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Doing Capitalism in the Innovation Economy: Markets, Speculation and the State Hardcover – 8 Oct 2012


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Product details

  • Hardcover: 340 pages
  • Publisher: Cambridge University Press (8 Oct. 2012)
  • Language: English
  • ISBN-10: 1107031257
  • ISBN-13: 978-1107031258
  • Product Dimensions: 15.2 x 2 x 22.8 cm
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (4 customer reviews)
  • Amazon Bestsellers Rank: 400,193 in Books (See Top 100 in Books)
  • See Complete Table of Contents

More About the Author

ABOUT AUTHOR WILLIAM H. JANEWAY
This book has been named one of the 6 "Best Economics Books of the Year" by the Financial Times.

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).

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.

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Review

'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, 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 Former Director, 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 [in the Innovation Economy] 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, Soros Fund Management

'An original analysis … entertaining.' Management Today

'Doing Capitalism is a magnificent chronicle of how technology combined with economics to forge the beast that is today's financial environment … A bravura literary debut.' Cambridge Business Online

'Janeway, who built the technology investment team of Warburg Pincus, has a powerful message: an innovative economy 'begins with discovery and culminates in speculation'.' Martin Wolf, Financial Times (online), 'Best Books of 2012'

'… self-recommending …' Stian Westlake, National Endowment for Science, Technology and the Arts blog (nesta.org.uk)

'… 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

'I highly recommend Doing Capitalism in the Innovation Economy by William H. Janeway. The author is a venture capital veteran who provides a fascinating glimpse into a rarified niche of the financial world, especially as to how VC firms funded the first modern technology start-ups of the 1970s and '80s.' Simon Towers, Associate Vice President and Group Manager, Center of Innovation for Tomorrow's Enterprise, Infosys Labs

'… [an] original and thought-provoking book.' John Cassidy, The New Yorker

'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)

Book Description

Combining insights from a lifetime's career in venture capitalism and a sophisticated understanding of the most up-to-date scholarship, William H. Janeway provides an accessible pathway for readers to appreciate the dynamics of the interaction between the state, financiers and entrepreneurs in the innovation economy.

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Most Helpful Customer Reviews

Format: Hardcover Verified Purchase
This wasn't what I was expecting it to be - but it was much better. I thought it would be an ABC guide to being a good venture capital investor from one of the masters of the trade. If you are a young venture capital investor, or looking to move into venture capital as a career, you would be an idiot not to read it. You could certainly take a huge amount from it if that was what you were seeking but it is also much more than that.

I hadn't appreciated Bill's academic background as an economist. Old habits die hard though and he has written a brilliant analysis of how venture capital sits within the innovation ecosystem and the wider economy. One of the central ideas of the book is that bubbles are OK. Governments shouldn't seek to control them as good comes out of them. If anything, though I don't think he would ever presume to be the one who says so, the really important lessons for the future of our economy in this book are for the people in power who seek to create the conditions in which innovation thrives.

I rarely read books cover-to-cover in one go but this took over my weekend.
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3 of 4 people found the following review helpful By Mike Scialom on 31 Dec. 2012
Format: Kindle Edition
A Cambridge resident since 2006, Dr William H Janeway CBE is a visiting scholar at the University of Cambridge's economics facility, chairman of the board of trustees of Cambridge in America and a member of the board of managers of the Cambridge Endowment for Research in Finance (CERF). He co-chaired Cambridge's 800th anniversary celebrations. He is also on the advisory board at Cambridge Judge Business School and remains a senior advisor at Warburg Pincus which he joined in 1988.
Basically, Janeway is as blue chip an economist you can get, but the Warburg Pincus reference should give you a clue: Janeway is one of the world's foremost - and surely most erudite - theorist-practitioners of economic activity, and all this time he's been living a double life: he's not your average academic. Very cleverly, he unmasks himself in "Doing Capitalism", his first literary outing. Many people will buy it on the strength of the illustrious backstory alone, but what intrigued me most is Janeway's involvement at Warburg, when he was at his most hyperactive as a venture capital investor.
His 40-year career actually began in 1970 "when venture capital was a tiny, tiny craft" and he has seen it evolve into a behemoth and then shrink back to the trickle of funding it is today (venture capital, as he points out, needs economic stability to succeed and that quality is in worryingly short supply in today's environment).
His time as a venture capitalist collided with the greatest technological surge in history, and it is this experience, from the crow's nest of innovation, that most fascinates.
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Format: Hardcover
As someone who has been involved in managing R&D as well as technology commercialisation, I found Bill's book a salutory reminder that creative destruction involves destruction. A very thoughtful read from a practitioner/theorist that all academic economists should read.
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3 of 5 people found the following review helpful By c perez on 16 Nov. 2012
Format: Kindle Edition
I had the privilege of following the process of creation of this book and I have found the result extremely powerful. It is a brilliant reinterpretation of capitalism seen from above and lived from inside, by someone who is as much at home in the practical world of innovation and finance as in the abstract world of economic theory. Janeway's book takes us in a fascinating double dip from theory to reality and back. It contains vivid and revealing anecdotes next to penetrating analyses of the interactions that maintain wealth creation in a market economy. I recommend Doing Capitalism as indispensable reading for anyone in finance or academia, in policy or politics wanting to understand our turbulent economy and act intelligently in promoting investment and growth.
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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 27 reviews
20 of 21 people found the following review helpful
One of the best books on the economics of innovation 22 Nov. 2012
By G. Leonard Baker, Jr. - Published on Amazon.com
Format: Hardcover Verified Purchase
I've been a partner in a leading Silicon Valley venture capital firm for 40 years. I've also been an avid reader about the economics and history of innovation. Of the many books on this topic, Janeway's is one of the best. He does a superb job of synthesizing economic theory, history, and his personal experiences as a successful financier of entrepreneurs in a beautifully-crafted and easy-to-read book.

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.
3 of 3 people found the following review helpful
Janeway,Doing Capitalism in an innovation economy 19 May 2013
By Syed Nawab Haider Naqvi - Published on Amazon.com
Format: Kindle Edition Verified Purchase
Janeway's book is really innovative. The state versus the private sector controversy is a perennial topic in the debate about how to keep the innovative spirit alive in a capitalistic economy( basically a private-sector led economy). The Conservatives wish to reduce the state to a Lilliputian size; while the Democrats would like an interventionist state. In the developing countries this debate is more or less settled in favor of a development-oriented state. In the developed countries, role of state is defined in terms of external economies, but the emphasis remains on achieving efficiency. Janeway is perhaps the first person to give a totally innovative argument for state intervention. He shows that the search of efficiency may turn out to be an enemy of innovation, which involves both the Schumpeterian waste as well as the Keynesian waste. It is these wasteful innovations that prove to be the game changers for the private sector to make profits in untried areas of investment. I whole-heartedly recommend the book for economists, including development economists.
2 of 2 people found the following review helpful
The enlightenment provided is very well worth the trouble 17 May 2013
By Alan J - Published on Amazon.com
Format: Hardcover Verified Purchase
This is one of the most enlightening books I've ever read. It's a phenomenal analysis of what parts of our crazy hybrid system of economics fuel innovation and growth and how this knowledge should drive policy. Instead of attempting to appeal to unrealistic economic assumptions, Janeway uses an incredible amount of historical research, combined with his own impressive professional experience in finance and expertise in econ, to craft a very convincing and iconoclastic theory for how our system really works.

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. It's also pretty difficult to isolate his critical points into small enough regions to highlight, which I take as evidence of poor cohesion. Lastly, some of his wording and choice of mantras (e.g. "the twin hedges of Cash and Control") are not only cringeworthy, but rather vaguely defined.

On the whole though, he provided major epiphanies every few pages, and that's what kept me eagerly reading in spite of the annoyances. I never felt out of patience. I'd highly recommend the book for ANYBODY truly interested in understanding our economy. I really hope for a second edition that irons out the editorial issues, because classes should be taught on the content of this book.

Janeway leaves us with a haunting question: will America's leaders and thinkers wake up and embrace the reality that they have, instead of the visions of reality that have short-term convenience to the establishment, or will we abdicate leadership in innovation well before we have to? If people read this book and soon, I maintain hope that we can choose the former.

P.S. This is a dense book, and it took me a couple months to read the whole thing. But good news, it's not quite as crazy long as it seems. The bibliography and index are the entire last third of the book, so measure your progress vs. 66%.
1 of 1 people found the following review helpful
Most important book on the economics of innovation in past 50 years. 27 Sept. 2013
By jlasersohn@hamptons.com - Published on Amazon.com
Format: Kindle Edition Verified Purchase
Full disclosure. I am also a venture capitalist and worked with Bill for many years.

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.

As Bill makes clear, the necessary and appropriate interaction between government and the free market to nurture innovation is broadly and completely misunderstood. What is required is neither the liberal fantasy of drugs being developed by the NIH nor the libertarian myth of entrepreneurship in the 'state of nature'.

If you really want to understand what is required for innovation to happen in the real world, read this book. (Xi Jinping, are you listening?)
4 of 6 people found the following review helpful
Comprehesive guide to our economy 31 Oct. 2012
By Kiteflyer - Published on Amazon.com
Format: Hardcover Verified Purchase
Disclosure: I don't know William Janeway personally, but he said some nice things about "Entrepreneurship in the Global Economy," which I co-authored with Henry Kressel, so I figured I owed his new book at least a look. Trust me, it was well worth it. "Doing Capitalism in the Innovation Economy" clarifies what he calls the "three-player game" among market innovators, financiers, and governments better than any other book I've read.

Janeway illustrates all his points with interesting and relevant examples, and shows how financial and economic strategies developed through history have shaped our modern world. Did the real estate-driven Great Recession of 2008 hit you in the pocketbook? Janeway explains how it happened and puts it in context with the great economic "bubbles" of the past, from the Dutch tulip bubble to the Great Depression of 1929 right up to today. Are you concerned about recent government bailouts of financial and manufacturing firms? His analysis of why they occurred and what they mean for the future is enlightening. Have the pro-innovation proclamations from politicians of all stripes made you curious about how the three-player game affects entrepreneurial startups? He provides examples in which he was a participant, such as BEA.

This is all framed by a balanced synthesis of economic theories. The viewpoint is cross-ideological, encompassing the insights and exposing the oversights of a wide range of economists, including Adam Smith, Marx, Keynes, Schumpeter, Samuelson, Minsky, and more. There are lucid explanations of how financial theories, new financial instruments, and the rise of computer modeling contributed to the market gyrations we have seen lately. And there are frequent flashes of wit about the errors made by investors, theorists, and politicians. All in all, a book that deserves a wide audience. You may not read it at one sitting, but you'll come back again and again.
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