Thursday, April 30, 2015

Middle Class Entrepreneurs

I am always amazed by the economists who take something that works, albeit in a very select manner, and then argue to its generalization. A recent article by two such types in the left wing blog, Project Syndicate, argues that what makes Silicon Valley work can be copied to create more middle class jobs.

They state:

The University of Virginia’s Miller Center recently created a commission ... to identify strategies to support the creation of middle-class jobs through entrepreneurship. The ideas proposed in the commission’s report include providing training and mentors for prospective entrepreneurs and startups, creating “ecosystems” of supporting infrastructure, and reducing regulatory barriers.The report also highlights the importance of unlocking capital for “Main Street” entrepreneurs, who struggle to find the funding they need to launch, sustain, or scale up their operations, particularly as the recent recession drove out many of the community banks on which they had traditionally relied for credit. Silicon Valley startups, by contrast, enjoy the generous support of VC funds, having received 30-35% of all venture investment deployed in the US since the 1980s. 

VC funding, and its like, which I have been doing for some 30 plus years, is a ruthless business, it is Creative Destruction real time. It requires motivated, intelligent, competent people. It is not a world for the reconstruction of the "middle class". We do not invest in a new candy store, at least I would not. We focus generally on game changing ideas that can be implemented with a dedicate team.

As I was once told, "A Good Idea Does Not a Business Make".  It takes a team whose sole focus, not even their day job, is dedicated to. To this team, failure is no option, and there is no life other than the new business. One cannot go home for dinner at night. 

Whose capital is being unlocked for Main Street? I suspect it is the taxpayers. That model just does not work. It never has. The Government is the worst entity to choose winners and losers. There is too much politics. Political favorites get taxpayer money and they most likely are good at getting political favors and not starting a business.

One must be wary of the advice rendered by these types of economists.