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Doing Capitalism in the Innovation Economy: Markets, Speculation and the State Hardcover – October 8, 2012
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Sanjay Unni, Quantitative Finance
"A rewarding memoir about the learning, training and life experience required to achieve mastery in the venture economy."
"Bill Janeway, a key creator of modern venture capital, tells the amazing story of the intersection of economics and innovation. This book is essential to anyone who wants to understand technology and how its creation will be financed for decades to come."
Marc Andreessen, co-creator of the Internet browser, and co-founder of Netscape and Andreessen Horowitz
"This is a masterful historical and conceptual analysis of the Three Player Game between the state, private entrepreneurial innovation and financial capitalism. The state has a key role in funding scientific research that leads to innovation. Amply funded by financial capitalism, innovation is a source of long term growth. But speculative funding of innovation is also associated with asset and credit bubbles that end up in financial crashes. A Minsky-inspired synthesis of the financial excesses of Schumpeterian creative destruction, this book should be required reading for all."
Nouriel Roubini, Professor of Economics, New York University, and Chairman of Roubini Global Economics
"A revelatory exploration of the complex dynamics underlying the innovation economy and the inherent roles of speculation and waste as experienced by one of the great venture capitalists and political/economic thinkers of our age. This book provides a powerful framework for dealing with the economic challenges we are facing today. It couldn't have come at a better time!"
John Seely Brown, Former Chief Scientist, Xerox Corp, and Director of Palo Alto Research Center (PARC)
"Janeway applies keen insights from his experience as a venture capitalist and creates a vision of the interaction between governments, financiers, and firms that shows what institutions society must develop to foster innovation. I believe that Doing Capitalism will help all of us, whether academics, private sector leaders, or government officials, to see beyond shallow political dogma and move to a deeper understanding of challenges of technological advance."
George Soros, Chairman of Soros Fund Management
"... a tour de force with a solid thesis, excellent writing and exposition, and a history that too many have forgotten ... or never knew. Brilliant!"
John C. Bogle, Founder of Vanguard Funds
"If you have ever wondered what the interplay of government, bubbles and venture capital have to do with innovation, this is the book for you ... Doing Capitalism in the Innovation Economy is rich in historical references and stories, wise in its philosophy, deep in its evaluation and observation; and a tribute to the life's work of an important investor and constructive thinker. This book is outstanding and deserves your time."
Wall Street Oasis (wallstreetoasis.com)
More About the Author
William H. Janeway has lived a double life of "theorist-practitioner," according to the legendary economist Hyman Minsky who first applied that term to him twenty-five years ago. In his role as "practitioner," Bill Janeway has been an active venture capital investor for more than 40 years. During that time he built and led the Warburg Pincus Technology Investment team that provided financial backing to a series of companies making critical contributions to the internet economy, including BEA Systems, Veritas Software and, more recently, Nuance Communications, the speech recognition company. He remains actively engaged as a Senior Advisor and Managing Director at Warburg Pincus.
As a "theorist," Janeway received a Ph.D in Economics from Cambridge University where he was a Marshall Scholar. His doctoral study on the formulation of economic policy following the Great Crash of 1929 was supervised by Keynes' leading student, Richard Kahn (author of the foundational paper on "the multiplier.") Janeway went on to found the Cambridge Endowment for Research in Finance. Currently he serves as a Teaching Visitor at the Princeton University Economics Department and Visiting Scholar in the Economics Faculty of Cambridge University.
Janeway is a director of Magnet Systems, Nuance Communications, O'Reilly Media and a member of the Board of Managers of Roubini Global Economics. He is a member of the board of directors of the Social Science Research Council, and a co-founder and member of the Governing Board of the Institute for New Economic Thinking (INET). In September 2012 he was granted the honorary honour of Commander of the Order of the British Empire (CBE) by HM the Queen "for services to education in support of Cambridge University and to UK/US relations".
Janeway and his family divide their time between New York City and Cambridge, UK. He is the son of the late novelist and critic Elizabeth Janeway and the late public economist Eliot Janeway.
Top Customer Reviews
It's always a bit of a thrill when read a book about a topic you know well and find bits that make you say to yourself: "I wish I'd thought of that". Janeway's case for the social utility of bubbles, his description of "hedging markets" versus "Ponzi markets", and his formulation of "Schumpeterian waste" versus "Keynesian waste" are all "aha!" ideas that I intend to steal from him and include in my own thinking.
My only quibble is that Janeway is a bit unbalanced as he (validly)criticizes financial capitalism but gives government a free pass for all the agency problems of government action. One could easily use his book as an argument for more of the kind of government intervention which I doubt he really intends to advocate. The book would have been stronger if he had spent more time discussing ways in which governments help and how they sometimes do harm.
Many venture capitalists write memoirs; many academic economists write theories of innovation with little understanding of what actually happens in the messy, micro-economic world. Janeway is a rigourous economist, a thorough historian, and a successful dealmaker. This makes his perspective rare. The fact that he writes well makes the book exceptional.
I found his history of venture investment and the American financial system to be truly enlightening. And for the parts concerning economics, it's definitely the most interesting thing I've read on the subject since an extremely well taught AP Economics blew my mind and turned me on to econ in high school. I almost completed a double major in econ in college but fell one class short, in large part because I lost interest. In retrospect, my AP Econ class emphasized a very eclectic mix of theories and a large dose of historical economics, but my college macro seemed to emphasize only abstract neoclassical theory, which I increasingly perceived to be unrealistically mechanical and grounded in unconvincing assumptions.
My biggest complaint is that this book is poorly edited, and I took a star away for that. It reads like a long rambling story from Janeway. I think that most of the facts he wants to get across eventually get in there, but not necessarily in the most logical order, and with a lot of reader-supplied context presumed. He saves probably the most relevant commentary to today's world, his analysis of the response to the financial crisis, until nearly the very end of the book.Read more ›
However, my review has absolutely nothing to do with the (completely accurate) VC anecdotes and adventures he describes so well. Instead, I am commenting as a lifelong student of the Industrial Revolution and the history and process of innovation. This book should be required reading for everyone in the innovation ecosystem, especially venture capitalists and government policy makers. Not as a 'how to do venture capital' book, but as a guide to the harsh and completely misunderstood realities of innovation and the interaction between entrepreneurs, government and the financial system that makes it possible. The lessons for the venture community, all mostly libertarians like me: if you don't recognize your complete dependency on rational government you are a fool. For the government: if you are thinking of being a venture capitalist you have probably been captured by some interest group.
Even more important, Bill explains with real life examples (many of which I experienced with him) just how messy the entire process of technological innovation really is and how it is completely dependent on irrational bubbles and monumental 'waste' too succeed. As he said in a recent paper for the Institute for New Economic Thinking(which he cofounded with George Soros): "... innovation at the frontier depends on sources of
funding decoupled from concern for economic value." My libertarian friends will be aghast to learn that one of those sources of funding is the government. Bill's liberal friends will be aghast to discover that the other, even more important, source is delusional investors, who many liberals would regulate out of existence.Read more ›
Most Recent Customer Reviews
great read on how stock exchanges and venture capital fuels innovation. Interesting take on Keyne's and the role of the state.Published 4 months ago by Martin Miliev
This is an amazing book, a treatise on venture economics + practical anecdotes/pearls of wisdom on the s/w industry.. would rate this a "must read", great work, Dr Janeway!Published 7 months ago by Nat D. Natraj
This is not a book that I would recommend to anyone other than people very much like the author. For those people, it may be a useful book, I really can't judge; it is not a very... Read morePublished 12 months ago by doug k
This book shifted my thinking about public policy more radically than anything has in a decade. What feels bad now to us can be good in the long run for the system. Read morePublished 12 months ago by Kyle Eschenroeder
A wholistic view on how innovation is funded by both private organizations and the state is presented by a practician and a theorist. Read morePublished 17 months ago by Roman I
Clear analysis, intelligent and deeply grounded. If you want to understand innovation from an economic/ financial perspective, this is a great book. Read morePublished 21 months ago by A. Roux
this book integrates several topics into a cohesive, well explained treatise on the economy and the role of venture (high risk) capital in it. Read morePublished on August 22, 2013 by Steven
This book is a very useful addition to a sophisticated library. Bill makes the great points that most innovations in practice require infusions of capital or policy support from... Read morePublished on April 17, 2013 by Henry