

China Frets: Innovators Stymied Here - shaurya
http://online.wsj.com/article/SB10001424052970203476804576617251769164740.html?mod=rss_about_china

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justincormack
It is worth reading Krugman's 1994 argument that the Asian miracle (unlike the
earlier Japanese one) is purely capital based, not productivity based.

[http://media.ft.com/cms/b8268ffe-7572-11db-
aea1-0000779e2340...](http://media.ft.com/cms/b8268ffe-7572-11db-
aea1-0000779e2340.pdf)

~~~
learc83
Thanks, for posting that. I've never really like Krugman all that much, but he
successfully put to paper, what my intuition has always told me about China's
rapid growth. Even more remarkable considering he wasn't really talking about
China, and it was written 2 decades ago.

~~~
dereg
Paul Krugman, in the 90s, was brilliant. Unfortunately, I think realized that
greater fame, influence, and wealth comes from partisan hackery. He still has
important thoughts to share, but his signal/noise ratio has degraded.

~~~
trevelyan
Is there even a single piece of his you can cite in support of this? Seems
mindless to attack the man as a partisan hack considering he is one of the
more critical voices attacking the Obama administration for its lack of fiscal
policy and ongoing banking bailouts.

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drieddust
Asians are slowly realizing that culture of conformity is not going to work
anymore.

~~~
Volpe
They are? That's why they are the ones holding all the money while the "non-
conformers" drown in debt.

~~~
jerf
No, they're drowning in debt issues too. Google "China debt" and you'll get an
earful, one example: [http://www.thedailybeast.com/articles/2011/08/23/why-
china-s...](http://www.thedailybeast.com/articles/2011/08/23/why-china-s-debt-
problems-are-worse-than-america-s.html) If you don't like that one pick your
own.

Nobody got out of the last decade unscathed, China just covered it up better.
Nobody's getting out of this one unscathed, either.

~~~
Volpe
I'm not saying they don't have debt, but they have consistently posted
positive growth throughout the financial crisis, whilst maintaining a GDP debt
percentage of < 20%. U.S has been in recession, and it's debt percentage is >
60%...

Sensationalist news articles that quote unknown economic groups are hardly a
'source of truth'. I'll stick with the officially reported numbers (from the
IMF[1]) until someone successfully proves they are false.

[1]
[http://en.wikipedia.org/wiki/List_of_sovereign_states_by_pub...](http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt)

~~~
jerf
The key word in your reply is "posted". The evidence that China is lying
through their teeth isn't exactly hard to come by. I'll believe they're a
shining economic star whose brilliant management of the debt crisis has
allowed them to escape unscathed if they can survive the next three or four
years without a major crisis, caused by dodgy numbers, poor lending practices,
and amazingly bad mismanagement of resources, the evidence of which is staring
anybody in the face who isn't so besotted by an ideology in which China must
be better than the US that they have been rendered incapable of seeing it.

Ah, how we fail to learn from history. It isn't as if we don't have decades of
experience pointing out how "Communist government" and "gamed economic
numbers" go together like chocolate and peanut butter. Remember how the USSR
was a raging economic lion that was going to "bury us" through their amazingly
productive economic practices and we were doomed, doomed, doomed before their
mighty centralized economic might, until it was revealed that they were
basically a third-world country with nukes and a credulous Western
cheerleading squad? Maybe not, maybe you're too young, but I'd suggest
spending some time with that chunk of history. It has a lot to say about China
today. Way more than the credulous cheerleading squad would like to admit.

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gurkendoktor
> "It's not that Chinese are not smart or don't have the potential. Look at
> Jerry Yang of Yahoo Inc. and Steve Chen of YouTube," he said, referring to
> the two Internet entrepreneurs who were both born in Taiwan and migrated to
> the U.S. at young ages.

This quotation is put into a weird context in the article. I guess what Kai-Fu
Lee is saying is that ethnic/cultural Chinese have potential. But much of the
article is about the political and economic framework of China as the country,
and there is a difference between China and Taiwan IMHO. Arguably, it was not
as big when Yang and Chen emigrated, but it muddles the point a bit.

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SoftwareMaven
As someone who is very conflicted about the IP laws in the US, it is
interesting how many of the comments focus on the problems no IP protection
causes.

~~~
lambdasquirrel
Well there's subtle but important differences between patents in general, and
patents as they have been abused regarding software.

There's also copyright and trade secrets. Namely, if someone swipes your code
here in the US, and you can prove it, it's considered pretty trivial to bring
them to court. This apparently not the case in China.

My take on software patents is that they aren't analogous to real-world
engineering patents, for, say, a BMW engine. The analogy from BMW engine
patents to software is more like copyright on the code itself. Software
patents as they are now seem more like business process patents.

~~~
sliverstorm
Spot-on. In the general case, patents do appear to serve their purpose in the
US. It is not a perfect system, (see: software patents) but it is without a
doubt superior to a total lack of IP protection.

~~~
dantheman
How is it without a doubt superior? There are cases where innovation only
takes off after the patent has expired. We don't know what the world would
look like without IP protection, it may be better it may be worse but we just
don't know.

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rogerjin
The greatest innovator (IMO) of China is Jack Ma from Alibaba Group
en.wikipedia.org/wiki/Jack_Ma

~~~
fraserharris
I would hope that no one here needs a link to Jack Ma.

As an added contribution, there is a well reasoned theory that Alibaba will
use Yahoo as a platform to destroy Ebay:
[http://ebaystrategies.blogs.com/ebay_strategies/2011/10/coul...](http://ebaystrategies.blogs.com/ebay_strategies/2011/10/could-
ebays-worst-nightmare-be-happening-soon-.html)

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Volpe
This article doesn't even mention Wang Chuanfu (王传福)?

Owner/Founder of BYD which is a pioneer in battery technology, expanding into
cars and electronics, it's is not too disimilar from Apple (in a business
sense, different industry).

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thinkcomp
This is certainly true, but innovators are stymied in good old California as
well. Try tackling a serious problem, such as finance, and you'll find that
your innovation breaks a recently passed law. That won't stop someone in
Shanghai from copying your work, though.

<http://www.1jton.com> = <http://www.facecash.com>

So who's innovating now?

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jessedhillon
This is a simplistic view. The law -- which requires payment processors to
have some large sum of money, $500k I think, in the bank -- doesn't prevent
innovation. There are still plenty of innovators in the payments space. What
you don't have is a space frothing with activity and losing the public's money
in fly-by-night schemes run by college sophomores. This sort of thing is what
the law aims to prevent.

It's not anywhere close to the situation in China.

Serious problems _are_ being challenged here in CA and in the US at large. I'm
sorry you decided to shut down your startup in CA to protest the law. However,
it is not the situation that the entire startup scene is defunct, or that
we're hurtling headlong into an authoritarian regime a la China.

~~~
thinkcomp
Not quite. Yours is a simplistic interpretation of a complex problem.

The problem is that the large sum of money is not $500K, which is the amount
written in the statute, or $500K "in the bank," which is different from $500K
in net assets. It's some other much higher number that isn't in writing and is
completely up to a single bureaucrat's discretion. (See
[http://www.americanbanker.com/issues/176_126/think-
computer-...](http://www.americanbanker.com/issues/176_126/think-computer-
mobile-payments-california-1039623-1.html). "A department spokeswoman says the
actual amount needed is 'more than $1 million.'" I was told in person that the
number is between $1 million and $80 million.) Even the Senior Counsel for the
California DFI admitted that this dynamic reminded him of an authoritarian
regime--but he's powerless to change it.

I didn't "decide" to shut down my startup to protest a law. The law shut down
the startup.

Corruption in the United States looks different than it does in other
countries. In other countries bribes are overt and expected. In the United
States bribes are written into the law to serve an upper class that prices
legal services out of most people's reach.

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jessedhillon
I also have researched requirements for becoming a licensed money transmitter,
while considering starting a payments solution. From looking over your website
and your company's topic in Quora, you are clearly more educated in this than
I am.

However, from what I know, I believe that you are mischaracterizing the law.
Perhaps this is because you feel that you have been victimized by a
bureaucratic process. If what you say here and elsewhere is true, I think that
it should have been possible to reach a solution that both satisfies the law
and allows you to continue doing business.

It's very surprising that, in so many places across the web, you have been
unable or unwilling to vocalize the possibility that the law has a legitimate
intent. Even the language you use to describe your company's lack of presence
in CA is misleading:

 _The California Money Transmission Act has forced this merchant to stop
accepting FaceCash payments. You can still pay with other payment methods._

No. You have decided not to comply with the law because you object to its
passing, to the entities you perceive to be backing the law, to its
constitutionality, and to its implementation.

As evidenced by the fact that other startups do tackle the payments space, and
will in the future, we can conclude that the situation has more to do with you
than with the Act.

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thinkcomp
You're right: I do object to the law's passing, to the entities that have been
_documented_ to be backing the law (see
[http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_2751-2800/ab...](http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_2751-2800/ab_2789_cfa_20100628_154447_sen_comm.html);
the members of The Money Services Round Table are clarified at
[http://www.federalreserve.gov/SECRS/2006/August/20060829/R-1...](http://www.federalreserve.gov/SECRS/2006/August/20060829/R-1258/R-1258_11_1.pdf)),
to its constitutionality, and to its implementation. That doesn't mean that I
"have decided not to comply with the law," which is quite a charge to levy.

Just to compare notes, I'd like to see your list of startups that have applied
for and are licensed under the California Money Transmission Act. As far as I
can tell, based on the DFI's monthly summaries (see
<http://dfi.ca.gov/publications/summaries/>), one startup (Venmo) has applied,
and zero startups have licenses to date. This is now ten months after the law
went into effect.

As for the law's intent, the statute claims that it's "consumer protection." I
doubt anyone who claims that a money transmitter needs $1 million to $80
million of net worth and $750,000 of surety bonds in order to safely transmit
$1.

Good luck with your startup. You should do some more research. Right now you
sound like an apologist for multi-billion dollar financial corporations.

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hahaonlysirius
Let's be clear: the multi-billion dollar financial corporations didn't shut
you down. The state did. They're the ones with the guns.

~~~
zizee
The financial corporations are the ones with the lobbyists.

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hahaonlysirius
Personally, I would rather be lobbied than shot.

