
Want to Startup America, fund Mega Projects and R&D not more web apps - messel
http://www.victusspiritus.com/2011/02/03/want-to-startup-america-fund-mega-projects-and-rd-not-more-web-apps/
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sausman
>>>The most beneficial action government can take to support long term growth
of startup ecosystems throughout the nation are large Research and Development
projects.

Unfortunately the government can't magically create resources. The only thing
the government can do is reallocate funds from one area to another which is
inefficient. The most efficient form of allocating resources is the market,
not central planning.

When the market allocates resources there is a much greater chance of the
resources being put to good use because they are seeking to generate a profit.
In order to generate a profit people must not only want something, but find
the price reasonable.

When the government allocates funds it takes money away from entrepreneurs.
More often than not what the government invests in would not be bought by
citizens for how much resources they actually put into it. This is completely
inefficient, as we are putting in let's say 100,000$ to get something that is
worth 10,000$ to the people using it. If this were a business, they would be
operating at a huge loss and go out of business. But since it is the
government they don't go out of business and continue to misallocate
resources.

In the off chance that the government uses these resources efficiently, it is
certainly not because of any magical "gift" the government has. In this case,
the same exact thing could have been accomplished by entrepreneurs. In fact,
entrepreneurs are incentivized to seek out these opportunities because there
is profit involved.

The only investments we need the "gift" of government to pursue are those that
we get less value out of than we put into. It's hard to argue that these are
good investments.

~~~
vannevar
_In this case, the same exact thing could have been accomplished by
entrepreneurs. In fact, entrepreneurs are incentivized to seek out these
opportunities because there is profit involved._

The first assertion is not true, and in fact the second assertion is the
reason. Entrepreneurs _are_ incentivized, but it is an incentive to get rich
quick. If I as a VC can make 10x my investment in 2 years by investing in a
'Hot or Not' web app, I'll do that rather than invest in a fundamental
technology that produces a 10x return in 15 years. The market is very focused
on web apps now because there are great opportunities for viral growth at the
expense of existing businesses. This is cannibalization, not real wealth
creation. We should really stop referring to web businesses as tech companies:
few of them produce any more real technology than your average McDonalds.

Government plays a valuable role precisely because it invests in technologies
that are unlikely to produce a return but nonetheless could provide the basis
for new businesses that can in the future. The Internet itself is a good
example.

~~~
sausman
Is getting rich a bad incentive? In order to get rich you must provide people
with goods/services that they want at a price they can afford. It's win/win.

If the general public wants Hot or Not apps that is what they will get. Who
are you to decide that their money/resources should instead be used on
something that you want?

~~~
bioh42_2
_Is getting rich a bad incentive?_

Is advancing the technology of a civilization a worthy goal?

If yes, then getting rich only accidentally contributes to advancing knowledge
and technology.

It could accidentally (because the goal is to get rich, not anything else)
make a huge contribution. It could also contribute almost nothing. Plenty of
people have gotten rich by finding a slightly cheaper way to either make or
distribute (or both) a commodity. We can look at webapps as a kind of
commodity.

The general public almost never wants the early or even medium term benefits
or a world changing technology. So if you only ever advance by what the public
wants today, you would not get very far.

This is why R&D has always been a long bet.

Over time fewer large corporations have decided to make this kind of long bet
(you can even think of it a long trading position) and more R&D has moved to
public institutions like universities and government labs.

Government is just plain terrible at most of the things it does, but when it
pours a ton of $ on R&D there are results.

It may not be the most efficient use use of $. I am certain startups quickly
iterating over business plans can do A LOT more with a lot less. But I am also
equally certain there are a lot of high tech things which require far more $
over farm more time then startups usually have.

But then again how much $ constitutes a startup is changing.

The recent Y combinator deal where you simply throw $150K at _everybody_ is
fascinating. This could be a way for Y combinator to fund biotech startups.

~~~
sausman
I am not saying that I think hot or not apps are more important than advancing
the technology of a civilization, but I do think that these decisions should
be made by the market.

If someone makes money it is because they provided the rest of us with
something that we value. It isn't our business to tell them exactly how to
spend that money, it is theirs.

I may have different priorities than other people, but it is wrong to tax away
their money that they could have spent on what they value, and to spend it on
what I value.

I agree a lot of the companies VC's invest in are pretty stupid. However, the
reason they are investing in a lot of these companies is because companies
like Google are willing to pay large sums of money for them. Given this, it
makes sense for them to invest in these companies.

Most of these acquisitions of web companies for millions of dollars are by
most standards a complete waste of money. But it is not my place to tell
Google or anyone else that they should not be offering to buy companies like
Path for a rumored $100m because I have a better use for their money.

Google can afford to make these acquisitions at a loss though because they
provide people with other things that are of value.

I'm not saying I disagree with your priorities, but I think it is wrong to tax
others to pursue them.

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cyrus_
Its insane to me how much leverage a first-approximation model of economic
activity, developed more than a century ago, has amongst even highly
intelligent people.

As soon as you leave the limit of omniscient investors with infinite capital
you will quickly see why government investment is necessary for large projects
with long-term impacts.

------
lowglow
I have a tiered system of ideas. At the bottom I have the easiest and cheapest
to deploy (aka web based), and as I move up the tiers the ideas become more
expensive and require more capital than I have right now -- these costs are
prohibitive in my execution.

