7 ms·

A Capitalist’s Dilemma, Whoever Wins the Election

70 points by iProject 14y ago

richcollins 14y ago
It’s as if our leaders in Washington, all highly credentialed, are standing on a beach holding their fire hoses full open, pouring more capital into an ocean of capital. We are trying to solve the wrong problem. Perhaps this is the cause of the problem and not just a poor solution to the problem.
- dmix 14y ago
  Indeed, what if the prevailing Keynesian economic theory is in fact making things worse. At what point can we determine it's not helping? > The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism.
  - te_chris 14y ago
    I thought Keynesian economics was about fiscal, not monetary stimulus like what the fed is doing? From my understanding you're confusing the two.
    - deleted 14y ago
      [deleted]
    - dmix 14y ago
      Fair point, Keynesian monetary policy is focused on lowering interest rates and not necessarily increasing banking reserves. But lowering interest rates is still a form monetary stimulus (which is currently being employed by the fed) and is a means to inject capital into the economy.
- 001sky 14y ago
  One issue people continually fail to grasp is that low rates are setting a low bar for capital investment. The result is shitty assets/investments/businesses.[1] People will only jump as high as the bar requires. Think of the analogy of your Kid: Would you set the bar low and expect the kid to excel and get into Stanford? No. Thats now how it works. Without coaching, encouragement, benchmarking, and measurement, success is the exception not the rule. Why is this so hard for DC to grasp? The empirical datapoint on this is clearly Japan in the 1990's. Ultra-low interest rates, and ultra-cheap capital might spur investment, but not <profitable> investment. Twice as much investment at 1/2 of the return on capital is not moving you anywhere. That's a major part of the problem. USA have been facing this since the Greenspan stimulus following the Dot-Com crash in the early 00's. _______ [1] This might work OK in a short run, of 6 months or a Year, but not over 3-5-10 years -- then you are talking entire capital investment life-cycles.
  - epa 14y ago
    Low interests rate are indeed preventing investment. Althought capital is readily available for borrowing, as the article says companies already have cash on hand as it is. Higher returns are needed to boost investment. Why do you think so many funds and banks are exploring developing nations. Higher returns.
    - tsotha 14y ago
      Low interest rates are preventing investment by people who have money, sure. But in theory they do stimulate investment in new plants and equipment. If I can borrow money for almost nothing I can build a factory to make products that are barely profitable. But the OP is right. Free money encourages waste. It encourages companies and governments to build things they can't really justify and can't afford to maintain. The real monument to Japan's lost decades is the amusement parks, golf courses, and rail lines that are crumbling because there was never enough demand to support them.
      - rayiner 14y ago
        > Free money encourages waste. It encourages companies and governments to build things they can't really justify and can't afford to maintain But are we seeing that here in the US? Empiricism is the path to salvation my friend.
jwallaceparker 14y ago
> The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism. Free markets fuel capitalism. The Fed's market manipulation is abhorrent to pure capitalism; it throws the elegant system of free competition and trade horrifically out of balance.
- virmundi 14y ago
  I'm not entirely sure why you're being voted down. I would like to see more detail from you, but I get the feeling that a Reddit mentality of "I don't like this, down boat for you" is at play.
  - rayiner 14y ago
    He's being voted down because he deserves it. His comment is based 100% on ideological handwaving. It's really no different than saying that something is "blasphemy" except he's espousing a different religion.
  - jwallaceparker 14y ago
    Thanks. :) A sound, stable currency is an essential component to a free market. When a currency is manipulated it can drastically upset the natural balance within a marketplace. When money is cheap (i.e. artificially low interest rates combined with Fed pumping new money into system) it leads to malinvestment. Consumers buy things they wouldn't normally buy. Companies invest in projects they normally wouldn't invest in. There is an initial "boom" (i.e. asset prices rise) that comes from people spending the easy money. But it can't last because the spending didn't come from savings or underlying productivity increases. It came from artificial stimulus. I'm glossing over a lot of points here, but it's called "business cycle theory" if you care to investigate.
    - mbetter 14y ago
      > When money is cheap (i.e. artificially low interest rates combined with Fed pumping new money into system) it leads to malinvestment. This assertion is observably false in the current economy.
guylhem 14y ago
The ideas are interesting, but there is one really big suggestion: "we should instead make capital gains regressive over time" - this is the single best idea I've heard recently! It would encourage self-sustaining growth instead of fly-by-night profits, made in the present at the expense of the future - ie let the market sort out which sectors are more likely to bring better long term outcomes, considering the current focus on short-term is a negative externality that should be fixed by government intervention. The author also properly acknowledges that increasing tax on the top 1% will only be redistributive, and increase consumption - which might certainly have better effects on consumption than leaving that money to the top 1% who might keep saving it while there is no current shortage of capital. But that is only a mechanical property of the progressive tax scheme (lower tax for lower incomes), which makes the redistributed money more likely to be spent instead of saved (or paid in tax) - yet as the author points out trading consumption for consumption is pointless given the current state of the economy. It's quite a interesting time. It seems like the current situation is not just a demand shock which can be treated with Keynesians stimulus, but a new kind of shock based on a slowdown of the progress of technology - especially of the "empowering kind". I wonder how this will make us reassume the traditional models such as Solow (technology drives long term growth) or Romer (technology and education), since it now seems there are different kind of technology and education that we should invest in - and some that we should consider as negative externality (like humanities - I have nothing against such studies, but they should not be on the taxpayer dime) Introduction to Solow model : http://en.wikipedia.org/wiki/Neoclassical_growth_model http://en.wikipedia.org/wiki/Neoclassical_growth_model Introduction to Romer model : http://en.wikipedia.org/wiki/Endogenous_growth_theory http://en.wikipedia.org/wiki/Endogenous_growth_theory
- jacques_chester 14y ago
  > this is the single best idea I've heard recently! Taxes aimed at changing behaviour are generally considered to be bad taxes. Firstly, you may not like the outcome. Changing the entire time-and-capital structure of an economy is Serious Business and is going to be utterly unpredictable (if it were predictable things would be more stable. They're not). Now, suppose it turns out to be a dumb decision. For example, say that some unforeseen feedback loop pops up between overdraft facilities and capital now sitting long-term because of tax changes. Suddenly overdrafts become even more difficult for small businesses to obtain and voila, new cash crunch. Even if it does more harm than good, you've created a powerful constituency for it. Bond market funds, index funds etc are now all in favour of the new tax rules and will lobby with great vigour to keep it. Now, this is true of every tax ever. But the reason economists counsel against taxing for non-revenue policy purposes is because every tax has externalities that are unrelated to the direct incidence of the tax. You want to minimise those as much as possible. Incidentally, the tax system already has consequences. For tax reasons that I simply don't understand, Australian corporations tend to be keen on paying healthy dividends and American corporations focus more on driving up the stock price. > But that is only a mechanical property of the progressive tax scheme (lower tax for lower incomes), which makes the redistributed money more likely to be spent The Australian experience has been that instead of spending the money, Australians are using it to pay down debt. Fine as far is it goes, but hardly the pump-priming that everyone was hoping for. There has been a seismic shift in debt/spending preferences across the population. > but a new kind of shock based on a slowdown of the progress of technology The long term trend of American GDP is stunningly linear[1] (edit: log linear -- actually exponential, I fail graph-reading forever); the only real deviation in the past century has been the Great Depression and WW2, a pair of connected economic earthquakes. We're talking about the 120 year period which included the widespread use of radio, television, highway systems, air travel, computers, the internet, modern medicine including antibiotics ... the list of literally revolutionary changes that quickly become blasé is very long indeed. Yet what we see today as monstrous fluctuations are within trend. Perspective matters (cue someone talking about the past 5000 years ...). [1] http://skepticlawyer.com.au/2012/10/27/the-ever-sharpening-crisis-of-capitalism/ http://skepticlawyer.com.au/2012/10/27/the-ever-sharpening-c...
jacques_chester 14y ago
If I may use a single data point, US fiscal and monetary policy is broken. Compare the US experience with Australia: http://skepticlawyer.com.au/2012/10/29/time-enough-for-success/ http://skepticlawyer.com.au/2012/10/29/time-enough-for-succe...
brucehart 14y ago
What are some empowering innovations that we can expect to see developed in the next few years? The only one that immediately came to mind for me was 3D printing.
dmritard96 14y ago
1. Part of this article reminded me of Jacque Fresco talks (http://en.wikipedia.org/wiki/Jacque_Fresco http://en.wikipedia.org/wiki/Jacque_Fresco). Well at least the part about efficiency and the effect on jobs. I am probably just being an annoying futurist but honestly, I don't see employment problems going away. Manned toll plaza's -hah. Self checkout - more and more common. Vending-machine-like fast food chains - not yet but wouldn't be a surprise. Self stocking shelves....blah blah blah. This will take a while but what are we going to do when low to mid skill jobs are less and less needed? 2. I hate to be the consumerism party pooper but I think pointing out that it has been 60 months and we still are not at prerecession levels to be a good thing (ducking for cover). The reason we were at those levels is partly because we were operating unsustainably - spending more than we had (or at least more than we should if we want retirement savings) and giving out mortgages and loans to people that couldn't afford them (obviously there are many more reasons...).
- cynicalkane 14y ago
  There is no such thing as spending more than we had. The housing boom didn't consist of houses borrowed from a cosmic banker, whom we now have to pay. A nation cannot spend anything it doesn't "have" except by trading with other nations, and trade does not remotely explain the deficit. As Friedman might say, monetary unsustainability is purely a monetary phenomenon. Even Keynesians know this and in fact that is why they tend to call for higher inflation.
  - dmritard96 14y ago
    "The housing boom didn't consist of houses borrowed from a cosmic banker, whom we now have to pay. " We don't have to pay because people foreclosed and filed for bankruptcy protection. A nation cannot spend anything it doesn't "have" except by trading with other nations, and trade does not remotely explain the deficit. When did we start talking about the deficit and why are you suggesting the deficit is related to the economy collapsing/recovering (not saying it isn't)? To be fair, when I mentioned retirement savings I wasn't really thinking public programs, probably should have been more specific. I think many would agree that irresponsible loans were given to people that didn't have the means to pay them off, especially if (when) the adjustable rates adjusted. If housing prices don't get back to prerecession levels for instance - well I think thats a good thing. People where inflating the markets that they really had no business being in and banks gave them mortgages for these markets wearing a grin...
stretchwithme 14y ago
Capitalism is a system where bad ideas and companies fail. They aren't propped up by government. The Federal Reserve has been shoveling money into large banks, literally lending trillions of dollars to them at times. Interest-free, of course. Then they lend it the US Treasury. Or leave it in their Federal Reserve accounts and collect interest there. With such a sweetheart deal, anybody could make a profit. How is it these guys deserve bonuses? One can only conclude that our government has been completely captured by these guys.
rzreik 14y ago
An empowering innovation we can expect int he next 5 years is a shared value business model. One that will free up a lot of the corporate cash of today and bring better returns for business and society. Michael Porter of HBS has been working on an academic framework.
chubbard 14y ago
Man this article has created all sorts of strange discussions. I've watched in on G+, Facebook and now here, and eventually they get soooo derailed talking about odd ball stuff not really related. I guess this means Mr. Christensen is onto something stirring up this much discussion. One thing is common among all of the discussions which is the fixation on the tax proposal, but I think it was just a swag at what a policy might look like. I thought the real interesting part of his observation is that we are rewarding efficiency innovation too much and transformative innovation almost nothing. Try and develop a new power system not based on fossil fuels and see how much money people want to give you when your time horizon is 10-20 years out. It is the transformative innovation that recreates jobs for the jobs lost through efficiency innovation. I think that is the more important discussion over a regressive capital gain tax. Remember, most entrepreneurship would qualify for preferential capital gains taxation (except for ISO options oddly) because even the efficiency innovation takes more than 1 year to payback. His tax would mostly affect wall street and the trader mentality: HFT, ETFs, day traders, etc. Remember people buying or selling securities don't actually give companies money directly. Companies only get more money when the issue more shares (or hold their own shares). If I buy a share for 1 day or 10 years the company doesn't benefit at all from my action. If you look at the green energy movement a few years back was going to be very transformative, but VCs backed off when it was hard to turn a profit as quickly as information technology. It's that kinda of calculus that needs changing if we really want to do what Christensen is outlining.
mickyd 14y ago
CLAYTON M. CHRISTENSEN is really a STUPID guy! The poor economy of US is not due to lack of innovation or capital, it's simply due to the fact that most of its low-tech jobs have been replaced by the cheap salary Asian workers such as Chinese workers! President Obama once asked Steve Jobs when he visited Apple Corp.:"Can you manufacture iphone in the US?" And Steve replied: "No, those jobs will never come back again", meanwhile Apple has earned $100 billion of profit! As you all know Iphone is designed by the American genius designers, if Apple needs to employ 1000 genius designer to design Iphone, but prefer to manufacture it in China by 100,000 Chinese workers in order to earn more profit, then US will lose these 100,000 low-tech jobs only because Apple wants to earn more profit! And obviously, no matter how you train these 100,000 workers, they will never become the 1000 genius designers, and it's unnecessary to have 100,000 genius designers too! So the answer for the poor US economy and high jobless rate is so simple! It has nothing to do with innovation or capital, it's just about moving those low-tech job posts back to the US! You ask Apple President: please sacrifice a little of your profit, but move your production lines back from China to your mother land - USA! Then think what? American will have 1 more million jobs and 10 production lines overnight! That's what Apple is using to manufacture Iphones, Ipads and Ipods in China now! Only for maybe $100 or so more profit per product! Greedy capitalists, including the Apple CEO are the guys to be damned! Obviously!

70 points by iProject 14y ago

It’s as if our leaders in Washington, all highly credentialed, are standing on a beach holding their fire hoses full open, pouring more capital into an ocean of capital. We are trying to solve the wrong problem. Perhaps this is the cause of the problem and not just a poor solution to the problem.

dmix 14y ago
Indeed, what if the prevailing Keynesian economic theory is in fact making things worse. At what point can we determine it's not helping? > The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism.
- te_chris 14y ago
  I thought Keynesian economics was about fiscal, not monetary stimulus like what the fed is doing? From my understanding you're confusing the two.
  - deleted 14y ago
    [deleted]
  - dmix 14y ago
    Fair point, Keynesian monetary policy is focused on lowering interest rates and not necessarily increasing banking reserves. But lowering interest rates is still a form monetary stimulus (which is currently being employed by the fed) and is a means to inject capital into the economy.
001sky 14y ago
One issue people continually fail to grasp is that low rates are setting a low bar for capital investment. The result is shitty assets/investments/businesses.[1] People will only jump as high as the bar requires. Think of the analogy of your Kid: Would you set the bar low and expect the kid to excel and get into Stanford? No. Thats now how it works. Without coaching, encouragement, benchmarking, and measurement, success is the exception not the rule. Why is this so hard for DC to grasp? The empirical datapoint on this is clearly Japan in the 1990's. Ultra-low interest rates, and ultra-cheap capital might spur investment, but not <profitable> investment. Twice as much investment at 1/2 of the return on capital is not moving you anywhere. That's a major part of the problem. USA have been facing this since the Greenspan stimulus following the Dot-Com crash in the early 00's. _______ [1] This might work OK in a short run, of 6 months or a Year, but not over 3-5-10 years -- then you are talking entire capital investment life-cycles.
- epa 14y ago
  Low interests rate are indeed preventing investment. Althought capital is readily available for borrowing, as the article says companies already have cash on hand as it is. Higher returns are needed to boost investment. Why do you think so many funds and banks are exploring developing nations. Higher returns.
  - tsotha 14y ago
    Low interest rates are preventing investment by people who have money, sure. But in theory they do stimulate investment in new plants and equipment. If I can borrow money for almost nothing I can build a factory to make products that are barely profitable. But the OP is right. Free money encourages waste. It encourages companies and governments to build things they can't really justify and can't afford to maintain. The real monument to Japan's lost decades is the amusement parks, golf courses, and rail lines that are crumbling because there was never enough demand to support them.
    - rayiner 14y ago
      > Free money encourages waste. It encourages companies and governments to build things they can't really justify and can't afford to maintain But are we seeing that here in the US? Empiricism is the path to salvation my friend.

jwallaceparker 14y ago

> The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism. Free markets fuel capitalism. The Fed's market manipulation is abhorrent to pure capitalism; it throws the elegant system of free competition and trade horrifically out of balance.

virmundi 14y ago
I'm not entirely sure why you're being voted down. I would like to see more detail from you, but I get the feeling that a Reddit mentality of "I don't like this, down boat for you" is at play.
- rayiner 14y ago
  He's being voted down because he deserves it. His comment is based 100% on ideological handwaving. It's really no different than saying that something is "blasphemy" except he's espousing a different religion.
- jwallaceparker 14y ago
  Thanks. :) A sound, stable currency is an essential component to a free market. When a currency is manipulated it can drastically upset the natural balance within a marketplace. When money is cheap (i.e. artificially low interest rates combined with Fed pumping new money into system) it leads to malinvestment. Consumers buy things they wouldn't normally buy. Companies invest in projects they normally wouldn't invest in. There is an initial "boom" (i.e. asset prices rise) that comes from people spending the easy money. But it can't last because the spending didn't come from savings or underlying productivity increases. It came from artificial stimulus. I'm glossing over a lot of points here, but it's called "business cycle theory" if you care to investigate.
  - mbetter 14y ago
    > When money is cheap (i.e. artificially low interest rates combined with Fed pumping new money into system) it leads to malinvestment. This assertion is observably false in the current economy.

guylhem 14y ago

The ideas are interesting, but there is one really big suggestion: "we should instead make capital gains regressive over time" - this is the single best idea I've heard recently! It would encourage self-sustaining growth instead of fly-by-night profits, made in the present at the expense of the future - ie let the market sort out which sectors are more likely to bring better long term outcomes, considering the current focus on short-term is a negative externality that should be fixed by government intervention. The author also properly acknowledges that increasing tax on the top 1% will only be redistributive, and increase consumption - which might certainly have better effects on consumption than leaving that money to the top 1% who might keep saving it while there is no current shortage of capital. But that is only a mechanical property of the progressive tax scheme (lower tax for lower incomes), which makes the redistributed money more likely to be spent instead of saved (or paid in tax) - yet as the author points out trading consumption for consumption is pointless given the current state of the economy. It's quite a interesting time. It seems like the current situation is not just a demand shock which can be treated with Keynesians stimulus, but a new kind of shock based on a slowdown of the progress of technology - especially of the "empowering kind". I wonder how this will make us reassume the traditional models such as Solow (technology drives long term growth) or Romer (technology and education), since it now seems there are different kind of technology and education that we should invest in - and some that we should consider as negative externality (like humanities - I have nothing against such studies, but they should not be on the taxpayer dime) Introduction to Solow model : http://en.wikipedia.org/wiki/Neoclassical_growth_model http://en.wikipedia.org/wiki/Neoclassical_growth_model Introduction to Romer model : http://en.wikipedia.org/wiki/Endogenous_growth_theory http://en.wikipedia.org/wiki/Endogenous_growth_theory

jacques_chester 14y ago
> this is the single best idea I've heard recently! Taxes aimed at changing behaviour are generally considered to be bad taxes. Firstly, you may not like the outcome. Changing the entire time-and-capital structure of an economy is Serious Business and is going to be utterly unpredictable (if it were predictable things would be more stable. They're not). Now, suppose it turns out to be a dumb decision. For example, say that some unforeseen feedback loop pops up between overdraft facilities and capital now sitting long-term because of tax changes. Suddenly overdrafts become even more difficult for small businesses to obtain and voila, new cash crunch. Even if it does more harm than good, you've created a powerful constituency for it. Bond market funds, index funds etc are now all in favour of the new tax rules and will lobby with great vigour to keep it. Now, this is true of every tax ever. But the reason economists counsel against taxing for non-revenue policy purposes is because every tax has externalities that are unrelated to the direct incidence of the tax. You want to minimise those as much as possible. Incidentally, the tax system already has consequences. For tax reasons that I simply don't understand, Australian corporations tend to be keen on paying healthy dividends and American corporations focus more on driving up the stock price. > But that is only a mechanical property of the progressive tax scheme (lower tax for lower incomes), which makes the redistributed money more likely to be spent The Australian experience has been that instead of spending the money, Australians are using it to pay down debt. Fine as far is it goes, but hardly the pump-priming that everyone was hoping for. There has been a seismic shift in debt/spending preferences across the population. > but a new kind of shock based on a slowdown of the progress of technology The long term trend of American GDP is stunningly linear[1] (edit: log linear -- actually exponential, I fail graph-reading forever); the only real deviation in the past century has been the Great Depression and WW2, a pair of connected economic earthquakes. We're talking about the 120 year period which included the widespread use of radio, television, highway systems, air travel, computers, the internet, modern medicine including antibiotics ... the list of literally revolutionary changes that quickly become blasé is very long indeed. Yet what we see today as monstrous fluctuations are within trend. Perspective matters (cue someone talking about the past 5000 years ...). [1] http://skepticlawyer.com.au/2012/10/27/the-ever-sharpening-crisis-of-capitalism/ http://skepticlawyer.com.au/2012/10/27/the-ever-sharpening-c...

jacques_chester 14y ago

If I may use a single data point, US fiscal and monetary policy is broken. Compare the US experience with Australia: http://skepticlawyer.com.au/2012/10/29/time-enough-for-success/ http://skepticlawyer.com.au/2012/10/29/time-enough-for-succe...

brucehart 14y ago

What are some empowering innovations that we can expect to see developed in the next few years? The only one that immediately came to mind for me was 3D printing.

dmritard96 14y ago

1. Part of this article reminded me of Jacque Fresco talks (http://en.wikipedia.org/wiki/Jacque_Fresco http://en.wikipedia.org/wiki/Jacque_Fresco). Well at least the part about efficiency and the effect on jobs. I am probably just being an annoying futurist but honestly, I don't see employment problems going away. Manned toll plaza's -hah. Self checkout - more and more common. Vending-machine-like fast food chains - not yet but wouldn't be a surprise. Self stocking shelves....blah blah blah. This will take a while but what are we going to do when low to mid skill jobs are less and less needed? 2. I hate to be the consumerism party pooper but I think pointing out that it has been 60 months and we still are not at prerecession levels to be a good thing (ducking for cover). The reason we were at those levels is partly because we were operating unsustainably - spending more than we had (or at least more than we should if we want retirement savings) and giving out mortgages and loans to people that couldn't afford them (obviously there are many more reasons...).

cynicalkane 14y ago
There is no such thing as spending more than we had. The housing boom didn't consist of houses borrowed from a cosmic banker, whom we now have to pay. A nation cannot spend anything it doesn't "have" except by trading with other nations, and trade does not remotely explain the deficit. As Friedman might say, monetary unsustainability is purely a monetary phenomenon. Even Keynesians know this and in fact that is why they tend to call for higher inflation.
- dmritard96 14y ago
  "The housing boom didn't consist of houses borrowed from a cosmic banker, whom we now have to pay. " We don't have to pay because people foreclosed and filed for bankruptcy protection. A nation cannot spend anything it doesn't "have" except by trading with other nations, and trade does not remotely explain the deficit. When did we start talking about the deficit and why are you suggesting the deficit is related to the economy collapsing/recovering (not saying it isn't)? To be fair, when I mentioned retirement savings I wasn't really thinking public programs, probably should have been more specific. I think many would agree that irresponsible loans were given to people that didn't have the means to pay them off, especially if (when) the adjustable rates adjusted. If housing prices don't get back to prerecession levels for instance - well I think thats a good thing. People where inflating the markets that they really had no business being in and banks gave them mortgages for these markets wearing a grin...

stretchwithme 14y ago

Capitalism is a system where bad ideas and companies fail. They aren't propped up by government. The Federal Reserve has been shoveling money into large banks, literally lending trillions of dollars to them at times. Interest-free, of course. Then they lend it the US Treasury. Or leave it in their Federal Reserve accounts and collect interest there. With such a sweetheart deal, anybody could make a profit. How is it these guys deserve bonuses? One can only conclude that our government has been completely captured by these guys.

rzreik 14y ago

An empowering innovation we can expect int he next 5 years is a shared value business model. One that will free up a lot of the corporate cash of today and bring better returns for business and society. Michael Porter of HBS has been working on an academic framework.

chubbard 14y ago

Man this article has created all sorts of strange discussions. I've watched in on G+, Facebook and now here, and eventually they get soooo derailed talking about odd ball stuff not really related. I guess this means Mr. Christensen is onto something stirring up this much discussion. One thing is common among all of the discussions which is the fixation on the tax proposal, but I think it was just a swag at what a policy might look like. I thought the real interesting part of his observation is that we are rewarding efficiency innovation too much and transformative innovation almost nothing. Try and develop a new power system not based on fossil fuels and see how much money people want to give you when your time horizon is 10-20 years out. It is the transformative innovation that recreates jobs for the jobs lost through efficiency innovation. I think that is the more important discussion over a regressive capital gain tax. Remember, most entrepreneurship would qualify for preferential capital gains taxation (except for ISO options oddly) because even the efficiency innovation takes more than 1 year to payback. His tax would mostly affect wall street and the trader mentality: HFT, ETFs, day traders, etc. Remember people buying or selling securities don't actually give companies money directly. Companies only get more money when the issue more shares (or hold their own shares). If I buy a share for 1 day or 10 years the company doesn't benefit at all from my action. If you look at the green energy movement a few years back was going to be very transformative, but VCs backed off when it was hard to turn a profit as quickly as information technology. It's that kinda of calculus that needs changing if we really want to do what Christensen is outlining.

mickyd 14y ago

CLAYTON M. CHRISTENSEN is really a STUPID guy! The poor economy of US is not due to lack of innovation or capital, it's simply due to the fact that most of its low-tech jobs have been replaced by the cheap salary Asian workers such as Chinese workers! President Obama once asked Steve Jobs when he visited Apple Corp.:"Can you manufacture iphone in the US?" And Steve replied: "No, those jobs will never come back again", meanwhile Apple has earned $100 billion of profit! As you all know Iphone is designed by the American genius designers, if Apple needs to employ 1000 genius designer to design Iphone, but prefer to manufacture it in China by 100,000 Chinese workers in order to earn more profit, then US will lose these 100,000 low-tech jobs only because Apple wants to earn more profit! And obviously, no matter how you train these 100,000 workers, they will never become the 1000 genius designers, and it's unnecessary to have 100,000 genius designers too! So the answer for the poor US economy and high jobless rate is so simple! It has nothing to do with innovation or capital, it's just about moving those low-tech job posts back to the US! You ask Apple President: please sacrifice a little of your profit, but move your production lines back from China to your mother land - USA! Then think what? American will have 1 more million jobs and 10 production lines overnight! That's what Apple is using to manufacture Iphones, Ipads and Ipods in China now! Only for maybe $100 or so more profit per product! Greedy capitalists, including the Apple CEO are the guys to be damned! Obviously!