I don’t think I had a chance to mention that I got to see Tom Friedman speak on his book tour at CU Monday evening. He’s a surprisingly good and engaging speaker, and he does a much better job of avoiding inanity than he does when he’s on the Sunday Morning news shows. In particular, I liked the passion he showed when facing questions from the audience, he really opened up and reminded me a bit of the globetrotting eye-opener who wrote From Beirut to Jerusalem.
I mostly liked what he had to say this morning in the Times, about whether or not it makes any sense to be talking about “saving” GM and Chrysler.
G.M. has become a giant wealth- destruction machine — possibly the biggest in history — and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labor agreements and new visions. When it comes to helping companies, precious public money should focus on start-ups, not bailouts.
Hard to argue with that. We are now, in effect, subsidizing GM to lost billions of dollars a quarter, continuing a years-long trend, with no particular reason to expect that the company, as a whole, can ever be fully turned around. Much better to let it die with assistance, letting profitable technology or lines be spun off into independent firms, with some government backing to arrange for favorable credit circumstances, while overhauling the leadership and management.
But, as always, Friedman’s solutions aren’t quite up to the task.
You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.
Putting aside the complicating questions of ‘who are the top 20 VC firms’, ‘who is going to run the oversight on these operations’, and ‘how do you define “upside” in this circumstance’, it’s almost comical that Friedman is subscribing exactly to the ‘great man’ theory that he is implicitly criticizing in saying that we need to dump the CEO’s of GM and Chrysler.
Venture Capitalists are great people, and are almost certainly more attuned to smart risk taking than CEO’s of huge bloated multinational corporations could ever be. However, they are still subject to a whole series of personal and professional biases, just like mega-CEO’s can be. Having come most recently from a VC-funded startup, I’ve seen how issues like personal friendship between a VC and the CEO can completely fuck up the ability of the funders to be objective about a company’s potential.
And, although good VC’s are almost certainly going to be better about avoiding conventional wisdom and pursuing unusual-but-promising research strategies, it’s still the case that, in 1978 or whatever, no VC could have predicted the ubiquity, just 30 years later, of the PC. At that point in time, computers were just too expensive, too big, too unwieldy, the ever work in the home of the average American. I suspect the next Big Thing is going to be similarly difficult to imagine today.
And, for pure practicality, I hate the idea of trying to recoup government-owned “upside” from a venture-funded research project. I can just see the discussions: “well, yes, we spent a little of your government funds on this project, but only on this side project, which never went anywhere. The main arm, which produced this product, we developed with our internally-raised funds, so you don’t get any of it back. Thanks for that billion, though!”
I would much prefer to see a prize structure put into place, and let the competition spend their own damn money getting there. For instance, we know we need better batteries. Put out a billion dollar reward for whoever builds a battery that can produce 80 amp-hours, and weighs less than five pounds, and can withstand 10,000 charging cyclyes, or whatever. You can even have partial goals, to help speed the process – you get 50 million for meeting this subgoal, with the only requirement being that the solution has to be publically available, so someone else can improve on it.
However, give Friedman his props: I like the point that it’s distinctly un-American to save dying companies. Rather than give GM billions to stay in business, I’d rather spend that money helping the employees of GM, and its subsidiary and supplier companies, get ready for Life After GM; investing in education, retraining, and the like. That’s Change I Could Believe In….