Capitalism - red in tooth and claw?

Tonight, Vince Cable, UK Business Secretary, blurted out the inconvenient truth when he noted that:

Vince Cable will tomorrow launch an aggressive attack on capitalism with a speech that warns that the current system "takes no prisoners and kills competition where it can". In an echo of Denis Healey's famous 1974 pledge to "squeeze property speculators until the pips squeak", Cable will unveil plans to shine a "harsh light into the murky world of corporate behaviour".

The business secretary will announce the launch of a major consultation on takeovers and executive pay, with the intent of ending "corporate short-termism".

"Let me be quite clear," Cable will tell the Liberal Democrat conference in Liverpool. "The government's agenda is not one of laissez-faire. Markets are often irrational or rigged."

Cue howling by all the big biz meedja poodles and proxies on the TV, newspapers et al. By this time tomorrow Mr Cable's character will have been assassinated more times than a working girl in a conclave of archbishops (or is that vice, versa?) . Meanwhile, back in the real world, as Michael Arrington writes, Capitalism is red in tooth and claw - if you are outside of the closed, smoked filled dining rooms that is....

This group of investors, which together account for nearly 100% of early stage startup deals in Silicon Valley, have been meeting regularly to compare notes. Early on it was mostly to complain about a variety of things. But the conversation has evolved to the point where these super angels are actually colluding (and I don’t use that word lightly) to solve a number of problems, say multiple sources who are part of the group and were at the dinner. According to these souces, the ongoing agenda includes:

- Complaints about Y Combinator’s growing power, and how to counteract competitiveness in Y Combinator deals
- Complaints about rising deal valuations and they can act as a group to reduce those valuations
- How the group can act together to keep traditional venture capitalists out of deals entirely
- How the group can act together to keep out new angel investors invading the market and driving up valuations.
- More mundane things, like agreeing as a group not to accept convertible notes in deals (an entrepreneur-friendly type of deal).
- One source has also said that there is a wiki of some sort that the group has that explicitly talks about how the group should act as one to keep deal valuations down.

At least two people attending were extremely uneasy about the meetings, and have said that they are only there to gather information, not participate.

So what’s wrong with this?

Collusion* and price fixing, that’s what. It is absolutely unlawful for competitors to act together to keep other competitors out of the market, or to discuss ways to keep prices under control. And that appears to be exactly what this group is doing.

It was ever thus, hence anti-trust laws etc etc, problem is the regulators are always one step behind. Private Equity of all stripes is still outside of most regulators' ambit, and no OECD government has yet had the balls to resurrect Glass Steagal, which sort of sets the whole tone for Cable and Arrington's duet.

Still, true or not, this one is going to be interesting to watch play out.................

*A collusion is when two cartels run into each other