Meaning, when the theory of innovation arbitrage is broken (as I explained in The first-ever State of Venture Capital, as valid today as in 2010), what can be discovered (as innovation) is inevitably broken. The waste of human intellect dedicated to producing advertising clicks (to aid corporate propaganda) is just one of those dumb humanitarian outcomes. I have got much more where this comes from, so don’t tempt me.
First, venture capital is one of the most opulent violators of freedom our country pretends to stand for. It violates the most fundamental principles of freedom one openly can conjure up, and worse, it breaks some of the very rules investors in public companies are bound by with all the dirty infractions of good sense and morality that comes with it. So much for deploying the trust instilled in a laissez-faire system without the necessary verification.
Second, the playground of innovation arbitrage steeped in (ten levels of bottom-heavy) collusion and risk diversification and fragmentation turned the initial pursuit of investing in prime innovation 20 years ago into a populist subprime business of private equity stock trading to greater-fools, thereby deflating the risk needed to attract outliers of innovation. So much so that now every person with more neural matter than a monkey, coddled by the enthusiastic and self-aggrandizing pageantry of positivity, believes they can be an entrepreneur breaking the norm set before him/her.
My point here is that neither the VC nor the entrepreneur is more malicious than they usually would be in their pursuit to make money. Still, they are both parts of a subprime dance induced by a silly operating-system of humanity that invites malpractice to fester, and that in the end yields only pyrrhic victories to society.
Kind of like playing a game of soccer in which none of the rules of the game are explained and enforced. Would you be surprised when some of the players pick up the ball with their hands? Would you be surprised eventually fewer soccer fans will be paying to sit on the bleachers? Do you still care who wins?
So: hate the game, don’t hate the players. We can and must change the name of the game to produce better outcomes and breed better actors, which means we must deploy principles that hold the purpose of the game to account.
Mind you: the problems we face in the arbitrage of technology innovation are identical to the issues found in other manmade systems, I discovered, yet have merely surfaced more quickly due to technology’s broad, immediate and rather unscrupulous adoption.
To improve the behavior of the players means all we need to do is to change (and enforce) the name (and the rules) of the game as we do in soccer.