Obama-Endorsed VC Program Promises 6,000 New Startups
hothardware.com
hothardware.com
The feds can't even protect the border or catch Osama bin Laden and now they want to run some fascist incubator to give the political class even greater control over our society.
This is the first step of course. As the program grows, Congress will start creating demands like set-asides for racial groups or veterans, and it will just so happen that a phone call from a politician will seal the deal.
Are you seriously calling this fascism?
"An inherent aspect of fascist economies was economic dirigisme, meaning an economy where the government exerts strong directive influence, and effectively controls production and allocation of resources. In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state."
At the next election, Obama can talk about how he gave $2B to politically correct businesses (though he won't use that term) and he'll have lots of "high tech" plants to tour where he can say "they said we couldn't, but I say we can, and we did, build this company! Making clean energy solar cells for the future!"
That's "contingent upon service to the state". He didn't say the "entire economy" was fascist, just that the fund was.
Fascism is telling Volkswagen to make tanks.
Maybe, but this isn't basic research.
> Fascism is telling Volkswagen to make tanks.
This is saying "we'll fund {you} to make {whatever}" when folks spending their own money don't believe in the combination of {you} and {whatever}.
Synfuels anyone?
Which reminds me, what fraction of the US govt-seeded/assisted solar biz haven't moved much of their operations to China?
The decision will be made on a political basis. That's how govt always works.
Fascism has a definition, and it involves getting all of the biggest corporations on the same page with the government to create a totalitarian state. (Communism differs in that the government is the whole deal).
We've been funding energy research for decades, and there are a lot of reasons for the government to try and kickstart green energy. This is an experiment with the funding mechanism, people complain about the grant system all the time, silicon valley works, so someone said hey let's give this a shot. It's not fucking fascism.
If it was under the DARPA line item would you be more ok with it?
Yes, but I didn't mention fascism. I merely described what the program in question is actually doing.
> We've been funding energy research for decades,
Yes we have. Is it unreasonable to ask whether said funding has been worth what it cost? Is it unreasonable to ask whether proposed funding will be worth what it costs?
Or, are you claiming that the decision to fund synfuels obligates us to fund every alt energy proposal?
> and there are a lot of reasons for the government to try and kickstart green energy.
Unless you think that said reasons justify any and all things that one can call "kickstart green energy", that statement isn't all that useful.
You don't get to assume "we're going to have good results" in the abstract. You need to show that the specific proposal is likely to work. Surely experience is relevant - if something has failed before, why will this time be different?
> silicon valley works
Actually, silicon valley doesn't work in the sense that is required by your argument.
The part of silicon valley that works is folks risking their own money and they don't agree on winners before the race. Govt programs lack both of those features.
Also, VC model actually doesn't work that well. The average is fairly low which means that the standout funds mask a lot of horrible performance by the vast majority. What are the odds that govt will be like Kleiner and not the typical fund?
> If it was under the DARPA line item would you be more ok with it?
No, but it's nice of you to try the ad hominem slam.
I'm happy to concede that I'm a bad person and you're a good person. However, that doesn't change the fact that these sorts of programs have been a disaster.
I suspect that you place a lot of weight on "good intentions". Are those intentions really all that good when they consistently have bad results?
The DARPA comment was serious. There's a huge military component to getting green energy moving.
The program in question isn't research. It's startup funding.
> Drawing a comparison to fascism, oblique or not, is ridiculous.
Surely you're not arguing that if it isn't fascism, it's good?
While you're vehemently insisting that it isn't fascism, you haven't responded to the fact that it is a close cousin, corporatism....
> The DARPA comment was serious. There's a huge military component to getting green energy moving.
So what? The military does lots of dumb spending. It also has different needs. So, even if green energy makes sense for certain military applications, that doesn't imply that funding it for general applications is a good idea.
Over 50 years ago an environment of heavy government regulation and anti-competitive legislation (as you describe in the first part of your post) was posited by Ayn Rand in Atlas Shrugged. The argument being that it is in politicians interest to make business hard so that businesses are beholden to politicians. She called it the "aristocracy of pull".
I like to point out that taking $2B out of the economy will prevent the creation of- in my estimation- 4,000,000 jobs over the next 10 years. The money must come from taxes or inflation, and that lowers the bottom line at the end of the year when business owners large and small are deciding whether to expand or not. The lack of expansion in the first year means the businesses lose out on the profits that would have come from it on the second year, and like compound growth the missed opportunity compounds as well.
Better to let people allocate their own resources and capital. Central planning doesn't work, and inevitably leads to the aristocracy of pull.
Borrowing money is the mechanism by which the currency is inflated.
Not so fast. Borrowed money is money that is unavailable for other purposes. That happens immediately.
It's not like the borrowed money was under a mattress.
The payback is from taxes or inflation, and the latter works only if the inflation is a surprise to the lender. Expected inflation is factored into the interest rate.
That's quite an estimate. I'm not quite sure how you got to this figure, but this seems to say that each $500 of additional taxes reduces job creation by one ($2B/4M). Inverting this logic would mean that the recent $120 billion reduction in payroll taxes, which was only part of the package extending the Bush tax cut, should allow for the creation of 240,000,000 jobs. Way to go Obama...although now we need to find a couple hundred million more Americans to fill all these awesome jobs you created!
I'm surprised there are such wild claims in such a highly rated post.
We started a company in "a special development area" = 30 years of high unemployment since the shipyards closed and a civil war didn't help. Every government department was queuing up to give money to create new entrepreneurial industries.
Department 'A' required you to have less than 5 employees - no problem you just count the founders.
Then Dept 'B' had a grant if you had created 10 jobs - no problem you just count every web designer and contractor.
Dept 'C" gave you money if you worked in a green technology - no problem you just sign up another startup doing green stuff as a customer and do some work on their website.
It actually did a fantastic job of creating an unofficial network of startups who all borrowed staff off each other and discussed the latest tricks to get the latest grant.
Still cost less than having the army on the street,
For decades, big corporations and venture capitalists (and their lobbyists) have used every trick in the book to get themselves special advantages.
Huge loopholes mean that the effective US corporate is the fourth lowest rate in the OECD (though the official tax rate is the second highest in the OECD). This is a great example of dysfunctional government intervention, but one that won't go away (because cutting loopholes is demonized as "raising taxes")
VC earnings (and for that matter long-term capital gains) are taxed at a much lower rate than W2 earnings of an employee. All of these things are due to government interventions (ostensibly to promote economic growth and create the "right" incentives)
I'm not a fan of big government intervention and I don't know much about the "Obama endorsed VC program". So I'm open to legitimate criticism of the program.
However, if folks are going to describe it as "fascist", I'd be interested to know why they haven't described the current system (with all of its tax loopholes and incentives) as fascist
Many corps actually do pay the official rate.
Advocates of higher taxes and higher US govt spending point to western european countries and say "look at all the great services they get from govt".
The problem with that argument is that the US govt currently collects about the same amount of money per capita as those countries. (It collects more than Canada.) In other words, the US govt already has the revenue to provide those services. Since it doesn't .....
Congratulations! You're on the way to understanding the viewpoint of the far left. (and I mean a generic 'you', I'd say your last sentence implies that you actually understand this.)
The idea (which I'm partial to, but this is just my opinion, etc, I'm still reading a lot, yadda yadda yadda) is that that's the inherent way that these things trend, unchecked. You're watching it unfold before your very eyes.
It's much harder to see historical events happening as they're happening.
(disclaimer: I also think that describing this as 'facist,' while good intentioned and kinda correct, suffers too much from the emotional response to the term 'facism' to really be effective.)
How could you NOT consider the US a fascist state? If we're not fascist, then no one is.
Absurd, I know!
If it was such a good idea, how come folks won't fund it voluntarily?
> Many things you use on a daily basis are thanks to government / taxpayers, including the internet you are using to read this.
Actually, very little internet funding came from govt. Yes, govt funded the basic research, but the infrastructure came from private investment.
Neither of these are evidence of corruption, they are just the nature of both economics and political influence peddling and electioneering.
No, you've merely shown that there were some benefits. You didn't discuss costs at all.
> Also I am pretty sure any grant writing process is definitely based on merit.
"merit" means only that the best proposals were funded. It doesn't tell us whether funding those proposals was a good idea.
Traditionally, and for various reasons, some to do with bargaining-power in the market, some with (good, but patronizing) care for citizens, others with bureaucracy, gave benefits to large, international corporations (tax breaks, complicated regulations that keep small competitors out, and the occasional bailout...).
And now startups get some support too. I see where most criticism here is coming from, but honestly, in the pragmatic scheme of things, this could actually help startups, and thus the economy, by leveling the playing-field (a bit) again...
How could the government, sponsoring a few thousand startups, be harmful to anyone? If they start competing with existing VCs, angels and incubators, they may become the ONLY source of funding. Look at the Dodd-Frank Act, they're already squeezing accredited investors out of the game. The State has an unfair advantage, they can assume any amount of risk and stay in business as long as they want. That's some steep competition.
So it becomes a choice between anti-startup tinkering, or both pro- and anti-startup tinkering.
I prefer the latter, but then I am no VC.
(an additional thing to note is that the government is generally slow to respond to the economy, so if and when the tech economy goes into another winter, the government will at least be there like an old lady, putting out seeds in the snow, for startups to feed on :)
sigh
The incentives are not aligned right. I am sure the VCs are happy about this, because their 2 & 20 has not changed.
But this is BAD news for the health of the startup community.
Why on earth would TechStars even encourage/be involved with this ?
sigh
I am not even a US taxpayer and I feel the pain of wasted taxpayer dollars.
I am all for boosting innovation, but I don't think throwing money at it is the right way at all. They need to fix IP/patent laws, lower the tax rates and get out of the way.
The valley is going through a 'debateable' bubble all by itself, without Washington's help.
Oh..and don't get me wrong. I am an Obama fan. I just think that this policy is misguided on MANY levels. Especially when things are heating up in the valley. I see NO upside coming from this.
That's all just for starters. It's pretty much a guaranteed net positive.
While I'm not a fan of government dollars invested in companies, some of the other stuff in the initiative (http://www.whitehouse.gov/startup-america-fact-sheet#adminis...) certainly sounds like a win for startups: "Administration Will Propose Permanent Elimination of the Capital Gains Tax on Certain Small Business Stock"
Not only that, but if we can end America's retarded policy of running around in the deserts of the middle east -- a policy largely fueled by oil money -- we can shave a lot of the ridiculous $800 billion/year defense budget ... which is higher than THE NEXT 15 COUNTRIES COMBINED (yes and that includes China and Russia).
I think that is worth the government investing a few billion dollars into startups to help spur innovation. If anything it's a great image booster for entrepreneurism in America.
The president has long talked about his focus on America out-innovating the rest of the world. Now he is putting $ where his mouth is.
And if I heard right, they will be cutting capital gains taxes for startups to 0. I can't imagine that those of you who are running a startup are upset about that. It's a nice move, why tax startups so much in the beginning for actually growing and making money -- taking less now will make them bigger later, create more jobs, and create more taxable income later.
As for the government picking the winners ... well, first of all they are MATCHING the VCs and working with the TechStars network, secondly you don't HAVE to take government money. They are just spurring innovation.
All in all I think this is a good approach.
Just let the energy market do its damn job. Once oil become cheap, nuclear and solar energy looks damn good.
Until then, it's unnecessary spending of money that could be productively diverted to area where they desperately need more research such as anti-aging. If we can cure aging, that will allows us to maintain the knowledge and experience contained within the elderly, not to mention that we effectively save lives several times over.