Doing Capitalism in the Innovation Economy

Janeway spent decades as a venture capitalist at Warburg Pincus and holds a Cambridge doctorate in economics, and this book combines the two. His argument is that the innovation economy runs on what he calls the three-player game between the state, the capital markets and market competition, and that speculative bubbles and government funding have both been necessary to the deployment of every general purpose technology.

His historical claim is that transformational infrastructure, including canals, railways, electrification and the internet, was financed by speculative capital that destroyed itself in the process. Investors lost their money and society kept the infrastructure. He calls this productive waste and argues that no rational allocation process would have funded these projects at the required scale. Separately, the state funded the upstream science and served as the initial customer for computing, semiconductors and networking, which private capital would not have done.

His practical material comes from investing. He distinguishes between building a company with cash flow that funds itself and building one dependent on continued access to capital, and argues the second requires the investor to manage the funding market rather than the business. His concept of cash and control, meaning that a venture investor should hold enough of both to survive being wrong, is the operating principle he draws from his own record.

The book moves between memoir, economic history and Keynesian and Minskyan theory, and the transitions are not always smooth. Readers wanting a practical venture manual will find the theory demanding, and readers wanting the economics will find the memoir intrusive.