Tom Perkins writes:

It’s no surprise that Silicon Valley’s Sand Hill Road in Menlo Park has been the locus of our national high tech activity and the envy of the world, while Wall Street is secure in its reputation as the planet’s frequent scourge.

The facts speak for themselves. Approximately 11%, or 12.1 million, of private-sector jobs reside at companies that were founded with venture capital. These companies include Intel, Genentech, Google, FedEx and Starbucks. Another 500,000 jobs are currently housed in newer start-up companies that are still privately held, and are poised to grow exponentially over the next decade.

In 2009, a year with nearly universal shrinkage in employment, 35,000 new jobs were posted on the job board StartUpHire.com, all created by companies backed by venture capital. This job creation has occurred in every one of the 50 states. Wall Street’s share? Zip, zero, nada.

Silicon Valley Is Not Wall Street

I know that the banks are demonized and venture capitalists seek to avoid being tarred with the same brush. Still, this line of reasoning does not establish the dominant success of the venture capital business.  I had trouble finding a statistic online but the number of firms helped by the commercial and investment banking industries must surely dwarf the venture capital business. Nearly every firm of 100 employees or more has made use of a syndicated loan, has issued bonds, or is publicly traded, meaning that they all have made use of real banking services. Yes, the VC business may not blow up quite as spectacularly, but in 2001 we were all living the hangover from what ex-post appeared to a humongous miss-investment of capital. By being an equity funded investment vehicle they are also less likely to have liquidity problems but not immune, they are know to run out of cash. Banks, by virtue of needing to transform short term deposits and loans into less liquid and longer duration assets is more likely to run into problems. But the benefits are enormous. If we required that all assets and liabilities be duration matched  we’d have higher borrowing costs and more expensive banking services.

With all due respect to the massive contributions and relatively limited systemic risk of the VC business, the banking industry has a massively more difficult risks to face and helps far more businesses.

The New Rules of War is a strategic re-imagining of the American armed forces that  adepts to integrate new tactics made possible by modern tactics. Most of what we’ve learned in this arena means adopting the successful tactics of  non-state actors, mostly terrorists but not terror. The discussion was detailed but completely lacked any discussion of the opportunity cost of such a policy. The author John  Arguilla is a professor of defense analysis at the U.S. Naval Postgraduate School so he could probably flesh out the sorts of trade-offs we’d be making by pursuing this strategy. Foreign Policy gave him plenty of ink for it too. I’d be quite surprised that a smaller, faster, more spread out, and decentralized military would be more effective and cheaper across all forms of conflict.

The article is also wide open to the Lucas critique, strategic outcomes reflect equilibrium  decision not off equilibrium ones. The reason Al-Queda in Iraq uses decentralized warfare is because of our massive conventional military superiority. If we didn’t have it then they’d have fought us the other way. Yes, America has massively dominated the skies for decades, but only by spending on advanced technology that has discouraging others from bothering. If you stagnate then others have the incentive to generate a next generation plane and we see different behavior. If you stop building submarines than other navies can build them to protect their ships. It within a framework of sky, water, and land dominance that we are able to fore our enemies to harass us. If we stopped investing in that stuff then maybe tanks, ships, artillery, and ships don’t look as old fashioned as weapons against us.

Also, for all the criticisms of modern American war, it is interesting that we have fought a war in two countries for almost a decade and that it still remains that entitlements are the biggest part of the budget. These wars are as cheap for us as any big wars have ever been. The casualties while tragic have been low and in the interim our Islamofascist enemies are unpopular and remain out of power. They have to live in caves without power or clean water while our way of life remains mostly unchanged. We may not be winning (though I believe we slowly are) but they do not appear to be winning.