Kenneth Rogoff, a professor of economics at Harvard University, wrote an article (see below) about internet entrepreneur and political activist Peter Thiel collaborating with former world chess champion Garry Kasparov on the subject of their new book covering the collapse of advanced-country growth and their proposed remedy with innovation policy.
Given the passion I have for straightening out our economy, yet without having read the book, I’ll add my snappy interpretation to the article nonetheless.
Kenneth writes that Thiel and Kasparov propose that innovation policy is bound to save us. An interesting but implausible notion, given that a free-market should not need the policy to align the demand for innovation with its supply. Doesn’t the need for an innovation policy exemplify we do not have a self-governing free-market model?
So, here is my rebuttal:
No, Thiel is wrong. The real problem is that we have deployed Neanderthal economics for too long. And non-renewable economics that are in blatant violation of free-market principles turn by definition every asset subprime.
Let’s take technology innovation for example. Why do we expect to generate outlier value and returns from innovation if the arbitrage of innovation (venture capital) is steeped in 10 levels of bottom-heavy diversification and a morass of investor socialism. Investor socialism is incompatible with finding outliers simply because socialism and innovation are. So, it is not our entrepreneurial assets we need to question, but the economics of its arbitrage.
I agree we are in deep trouble, but not because of our purported inability to produce innovation. The problem of innovation is its arbitrage. Exactly the arbitrage Peter Thiel is responsible for deploying, so why does he need a policy? Maybe because the arbitrage of innovation is held to different economic principles than production. Perhaps because we as entrepreneurs are not as free as we think?
Bad times are ahead because of our economic ignorance. If you are on the production side of innovation, you should have nothing to worry about. Because unlike your arbitrage, you know how to reinvent yourself. We are in trouble because of the buffoons we elect as “leaders” cannot build systems of human excellence for the life of them.
[Kenneth’s article appears here]