

What if Obama gave Y Combinator 40 Billion Dollars - landist
http://zaid.posterous.com/what-if-obama-gave-y-combinator-40-billion-do

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pg
If someone wanted to give us that much money to invest, I'd probably do it,
just to see what would happen. We could probably cook up some schemes for
scaling. I wouldn't be surprised if it turned out to be a lot like scaling
software. You run into a lot of unexpected problems, but you also end up
finding ways to solve most of them. Plus you get unforeseen effects of scale,
some of them good.

~~~
mahmud
Please do not try to "cook up" small start ups. It's better people juice their
own ingenuity on their own time, when they have something big at stake.

I grew up in a communist country and I remember how the state gave allowances
to housewives in order to invigorate women's businesses. It didn't turn out
that well; most women, like most men, are not interested in the ungodly effort
and the labor of love that goes into enterprising.

[Edit: specifically, there came up a cottage industry of document fixers who
could get you bankruptcy documents so you get to keep the federal investment
AND get compensation. People looted the fund.]

~~~
pg
Don't worry, the scenario is a hypothetical one, to put it mildly.

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noonespecial
The sudden lack of scarcity would cause the quality of the investments to
plummet. YC uses its money carefully because the supply is not unending.

When you only have one shot, you aim.

~~~
vaksel
not really applicable, since YC invests in 40-45 companies at a time

edit: I was talking about the "one shot" comment

~~~
mahmud
for 40B, people will get into starting up for the _salary_.

don't start a company to make ends meet, start it to execute a haunting vision
that you can't get rid of (ever wonder why people quit their jobs, often to
their financial detriment, to startup? yeah, it's a curse.)

~~~
gruseom
_start it to execute a haunting vision that you can't get rid of_

I agree with this - only partly, because it isn't necessarily in a person's
control - but a haunting vision that you can't get rid of is a real asset.
It's easier to devote insane effort to something that your intellect and/or
soul are deeply invested in than to something arbitrary or trivial. I wonder
whether luck is more of a factor in the latter kind of project.

In any case, I am having this experience these days, quite unexpectedly as I
never set out to have it and used to feel dismissive when hearing people talk
about "vision". I'm grateful for it. It makes it easier to crawl over broken
glass.

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mtpark
I think a lot of you are missing the point. I could be wrong but I think the
gist of the message is to look at what 40B into ycombinator would mean in
terms of value added, employment created, etc. (with the wild assumption that
it all scales). His point is to heavily criticize the 40B bailout of GM.

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baguasquirrel
I'm as much for promoting startups as the rest of you, but is a massive, blind
infusion of cash the answer? The thing about YCombinator, Sequoia Capital,
Kleiner Perkins, DFJ, etc., is that there just aren't too many of them. There
was an article on here just the other day heralding the end of VC as we know
it, because the vast majority of the industry wasn't producing good returns.

Investing in startups is the most difficult capitalistic resource allocation
problem you can get into because you have no "reputation" to go on. When
you're investing in public stocks and bonds, you're usually dealing with
companies that have an established track record, or an area of the economy
where the variables are known. But that is by definition not the sort of thing
we're interested in doing here.

The real question should be, how many startups can PG and team invest in and
coach if money were not the limiting factor? Is money the limiting factor
right now?

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timr
This is just silly.

Ignoring the fact that YCombinator probably wouldn't know what to do with $40
billion (a lot of rice and beans?), the jobs created by such an investment
would benefit about 1% of the country -- smart, risk-taking, well-educated
young men who are willing to live in California.

The point of saving GM is only nominally to save GM. The point of saving GM is
to save the industrial base of a big chunk of the US population, and hopefully
keep places like Michigan from sliding into permanent and irreversible
poverty. The benefit is greater than the sum of the jobs saved.

~~~
Xichekolas
Well yeah this idea is silly, but his original point about saving GM (that
it's also silly) probably still stands.

His figure for GM employees is old (2005). Last I saw, the current unionized
hourly workforce is 60k employees (see link below). If you simply gave those
employees $125k each, it would only have cost the government $7.5 billion.
That kind of money should allow all those employees plenty of time to find
other jobs or get training for a new _skilled_ career. Then if you gave the
retirement/healthcare VEBA what it needed, that would be another $20 billion,
for a grand total of $27.5 billion... we've already spent more than that just
keeping it afloat the last 8 months.

If they let GM die, of course some parts makers would have to scale down too,
but the parts industry wouldn't collapse, because they still have the other
car makers to sell to.

Link to employees figure cited above:
[http://blogs.moneycentral.msn.com/topstocks/archive/2009/06/...](http://blogs.moneycentral.msn.com/topstocks/archive/2009/06/01/gm-
bankruptcy-could-yet-reverse-the-market-s-rally.aspx)

~~~
timr
The argument about GM is the _silliest_ part. I think it's somewhat plausible
that YC could find a way to use $40Bn productively.

Again, the point of this bailout is not just to save 60,000 current GM jobs.
The point is to save the GM, the GM supply chain, the local economies of
several large industrial states, and the millions of people in an economic
ecosystem that has built up around GM. Looking at only the 60,000 jobs at GM
is taking an absurdly narrow view of the situation.

~~~
Xichekolas
> _the GM supply chain, the local economies of several large industrial
> states_

I don't see how these are going to just disappear if GM is gone. There are
other car companies these suppliers can sell to. Of course there will be
disruption, and probably some job losses, but not the whole 2-million-person
industry (to use the industry number). And if some of those jobs do disappear,
maybe it's because demand for the product no longer supports them.

I know my perspective is different on this, because I'm 25, and honestly
cannot fathom a lifetime with one company. My career will be a couple years
here and there, and most likely I'll have more than one career as well. So it
is alien to me that anyone wants to protect (or even prefers) this idea of
having a single job, at a single employer, for life. Why is it so terrible
that someone might have to find a new job or that a town might die out?

That said, I'm not unfeeling about this issue. I realize these are real lives
here (my dad is a GM retiree). What I don't understand is why we are bailing
out the _company_ , and not the workers.

I'd rather we spent the money on retraining the employees, hopefully giving
them skills in an industry that isn't slowly dying. And this generalizes to
all those losing their jobs, no matter the industry. Stop trying to save the
individual companies (bailouts) or whole industries (tariffs and subsidies)
and educate people.

~~~
timr
_"I don't see how these are going to just disappear if GM is gone. There are
other car companies these suppliers can sell to."_

That's your opinion, but the facts are pretty clearly against you. Listen to
the radio and read the newspaper -- the suppliers are already failing. And
they're not failing because there's no demand for _cars_ (GM sold about 9
million cars last year, incidentally), but because their primary customer has
stopped paying the bills. That's what the government is trying to save -- not
to mention the numerous American towns that have no economy without the local
GM plant.

And before you argue that bailing out these towns is the wrong solution, try
to remember that the world doesn't turn on a dime. Yes, a place like
Youngstown, Ohio probably needs to find a way to survive without the GM plant.
But they aren't going to diversify their economy overnight, and it isn't going
to help them to let their primary employer die.

So maybe you're right, and some non-zero number of these suppliers would
survive a total GM liquidation. I don't know. The point is, the bailout isn't
designed to save GM, so much as it's designed to save the entire economy that
_surrounds_ GM. Everyone who tries to make the calculation in terms of a cost-
per-GM-head is being simple, and is failing to consider the larger picture.

~~~
philwelch
"And before you argue that bailing out these towns is the wrong solution, try
to remember that the world doesn't turn on a dime. Yes, a place like
Youngstown, Ohio probably needs to find a way to survive without the GM plant.
But they aren't going to diversify their economy overnight, and it isn't going
to help them to let their primary employer die."

How much can we afford to spend on people's romantic attraction to their home
town? This country's had ghost towns appear when markets collapse and
industries disappear before, it could stand to see that happen again. I happen
to live in a college town where the second biggest employer (i.e. not the
college) is hiring electronics assemblers every week, because it's in a
growing market. Why can't a few people leave Michigan and move here?

It's probably wrong to think about this in terms of Youngstown, Ohio surviving
the death of GM. People can leave Youngstown.

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vaksel
Does anyone else have a problem with assumption #1?

"First off, let's take out 25% for running Y-Combinator. This leaves $30B of
cash to dole out."

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bayareaguy
I'd prefer the US government revise the operating practices of agencies like
the SBIR[1] to work more like the Grameen foundation[2] to help entrepreneurs
of all kinds establish or expand businesses (not just the tech/media companies
which are YC's focus) and then put a few billion dollars into it. Extending 40
billion dollars of microcredit loans would make a lot of sense to me in any
kind of economy.

1- <http://www.sbir.gov>

2- <http://www.grameenfoundation.org/>

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amichail
The failure rate will skyrocket as all these startups compete for users.

~~~
pg
It's not users you compete for, but needs. And those are effectively infinite.
The limiting factor would more likely be the rate at which technology can
evolve. But it would be kind of cool if you ever reached that point.

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johnnybgoode
I understand that the main point was to rightly criticize the GM bailout, but
subsidizing YC would be wrong for essentially the same reason. Governments are
unable to allocate capital as efficiently as markets can. This holds even if
Paul Graham is the central planner, no matter how much you might hope
otherwise.

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rjurney
I believe this has been tried before. Its called a centrally planned economy.
How did that work out last time?

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tlrobinson
I suspect many medium to large tech companies would come grinding to a halt as
1 million engineers left to start their own companies...

But perhaps I overestimate such employees' desire to give up job security for
the excitement of a startup.

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jmonegro
And so the government would own 70% of YC, just like GM?

And then, they'd rebrand it to GC - Government Combinator.

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gojomo
(1) $6K+(N×$6K) ? _As if._ Now $6MM+(N×$6MM).

(2) Bye-bye Ramen, hello Roman holiday!

(3) Build defensible advantages. Like, a castle with a moat to keep away all
the crooks, scammers and favor-seekers. ("Make something people want to break
into, but can't.")

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oldgregg
Ha right, how the government allocates money, "Paul Graham" would spend
$39,999,999,992.07 on coke and hookers and the founders would split a
frappuccino.

~~~
joel_feather
Surely Paul Graham does not need that many hookers.

~~~
dave_au
Perhaps the money would be to keep them away so he can get some work done...

