I love the contrariness of the brief article by Masayuki Hirukawa and Masako Ueda: The tenuous relationship of venture capital and innovation. Here’s the conclusion:

The current financial crisis has shut off venture capitalists’ opportunities to cash in their investments by bringing their portfolio firms to public stock markets. As a consequence, they are currently hesitant to invest in young firms in the first place. However, taken together, the evidence supporting the positive impact of VC on innovation is weak at best. Some innovations, especially less profitable ones, may take more time to be commercialised, but innovation is likely to persist even during this downtime, thanks to scientific curiosity and enthusiasm.

Living in the Bay Area, you never hear this skeptical view of venture capital. There is certainly plenty of grousing about their wrong-headedness, arrogance, luck, etc. But their fundamental role in the ecosystem of innovation here in northern California is taken for granted. I think research like Hirukawa and Ueda’s should give pause.

That said, I have some problems with their definitions. There seem to be two measures of “innovation” at stake. First is the commercialization of patents. Second is productivity growth. I grant that both can help measure some innovation, but they are poor proxies for innovation as a whole.

Since we’re in Davos week, I can recall a particularly juicy Davos moment way back when. Competitiveness guru and Harvard professor Michael Porter was holding forth on some research he had done showing that Japan remained particularly innovative and competitive. His figures were largely based on patent output. The one CEO on the stage with Porter was then-CEO of Renault, Louis Schweitzer. Very calmly, Schweitzer pointed out that the biggest innovation in his industry in that era — the minivan — didn’t involve any patents. How did Porter capture that? He didn’t.

Most innovation that occurs in what Richard Florida calls the creative economy can’t be patented, and the contributions to productivity are extremely hard to measure. That may also make some innovations harder to defend commerically, but it makes them no less innovative.

Brad DeLong is a national treasure:

Today, buttermilk-fried petrale sole with pickled vegetables and parsley mayonnaise, served at Chez Panisse Café, costs the same share of a day-laborer’s earnings as the raw ingredients for two big bowls of oatmeal did in the 18th Century.

Read the whole thing to gain a better understanding of what Brad terms “our economic appetite”.

A reporter from the Financial Times looks into why no one is admitting they flew corporate jets to get to Davos (except for JPMorgan Chase’s Jamie Dimon), yet the numbers of private jet landings is at a record high. A+ for enterprising reporting. But a F for gullibility. Here’s a paragraph offered without qualification:

There are many arguments for executives using corporate jets. They are beneficial for security reasons, they allow executives to work together in the air and can be cost-efficient compared with the price of first-class tickets.

The outrage against outsized bonuses in finance is understandably growing. Here’s Obama today:

One point I want to make is that all of us are going to have responsibilities to get this economy moving again.  And when I saw an article today indicating that Wall Street bankers had given themselves $20 billion worth of bonuses — the same amount of bonuses as they gave themselves in 2004 — at a time when most of these institutions were teetering on collapse and they are asking for taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don’t provide help that the entire system could come down on top of our heads — that is the height of irresponsibility.  It is shameful.

The only mystery to me is why has it taken so long?

I’ve never had a problem with entrepreneurs getting staggering rewards. The Google guys deserve their billions, as does Bill Gates, who is providing perhaps the best demonstration ever of how to spend your money once you have it. But why on earth did m&a rainmakers and whizzes on trading desks ever rate multi-million dollar bonuses? I think the only answer is the bonuses soared upward because they could. Banks made outsized profits and paid the bulk of them to their employees (or, at least, a subset of employees) rather than to shareholders.

The phenomenon led to terrible distortions in the market for talent. I may have missed something but when I graduated from my elite university in 1978, no one talked about investment banking. When I returned for my 25th reunion in 2003, the faculty members still around from my day told me that a healthy proportion of students wanted to become “i-bankers”. Given how these Ivy Leaguers screwed things up (as did the more rough-and-tumble crowd that was recruited by places like Bear Stearns), maybe it’s a good thing that this part of the purported intelligentsia didn’t go into neurosurgery or structural engineering.

A few years after I left the World Economic Forum, but at a point when some people there still occasionally sought my advice, I suggested a session on “What’s too much?” I was thinking of the great wealth CEOs were accumulating, rather than Goldman Sachs bankers. But the question applies even more forcibly today.

I have a private theory that both corporations and banks could probably invert their pay and reward scales. At some point, perhaps near the boardroom, rewards would decrease rather than increase. Companies would save money, and the leadership would be drawn from those who really want the responsibility — and, above all, the power — rather than those just in search of lucre.

I’ve raved about David Peace’s The Damned United before, so I’m excited that there’s going to be a film. Given the provenance of the makers (The Queen, Frost/Nixon), the auguries are good.

Brian Phillips, who writes the brilliant Run of Play, is not optimistic:

What I’m afraid of, in other words, is that the combined intelligence of the filmmakers will be applied to the task of middlebrow simplification. I fret, on the evidence of The Queen, about overarching stag metaphors.

The trailer looks pretty good:

[youtube 4ImnSx1HPIw]

Not because they’ve created another angel in heaven, but because today is William Kristol’s last column for The New York Times. It’s almost as much of a relief as the day when the Financial Times got rid of Amity Shlaes.

Now, when is the Times going to sack Ben Stein? And when will the axe fall at the FT on Tyler Brulé? I’m one of the diminishing band of people who pay with their own money for delivery of these papers in physical form every day. But some of the content does make me gnash my teeth with regularity.

Like anyone who has signed up online, I’ve become blasé about emails from Barack and Michelle. But it is great to get an email from the president.

From Fistful of Euros (a site I’ve long followed, but which is becoming essential for understanding the global implications of the economic storm we’re in):

While it may well be true that China is not (yet) entering the Second Great Depression, I am arguing that China is really going to be one of the worst case scenarious in the current global recession, and that consensus thinking still has a very very long way to go in catching up with events in the China case.

As convention has it, you should read the whole analysis. It’s hard to imagine worse news for the global economy — and for the geopolitical situation. Political stability in China has been bought by the year after year, steady, strong economic growth. Take that away, and what do you have?

During the presidential debates I wondered why China was hardly mentioned. President Obama and his administration have plenty of things on their agenda: the US economy, two wars, climate change, healthcare reform, education reform. China is going to force itself onto that list.

I love the White House site as of 12:01 today.

Dopplr, the beautifully designed travel networking site, will apparently be providing its members with personal annual reports.  I suspect Barack Obama didn’t have time last year to join Dopplr, but they’ve thoughtfully created an annual report for him.

More eye-opening is the annual report Nicholas Felton creates for himself each year. Wondrous information graphics, and a disturbingly anal amount of attention to the details of his life. He could be the narrator of a Nicholson Baker novel.