Boyd Cohen — Post-Capitalist Entrepreneurship

The Occupy Movement perhaps first raised global awareness of the growing dissatisfaction with market-based capitalist economy. Banks too big to fail, government bailouts, and rising income inequality drew the ire of millions around the globe. Since then, the calls for a rethink of our economic paradigm have grown louder. One potential framing which has gained followers is Postcapitalism, popularized by Paul Mason in a book of the same name. Postcapitalism is not a return to Marxism, but instead, driven by the understanding that a third way that is not focused on heavy handed government control, nor on proprietary, venture-capital backed and publicly traded goliaths. Instead a postcapitalist economy would be driven more by collective, cooperative or even autonomous organizations, frequently leveraging non-government backed (fiat) currencies as well.

To date, however, there has been insufficient discussion about the role of entrepreneurship in a postcapitalist economy. While it may seem like an oxymoron to discuss entrepreneurship in a postcapitalist economy, I argue that is only because we have a narrow view of what entrepreneurship is. In Post-Capitalist Entrepreneurship (PCE) I highlight several emergent entrepreneurial forms including commons-based peer production, platform cooperatives, alternative currencies and initial coin offerings (ICOs) and blockchain-enabled distributed autonomous organizations among others....

Post-capitalism is an entrepreneurial activity. It has to be if the the system is to transform itself from within through adaptation that takes advantage of return in increasing coordination, decentralization of power and decision making as well as economic activity, and seizing emergent opportunities while addressing emergent challenges.

Evonomics
Post-Capitalist Entrepreneurship: Basic Income, Blockchain Cities, and Local Currencies — Towards a new, local, but globally interconnected, digital, collaborative, urban economic model of shared prosperity.

Boyd Cohen, Ph.D. in Strategy and Entrepreneurship from the University of Colorado who has been teaching, researching and participating in sustainable entrepreneurship for 15 years

Martin S. Feldstein — Why the U.S. Is Still Richer Than Every Other Large Country

Will America maintain these advantages? In his 1942 book, Socialism, Capitalism, and Democracy, Joseph Schumpeter warned that capitalism would decline and fail because the political and intellectual environment needed for capitalism to flourish would be undermined by the success of capitalism and by the critique of intellectuals. He argued that popularly elected social democratic parties would create a welfare state that would restrict entrepreneurship.

Although Schumpeter’s book was published more than 20 years after he had moved from Europe to the United States, his warning seems more appropriate to Europe today than to the United States. The welfare state has grown in the United States, but much less than it has grown in Europe. And the intellectual climate in the United States is much more supportive of capitalism.

If Schumpeter were with us today, he might point to the growth of the social democratic parties in Europe and the resulting expansion of the welfare state as reasons why the industrial countries of Europe have not enjoyed the same robust economic growth that has prevailed in the United States.

What's wrong with Martin Feldstein's argument?

First, he defines national wealth based on real GDP per capita regardless of distributional effects. Biased and skewed away from distributed prosperity.

Secondly, he proposes no rigorous method for identifying causal factors, determining their relationships and priority of importance, and isolating confounding factors. Methodologically unsound.

Thirdly,  it is blatantly political. A view of economics is used to promote a political viewpoint. Ideology rather than science.

He knows better. Fail. A grade for persuasion based on ideology though. It even appeals to authority (Schumpeter). And Feldstein is also using his own authority to persuade.

Harvard Business Review
Why the U.S. Is Still Richer Than Every Other Large Country

Martin S. Feldstein | George F. Baker Professor of Economics at Harvard University, and the president emeritus of the National Bureau of Economic Research

Noah Smith — Want More Startups? Build a Better Safety Net

Good one. Another myth debunked.

It's about creating space and the right conditions for things to happen rather than relying on incentive.

This goes along with Mariana Mazzucato's entrepreneurial state. A safety net creates space and an entrepreneurial state creates the right conditions.

Bloomberg View
Want More Startups? Build a Better Safety Net

Noah Smith, contributor

Gallup Chairman and CEO — What recovery?

I've been reading a lot about a "recovering" economy. It was even trumpeted on Page 1 of The New York Times and Financial Times last week. 

I don't think it's true.

Gallup

The Invisible American

Jim Clifton | Chairman and CEO at Gallup

ht Zero Hedge

Chris Dillow — Uber vs coops

Although these points explain why a coop didn’t come up with Uber in the first place, they are consistent with the possibility that coops will displace it eventually.…

In a classic paper, William Nordhaus pointed out that the profits from innovative activity usually got competed away. The question for Uber, therefore, is: does it have what Warren Buffett called an economic moat – protection against competition**? Is first mover advantage really sufficient? I’m not sure. And I’m certainly not $62.5bn sure.

Coops have started slowly in the race against cyber-feudalism, but they might win in the end.

The takeaway of this post is that the ability to organize the basis of entrepreneurship. Groups of individuals are not as capable as individuals or teams. However, most firms can be managed cooperatively, so that is good reason to believe that down the road, the entrepreneur as middleman will be eliminated.

Stumbling and Mumbling
Uber vs coops
Chris Dillow | Investors Chronicle

Xinhua — Premier urges 'fertile soil' for innovation, entrepreneurship

Chinese Premier Li Keqiang has demanded "fertile soil" for innovation and entrepreneurship and called for more efforts to discover and support inventors.

He made the remarks in an instruction to the opening of the 7th national congress of the China Association of Inventions, praising the great inventions throughout Chinese history.

"Currently, China is pushing ahead with mass innovation and entrepreneurship under an innovation-fueled growth strategy, which is expected to unleash the great creativity of ordinary people," said Li.

Innovation can nurture new technologies, new industries and new business types to deliver sustained and healthy economic growth, said the premier.

Ecns.cn
Premier urges 'fertile soil' for innovation, entrepreneurship

Xinhua

Sam Calamine — The Founder of Dogfish Head on Flouting a 500-Year-Old Beer Law

There's a lot in here, not just a applicable to brewing bear commercially. It's about tradition and innovation.

Harvard Business Review — HBR Blog Network
The Founder of Dogfish Head on Flouting a 500-Year-Old Beer Law
Sam Calagione

Dean Baker — China Can Develop a Drug for Just 3 Percent the Cost in the United States

That would be an implication of research by Tufts University professor Joseph DiMasi. He found that it cost an average of $2.6 billion to develop a new drug in the United States. By contrast, the Wall Street Journal reported that a company in China developed a new cancer drug for just $70 million, less than 3 percent of DiMasi's estimate....

Beat the Press
China Can Develop a Drug for Just 3 Percent the Cost in the United States
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, DC

Roger Parloff — Peter Thiel disagrees with you

Good article on Peter Thiel at Fortune, with video.

… devaluing competition is a central theme of Thiel’s new book. He asserts that “capitalism and competition are opposites,” because “under perfect competition, all profits get competed away.” He exhorts entrepreneurs to seek out monopolies, concluding, “All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition.”

Absolutely. Capitalism is not about competition but competitive advantage.

To be successful as an entrepreneur in today's highly competitive environment, you either have to open up a new market, which is chancy and expensive, or else carve out a niche in an existing market that either invisible to competition or not really worth competing for since it is merely a niche that's not very scalable, making it relatively safe and inexpensive for the one who finds it to enter.

This is becoming more and more true as more and more the informal economy is being monetized and then corporatized. It's nearly impossible to compete against the big boyz that enjoy economies of scale and dominate entire industries. The old mom and pop stores have gone the way of the buggy-whip makers.

Another way is to develop a new product and then sell the company. I had an acquaintance who was an engineer for a large tech company. He proposed they develop and introduce a new product he had designed. They liked the idea and told him that they weren't really into startups but that they would fund him with venture capital and then buy the company when it grossing $250 million. He gladly took the deal.

But the article is about much more than this and is definitely worth a read to catch the flavor of where the next Andrew Carnegie and Steve Jobs are coming from.

Fortune
Peter Thiel disagrees with you
Roger Parloff

Derek Thompson — The Mysterious Death of Entrepreneurship in America

The story of American entrepreneurship begins with a tale of two definitions ofentrepreneur. When the press imagines the modern entrepreneur, our minds turn to tech—coders, hackers, hoodies, apps, Silicon Valley (the show), Silicon Valley (the valley). And it's true: This sliver of entrepreneurship has grown, by all sorts of measures, for example by venture-capital funding:

But researchers studying national entrepreneurship trends aren't caught staring at the tip of the iceberg. When they describe "declining business dynamism" (at Brookings) and steadily falling entrepreneurship (at BLS), they're looking at the whole block of ice. And it's melting.

The Atlantic
The Mysterious Death of Entrepreneurship in America
Derek Thompson

Mises on the four classes of people and the basis of the market society

"Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry. The pacemakers of this evolution were the ideas that created the institutional framework within which capital accumulation was rendered safe by the principle of private ownership of the means of production. Every step forward on the way toward prosperity is the effect of saving. The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.

"The entrepreneurs employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not-yet-satisfied wants of the consumers. Together with the technologists, intent upon perfecting the methods of processing, they play, next to the savers themselves, an active part in the course of events that is called economic progress. The rest of mankind profit from the activities of these three classes of pioneers. But whatever their own doings may be, they are only beneficiaries of changes to the emergence of which they did not contribute anything.

"The characteristic feature of the market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes—those saving, those investing the capital goods, and those elaborating new methods for the employment of capital goods—to the nonprogressive majority of people. Capital accumulation exceeding the increase in population raises, on the one hand, the marginal productivity of labor and, on the other hand, cheapens the products. The market process provides the common man with the opportunity to enjoy the fruits of other peoples's achievements. It forces the three progressive classes to serve the nonprogressive majority in the best possible way.

"Everybody is free to join the ranks of the three progressive classes of a capitalist society. These classes are not closed castes. Membership in them is not a privilege conferred on the individual by a higher authority or inherited from one's ancestors. These classes are not clubs, and the "ins" have no power to keep out any newcomer. What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power. The heir of a wealthy man enjoys a certain advantage as he starts under more favorable conditions than others. But his task in the rivalry of the market is not easier, but sometimes even more wearisome and less remunerative than that of a newcomer. He has to reorganize his inheritance in order to adjust it to the changes in market conditions. Thus, for instance, the problems that the heir of a railroad "empire" had to face were, in the last decades, certainly knottier than those encountered by the man who started from scratch in trucking or in air transportation.

"The popular philosophy of the common man misrepresents all these facts in the most lamentable way. As John Doe sees it, all those new industries that are supplying him with amenities unknown to his father came into being by some mythical agency called progress. Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity. If any man has to be credited with what John Doe considers as the rise in the productivity of labor, then it is the man on the assembly line. Unfortunately, in this sinful world there is exploitation of man by man. Business skims the cream and leaves, as the Communist Manifesto points out, to the creator of all good things, to the manual worker, not more than "he requires for his maintenance and for the propagation of his race." Consequently, "the modern worker, instead of rising with the progress of industry, sinks deeper and deeper.... He becomes a pauper, and pauperism develops more rapidly than population and wealth." The authors of this description of capitalistic industry are praised at universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with radio and television sets."

Ludwig von Mises

The Anti-Capitalist Mentality

Grove City, PA: Libertarian Press, originally published 1956, p. 31-33

(h/t Sandwichman at EconoSpeak)

Austin Frakt — Job lock: Entrepreneurship lock

The preponderance of evidence from the literature is that “entrepreneurship lock” exists, though there are varying estimates of its extent.

The Incidental Economist

Job lock: Entrepreneurship lock

Austin Frakt | Assistant Professor of Psychiatry at BostonUniversity School of Medicine, Assistant Professor of Health Policy and Management at Boston University School of Public Health. and a Health Economist with Health Care Financing & Economics, VA Boston Healthcare System
(h/t Brad DeLong)

Noah Smith — "Land of the brave" no more?

Noah Smith speculates on reasons for the decline in entrepreneurship in the US implying an increase in risk aversion. They are all correct in my view. 

What he leaves out is the tightening of bankruptcy law, the purpose of which is to offset consequences of failure in addition to providing recourse for creditors. Now it is skewed toward creditors thanks to creditors' lobbying efforts.

Another reason may be concentration of capital in dominant players, leaving only relatively minor niche markets available for modest startups. Before Walmart and the big box stores, and now Amazon and the Internet, it used to be less difficult to carve out a niche in retail, for instance.

Noahpinion

"Land of the brave" no more?
Noah Smith | Assistant Professor of Finance, Stony Brook University

Daniel Isenberg — Entrepreneurship Always Leads to Inequality

Isenberg asks, "So is inequality, when it is directly created by entrepreneurs, good or bad?"

The obvious answer is that some inequality is necessary as a incentive under capitalism but excessive inequality poisons the well. The knotty question is, how much? Once that is answered, how is the balance to be maintained?

What's required is a squeeze on wealth deemed to be excessive. Tax assets in addition to income to reduce wealth disparity and to provide a very generous tax credit for charitable contributions that are either endowments funding future spending, or are spent on immediately?

Harvard Business Review — HBR Blog Network
Entrepreneurship Always Leads to Inequality
Daniel Isenberg | Professor of Entrepreneurship Practice, Babson Executive Education

Klint Finley — Forget Mega-Corporations, Here’s The Mega-Network

Corporations are arguably more powerful today than ever before. But the economy isn’t dominated by a handful of megalithic conglomerates. it consists of hundreds or thousands of smaller, more specialized firms. Our cyberpunk future-present is dominated instead by a new power structure: the mega-network.

TechCrunch
Forget Mega-Corporations, Here’s The Mega-Network
Klint Finley
(h/t Lambert at Naked Capitalism)

INET — Mazzucato and Wray: Making Finance Work for Innovation (video)

This episode features Institute for New Economic Thinking grantees Mariana Mazzucato andRandall Wray, who are working together on an Institute grant on how to best finance the innovation we need in the 21st century.

Building on the seminal work of Joseph Schumpeter and Hyman Minsky, Institute for New Economic Thinking grantees Marianna Mazzucato and Randall Wray are bringing the disparate intellectual traditions of finance and innovation together in the search for insights about how finance might better serve the purpose of capital development. A key question in their exploration is whether financial innovations support value creation in the real economy or if they extract value from the real (productive) economy and, as a result, undermine the value creation and capital development process.

Wray and Mazzucato both have unique career trajectories for an economist. Wray came to economics relatively late in his academic career after studying psychology as an undergraduate, and Mazzucato studied history before finding the discipline. These diverse backgrounds have a strong influence on their research, as both Wray and Mazzucato approach economics as outsiders. Specifically, Wray’s perspective is informed by Minsky’s work on money and finance, while Mazzucato’s view is deeply influenced by Schumpeter’s thinking on innovation.

Together, they offer a unique perspective on the economics of innovation and on how well the financial sector is serving society. Is finance engaged in "creative destruction" or is it's speculation really a case of "destructive creation?" Watch the interview to see what they have to say!

INET
Mazzucato and Wray: Making Finance Work for Innovation (video)
L. Randall Wray | Professor of Economics, UMKC and Mariana Mazzucato, RM Phillips Professor of Science and Technology at the University of Sussex

So much for the myth that MMT downplays the role of private investment in the economy.

Peter Radford — Human capital – The knowledge dimension

People like Tyler Cowan, for example, predict a diminished trajectory for GDP growth because our economy is not innovating as well as it once did. According to Cowan, our latest inventions have a far smaller impact on future wealth creation than did those of a century ago. This conclusion feeds into his standard right wing cry for freeing up enterprise and the reduction of social entitlement programs. He says we cannot afford those programs because of the diminished future, and if we want to move the growth curve back upwards we need to reduce government controls.

But my narrative produces a different interpretation: the cause of our diminished future resides in the private sector’s single minded pursuit of profit being extracted from efficiency rather than from innovation. We have succeeded mightily in squeezing profits from our current set of ideas. But at the cost of thinking about and finding the innovations that build the future.
We have become overly bureaucratic, technocratic, and reliant on primary knowledge.

I think the Golden Age of Human Capital is yet to come. The age of problem solving, that is. Not the age of rote learning.

Real-World Economics Review Blog
Human capital – The knowledge dimension
Peter Radford

Peter Radford's analysis is interesting to compare with Joseph Schumpeter in Capitalism, Socialism and Democracy. Schumpeter saw the failure of capitalism based on economic liberalism and its replacement by social democracy as coming from the decline of entrepreneurship and innovation. His work is dated in that the context and changed greatly so the path that Schumpeter predicted based on then current trend has shifted considerably.

The path that Peter Radford describes is characterized by a push for efficiency and cost-cutting over innovation and entrepreneurship. This has become the driving force in US business. While Radford foresees a resurgence of innovation and entrepreneurship, the evidence is thin. Instead what we are seeing is the social reaction that Schumpter foresaw, but for different reasons. 

It is not government responding to popular desire that is causing the shift away from innovation and entrepreneurship, but rather it is the current business model based on efficiency that is resulting in social unrest and a call for greater social democracy to deal with the effects of inequality, which the wealthy and powerful brush off as class envy if they are even aware of it, being isolated in a bubble.

Ram Charan — Why the South Will Lead in the Global Tilt

The global tilt is an irreversible shift of economic power from North to South: from the U.S., Europe, and Japan in the Northern hemisphere to China, India, Brazil, Indonesia, Malaysia and other countries mostly in the Southern hemisphere. The center of gravity for jobs, wealth, and market opportunities is moving, disrupting the world economic order as we have known it.

Fluid capital, mobile communications, and an expanding global middle class all contribute to the global tilt, but the human factor is also a powerful driver. Along with a newly enriched investment class, business leaders in the South are on the move, tapping into the readily available funding and expertise they need to grow, and scaling up fast to grab once-in-a-lifetime opportunities. The empires they are building could rival those created in the nineteenth-century by the likes of Cornelius Vanderbilt, J. P. Morgan, Andrew Carnegie, and John D. Rockefeller.

Harvard Business Review — HBR Blog Network
Why the South Will Lead in the Global Tilt
Ram Charan

Michel Bauwens — The emerging gig economy and the scenario of distributed capitalism

“Tina Brown, editor of The Daily Beast, recently christened today’s job market as the “gig economy.” Her point is that fewer people seem to have full-time jobs; instead they have contract gigs. Being a freelancer or contract worker may actually be a practical way to survive this recession. It could also lead to new entrepreneurial vistas.*“

P2P Foundation
The emerging gig economy and the scenario of distributed capitalism
Michel Bauwens

FORBES estimates the revenue flowing through the share economy directly into people’s wallets will surpass $3.5 billion this year, with growth exceeding 25%. At that rate peer-to-peer sharing is moving from an income boost in a stagnant wage market into a disruptive economic force.” 

Meet the Visionary Venture Capitalist Who's Inspired by Marx and Keynes: Lynn Parramore interviews William Janeway

William Janeway is no ordinary businessman. In his view, waste can be good, efficiency is the enemy of innovation, and government investment builds the platform on which venture capitalists and entrepreneurs can “dance.” A Cambridge-educated economist whose career as a venture capital investor has spanned four decades, Janeway has been called a “theorist-practitioner” by the great Hyman Minsky. As an investor, he built and led the Warburg Pincus Technology Investment team that provided financial backing to some of the companies that sparked the Internet economy. 

Janeway’s new book, Doing Capitalism in the Innovation Economy, reveals how the state, the market economy, and financial capitalism work together to create innovative technologies. As he sees it, innovation has stalled in America, and it’s time to get it up and running again, particularly in critical areas like clean tech/green tech that can help us fight climate change. Somewhat unusual among highly successful businessman, Janeway draws lessons not from Milton Friedman and Friedrich Hayek, but from Karl Marx, John Maynard Keynes and Joseph Schumpeter. He believes that if we can break free of the fetters of neoclassical economic theory, the U.S. can lead the way in innovation and provide more of the things that make for a good life for all.

AltertNet
Meet the Visionary Venture Capitalist Who's Inspired by Marx and Keynes
Lynn Stuart Parramore