I received a quite bit of personal feedback for my open letter  last Tuesday regarding my view that the twin pillars of the federal government's response to the economic crisis - namely "bailout" and "stimulus" - were fundamentally at odds with the interests of Entrepreneurial America. The positive comments (which were the majority) were mostly of the "hear, hear" variety and those I appreciate very much. The negative comments were mostly of the sort that I was grinding a political ax against the Obama administration. To this critique, let me respond as follows:
President Obama, with his "only in America" life story, arguably is the most "entrepreneurial" American President ever. Son of a Kenyan immigrant father and a teenage mother, raised and schooled in Hawaii and Indonesia, and attaining the highest pinnacle of American society, what is more entrepreneurial than that? And as a student of political history, I don't know if I have ever heard a politician state the "entrepreneur's creed" more eloquently than President Obama did in his inaugural:
"In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted -- for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things -- some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom."
Having said this, President Obama also, like most federal officials, has a) never started or built a business b) is trained as a lawyer and c) in his approach tends to default to the "As go Washington and Wall Street, so goes America" view of things. And this is where we part company.
From my perspective and that of my entrepreneurial brethren, the bailout and stimulus default mode that masquerades as economic policy in Washington makes me, quite simply, embarrassed for my country. Why?
First of all, the size of these packages is simply way too big - by their very size dwarfing everything and are thereby de-motivating to the private sector.
Secondly, they are too arbitrary - why bailout Bear Stearns and Merrill and not Lehman? Why bailout AIG and Citigroup and GM and Chrysler and not the literally thousands of other insurance, banking and manufacturing companies that are equally struggling?
And thirdly and most to the point - they are philosophically wrong. Business and markets and entrepreneurship are dependent on and driven by the acceptance of risk and the corresponding consequences of failure. Take away this fundamental market egalitarianism and fairness, and the whole system becomes skewed and corrupted. How? Well here at Growthink most of our client and investment inquiries are usually of the nature "How can I build this business?" or "How can I add value to the marketplace with this product or service?" or "Should I invest in this company?" Now, their tenor is more and more of "How can I get myself a piece of all of this federal money that is sloshing around?" And I challenge anyone to argue that this is a good thing.
Let me offer two quotes to sum up my concern - one anonymous and one from Louis Brandeis, the great Supreme Court Justice and defender of privacy:
The anonymous one comes from my travels in India when an Indian friend there, explaining the hoops that Indian entrepreneurs must jump through, and the bribes they must pay, to secure the necessary permits and licenses to start and grow their businesses - "Doing business in India turns even an honest man bad," he said.
In this vein, Justice Brandeis famously once said, "The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding."
While I have a lot of respect for many aspects of Indian society and culture, the public - private "partnership" in their economy is certainly not one of them. And while I certainly trust President Obama's fine intentions, it would be very wise for him and his Washington brethren - Republican and Democrat - to consider the the psychological and structural costs to a free and entrepreneurial economy of these unprecedented, gigantic governmental interventions.
Webinar: Keys to Successful Private Company Investing
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- How to utilize the Internet to source and research opportunities
- How to conduct data-driven risk analysis on private company deals
- How to exploit the "pricing inefficiency gap" endemic to private equity
- The importance of technology bias (and which technologies to bias) when selecting deals
- How to properly apply "black swan," or "randomness" thinking to private company investing strategy
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