A Capitalist’s Dilemma

A Capitalist’s Dilemma. Clayton Christensen’s one of our favorite business thinkers…

…cash hoards in the billions are sitting unused on the pristine balance sheets of Fortune 500 corporations. Billions in capital is also sitting inert and uninvested atprivate equity funds.

Capitalists seem almost uninterested in capitalism, even as entrepreneurs eager to start companies find that they can’t get financing. Businesses and investors sound like the Ancient Mariner, who complained of “Water, water everywhere — nor any drop to drink.”

It’s a paradox, and at its nexus is what I’ll call the Doctrine of New Finance, which is taught with increasingly religious zeal by economists, and at times even by business professors like me who have failed to challenge it. This doctrine embraces measures of profitability that guide capitalists away from investments that can create real economic growth.

Executives and investors might finance three types of innovations with their capital. I’ll call the first type “empowering” innovations. These transform complicated and costly products available to a few into simpler, cheaper products available to the many.

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3 Comments

  1. I really like the principle of taxing less on long-term investments (or taxing more on short-term investments). It does seem a little funny that holding onto an investment for over a year allows it to be taxed as capital gains instead of personal income, but anything longer doesn’t provide anymore tax incentive. Never thought of that before…

  2. So why isn’t there a balance sheet tax. People are claiming lower taxes will help businesses grow but if they are sitting on cash already, giving them more through tax breaks will do nothing.

  3. I have 1,001 ideas that go no where, but could have made money if I could get access to some kinda of investment money.

    Now If I could get some startup money, I could be the first manufacturer of peltier solar panels. (integrated at the silicon level.) But NOPE, I will remain a poor inventor who has no choice but to just give all the ideas away for free, with no hopes of ever pursuing them or even making any kind of living on them. I currently claim welfare. This whole capitalist thing….NOT REALLY WORKING……

    Example:
    Use peltier devices on the backside and in direct contact with the solar panel to use the extra radiant heat from the sun, instead of just letting it COOK the solar panel. So the addition of peltier devies to solar panel backsides, might prove to be a match made in ……HEAVEN?

    TERMS OF USE: MIT License & Licensed under the TAPR Open Hardware License (www.tapr.org/OHL)

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