# Why Capitalist Corporations are Failing and What’s Next (Part 2 of 3) Date: 2024-02-28 Next Part: https://disrael.github.io/blogs/raw/why-capitalist-corporations-are-failing-and-what-s-next.part3.md Previous Part: https://disrael.github.io/blogs/raw/why-capitalist-corporations-are-failing-and-what-s-next.part1.md --- However there is still a great deal of hero worship for many of our captains of industry and big name academics. Much of this is the result of the sort of enormous undertakings being attempted. Because human lives are so short a 100 year war on cancer or perhaps 1000 year attempt at AI needs intermediate results that can be celebrated. Towards that end Ponzi scheme fraud can be seen as a fake it till you make it virtue. Capitalism is stalling out but hype is still the only way to overcome such large waits for return on investment. We have to celebrate smart phones while hoping for larger accomplishments and as long as we are exaggerating credit might as well lionize Steve Jobs as well. Except that at some point the hype becomes counter productive. What started as incentive now blocks the slow progress that is possible without fraud. A busted fake it till you make it scheme like Theranos doesn’t benefit anyone and an entire economy of over inflated status and expectations won’t end well either. ### Short Term Investment But Theranos had two strikes against it — being riddle with status hierarchy was just the first. The second problem goes back to [Dodge v. Ford Motor Company](https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.): > A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end and does not extend to a change in the end itself, to the reduction of profits or to the nondistribution of profits among stockholders in order to devote them to other purposes. Even if Theranos could have been a true group effort instead of a status vanity vehicle corporations are unable to invest for the very long time frames necessary. There are seven companies worth over a trillion dollars in 2024 and anyone of them is capable of sustained investment. However none of them can look forward the decades or centuries necessary to solve problems bigger than, for instance, fully autonomous driving. Their investment is constrained to roughly a decade out on problems with somewhat known solutions. On the biology side the number one company is Eli Lilly at around $700 billion and that’s not nearly enough for moonshot biology problems. Jeff is also aware of this problem: > Altos Labs raised US$3 billion in a funding round from investors in January 2022. It is said to be the best funded biotech start-up to date. Investors reportedly include Amazon founder Jeff Bezos and ARCH Venture Partners founder Robert Nelsen. However even if Jeff put his full $200 billion into a solution he would have to be joined by scores of other oligarchs to have a chance. The complexity of the human body and the [universe in general](https://medium.com/@disrael/benefits-of-the-end-of-certainty-6a672783a05d) makes its problems less of the gold rush that capitalism excels at and more of the basic research it does not. Of course universities are set up for basic research but not at the level of prolonged investment necessary. Nor can a government reliant on keeping the stock market pumped up gather the votes for really long term investments either. Investment longer than a human life span puts status off the table and that turns off most politicians as well. ### IP Mercantilism In response to failing capitalist corporations, the beginnings of a new form of mercantilism are already being developed. The original [tenets of mercantilism](https://en.wikipedia.org/wiki/Mercantilism): > That every little bit of a country’s soil be utilized for agriculture, mining or manufacturing. > That all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value than raw materials. > That a large, working population be encouraged. > That all exports of gold and silver be prohibited and all domestic money be kept in circulation. > That all imports of foreign goods be discouraged as much as possible. > That where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of gold and silver. > That as much as possible, imports be confined to raw materials that can be finished [in the home country]. > That opportunities be constantly sought for selling a country’s surplus manufactures to foreigners, so far as necessary, for gold and silver. > That no importation be allowed if such goods are sufficiently and suitably supplied at home. can be modified: * That every little bit of a country’s research be utilized for long term benefit. * That all intellectual property in a country be used in domestic manufacture. * That a large, highly educated, working population be encouraged. * That all exports of intellectual property or intellectual property investment be prohibited. * That all imports of foreign goods be discouraged as much as possible. * That where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of intellectual property. You can see the new mercantilism policies [already being enacted](https://www.csis.org/analysis/balancing-ledger-export-controls-us-chip-technology-china): > In a major move, on August 9, 2023, President Biden signed an executive order to create a mechanism for restricting outbound investment in the semiconductor, quantum information, and AI sectors in foreign “countries of concern,” a designation that includes China. If you want major, long term, investments in research and development then the first order of business is insuring those investments pay off for the nation making them. However that’s just the beginnings of the issues IP mercantilism faces: ![Image](https://disrael.github.io/blogs/assets/why-capitalist-corporations-are-failing-and-what-s-next-bec4c07c65.png) The university system cannot handle beyond publish or perish research and judging and encouraging long term basic research requires a whole new alternative economy. The argument has been that hording IP [reduces the global research](https://itif.org/publications/2021/10/07/chinas-innovation-mercantilism-reduces-rate-global-innovation/) effort and so is counter productive. However now that it’s increasingly clear that COVID was [created in a lab](https://www.city-journal.org/article/new-documents-bolster-lab-leak-hypothesis?fbclid=IwAR32m--5ms9MMVBy_8SEBnEcdTx43zg8Q6PrmXarJr1uhl_Dn7aMcZMNWyA), regulating research will have to go hand in hand with investment and there is no way to globally regulate. Meanwhile war [sanctions are quietly continually growing](https://www.dentons.com/en/insights/alerts/2024/february/26/us-announces-largest-sanctions-action-to-date-against-russia). More directly for IP mercantilism is [Florida’s 2023 legislation](https://www.flsenate.gov/Session/Bill/2023/846/BillText/er/PDF) > An act relating to agreements of educational entities with foreign entities; amending s. 288.860, F.S.; defining terms; prohibiting state universities and state colleges from accepting grants from or participating in partnerships or agreements with a college or university based in a foreign country of concern or with a foreign principal unless specified conditions are met and the federal [pending BIOSECURE Act](https://www.arnoldporter.com/en/perspectives/advisories/2024/02/navigating-the-pending-biosecure-act). However the long term research first tenet of IP mercantilism [is stalled](https://www.nyit.edu/news/features/cutting_federal_funding_for_basic_research_hurts_the_economy). The original mercantilism encouraged long term investment by [granting monopolies](https://www.history.com/news/east-india-company-england-trade) and the break from these monopolies was the start of modern capitalism: --- **[Continue reading Part 3 of 3](https://disrael.github.io/blogs/raw/why-capitalist-corporations-are-failing-and-what-s-next.part3.md)**