Re: Anti-singularity spam.

From: J. Andrew Rogers (
Date: Wed Apr 19 2006 - 12:41:25 MDT

On Apr 18, 2006, at 8:29 PM, Richard Loosemore wrote:
> But on the other hand, if Seidensticker wants to point to stupidly
> overhyped technology, he is speaking words of wisdom. The
> imaginary version of the internet that drove the investors into a
> feeding frenzy in the late 1990's was a complete fiction. By
> itself, the internet was good, but it was not *that* good. There
> are a lot of details that we could argue about here, but my basic
> point is that the internet by itself (not the other things that
> might one day be facilitated by it, but the direct thing in itself)
> was not something to get that worked up about. It was convenient
> for the Market, because the Market has a voracious need for
> (controlled) volatility, fresh blood and emotional enthusiasm in
> order for the skillful players to make their killings, but for the
> world in general it would have been better if the internet had
> simply developed at a regular pace and nobody threw a hundred
> billion dollars down the toilet trying to get rich on it.

That is a very European perspective of the market (not to be
construed as a criticism of Europeans, just an observation having
read quite a number of economics writings from current top European
economic academics). Much of that money may have been spent
frivolously and stupidly, but it does not just disappear either. In
a market heavily chummed with capital and low transaction viscosity,
an extraordinary amount of innovation happens feeding on the detritus
of poor investments. Whether or not investors lost hundreds of
billions of dollars on stupid investments is almost immaterial to the
argument here. That frenzy created an ecology that allowed a
plethora of good technologies to develop and survive by feeding on
the capital chum even if they were not the direct targets of major

A bit of folk wisdom about the Silicon Valley business cycle (which
is ~10 years long) is that a large percentage of the really solid and
successful startups are formed during the bust rather than the boom.
Those companies are light on direct capital investment, but are
frequently so successful because they are scavengers that feed on the
cornucopia of technology carcasses from the last bust, picking and
choosing the bits they want from trash that no one is interested in
-- a very powerful form of indirect capital investment that favors
the smart and bold. The carnage of the business cycle looks very
bloody and is unappealing to many people because of that, but that
death and decay feeds a lot of other less noticeable innovators that
frequently are under even stronger evolutionary pressures.

A nice orderly market with a boringly regular pace may seem more
efficient, but in reality it tends to kill huge swaths of innovation
ecology that need the carnage to survive. A portion of that "wasted"
capital ends up in the hands of innovators in various forms that
would have been unlikely to get direct capital in any case. With
reference to my comment above, many European economists decry the
wastefulness of the investment carnage that regularly occurs in
places like Silicon Valley for most of the same reasons you cite, but
fail to recognize that the "waste" itself is relative and a very
important kind of investment that drives innovation and lowers
barriers to entry for new ideas.

J. Andrew Rogers

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