The Innovation Squelch

City Journal ^ | 3 March 2009 | James Manzi

[Lorianne]

For an academic macroeconomist, Nobel laureate Edmund Phelps can sound shockingly in touch with the real world. In a recent interview, he described the possible implications of the large government-spending programs in President Obama’s stimulus package: “There’s . . . a chance that the perceived increase in the role of government of this sort will have some unanticipated effects on the animal spirits of entrepreneurs.” In fact, not only the stimulus package itself, but the higher taxes that it will require—both tax increases explicitly proposed in the president’s budget and the expectation of large future tax increases because we’re paying for all this spending with the national credit card—are likely to reduce the number of entrepreneurs in America.

Consider a hypothetical aspiring entrepreneur: an engineer, say, with an idea for a new company. First she has to invest a lot of her own time just to develop her idea to the point that it could win funding from a venture capitalist or angel investor. The odds of going from idea to funding are, say, ten to one against. But let’s assume that after working nights and weekends for a year to produce a working prototype, write a business plan, and recruit a team, she finally gets funded by a professional venture capitalist. Having cleared this hurdle, she gets to quit her job and work much longer hours for much lower wages for about a decade. All the while, our engineer knows that she has only a 20 percent chance of steering the company to a successful exit that makes her a lot of money.

[Citizen Tom Paine]

IMHO this article misses the point on the individual’s motivation. This engineer starting a company can have three outcomes - failure, roaring success, or survival mode. In the last two you are working for yourself and no one (except your customers) boss you around. This is a great motivator. If you fail, all you have lost is the money which you would have saved during the years that you worked on your idea. In most instances this is not a large sum. If there were legit reasons for your startup’s failure, you probably can land a pretty good job based on your efforts.

If you have a good idea go for it. The problem with an engineer running a startup is when it gets to a certain size the management skills that most engineers have are exceeded. Then is the time to hire someone to run the company, and you start working on another idea. Or sell the company, and sit on the beach for a few years until you get antsy again. Nothing succeeds like success.

[AmericanVictory]

As we have been saying for years the problem is far deeper. It really got going when Clinton and Gore did away with the “wrapper” at the PO and then, with the help of Republican Congress, put the clamps on the small company inventor-intrepreneur in the name of “submarine patents.” That did not work out quire as planned when Ron Brown went down in a plane crash. Then Bush came in and did not clean out the mess that Clinton Gore had made at the PO and in fact made it worse. IPO’s based on breakthrough ideas fled and now IPO’s altogether have fled. End of our world leadership.

[OneWingedShark]

...Is the Obama catchphrase in reality “Snatching Defeat From The Jaws of Victory.”? I mean that’s what it seems...