capitalism without free markets).
I'm not saying that his Bullet Point 3 is wrong. I'm saying that it's too soon to call China a reliable data point for making any long-term overarching claims.
edit: clarification
We've heard this story before, and it didn't work out well for the USSR.
Also, you don't need to meet Western development to be a success. China has incredibly high growth rates and Deng Xiaoping's "Socialism with Chinese characteristics" (i.e. the mixed economy) basically saved China.
If we take these things to have a certain lifespan, I'd expect China to have a significant restructuring around 2030.
The PRC isn't really capitalist either, consider how much of the economy is still state-owned enterprises. In any case, the reference class here is more 'fast-growing industrializing economies starting on a primitive agricultural basis', where regularly you see impressed people (and flacks) declaring that This Time Is Different and perhaps Western-liberal-democracy-plus-capitalism has been rendered obsolete. USSR, Japan - China?
On a small scale its fox guarding the henhouse corporate metric evaluations. You pick the winners and losers, and by how much, then you design todays metric to match the conclusion, then you use numerological processes to gather numbers for the metric. Thats the way the real world works.
Can you list some of these "many examples"? And in particular, can you list some examples of states that don't have democracies but do have capitalism and are still failing?
From a logic point of view "X does not require Y" does not entail "X must universally succeed when Y is absent". So a counterexample to the latter statement is not a counterexample to the former.
On the other hand, I suspect that I'm in the "eye-wateringly rich" category (as is everyone reading this on HN).
I wonder however if his partitioning of the economy into "labor" and "capital" isn't a bit too black and white, though.
In particular, it leaves out knowledge workers who are capable of implementing automation, inventing new products, performing new research. These activities can be fueled by capital but they are gated by a not-entirely-fungible resource; namely, skilled individuals, that I'm not sure it makes sense just to classify as "labor". Such individuals could wield considerable influence, aside from capital.
I can't help but wonder what kind of an effect (if any) this observation has on his analysis.
I'm not sure there was such a thing as an aerospace engineering degree in 1927, but if you think a CS degree from 1990 is worthless than you didn't learn much. That theory is still applicable today. Just because the shiny bits on the outside look all new and fancy does not change the underlying theory one bit.
So, yeah.
The CS field moves at an especially breakneck pace, though. The half-life of the knowledge learned in school is very short.
There are probably some other degrees out there where the knowledge stays relevant a bit longer. But I think it really comes down to the fact that you need at least some degree of continual learning to stay employable after graduation.
The CS field does not move at breakneck pace. The core classes taught in CS are the same now as they were then.
aka, the tyranny of the bureaucratic overhead equation
Δw = p ln (st / sg)
w := "useful work towards the objective"
g := "the group of people doing w"
p := "effective productivity of g"
sg := "total size of the g"
st := "total size of the organization (sg + bureaucracy)"It's tough to respond to statements like this as written. 'Capitalism', 'democracy' and 'work well' are not precise terms, and the statement can be either true or false depending on the shade of meaning.
What about the quoted passage do you actually think is ambiguous?
Some things are inherently imprecise. We can talk about them anyway.
I would downvote you but I'm just going to register my disapproval of your sort of criticism, which seems empty and baseless.
> I want Bitcoin to die in a fire: this is a start, but it's not sufficient.