Posted on 10/01/2011 11:44:27 AM PDT by moneyrunner
Megan McArdle writes in the Atlantic about the difference between government venture capital and private venture capital. By far the biggest difference is not even mentioned.
There is a dramatic and critical difference between government loan guarantees and private venture capital (PVC). The PVC investor expects to make a bundle from his investment, typically by getting an equity stake and cashing out when the successful firm goes public. That’s the best case scenario for PVC. If the company fails, they’re out their seed capital.
When the government gets into the venture capital business, risking your money and mine, what’s the payoff for the people whose capital is at risk? What, exactly do the taxpayers get in return for guaranteeing the loan? We know what they lose if the company fails, but exactly what is the payoff for the taxpayers if the company’s successful. Suppose Solyndra had been a success. The other investors would have make lots of money, the executives would have made lots of money and the banks would have made money. But what would the taxpayers have gotten in return for the risk they took?
Even the far-Left Think Progress admits that government venture capital is a designed lose, not make, money. The only argument is about the size of the loss for the taxpayer.
(Excerpt) Read more at moneyrunner.blogspot.com ...
When the Solyndra story first broke, some blogger termed government investment “Venture socialism.” I like it..
What a great article. My latest thinkings put nicely and concisely. BTTT
Correctly understood, the point is the furtherance of a policy position or outcome under government direction, with the result of decreasing the size of the private economy, and bringing more of it into the government's control.
In other words, "Public Private Partnerships" are just slimy socialism, rather than the honest kind.
It’s catchy but inaccurate, since government cronies rather than the government itself owns the means of production. It’s really Venture Fascism.
In one way, it would depend on the investment. The reward may not always be monetary and the reward may be grand, but these items should still be desired by us not lobbying firms. Perhaps, there could be a way to have national referendums or some sort of checklist that you send in annually with the choices of items that you would choose to invest in. If an item is not funded very well, it would send the signal that the public feels it is not worth our money at this time.
Of course, the politicians could always lie about what got funded because as the saying goes, its not who voted for what, its who counts the votes....
Venture Fascism.....I....like...it!!!
We already have this system: it's called the New York Stock Exchange.
[And other private equity markets, as well.]
We already have this system: it's called the New York Stock Exchange.
[And other private equity markets, as well.]
Great group .... Among the “Very Best of the [Gov’t] Ventures”:
- (Half) Honky Talk
- (We’re) WipedOut
- Let’s Mooove (guest vocals by MO)
- Hawaii 5-0bama
- (NO) Pipelines
- Rebel Rouser
Thanks. I meant for those not-so-bright ideas that the government decides to fund with taxpayers money.
So did I.
Really? How well was solyndra doing in the NYSE or NASDAQ?
Risk/valuation gets worked out through the the daily evaluations of millions of investors, and when publicly traded options aren't available, venture capitalists take a look and see if they want in. The government will never have the intelligence of private markets or investors with a stake in the game. Everything is affordable with someone else's money.
This is really the whole message of the collapse of the housing bubble as well. The "Quasi Government Enterprise" secondary mortgage market was essentially a government venture capital bank/brokerage for risky mortgages. It shouldn't even exist.
But sadly, if we didn't learn the lesson after nearly destroying our entire financial system and costing taxpayers trillions, we aren't going to.
Good insight. Whether company wins or loses, people lose.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.