The Coming Creativity Boom By George Gilder
The Bear on Nov 19 2008 at 9:28 am | Filed under: Economy
The real source of all growth is human ingenuity and entrepreneurship, which often thrive in the worst of times–and are always surprising.
Knowledge is about the past; entrepreneurship is about the future. In a crisis the world of expertise pulls the global economy ever deeper into the past, where accountant-economists ruminate on the labyrinthine statistics of leviathan trade gaps, tides of debt and deficits, political bailouts and rebates, regulatory clamps and controls, all propping up the past in the name of progress.
The crucial conflict in every economy, however, goes on. It is not between rich and poor, Main Street and Wall Street, or even government and the private sector. It is between the established system and the new forms of wealth rising up to displace it–all the entrenched knowledge of the past and the insurrections of futuristic enterprise and invention.
The real source of all growth is human creativity and entrepreneurship, which always comes as a surprise to us, especially in the worst of times, as Rich Karlgaard notes. No amount of knowledge about the present can predict the specific profile and provenance of innovation. From the pits of the crash of 2000, when the Internet and the dot.com siege were famously dismissed as a barren “bubble,” came Google (nasdaq: GOOG - news - people ) and MySpace to rise up and take all the chips and establish a new Internet economy. If creativity was not unexpected, governments could plan it and socialism would work. But creativity is intrinsically surprising and the source of all real profit and growth.
Because the U.S. remains the world’s largest economy and still leads the world in business and technological creativity, the current crisis is mostly confined to boondoggles of finance. It will pass rapidly and evolve into a new boom. Emerging is a parallel unregulated financial system based on entrepreneurial creativity and invention.
At the heart of this multitrillion-dollar engine of growth are 741 venture capital firms that traffic in creativity as a business. These firms command $257 billion under management and have launched companies generating $2 trillion-plus in revenues. Complementing the venturers are some 10,000 hedge funds and private equity players, with upwards of $2 trillion under management. Like everything else, the hedge funds are down this year. But collectively losing 12%, they have succeeded in preserving the bulk of their capital. More important, these funds represent a vast laboratory of capitalist ferment and experimentation beyond the heavy hand of politics.
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