
The hypocrisy in Silicon Valley's big talk on innovation - coloneltcb
http://www.sfgate.com/technology/dotcommentary/article/Innovation-and-the-face-of-capitalism-4342160.php
======
rayiner
"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).

[1]
[http://en.wikipedia.org/wiki/AI_winter#DARPA.27s_funding_cut...](http://en.wikipedia.org/wiki/AI_winter#DARPA.27s_funding_cuts_of_the_early_.2770s)

~~~
hencq
The article makes that exact point:

> 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.

~~~
dreamdu5t
Thats not true. There was no long view government plan to create what we now
call the Internet.

~~~
rayiner
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.

~~~
samstave
DARPA is amazing, at least for their history and what has come from them.

Dies any other country have a DARPA equivalent? Or, more specifically, did any
other country have a DARPA equivalent 40+ years ago?

~~~
rayiner
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.

------
pg
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?

~~~
jacoblyles
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.

~~~
pg
_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."

~~~
pessimizer
They may be prejudices, but I don't think that they're unexamined.

------
fl3tch
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.

~~~
jjsz
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.

~~~
eldavido
I think you're talking about Brave New World by Huxley?

~~~
jjsz
Yes, that book! Thank you!

------
mgkimsal
"Time to drop the pretense"

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?

------
kmfrk
Evgeny Morozov wrote a must-read book review that deals with this bloviating
mentality: <http://bookforum.com/inprint/019_05/10825>.

Can't wait to read his upcoming book on the subject.

~~~
pron
Thanks.

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.'

~~~
kmfrk
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.

Gotta juke them stats.

~~~
pron
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.

------
BummerCloud
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."

[http://www.wired.com/business/2013/02/mf-clayton-
christensen...](http://www.wired.com/business/2013/02/mf-clayton-christensen-
wants-to-transform-capitalism/all/)

------
pbreit
Author could have mentioned that Tesla and SpaceX received sizable government
funding.

------
csomar
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._

------
jacoblyles
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.

------
kevinalexbrown
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?

[0](<http://invo.northwestern.edu/about>) [1](<http://cd2.northwestern.edu/>)

~~~
robomartin
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.

~~~
unclebucknasty
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.

~~~
RougeFemme
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.

~~~
unclebucknasty
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.

~~~
robomartin
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.

Well, except for China.

~~~
Retric
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.

~~~
robomartin
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.

~~~
Retric
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.

------
a_p
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."

[1] <http://www.dwheeler.com/innovation/innovation.html>

[2] <https://lwn.net/Articles/445687/>

~~~
ahoyhere
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.

------
DanielBMarkham
"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.

~~~
timr
_"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.

~~~
yummyfajitas
_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.

~~~
erichocean
_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.

~~~
timr
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.

~~~
mattgreenrocks
Where is the research? I want to work in it, but every company in this 'hot'
industry is too enamored with cranking out disposable apps.

~~~
timr
That's my point: there isn't much going on.

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.

~~~
yummyfajitas
_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.

------
NoPiece
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.

~~~
gnosis
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).

[1] -
[https://en.wikipedia.org/wiki/List_of_unsolved_problems_in_p...](https://en.wikipedia.org/wiki/List_of_unsolved_problems_in_physics)

[2] -
[https://en.wikipedia.org/wiki/Unsolved_problems_in_mathemati...](https://en.wikipedia.org/wiki/Unsolved_problems_in_mathematics)

------
DaniFong
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.

\---

I would welcome any hard _data_ to the contrary.

~~~
eli_gottlieb
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.

~~~
harryh
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.

~~~
eli_gottlieb
_What do you wish you could do that you can't?_

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.

~~~
akiselev
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)

~~~
eli_gottlieb
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.

~~~
akiselev
I wasn't aware that was a big problem in infrastructure. Thank you for the
info.

Perhaps a drop in the other costs could help cover the cost of acquiring land
rights and permits?

------
31reasons
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.

~~~
pbiggar
Anyone building those companies - as of about 6 month ago - are going to be in
trouble anyway.

------
buss
> 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>

------
shmerl
To boost innovation US needs to abolish software patents and significantly
rework the whole sick patent system.

------
pastaking
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.

------
Cardeck1
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.

------
redwood
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.

------
tyang
This article stirs the pot but is flawed.

Low hanging fruit gone?

Proof?

And how is that relevant?

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.

And stop whining. :)

------
ohwp
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.

------
RougeFemme
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.

------
ghaff
I'd encourage anyone interested in this topic to also check out the cover
story from Technology Review a few months back: "Why we can't solve big
problems." [http://www.technologyreview.com/featuredstory/429690/why-
we-...](http://www.technologyreview.com/featuredstory/429690/why-we-cant-
solve-big-problems/)

It touches on issues with the VC investment model but brings in a lot more as
well.

------
stretchwithme
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.

------
snambi
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.

------
jenkinsj
I very similar view on advertising was expressed by David Copeland not to long
ago. <http://news.ycombinator.com/item?id=2832538>

------
SqMafia
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.

------
frozenport
Silicon Valley has shifted from hardware to software, this is the real story.
New hardware matches our understanding of innovation significantly more than
software.

------
graycat
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.

------
michaelochurch
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.

~~~
te_chris
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.

~~~
michaelochurch
_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.

~~~
bokonist
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.)

~~~
philwelch
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.

~~~
bokonist
"Let [us] not use FDIC as a crowbar"

Who's "us"? I don't work for or have any power over the government or FDIC.

~~~
philwelch
You're not a citizen?

~~~
bokonist
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.

~~~
philwelch
Instead of parsing my imprecise usage of the word "let's", can you address my
actual point?

~~~
bokonist
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.

~~~
philwelch
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?

~~~
bokonist
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.

------
OGinparadise
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

~~~
saraid216
I keep hearing about self-driving cars...

~~~
OGinparadise
Oh, you must've heard about BMW, Audi and other car manufacturers that can't
match Google's PR machine [http://www.nydailynews.com/autos/making-self-
driving-cars-ev...](http://www.nydailynews.com/autos/making-self-driving-cars-
everyday-reality-article-1.1251048)

~~~
saraid216
I've heard about them, too, but when I find the relevance of your point, I'll
drop you a line.

------
andyl
"Silicon Valley loves to talk big about innovation; it's just not as good at
following through."

BS. Computing, Networking, Biotech, Internet, and more. Silicon Valley has
delivered, and there is more to come.

Not every new investment is going to change the world. But collectively, the
track record is very strong.

~~~
trotsky
do you really believe those things were created in or by silicon valley?

Even beyond their public pasts, their early private champions like Bell Labs,
BBN and IBM weren't from california nor private equity backed.

~~~
rayiner
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.

~~~
joonix
IBM Watson is IMO a huge embarrassment for SV.

------
sultezdukes
"The hypocrisy in Silicon Valley's big talk on innovation"

Wrong title. It's "I, James Temple, have a different political philosophy than
these guys".

