| Do you mean: C.) That the possibility of the firm going out of business puts pressure on decision makers to be more careful D.) That the firms who make bad bets (or get unlucky) may stop participating, in which case the VC industry becomes better "on average" Or a combination of the two (or is it something else)? C to me seems to be a generic rephrasing of A and B. D isn't all that simple since one has to make some nontrivial assumptions data hasn't really borne out (acknowledging here that data hasn't conclusively borne anything out): e.g. that investment is neither primarily chance or primarily networking effects, that predictive quality of firms is mostly invariant across changing technology, that turnover internal to firms moves slower than turnover in the market, that the damage done to the market by lost capital investment is outdone by better average performance, that firms moving in to replace losers don't 'undo' gains to average, and that there even exist (and that the market can support) enough potential big-payout startups to benefit more than a few lucky VC firms to begin with. Certainly the point is taken that in cases where both harder work matters and where leverage exists (be it slavery, authoritarianism, competition, financial pressure, legal pressure, etc) to get people to work harder, better results are likely to be had. There is a question both to what degree harder work matters in capital investment and also to what degree leverage that exists in private top-down firms does not and can not exist in public top-down firms. One can consider the internet itself as a product of public investment (where there was competition among researchers AND private firms for capital to develop and research packet switching) among countless other examples; namely public investment isn't devoid of its own very large successes. In the discussion is also the subject of 'efficiency' for which reasonable arguments to include 'social income' exist. Counter to this in the public space there are dangers of conflicts of interest and cronyism (these exist, but less problematically, in private sectors). |