Prof. Hilary Allen On Venture Capital

After writing Predatory Pricing, via David Gerard, I found Prof. Hilary Allen's Interest Rates, Venture Capital, and Financial Stability. In the abstract she writes:

This Article illuminates one path through which the prolonged period of low interest rates from 2009-2021 has impacted financial stability: it traces how yield-seeking behavior in the wake of the Global Financial Crisis and Covid pandemic led to a bubble in the venture capital industry, which in turn spawned a crypto bubble as well as a run on the VC-favored Silicon Valley Bank.
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It argues for increased monitoring of the venture capital industry by financial stability regulators, given that venture capital is well-positioned to generate asset bubbles now and in the future. More specifically, it argues for more aggressive enforcement of the securities laws to tamp down on the present crypto bubble, as well as for structural separation between crypto and the traditional financial system.

Prof. Allen describes yet another of the many ways the current venture capital industry is malfunctioning, and calls for increased oversight of these risks to financial stability. Below the fold I discuss this and one of the papers it cites.

Techno-feudalism

Source

Two of my favorite authors are making the same point. First, Kim Stanley Robinson in passing during a fascinating interview by Oscar Boyd and Akshat Rathi:

Capitalism is the name of a power relationship of the few over the many. It is a hierarchy. It is feudalism liquidified, where money has replaced land as the source of power, but there's still the powerful and there's still the weak, and there's still incredible inequality in the world system.

Second, in Autoenshittification Cory Doctorow writes:

In his forthcoming book, Techno Feudalism: What Killed Capitalism, Yanis Varoufakis proposes that capitalism has died – but it wasn't replaced by socialism. Rather, capitalism has given way to feudalism:

https://www.penguin.co.uk/books/451795/technofeudalism-by-varoufakis-yanis/9781847927279

Under capitalism, capital is the prime mover. The people who own and mobilize capital – the capitalists – organize the economy and take the lion's share of its returns. But it wasn't always this way: for hundreds of years, European civilization was dominated by rents, not markets.

Below the fold some discussion of this idea.

Optical Media Durability Update

Five years ago I posted Optical Media Durability and discovered:

Surprisingly, I'm getting good data from CD-Rs more than 14 years old, and from DVD-Rs nearly 12 years old. Your mileage may vary.

Four years ago I repeated the mind-numbing process of feeding 45 disks through the reader and verifying their checksums. Three years ago I did it again, and then again two years ago, and then again a year ago.

It is time again for this annual chore, and yet again this year every single MD5 was successfully verified. Below the fold, the details.

Predatory Pricing

Adam Rogers' The dirty little secret that could bring down Big Tech is based on work by Matt Wansley and Sam Weinstein of the Cardozo School of Law, who questioned why the investors in companies such as Uber, Lyft, or WeWork would sink:

billions of dollars of capital into a money-losing business where the path to profitability wasn't clear?

The answer is the remarkable effectiveness of predatory pricing at making money for VCs and founders. Rogers writes:

Wansley and Weinstein — who, not coincidentally, used to work in antitrust enforcement at the Justice Department — set out to change that. In a new paper titled "Venture Predation," the two lawyers make a compelling case that the classic model of venture capital — disrupt incumbents, build a scalable platform, move fast, break things — isn't the peak of modern capitalism that Silicon Valley says it is. According to this new thinking, it's anticapitalist. It's illegal. And it should be aggressively prosecuted, to promote free and fair competition in the marketplace.

Below the fold I discuss Wansley and Weinstein's paper and relate it to events in the cryptosphere.

Video Game History

Arguably, video games have become the most important entertainment medium. 2022 US video game revenue topped $85B, compared with global movie industry revenue of $76.7B. Game history is thus an essential resource for scholars of culture, but the industry's copyright paranoia means they have little access to it.

Salvador Table 1

In 87% Missing: the Disappearance of Classic Video Games Kelsey Lewin of the Video Game History Foundation describes their recent study in cooperation with the Software Preservation Network, published by Phil Salvador as Survey of the Video Game Reissue Market in the United States. The report's abstract doesn't mince words:

Only 13 percent of classic video games published in the United States are currently in release (n = 1500, ±2.5%, 95% CI). These low numbers are consistent across platform ecosystems and time periods. Troublingly, the reissue rate drops below 3 percent for games released prior to 1985—the foundational era of video games—indicating that the interests of the marketplace may not align with the needs of video game researchers. Our experiences gathering data for this study suggest that these problems will intensify over time due to a low diversity of reissue sources and the long-term volatility of digital game storefronts.

Below the fold I discuss some of the details.

This Could Be An Issue

Allyson Versprille's Wall Street Banks Side With Nemesis Elizabeth Warren on Crypto Crackdown describes this improbable occurrence thus:

The Bank Policy Institute, a trade group for lenders that Warren often blasts, threw its weight behind bipartisan legislation that the Massachusetts Democrat and three of her Senate colleagues reintroduced this week. The bill aims to force the crypto industry to comply with tougher rules for combating money laundering and terrorism financing.

“The existing anti-money laundering and Bank Secrecy Act framework must account for digital assets, and we look forward to engaging in this process to defend our nation’s financial system against illicit finance in all its forms,” BPI said in a statement.

The three colleagues are Joe Manchin (D-WV), Roger Marshall (R-KS) and Lindsey Graham (R-SC). It is worth noting that Senators Warren and Graham also have a bill to tighten regulation of big tech, described in their "Guest Essay" for the New York Times entitled When It Comes to Big Tech, Enough Is Enough.

Follow me below the fold for the sting in this bill's tail