Entrepreneurs are redesigning the basic building block of capitalism

Someone commented this but deleted it because they were getting downvoted:<p><i>Land ownership, intellectual property and limited liability ownership of companies by individuals are the basic building blocks of capitalism. I.e., property forms guaranteed by the government. Which one of these are being challenged by unicorn startups, again?</i><p>I think this is spot on and deserves repeating.<p>Unicorn startups are changing the way we utilize capital (Uber=cars and labor, Airbnb=property) but they are not changing the fundamental fabric of capitalism. Our legal framework forms the backbone of our society, and regulation&#x2F;policy is the tool we use to adjust that foundation. Entrepreneurs and investors respond accordingly.<p>Uber and AirBNB might hire some lobbyists to change a few minor rules in the hoteling&#x2F;taxi industry, but the really important variables are the distribution of government spending, scope of and resources committed to regulatory oversight, and the tax code.<p>The article lacks a comprehensive review of the data and its arguments come across as surface level speculation.

Not a great article, and I think it misses the one big thing that is genuinely revolutionary about the Silicon Valley form of entrepreneurship. And that&#x27;s that venture-backed entrepreneurial companies are, by and large, the new Research &amp; Development Departments. Acquihires can in fact be great deals for VCs, founders, employees, and acquirers. Many companies are curtailing their own research agendas and relying upon smart technology investments to position them for the 5-10-15 year time horizon. I suspect we will ultimately consider this a vastly more efficient form of capital allocation than the old-fashioned &quot;R&amp;D Department&quot; at IBM, GE, DuPont, AT&amp;T, etc.

Maybe the current set of unicorn startups are just very clever financial inventions to get returns in todays crazy financial world of ZIRP and never ending QE.

This article tries to refute two different types of arguments, and in the process confuses them. The empirical arguments (&quot;this isn&#x27;t happening!&quot;) it refutes quite well.<p>The normative argument (&quot;this is a bad thing!&quot;) it does less well at. Ownership in these companies <i>is</i> cut off from the rest of the economy, but the Economist seems to think that this trend is only worth reporting if the social issues can be brushed off. They cannot. SeedInvest is not a substantial source of capital on the same level as privately VC funds. Mutual funds, maybe.

But VCs are funds, not long term owners. Their goal is an exit, so they can pay off their investors in cash. Their goal is not to become conglomerates or zaibatsu or chaebol. YCombinator is not in the business of becoming the next Samsung.

Hm... no.<p>These innovations are just a child of capitalism, not something unexpectedly changing it.

The exception was the post war managerial capitalism that Galbraith wrote about. This is really just a return to the older model.

&quot;All this has happened before and will happen again&quot;