IP: Replies to TWO Queries on Mark Stahlman's note

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Newmedia () aol com
Date: Thu, 4 Jul 2002 10:41:54 EDT
To: dave () farber net
Subject: Replies to TWO Queries

Dave:

Replies to TWO Queries

Admittedly, I'm guilty of throwing TWO novel arguments into TOO short a
space 
(i.e. that we have BOTH a crisis in Venture Capital *and* in National
Security), so let me compound my error by claiming that they SHARE a common
(and, perhaps, novel) root and origin.

We have put too much TRUST in fundamentally insecure (and inhuman) MACHINES.
This is our ERROR.

I will now attempt to demonstrate my point by replying to two comments on
the 
list.

Mr. Kedrosky thinks that I have erred in stating that there is a CRISIS in
Venture Capital.

Paul . . . *all* investments in private equity CANNOT be properly termed
"Venture Capital," regardless of the name on the fund manager's business
card. <g>

You have allowed that perhaps we should cut the funds-raised number for the
late 1990's in half . . . how about divide it by 1000?  Or, 1,000,000?

Venture capital is -- by definition -- the most RISKY of all investments,
carrying the highest potential reward to compensate for this risk.

I maintain that if there is ANY widely anticipated EXIT STRATEGY for an
investment, then it is NOT Venture Capital, since, in the minds of the
investor, they have a clear path to LIQUIDITY and, thus, a greatly
diminished 
risk.

How much of the 50 BILLION recently raised (to use your numbers) and which
(cynically) calls itself "Venture Capital" was raised with the caveat of NO
IDEA of how or when that investment would EVER become liquid?

None.

But, according to the dozens of stories I've heard from the "old-timers," in
the 1970's and early 1980's (when "Venture Capital" was born), this was
exactly the way that it usually went.

The money that initially supported Intel, Apple, Microsoft, Sun and AOL was
NOT raised with any particular EXIT in mind . . . therefore, it was "true"
Venture Capital.  In those days, few had heard of what was later dubbed
Moore's Law (and even fewer believed it) and the idea that "software" would
have lasting value was LAUGHED at.

Yet, that money raised and invested wasn't ZERO.  However, NONE of THAT
money 
is currently available.

At exactly the moment when we need it the most.

Why?

And, Mr. Watson suggests that the problem is much larger than a mere crisis
in Venture Capital.

I believe that he is right.  But, let's try to get at the root of all this.

In the late 1990's "madness," financial analysis was replaced by banking
shildom, auditing by blind-eyed consulting, journalism by cheerleading and
"sober" pension management by "wacked-out" hedge-funding . . . on top of the
total collapse of "true" venture investing which I have described.  And,
everyone involved in any of these arenas KNEW it.

Now, these chickens are coming home to roost.

Antony, you are right that this broader crisis (okay, throw in the added
crises in our military, intelligence, electoral, governmental, media and
religious institutions <g>) has PROFOUND implications for global SECURITY in
a very dangerous world.

Hopefully, you will agree with me that understanding how and why we got into
this MESS might help us figure out how to get out of it?

I maintain that we allowed the HUMAN element to fade from the picture and
replaced JUDGEMENT with machine-like ROBOTIC lockstep inevitability.

We allowed the FICTION known as the NEW ECONOMY (and the correlates in each
other sphere) to take over and we put our TRUST in technology which is
fundamentally INHUMAN . . . and INSECURE.

To be blunt, would the CHINESE have allowed this to happen?

No, they wouldn't.  Their "culture" would not have allowed it to happen.

And, any of you who follow the literature on the Chinese preparation to
ATTACK the United States' reliance on these insecure (and inhuman) MACHINES
(aka INFOWAR), knows what I'm talking about.

I reiterate.  This is ONE very serious crisis.

And, to paraphrase someone far wiser than I, "Anyone who does not understand
HISTORY, is DOOMED to repeat it."

Happy 4th of July!

Mark Stahlman
newmedia () aol com
Director
New Media Laboratory
New York City
www.markstahlman.com
(212) 645-5444




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