Doing Capitalism in the Innovation Economy: Markets, Speculation and the State

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Overview

The innovation economy begins with discovery and culminates in speculation. Over some 250 years, economic growth has been driven by successive processes of trial and error: upstream exercises in research and invention and downstream experiments in exploiting the new economic space opened by innovation. Drawing on his professional experiences, William H. Janeway provides an accessible pathway for readers to appreciate the dynamics of the innovation economy. He combines personal reflections from a career spanning forty years in venture capital, with the development of an original theory of the role of asset bubbles in financing technological innovation and of the role of the state in playing an enabling role in the innovation process. Today, with the state frozen as an economic actor and access to the public equity markets only open to a minority, the innovation economy is stalled; learning the lessons from this book will contribute to its renewal.

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Editorial Reviews

Publishers Weekly
Consumers measure the economy's strength by the things that affect them most, including job security, prices for staples like food and gas, and home values. As the Warburg Pincus Technology Investment team's director, Janeway aims this economic treatise at financial professionals, like himself, who shape consumers' economic life while assessing the economy very differently. Drawing on 40 years of experience in venture capital, Janeway breaks the "Innovation Economy" down into three abstract components: the state, defined by its coercive power over the market; the market economy, comprised of "institutions that enable the production and exchange of goods and services"; and financial capitalism, dubbed "discontinuous opportunism." The book's first half relates the many changes he has witnessed on Wall Street, from the advent of the computer, to the resurgence of IPOs, to the explosion in venture capital. The second half advises investors on accessing opportunity. Seeking to promote understanding of how bubbles work in the economy, Janeway offers detailed accounts of several incidents from history, emphasizing the role of the state. This dense tome will find its ideal audience among the market-savvy.
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From the Publisher
Named one of the "Best Economics Books of the Year" by The Financial Times.

"A rewarding memoir about the learning, training and life experience required to achieve mastery in the venture economy." - Kirkus Reviews

"Bill Janeway, a key creator of modern venture capital, tells the amazing story of the intersection of economics and innovation. This book is essential to anyone who wants to understand technology and how its creation will be financed for decades to come." - Marc Andreessen, co-creator of the Internet browser, co-founder of Netscape and Andreessen Horowitz

"This is a masterful historical and conceptual analysis of the Three Player Game between the state, private entrepreneurial innovation and financial capitalism. The state has a key role in funding scientific research that leads to innovation. Amply funded by financial capitalism, innovation is a source of long term growth. But speculative funding of innovation is also associated with asset and credit bubbles that end up in financial crashes. A Minsky-inspired synthesis of the financial excesses of Schumpeterian creative destruction, this book should be required reading for all." - Nouriel Roubini, Professor of Economics at New York University and Chairman of Roubini Global Economics

"A revelatory exploration of the complex dynamics underlying the innovation economy and the inherent roles of speculation and waste as experienced by one of the great venture capitalists and political/economic thinkers of our age. This book provides a powerful framework for dealing with the economic challenges we are facing today. It couldn't have come at a better time!" - John Seely Brown, Former Chief Scientist of Xerox Corp and Director of its Palo Alto Research Center (PARC)

"Janeway applies keen insights from his experience as a venture capitalist and creates a vision of the interaction between governments, financiers, and firms that shows what institutions society must develop to foster innovation. I believe that Doing Capitalism will help all of us, whether academics, private sector leaders, or government officials, to see beyond shallow political dogma and move to a deeper understanding of challenges of technological advance." - George Soros, Chairman of Soros Fund Management

" [. . .] a tour de force with a solid thesis, excellent writing and exposition, and a history that too many have forgotten . . . or never knew. Brilliant!" - John C. Bogle, Founder of Vanguard Funds

Kirkus Reviews
A rewarding memoir about the learning, training and life experience required to achieve mastery in the venture economy. Warburg Pincus senior advisor Janeway debuts with this account of the implications of relatively less-discussed aspects of the economic theories of John Maynard Keynes, including his interest in investment and speculation and views of the fallibility of human judgment. The author reviews several main strands in the development of contemporary economic theory and shows where their advocates have gone off the rails or worse. His frame is provided by what he calls "three sets of continuous, reciprocal, interdependent games played between the state, the market economy and financial capitalism." Janeway asserts that modern market orthodoxies are absolutely wrong, that there is no such thing as a hedge for any investments, that bubbles have beneficial effects as well as unpleasant ones, and that "cash and control," not debt, are key at all levels to offset the dangers of illiquidity crises. The author's own career provides the context for a much broader discussion of the history of scientific and technological innovation in relation to the development of market-based economies. He shows that only the state can sponsor the outcome-independent commitment to basic science that makes economic innovation possible, but which also requires investment best mobilized through stock markets. Interestingly, Janeway argues that what became known in the 19th century as the "American System," associated with Alexander Hamilton, remains the most effective political organization for the three-player game. A well-written, occasionally humorous book most appropriate for specialists but useful for general readers as well.
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Product Details

  • ISBN-13: 9781107031258
  • Publisher: Cambridge University Press
  • Publication date: 10/8/2012
  • Pages: 344
  • Sales rank: 593,704
  • Product dimensions: 6.30 (w) x 9.10 (h) x 1.00 (d)

Meet the Author

William H. Janeway has been an active venture capital investor for forty years. In particular, he built and led the Warburg Pincus Technology Investment team that provided the financial backing to a series of companies which made critical contributions to building the internet economy. He received his PhD in Economics from the University of Cambridge, where he founded the Cambridge Endowment for Research in Finance, and is a Teaching Visitor in the Princeton University Economics Department. He is a member of the Board of the Social Science Research Council and of the Institute for New Economic Thinking. In September 2012 he was granted the honorary honour of Commander of the Order of the British Empire (CBE) by HM the Queen 'for services to education in support of Cambridge University and to UK/US relations'.

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Table of Contents

Introduction; Part I. Learning the Game: 1. Apprenticeship; 2. Discovering computers; 3. Investing in ignorance; Part II. Playing the Game: 4. The financial agent; 5. The road to BEA; 6. Apotheosis; Part III. Understanding the Game: The Role of Bubbles: 7. The banality of bubbles; 8. Explaining bubbles; 9. The necessity of bubbles; Part IV. Understanding the Game: The Role of the State: 10. Where Is the state?; 11. 'The failure of market failure'; 12. Tolerating waste.

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