Prosperity requires that people abandon old ways of doing things, old industries and bet on new ways and new industries. To achieve that transition, capital must move from yesterday’s industries to those of the future. The move is a bet. People experiment. Experiments must be financed. Financing requires mobility of capital: people having the incentives to switch money from one enterprise to another. If this switch is taxed – and capital gains taxes are a tax on just such a switch – the incentives to shift resources out of the old and toward a better match diminish.
“Angels,” venture capital firms, merchant and investment banks finance such ventures. They do not know either what will succeed and what will not. But they have experience in so shaping financial contracts as to best insure that mistakes would not last too long – a skill government employees and politicians, who claim responsibility for “investing” and picking winners, utterly lack.
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Reuven Brenner received his PhD from the Hebrew University in Jerusalem and now holds the REPAP Chair at McGill’s School of Management. He has been working with corporations, investment banks, investors and money asset managers in Canada, Mexico, Russia, Thailand, Hungary, and the US on strategic and management issues, business plans and financing companies. He is the author of several books and has been contributor to Forbes Global, Forbes, National Post (where he is member of the Contributing Board), Strait Times (Singapore), Dow Jones, The Wall Street Journal, and Figaro (Paris). Dr. Brenner also appeared in many public debates to share his view on various topics. Among many honors Forbes Global dedicated the August 8, 1998 cover story, titled “Leapfrogging,” to Brenner’s endeavors. Brenner now holds Canadian, European Community and Israeli citizenships. He is fluent in English, French, Hebrew, Hungarian and understands Rumanian, though he no longer speaks the language.