Get Rid Of ‘Innovation Ecosystems’

To say ‘business ecosystem’ or ‘innovation ecosystem’ is to commit the teleological fallacy...

Asia’s Technology-Driven Futures

KAIST International Forum on Asia’s Futures, Session 2 Seoul, December 13, 2018 I thank...

The Globalization Paradox

Though it would seem that only global cooperation can solve global environmental problems, globalization...

When The Missionaries Of Neoliberal Economics Knock, Bar The Door

The Foundation for Economic Education, with the inevitable acronym FEE, aims to “promote new...

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Fred PhillipsRSS Feed of this column.

After a dozen years as a market research executive, Fred Phillips was professor, dean, and vice provost at a variety of universities in the US, Europe, and South America. He is now Professor at University... Read More »


Three reasons why government can look less efficient than it really is:

1. Cherry-picking in privatization. Let’s suppose we could rank government agencies or services in descending order of productivity: 1, 2, 3, and so on, with agency 1 being the most efficient and productive. As a reality check, let’s note that such a ranking is indeed possible, in a rough way.

1. Thou shalt not
screw thine early adopters. They made thou what thou art, even showing patience with thine inattention to upward compatibility. Yea, though they paid high early prices, thou hast refused them free upgrades. Now as they glance at their boxes of obsolete connectors, power sources, software and disk drives, they plan to make their next purchases from thine upstart competitor.
Prior to World War II and dating back to the 1890s, the phrases “social technology” and “social engineering” carried strong connotations of central planning. This became particularly true in the Soviet Union, where the terms appeared in various tracts.

I started a new job this spring. After a long search in a tough market, I landed my dream job as a senior professor and administrator at a top research university – a university that did not retain a headhunter for its search.

Talks at other schools had progressed to first or second interviews before fizzling, and they fizzled due to the ineptitude of the universities’ search firms. The headhunters deserve a whipping, and this column administers ten lashes.
I make the case for replacing business executives with robots.*† This is no smart-ass slur on the intellects of executives. A transformation of business soon will be upon us. In the transformed enterprises, robots will take on more and more business decisions. Humans will retain a smaller but still crucially important role.

The argument involves ‘real options’ and ‘agency theory.’ Explaining them is simple, though lengthy. So let’s get started, using an illustrative example:
An opportunity requires Rineu Corporation to invest $10,000 now, with an assured first-year cash flow of $6,000. The second-year cash flow is uncertain with a 50-50 chance of either a $15,000 gain or a $5,000 loss.

For innovative and high-tech startups that need financing, a worldwide drought is in the offing.

Coming shortage of equity investment

The Global Entrepreneurship Monitor reports a surge in early-stage entrepreneurial activity worldwide in 2011. Over 12 percent of US adults started a business in that year, compared to less than 8 percent in 2010. Entrepreneurship increased in three fourths of the developed countries GEM studied. Even in China and other countries where entrepreneurship was already high, entrepreneurial participation jumped 25% in 2011 [Klein].

Some reports show US venture capital funding 22 percent above 2010 levels [Bigelow]. Other news stories paint the Austin VC market as hot. And yet...