In this issue of NanoNews-Now Editor Rocky Rawstern covers molecular nanotechnology (MNT) via interviews with Mike Treder and Chris Phoenix of CRN, Doug Parr of Greenpeace, and Scott Mize of the Foresight Institute. ETC Group was invited to participate, but declined. In order to help with definitions, we have also included a section of CRN's What Is Molecular Manufacturing? Also in the main section, we have included a portion of Inside Foresight: The Evolution of Foresight's Message, and an interview with D. M. Berube, Professor of Rhetoric and Communication Studies, University of South Carolina (which was originally published in December 2003, and remains pertinent to this topic). Off the main topic: Dr. Pearl Chin (in the next in her monthly series) contributes an article titled Assessing Venture Capital Returns for Efficient Investing in Nanotechnology. Join us as we present "MNT" University Technology Transfer & Patents Learn More Only the news you want to read! Learn More The latest news from around the world, free Full-service, expert consulting Learn More Advertisement From Leading nanotech experts puts 'grey goo' in perspective. "Contrary to previous understanding, self-replication is unnecessary for building an efficient and effective molecular manufacturing system. Instead of building lots of tiny, complex, free-floating robots to manufacture products, it will be more practical to use simple robot arms inside desktop-size factories. A robot arm removed from such a factory would be as inert as a light bulb pulled from its socket. The factory (*) as a whole would be no more mobile than a desktop printer and would require a supply of purified raw materials to build anything." "An obsession with obsolete science-fiction images of swarms of replicating nanobugs has diverted attention from the real issues raised by the coming revolution in molecular nanotechnologies," said Drexler. "We need to focus on the issues that matter - how to deal with these powerful new capabilities in a competitive world." —Mike Treder, Executive Director of CRN, said, "We hope that this article will advance the discussion of the actual implications of molecular manufacturing. There is no need for panic, but there are urgent concerns that must be addressed before the technology arrives." This article is well worth a read. (*) Artist's concept of a desk top factory. See All About Bootstrapping for more. Image courtesy of and © John Burch, Lizard Fire Studios, http://www.lizardfire.com Click here for expanded view of core mechanism. (1551 x 1380 - 851K)

Table of contents: CRN Doug Parr Scott Mize What Is? Evolution D. M. Berube Pearl Chin Quotes Useful Links Next Issue Glossary About Us Contact NanoNews-Now Editorial Calendar Mar '05 Memory and Chip Tech Apr '05 Jobs May '05 Education Jun '05 Tools Jul '05 Investments Aug '05 Security Sep '05 Life Extension Oct '05 Military Nov '05 Materials Dec '05 Possible Futures

Mike Treder Executive Director of CRN

Chris Phoenix Director of Research CRN

Please describe the difference between molecular manufacturing and other kinds of nanotechnology.

The basic difference is that molecular manufacturing aims to achieve direct programmable control of reactions between individual molecules. Other kinds of nanotechnology produce small and useful objects, but they do it with equipment that is very limited in its ability to inject information to the nanoscale. Most nanotech products are small, simple, or both. Molecular manufacturing is an approach that connects information technology directly to the nanoscale.

Programmable construction of molecular tools will create new ways to manipulate the nanoscale. The smaller the tools, the more material they can process per second-especially relative to their size. Also, the inherent precision of molecule-forming reactions will make it easier to build precise and highly functional products. As the tools shrink and improve, molecular manufacturing will become able to build its own construction equipment. This "nano building nano" approach will allow rapid scaleup of production capacity: exponential manufacturing. Although even primitive molecular manufacturing will be useful, the achievement of exponential manufacturing will be revolutionary.

Do you see the development of that sort of transformative molecular manufacturing as a natural progression from today's nanotech research, or will it require significant new scientific breakthroughs?

We see it as a natural progression. The main breakthrough needed is not in science, but in scientists: the recognition that molecular manufacturing is a very powerful approach to the nanoscale. This is not to downplay the work that will be required to develop it. But we're close to the point, if not already there, where molecular manufacturing can be developed by a very large-scale engineering effort comparable to the Manhattan Project.

Although the goals and methods of molecular manufacturing are straightforward applications of today's science, the achievement of exponential manufacturing could be a very significant practical milestone. The products it could build will depend on the choice of materials and the sophistication of the software. But from what we know so far, it looks like new and powerful products could be developed too quickly for sensible policymaking.

Which kind of nanotechnology has the most significant near-term and long-term concerns, and what are the concerns?

There are two basic concerns associated with today's nanoscale technologies. One is that any powerful technology can have undesirable societal effects. The other concern associated with nanoscale technologies is that some of those technologies produce nanoparticles, and some kinds of nanoparticles are unknown and possibly hazardous classes of chemicals. Industry and regulators should not assume that nanoparticles are safe, and the public and special interest groups should not assume that nanoparticles are dangerous. Ordinary smoke and dirt have been full of nanoparticles for billions of years. But even when they're made of familiar materials, nanoparticles can have new properties that mean they should be treated like any other unfamiliar chemical.

The real nanotechnology revolution will begin with the shift from the production of new materials and products to the production of new systems of production. When we achieve the ability to do automatic, programmed, atomically-precise manufacturing, and when those new systems of production can, on command, produce copies of themselves, then we will have entered the age of exponential general-purpose molecular manufacturing. We expect this to occur ten to fifteen years from now, though with sufficient effort it could conceivably happen in less than ten years.

But when it comes, it will be dramatically transformative. All areas of society will be affected, and unless adequate preparations are made, the economic and geopolitical destabilization could be severely disruptive.

How is CRN helping to prepare for likely near-term societal, environmental, and technological aspects of nanotechnology?

The first and most important thing that is needed-which we are working hard to stimulate-is serious research into the likely impacts to society's institutions, proposed solutions, and the resulting complex interactions. Because of the largely unexpected transformational power of molecular manufacturing, it is urgent to understand the problems that it could create. To date, there has not been anything approaching an adequate study of these issues. We've compiled a comprehensive list of areas that must be examined, and we've created a collaborative webspace for researchers to compare and discuss results. In addition, we're coordinating student research projects. We're also doing our own work, of course, in both technical and policy research, and presenting our findings, but much more needs to be done.

How has the public perception of nanotechnology changed in the past three years? What issues still concern you regarding public perception? How can those issues be ameliorated? What is CRN doing along those lines? What are other groups doing? Which groups are helping, and which are hindering the effort to educate the public along realistic lines?

Last summer, North Carolina State University researchers released the results of the first nationally representative survey designed to gauge the U.S. public's perceptions about nanotechnology. They reported that "most Americans hold a generally positive view of the emerging science and believe the technology's potential benefits outweigh its perceived risks. At the same time, most Americans do not trust business leaders in the nanotechnology industry to minimize potential risks to humans."

So, that's good news and bad news. But we were pleased to learn that economic disruption, arms races, and privacy-issues that CRN has raised concern about-were three of the top four identified risks. We were also pleasantly surprised to see that out-of-control sci-fi scenarios, like Michael Crichton's rogue nanobeasts (from Prey), did not rank higher, and that the widely reported worry about inhaling nanoparticles is third, and not first. Survey respondents said that among the worthiest goals for nanotechnology are improving human health and cleaning up our environment-not just better consumer products-and we heartily agree.

Can you lay to rest the media-hyped concerns over grey goo?

Completely laying it to rest is probably beyond our reach. But we can reiterate that nanotechnology-based fabrication can be thoroughly non-biological and inherently safe: such systems need have no ability to move about, use natural resources, or undergo incremental mutation. Moreover, self-replication is unnecessary: the development and use of highly productive systems of nanomachinery (nanofactories) need not involve the construction of autonomous self-replicating nanomachines. Accordingly, the construction of anything resembling a dangerous self-replicating nanomachine can and should be avoided. Although advanced nanotechnologies could (with great difficulty and little incentive) be used to build such devices, other concerns are more urgent. Since non-replicating weapons systems will be easier to build, more efficient, and more likely to draw investment, the potential for dangerous systems is best considered in the context of military competition and arms control.

As pointed out in the previous answer, public worries about so-called grey goo may be more of a manufactured story than a real issue. Nevertheless, in an effort to confront such concerns, CRN Director of Research Chris Phoenix collaborated with nanotechnology pioneer Eric Drexler in writing a paper on Safe Exponential Manufacturing, which was published in the August 2004 issue of the Institute of Physics journal Nanotechnology. That paper addresses the reasons why grey goo is a far less worrisome risk than previously thought.

Dr. Douglas Parr Chief Scientist, Greenpeace UK. Dr. Parr came to Greenpeace UK in 1994 to head up the Science Unit. Doug's main focus is the many issues surrounding science and policy. He is particularly interested in nanotechnology, and is also currently working on issues such as genetically modified crops/food, marine biodiversity and climate change. As our chief scientist, he supervises the science and information functions within the organization.

How is Greenpeace helping to prepare for societal, environmental, and technological aspects of nanotechnology?

It seems to me that these impacts are not a given but shaped by decisions to be taken from now and the many points in the future where those impacts occur. It is important to recognize (and this is what I'm attempting to do) that technology - including nanotechnology applications - is not a black box out of which it emerges as some kind of God-given certainty. Instead it is a process of choices informed by funders' interests, various sectoral market conditions, governmental policy and regulation etc. and thus is a result of choices which we are making consciously or not. By raising the issues and get recognition of this I hope that it will in turn lead to decisions that are more in tune with environmental and social goals.

How has the public perception of nanotechnology changed in the past three years?

Broad public appreciation is still at a very low level. My guess is that it is rising but do not have data to support that. However in as much as one can learn from the previous furores over GMOs, BSE etc. then the institutional dynamics (by which I mean the role that Government, business, professional scientists institutions play) is fundamentally unchanged from those previous crises - those institutional dynamics were what drove the political problems at least as much as the technical issues.

What issues still concern you regarding public perception?

It is not so much a matter of perception as public being skeptical about what these institutions are doing and why. The public remains skeptical - with some justification. It seems to me that some of the potential good from nanotech could be lost because of this but the answer is not 'public education' but changes in the way that those introducing technology into society go about it. i.e. there needs to be some substantive changes.

What is Greenpeace doing along those lines?

We are looking to promote ways in which public concerns can be raised early in the development of the new technologies.

What are other groups doing?

Some other groups (like the National Consumers Council and the think-tank DEMOS in UK, Meridian Institute, ETC Group) appear to be raising similar concerns)

Which groups are helping, and which are hindering the effort to educate the public along realistic lines?

I think the contribution of all those groups is broadly helpful because at this stage the more that there are discussions about what nano is used for and why cause governments, businesses and scientists to reflect upon what is happening, the better.

Scott Mize President, the Foresight Institute.

How is the Foresight Institute helping to prepare for societal, environmental, and technological aspects of molecular manufacturing?

For 18 years, Foresight has provided information on these topics in the form of books, white papers, articles, essays, our Web site, conferences, and testimony before Congress and interviews with the media. We will continue to do this. In addition, over the last several months we have been overhauling the organization and updating our mission and focus. Foresight now sees its mission as ensuring the beneficial implementation of nanotechnology. The core of this effort is The Foresight Nanotechnology Challenges, which are the critical challenges facing humanity that can be addressed by nanotechnology. We have talked about this work in progress in a few venues, and will be rolling this out to the public later in the year. This new focus puts molecular manufacturing in a broader context, which is application-oriented. Much of our efforts will be focused on encouraging and catalyzing research and development that addresses the Foresight Nanotechnology Challenges. In the long run, molecular manufacturing will play a crucial role in addressing many of these challenges. We are also beginning a roadmapping initiative to chart the possible technical pathways to more complex and powerful forms of nanotechnology, including molecular manufacturing. Such a roadmap can be used to help formulate a research and commercialization agenda that will get us there.

Can you lay to rest the media-hyped concerns over grey goo?

I’m not sure how many people are really concerned about the Gray Goo scenario. The most concerned group seems to be the media itself. This is an issue which we should think about and monitor, but in any case it would be decades before the Gray Goo scenario is even technically possible. Moreover, we can realize the benefits of extremely powerful future nanotechnologies without risking such a scenario. Despite this long time horizon, Foresight has developed the Foresight Guidelines on Molecular Nanotechnology (www.foresight.org/guidelines), which if followed will prevent a Gray Goo scenario. The bottom line is that there are far more pressing dangers that society should concentrate on now, such as global warming, pandemics, poverty, nuclear proliferation, terrorism and so forth.

How has the public perception of nanotechnology changed in the past three years? What issues still concern you regarding public perception? How can those issues be ameliorated? What is Foresight doing along those lines?

It is important for the nanotechnology community to understand that nanotechnology is still not on the radar of the majority of the public. However, awareness continues to grow due to broad ongoing coverage by the media. People who are aware of nanotechnology generally believe it can bring great benefits to society and that the government should invest in this area. Most of the public is not greatly concerned with the potential risks of nanotechnology at this point. I think the biggest issue regarding public perception is a confusion about what is possible in the short term vs. the long term. Because the media has regularly highlighted some of the more fantastic long-term visions of nanotechnology, much of the public believe that the government is working on these very advanced forms of nanotechnology today, such as molecular machine systems and molecular manufacturing. The reality is that the research investment today is largely focused on much more basic nanotechnology. Meanwhile other countries, particularly in Asia, are embracing these more powerful, longer-term ideas and going to work to make them happen. The U.S. public needs to understand that other countries are starting to make investments in this realm. If we do not match these investments, we are likely to find ourselves as a second-tier player in the global nanotechnology game. This is an issue of international competitiveness and jobs, so it is in the public’s best interest to advocate a change in U.S. policy. Foresight is using all of its communications vehicles to educate the public and policy makers on this issue.

From What Is Molecular Manufacturing?
Chris Phoenix, Director of Research, CRN

The term "molecular manufacturing" has been associated with all sorts of futuristic stuff, from bloodstream robots to gray goo to tabletop factories that can make a new factory in a few hours. This can make it hard for people who want to understand the field to know exactly what's being claimed and studied. This essay explains what the term originally meant, why the approach is thought to be powerful enough to create a field around, why so many futuristic ideas are associated with it, and why some of those ideas are more plausible than they may seem.

Original Definition

Eric Drexler defined the term "molecular manufacturing" in his 1992 technical work Nanosystems. His definition used some other terms that need to be considered first.

    Mechanochemistry    In this volume, the chemistry of processes in which mechanical systems operating with atomic-scale precision either guide, drive, or are driven by chemical transformations.

In other words, mechanochemistry is the direct, mechanical control of molecular structure formation and manipulation to form atomically precise products. (It can also mean the use of reactions to directly drive mechanical systems—a process that can be nearly 100% efficient, since the energy is never thermalized.) Mechanochemistry has already been demonstrated: Oyabu has used atomic force microscopes, acting purely mechanically, to remove single silicon atoms from a covalent lattice and put them back in the same spot.

    Mechanosynthesis    Chemical synthesis controlled by mechanical systems operating with atomic-scale precision, enabling direct positional selection of reaction sites; synthetic applications of mechanochemistry. Suitable mechanical systems include AFM mechanisms, molecular manipulators, and molecular mill systems.

In other words, mechanosynthesis is the use of mechanically guided molecular reactions to build stuff. This does not require that every reaction be directly controlled. Molecular building blocks might be produced by ordinary chemistry; products might be strengthened after manufacture by crosslinking; molecular manufactured components might be joined into products by self-assembly; and building blocks similar to those used in self-assembly might be guided into chosen locations and away from alternate possibilities. Drexler’s definition continues:

    Processes that fall outside the intended scope of this definition include reactions guided by the incorporation of reactive moieties into a shared covalent framework (i.e., conventional intramolecular reactions), or by the binding of reagents to enzymes or enzyme-like catalysts.

The point of this is to exclude chemistry that happens by pure self-assembly and cannot be controlled from outside. As we will see, external control of the reactions is the key to successful molecular manufacturing. It is also the main thing that distinguishes molecular manufacturing from other kinds of nanotechnology.

The principle of mechanosynthesis—direct positional control—can be useful with or without covalent bonding. Building blocks like those used in self-assembly, held together by hydrogen bonding or other non-covalent interactions, could also be joined under mechanical control. This would give direct control of the patterns formed by assembly, rather than requiring that the building blocks themselves encode the final structure and implement the assembly process.

    Molecular manufacturing   The production of complex structures via nonbiological mechanosynthesis (and subsequent assembly operations).

There is some wiggle room here, because "complex structures" is not defined. Joining two molecules to make one probably doesn't count. But joining selected monomers to make a polymer chain that folds into a predetermined shape probably does.

    Machine-phase chemistry    The chemistry of systems in which all potentially reactive moieties follow controlled trajectories (e.g., guided by molecular machines working in vacuum).

This definition reinforces the point that machine-phase chemistry is a narrow subset of mechanochemistry. Mechanochemistry does not require that all molecules be controlled; it only requires that reactions between the molecules must be controlled. Mechanochemistry is quite compatible with "wet" chemistry, as long as the reactants are chosen so that they will only react in the desired locations. A ribosome appears to fit the requirement; Drexler specified that molecular manufacturing be done by nonbiological mechanosynthesis, because otherwise biology would be covered by the definition.

Although it has not been well explored, machine-phase chemistry has some theoretical advantages that make it worth further study. But molecular manufacturing does not depend on a workable machine-phase chemistry being developed. Controversies about whether diamond can be built in vacuum do not need to be settled in order to assess the usefulness of molecular manufacturing.

Early writing on MNT highlighted one specific technical possibility: building molecular machine systems that could make copies of themselves. It was pointed out that this ability would be extremely powerful in being able to make large numbers of systems, and in getting costs down.

This is true, but the self-replication concept has generated an amazing amount of heat and confusion, especially as attention has shifted to nanotechnology policy. Eric Drexler (Chairman of the Advisory Board, Foresight Institute) was asked to provide some clarification:

    Self-replicating nanomachines (SRNs) - especially as they are commonly understood (tiny, autonomous, self-replicating devices analogous to living things) - are not necessary for molecular manufacturing and should be de-emphasized as a goal.

   Why is this a sensible position?

    SRNs are not necessary: Macroscopic manufacturing systems expand their output by using existing capital goods to produce more capital goods without building self-replicating machines on the macroscale; likewise, self-replicating machines are not necessary on the nanoscale.

    SRNs should be de-emphasized as a goal for several reasons:

1. There has (oddly) been a persistent resistance to the idea that SRNs are possible; it is preferable to avoid advocating goals seen as impossible.
2. A shallow understanding of SRNs suggests that they are by nature dangerous; it is preferable to avoid advocating goals seen as dangerous.
3. SRNs as commonly understood play no role in current nanofactory-based concepts of molecular manufacturing.

    What related messages do make sense?

    Desktop nanofactories will be general purpose manufacturing systems. They can be inexpensive because they can (for example) be used to make parts that snap together to make more nanofactories.

    A set of blacksmith's tools can be used to build a set of blacksmith's tools, but we don't call them self-replicating. Likewise, not all nanotools that can be used to build more nanotools should be termed self-replicating. SRNs are possible, but they won't be the simplest or most efficient tools for making other products.

    Studies of self-replicating systems and their control are valuable and appropriate: SRNs (not necessarily as commonly understood!) are an important potential application of the technologies that will enable molecular manufacturing. They may have genuine uses, and could certainly be a threat. (Thus, the Sherman language [in the 2003 House nanotechnology bill] is still valuable and appropriate.)

Based on this thinking, you may see Foresight talking more about desktop nanofactories and parallelism, and less about self-replication as a goal.

—From Inside Foresight: The Evolution of Foresight's Message

In your opinion, what should be done to mitigate (if not eliminate) the potential downsides to MNT, as well as to maximize the potential upsides?

Study, study, and study some more. Involve the public, social scientists, and humanists. Vet the claims. Debunk the foolishness. What is needed is the Center for American Technological Preparedness as specified in the 21st Century Nanotechnology Research and Development Act. Regulators need to use the broad expertise of all the actors noted above to promote safe and effective nanotechnology applications. Personally, I would expect something (like) the Kefauver Amendments to the Food, Drugs and Cosmetics Act applied to nano-products. If coupled with an invigorated Occupational Safety and Health Administration. And a rediscovered Consumer Product Safety Administration. This tripartite may serve as a basis for a regulatory regime for processes and products. Manufacturing might demand a heightened liability regime matched with more standards regulatory structures, such as treaties and agreements.

Who are the players in the developing debate on nanoscale-materials technologies and MNT? What are they getting right? What are they getting wrong?

The players: government, industry and citizen-consumers. The government has begun to be interested in societal and ethical implications of nanotechnology (SEIN). Whether as window dressing or not, we cannot tell though it appears to be promising. Industry has also been investigating SEIN such as NbA's HEITF (Health and Environmental Issues Task Force). Unfortunately, profit may blind corporates to liability concerns given the many ways companies, like a phoenix, rise from it own ashes. The citizen-consumer is out of the loop. There is no public sphere for science and technology policy in the USA. Unless we scientiate (educate) the citizen-consumer we will find them among the troops recruited by an anti-nanotechnology transnational protest movement.

Who isn't participating in the debate that should be, and why?

We need full participation. More social scientists, community leaders, and citizen-consumers need both time and space to engage in the debate. The process needed to promote involvement includes: (1) writing and rewriting the message (the nanotechnology story) to maximize its comprehensibility; (2) education and outreach in multiple venues: schools, town hall meetings, political campaigns, etc.; (3) have all parties meet in dialogue, as face-to-face as possible; and (4) assess, repair and repeat.

Regarding the nanoscale sciences: Talk a little about education, where we're doing it right, where improvements can be made, and why.

Start early. Students get turned off the science in primary school. Teachers need to teach science, which takes more talent than only speaking science. How science can compete with popular culture has evaded thinkers better than me. Science and scientists are not as sexy as basketball stars or television personalities. Next, science needs to be taught juxtaposed to its application, technology. If viewed as two parts of the same phenomenon, we may be able to bring together many fields of study currently isolated by curriculum, sometimes geography. Good science education starts early, makes an effort to be relevant, and can only be sustained in an environment that reinforces the scientists and their work.

Regarding the likelihood that sooner or later someone will develop MNT: If you could gather all the leaders, decision-makers, politicians and opinion-shapers from around the world and speak to them collectively, what points would you make?

Do less harm than good. Treat everyone with intrinsic worth and value. Invest in long-term scientific research since the free market does that poorly. Regulate as a last resort. Bans aren't solution but expression of failure. Listen to as many voices as you can. Participation is a process.

How would your respond to the following statement?
"Nanotechnology's highest and best use should be to enable the creation of a world of abundance, where no one is lacking for their basic needs. Those needs include adequate food, safe water, a clean environment, housing, medical care, education, public safety, fair labor, travel, artistic expression and freedom from fear and oppression."

Sounds great. I hope we get through the next 5 years. Nanotechnology will profoundly affect war-fighting. In the war against terrorism, our armies will bring its best technologies onto the battlefield. Nano-weapons (meaning nanotechnology enhanced weaponry) scare me. Proliferation of nano-weapons might foreclose any of the benefits in the statement made (earlier). "Goo" is nothing to be feared. Purposeful use as a tool to exterminate our enemies is much more provocative. Freedom needs to survive terrorism and that might be overly optimistic.

—D. M. Berube, Ph.D. (December 2003, in an intervew with Nanotechnology Now)
Professor of Rhetoric and Communication Studies
Chair, University Budget Committee
Director, Carolina Debate
Dept. of English
University of South Carolina

Assessing Venture Capital Returns for Efficient Investing in Nanotechnology - Short Version

(Editor's Note: Here is a short version of Dr. Chin's entire article, which is being printed in the Nanotechnology Law & Business Journal.)

With the advent of nanotechnology and the emergence of venture capital funds investing in early stage start-up nanotechnology companies, now is the time to take a closer look at the venture capital industry and ask some questions on how to evaluate venture funds who claim they can successfully invest in nanotechnology and avoid the investment pitfalls of the dot.com and biotech era.

In the aftermath of the dot.com and biotech bubble bursting, it becomes very important for investors to be savvier about how to prevent the considerable investment losses sustained during those periods of investing in technology. Nanotechnology is the next big thing in which to invest, but investors are now much more cautious about investing in technology. However, technology still offers excellent opportunities for significant returns, but it may be useful for investors and venture capital funds to learn from past history.

Estimating the returns to venture capital is necessary to evaluate the entire asset class as an investment opportunity and the performance of individual fund managers. A number of recent academic studies provide examinations of the returns to private equity. In this article, the focus will mainly be on venture capital, although the studies cover private equity with regard to both venture capital and buyout funds. These studies have been able to help identify what factors may result in a successful venture capital fund.

The findings confirm some commonly held beliefs about the return patterns, but also contradict the widely held assumption that the private equity asset class has been a source of abnormally high returns when compared with public equity. Private equity funds, both venture capital and buyout, generated returns that were roughly equal to the returns of public equity. This result should be distressing to most investors in venture capital funds because that means the risk and returns do not justify the management fees.

The fact that these studies conclude that the overall returns on private equity are not that different from public equity is of great interest. This should not discourage investors from investing in private equity as there is still a need to diversify portfolios. However, this argument to invest in private equity for that reason would not satisfy the many small investors, whose 401K and other retirement plan monies are being managed by LPs that invest in such vehicles as venture capital. These small investors will demand a better management of the return for the risk being taken on investing their retirement monies. An investment manager that does not garner higher return for higher risk to his/her investors will likely not stay in that position for long.

A conclusion presented based on this data was that value can be created through more intensive monitoring and the allocation of contingent control to the VC. The studies also conclude that good venture capital management is a key factor for success. Funds with good performance were partly attributable to management limiting the size of their portfolio, allowing them to select only the best possible investments, which is a very targeted approach at choosing a few good deals rather than a carpet-bombing approach. It was found that funds that concentrated their investments in a particular industry or investment type produced better returns. In other words, focusing on a particular sector or sectors of deep expertise can maximize returns. Of course, this increases your risk, but also the potential reward, because the portfolio is implementing a lower diversification strategy, and because risk and return are directly related.

The conclusions drawn from these independent studies of the returns to private equity, in particular venture capital, indicate that it becomes important to pay more attention to assessing management potential, aside from just searching for fund managers with previous good track records to ensure a fund's success. The chances of a good management team member of a successful fund leaving to start a new fund is slim, as they often have equity stake in those prior funds that require their continued participation. However, the upside is those types of managers are not the only game in town. The downside and the risk is how to figure out who is the real deal. However, how these potential abilities are currently being assessed without demonstrated ability or track record is limited in scope. There must be greater efforts to improve their understanding and the assessment of value of management. It is important to remember that good information - and how a good manager makes appropriate use of information - mitigates risk.

Perhaps this following illustration to describe management and its value may be helpful to elucidate the purpose and value of management. "Four workers can make 6 units in an eight-hour shift without a manager. If I hire you to manage them and they still make 6 units a day, what is the benefit to my business of having hired you? On the other hand, if they now make 8 units per day, you, the manager, have value." It is also evident that if they subsequently make 4 units a day, that there is a problem with the manager. The same analogy applies to service, or retail, or teaching, or any other kind of work. Can your group handle more customer calls with you than without you as a manager? Sell higher value merchandise? Impart knowledge more effectively? That is the value of management - making a group of individuals more effective.

Hence, how will a manager of a venture capital fund return more value than the industry average, which in this case is also that of the public equity markets?

Another result of the data demonstrated that funds started by new firms in boon years with the heaviest capital inflows subsequently performed the worst. Such inexperienced funds resulted in too much money chasing too few good deals. The increase of capital flowing into private equity during these flush markets does not go to the top performing funds, but rather to those bad-performing inexperienced new funds that are trying to jump on the bandwagon.

In addition to that, European VC funds lagged in performance relative to US VC funds. One possibility for that gap was the assessment that European VC's were more deal-makers than they are active monitors and still seem to be lagging in their ability to select projects and provide value-added services to their portfolio companies. This is supportive of the idea that an appropriate VC management could create similar value add to European deals as is done with U.S. deals as there is no evidence that the quality of deals in Europe are any worse than the ones originating from the U.S. With that being the case, imagine the opportunities available in Europe with a U.S. style investment and management philosophy, and if there were a venture capital fund that could invest in European nanotechnology as put forth.

There are many instances of venture capital deals achieving fantastic returns. This indicates that the private equity firms have not yet achieved their potential, and there is much room for improvement, and that new approaches in venture capital investing should be considered more seriously. Change can be a good thing, but it will likely be scary for many who prefer to continue in the current methods because they have become accustomed to poor performance being the norm. However, this becomes a problem if even a few investors take the chance on a different investment approach, perhaps one that is considered a contrarian approach by some, and who then get rewarded with returns appropriate for the risks they took on for something new and untried. At that point, there will be many fingers pointing at investment managers as to why they were not able to recognize value when others did. This is certainly an indication that investors should change their decision process on how they choose venture capital funds in which to invest.

If a traditional VC fund is considered successful based on a 1 in 10 hit rate using a carpet-bombing approach to deal selection, then when a new VC fund comes along offering a management team with as good deal selection abilities (in terms of investment and technology experts) they would be expected to do at least as well. If in addition, the new fund also offers credible management capability for each company invested, this can only increase the probability of success.

Seraphima Ventures' business model is based on the assertion that better management oversight is what tips the scales in favor of a successful fund. These studies support Seraphima Ventures' business model which asserts that management abilities is a major factor for determining fund performance and success. If a new venture capital fund with a team that professes to offer explicitly superior management capability, such as Seraphima Ventures, potential investors may wish to take a closer look at what they are offering as it seems they may well have figured out on their own, without the studies, how much more that added management value may be worth. As Seraphima Ventures is focusing on international investments, that investment management philosophy can only improve performance from European investments as well.

Management is both art and science. It is the art of making people more effective than they would have been without you. The science is in how you do that. A manager's most important and most difficult job is to manage people. You must lead, motivate, inspire, and encourage them. And sometimes you will have to hire, fire, discipline or evaluate employees. Investors are encouraged to increase their understanding of management and assessing its value since it is not straightforward.

Hence the ability and skill of a VC to understand these results, management and market dynamics, and to translate it into an investment strategy for his or her portfolio of companies, could potentially directly translate into significantly higher returns than the public equity markets. Investors are strongly encouraged to do their due diligence on profiling the capability of the management team members of any fund.

A key takeaway is that these conclusions apply to any industry where venture capital investment internationally is possible, not only to nanotechnology. However, it would be best to implement these strategies now to optimize returns investing in nanotechnology and to avoid a nanotechnology bubble.

Stay tuned for next month's article.

Nanotechnology may help the human race to survive the global problems we have created; or it may accelerate our downfall. This depends very much on the development and globalisation of another innovation, not in technology, but in human relations.

I am speaking of organisational accountability.

Organisational accountability is an expression of our moral and ethical concern for each other, including future generations. Its basic premise is that large organisations have a duty to explain and justify their decisions, acts and omissions in so far as they affect the public, and the public has a right to know and to be involved in decision-making.

Nanotechnology has the potential to bring about a revolutionary transformation of our material world, a transformation that may surpass that brought about by information technology and telecommunications. Yet there is currently little or no public knowledge of, let lone involvement in, the rapid expansion of this technology and its dangers.

What is needed is a public accountability framework in which experts, industry representatives and government officials have their role among other stakeholders. This is what the NGO Greenpeace calls a 'new contract'.

Recommendation: An International Nanotechnology Agency

The United Nations should convene an international conference with a view to the creation of a permanent international multi-stakeholder body (International Nanotechnology Agency) to review, monitor and regulate NT developments. There is as much reason to create such a body as there was to create the International Atomic Energy Agency with its monitoring powers.

Such an agency must not be restricted to the representatives of governments, corporations and research institutions, but must involve NGOs/NPOs, representatives of major world religions and ordinary citizens. The Agency will function on the principles of organisational accountability. It is now the priority of mankind, to engender through stakeholder dialogue, a more mature understanding of trusting and cooperative human relations at the organisational level.

Nanotechnology and Survival - Ethics and Organisational Accountability http://www.freedomtocare.org/page316.htm
—Geoffrey Hunt, Professor of Philosophy of Care
European Institute of Health & Medical Sciences, University of Surrey, UK
Paper delivered at Institute of Seizon and Life Sciences, Tokyo on 5th July 2003.

If you've not read Bill Joy's article in Wired about plagues of nano-replicators, then I urge you to do so. It's a wonderful example of how intelligent and compelling fear-mongering can be. The phrase "fear-mongering" might imply that I am accusing Bill Joy of bad faith. Far from it - I'm sure he believed every word. I am also sure that he is very pro-technology in principle.

But the phrase "fear-mongering" does appropriately imply being unduly alarmist, and to describe a technology as bringing us to (I quote) "the cusp of the further perfection of extreme evil… and on to a surprising and terrible empowerment of extreme individuals" is, let's say, questionable. Indeed the title (which may not have been of Joy's choosing) is equally questionable: "Why the future doesn't need us."

If you go to the Web, you'll easily find plenty of debate about Joy's article. You'll find responses from champions of nanotechnology such as Richard Smalley and Robert Freitas, as well as Freeman Dyson. You'll find plenty of debate from magazines. One important point raised by an online critic: Joy's article contained no technical analysis of any kind.

—Philip Campbell, Editor-in-chief of Nature, on Nanotechnology link.

One of the big questions facing nanotechnology is: Will it be the next GM?

My first answer is that it has definitely got all the right ingredients.

• It's a new and radical area of science.
• It has huge potential, leading to scary visions of self-replicating nanobots turning the world into 'grey goo' which appeal to the media who love nothing more than a good scare story.
• Nanotechnology also has some powerful adversaries in the form of Prince Charles, Zac Goldsmith and a number of campaigning environmental groups among others, all of whom know how to ensure their concerns are voiced in the media.

But on reflection, I would answer differently. Whether nanotechnology becomes the next GM is surely down in part to the scientists, companies and science press officers involved.

—Fiona Fox (Science Media Centre, UK) on communicating nanotechnology - a guideline for scientists

Open source for nanotechnology. The increasing ability to precisely control the assembly of matter at the molecular and atomic level (one definition of nanotechnology) promises to make matter like software. Building equipment, food and other materials might become as easy, and cheap, as printing on paper is now. Just as a laborious process of handwriting texts was transformed first into an industrial technology for mass production and then individualized in computer printers, so also the manufacturing of equipment and other goods might also reach the same level of customized production. If "assemblers" could fabricate materials to order, then what would matter would not be the materials, but the design, the knowledge lying behind manufacture. The most important part of nanotechnology would be the software, the description of how to assemble something. This design information would then be quintessentially an information resource, software.

The same principles which have promoted the rapid development of accessible, affordable and innovative open source software might also be applied to the creation of knowledge for nanotechnology. Nanotechnology could maintain the paradigms of openness, public criticism and development as a community effort which are already part of its foundations in current nanoscience, rather than assuming that proprietary secrecy is the only route to further development. This could accelerate research and development, and promote accessibility, while also promoting safety.

An obvious starting point would be to promote open source approaches in developing modeling software for nanotechnology design. Such design is already being done on an exploratory basis, largely in a scientific mode, to see what sorts of molecules might be build for nanomachines. Creating commitment to open source in modeling software for the longer term, even after commercialization, would establish a foundation for accessible information. This would gain the advantages of peer review to examine design safety issues. It would build a coalition of individuals and organizations interested in supporting open source software for modeling nanotechnology designs. Such an initiative would benefit from first-mover advantages, and could establish standards, creating the intellectual infrastructure for a new field.

Nanotechnology and the Commons: Implications of Open Source Abundance in Millennial Quasi-Commons

—Bryan Bruns
link www.BryanBruns.com
BryanBruns@BryanBruns.com
Prepared for presentation at:
Constituting the Commons: Crafting Sustainable Commons in the New Millennium
Eighth Conference of the International Association for the Study of Common Property
Bloomington, Indiana, USA, May 31-June 4, 2000

Commenting on how society can cope with the (predicted) massive changes that will result from our understanding of the nanoscale, Dr. Robert D. Atkinson (1) said "We should not use the precautionary principle as our guide, nor should we just ignore the potential problems. We should go forward with research on nano while at the same time go forward with research into the potential problems from nano and the solutions to them."

(1) Vice President and Director of the Technology and New Economy Project, Progressive Policy Institute. Author, "The Past and Future of America's Economy: Long Waves of Innovation that Power Cycles of Growth"

From Our Molecular Future: How Nanotechnology, Robotics, Genetics, and Artificial Intelligence Will Transform Our World, by Douglas Mulhall:

• What happens to the monetary system when everyone is able to satisfy his own basic material needs at very low cost?
• How would we use cash when digital manufacturing makes it impossible to differentiate a counterfeit bill or coin from the real thing?
• What happens to fiscal policy when digital information, moving at light speed, is the major commodity?
• How fast will monetary cycles move compared to, say, the ten- or twenty-year cycles of the late twentieth century, when products and patents go out of date in a matter of months instead of years?
• What happens when we don't have to worry about trade or social services for our basic needs, because most of what we need is provided locally with digital manufacturing, and the biggest trade is in information?
• How do we control the excesses of the ultrarich, the overabundance of the molecular assembler economy, and the challenge to intellectual property laws created by intelligent, inventive machines?
• What happens if half of all jobs are made redundant every decade?
• What happens to the War on Drugs when there's no import, export, or transport of contraband because drugs can be manufactured in a desktop machine using pirated software downloaded from the Internet?
• What happens to democratic controls when individuals can get as rich as small governments in a year or so?
• What's the relevance of insurance if many things are replaceable at very low capital cost, but liabilities from software are potentially unlimited?
• How should organized labor react when molecular assemblers and intelligent robots eliminate most manufacturing jobs?
• What is the nature of work going to be?
• What happens to land prices when an individual can build a tropical farm under a bubble in North Dakota, and get there from New York in an hour?
• What happens when everyone can go everywhere, whenever they want, and work from wherever they want?

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Issue #21 will cover Memory and Chip Tech. It will land in your mailbox March 7th, 2005.

Infamous Quotes:

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." Western Union internal memo, 1876
"Heavier-than-air flying machines are impossible." - Physicist and mathematician Lord Kelvin, President of the British Royal Society, 1895
"Everything that can be invented has been invented." - Charles H. Duell, Director of U.S. Patent Office, 1899
"There is no likelihood man can ever tap the power of the atom." - Robert Milikan, Nobel Laureate in Physics, 1923
"Theoretically, television may be feasible, but I consider it an impossibility-a development which we should waste little time dreaming about." - Lee de Forest, inventor of the cathode ray tube, 1926
"I think there is a world market for maybe five computers." IBM's Thomas Watson, 1943
"Landing and moving around on the moon offer so many serious problems for human beings that it may take science another 200 years to lick them." - Science Digest, August 1948
"Computers in the future may weigh no more than 1.5 tons." Popular Mechanics, 1949
"There is no reason anyone would want a computer in their home." Ken Olsen, Digital Equipment Corp, 1977

And the lesson is? It's a tough game to call.

Need advice? Check out NanoStrategies

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