[FoRK] Capitalism's Fatal Flaw

Jeff Bone jbone at place.org
Sun Nov 8 08:42:00 PST 2009


Ken writes:

> Mitra's concern is that capitalism's fatal flaw is its dependence on  
> integrity in its leaders.

And who, exactly, would those "leaders" be?  (The idea that capitalism  
itself has "leaders" is inherently flawed, an unexamined premise  
suffered by both socialists and to a lesser degree but with equal  
worship, Randites.)

It is not "leaders" that reward individuals, it is the market itself  
at large.  Come up with something novel and useful, do a good job  
making and selling it, create value, reap the rewards;  that's how  
entrepreneurship is "supposed" to work.

The problem with entrepreneurship is, rather, competence (lack  
thereof) in most of those that serve as the fertilizer for the "seeds"  
of innovation, and in large parts of the dependency network that gets  
created in any venture.  This problem with incentives, with rewards,  
isn't necessarily due a lack of integrity anywhere in particular  
within the network;  it's that there's simply a higher risk-adjusted  
reward --- and more outcome over control, less dependencies ---  
elsewhere.  This is a consequence of the ineptitude and  
ineffectiveness of the entire system from inception to reward,  
starting with (but not confined to) the venture capitalists  
themselves.  The environment itself is too noisy;  too often the  
signal cannot penetrate.

> Criticize her for confusing a failing of capitalism with a failing  
> of capital markets if you will

Thank you;  I believe I did. ;-)


jb



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