
Barack Obama Loves Startups: New Federal Office for Early-Stage Entrepreneurs - Anon84
http://www.readwriteweb.com/readwritestart/2009/09/barack-obama-loves-startups-ne.php
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btilly
In <http://www.paulgraham.com/5founders.html> Paul Graham brings up the
testimony at
[http://app.cypress.com/portal/server.pt?CommunityID=201&...](http://app.cypress.com/portal/server.pt?CommunityID=201&DirectoryID=204370&PageID=344&control=SetCommunity&space=CommunityPage)
for why another attempt by the Federal government to direct money towards high
tech innovation was counterproductive. That testimony is as relevant today as
it was in the early 90s.

I do not fully agree with that testimony, but I completely agree with the
point that if taxing the private sector to raise money to fund startups only
works if the public sector is better at predicting success than the private
sector. And I think the public sector is worse at that.

How should this affect government policy? Let's take green energy for my
example.

First I accept the proposition that basic research benefits from government
funding. Why? Because commercialization timelines from are long, research
benefits from sharing knowledge, and free sharing of knowledge causes economic
benefits to accrue to different people than the ones who did the research.
Therefore capitalistic incentives don't work so well. So I'm behind NSF grants
into basic science.

Second I accept that carbon fuels have significant externalities and cause
global warming. By all means have some kind of carbon tax, or a cap and trade
system to make oil more expensive to use. Economic theory is solidly behind
this method of making private companies properly account for externalities.

And that is where the government should stop. If the price of gas is high
enough, consumers will demand that companies meet strict fuel standards.
Additional fuel standards regulations are an admission that the incentives are
wrong. If the economic returns are guaranteed to be there, then the free
market will throw up solutions. Direct investment in green technologies is an
admission that the economic incentives are not there for alternative energy,
and breeds companies that are dependent on that direct investment.

~~~
jbarciauskas
"I completely agree with the point that if taxing the private sector to raise
money to fund startups only works if the public sector is better at predicting
success than the private sector. And I think the public sector is worse at
that."

I can think of a number of flaws in this logic - for one, the public sector
may not be as good at predicting winners and losers, but public investment can
still be valuable if the overall level of investment is too low. The
comparison is not strictly with the same amount of money being invested by the
private sector - it is also the same amount of money being used in non-startup
investment ways in either the public or private sector. Additionally, while
the private sector will exclusively target companies with the greatest
potential return on investment in cash terms, opportunities will be lost where
the social benefit of the startup does not translate directly in to revenue,
cash and profit.

That's assuming that the private sector is in fact better at picking winners,
and as I allude to in my last point, that their definition of a "winner" is
the most beneficial, neither of which are proven.

~~~
btilly
If you're measuring success by GNP, then it is trivial that the government
taxing then spending on something is only worthwhile if the government is
making more effective decisions on that something than the taxed people would
have through the free market.

You're right that that reasoning ignores social benefits other than GNP.
However my experience suggests that it is easier to claim social benefits than
measure them. And when you can't reliably measure a benefit, delivery tends to
be very inefficient.

That isn't to say that government can't meet that bar. Economic theory says
that private enterprise deals poorly with externalities. It is hard for a
private enterprise to recoup the value provided by national defense, police,
clean water supplies, public health inspectors, etc. For that reason it is
economically efficient for us to be taxed so that the government will supply
us those services.

However startups are a case where a person who is good at picking then
nurturing entrepreneurs recoups the value from doing it well. Therefore there
is every reason to believe that free enterprise does that job well, and so no
reason to believe that the government is likely to do it better.

In that situation underinvestment is a signal that the market doesn't believe
that the returns are there. Artificially improving those returns therefore
should stimulate investment. And I believe would do it more efficiently than
attempting to directly pick winners and losers.

------
jdminhbg
Retitled: Barack Obama Loves Federal Offices

~~~
ckinnan
Do we really think that the Commerce Department can run a venture slush fund
without political influence and outright corruption? This is not the
responsibility of the U.S. government, it is another avenue for the political
class to expand their control of the economy.

~~~
jhancock
Every adult U.S. citizen is a part of the "political class". The greater the
involvement, the more you reduce corruption and even out influence. There is
no other way for a Democracy to work properly. This is not limited to the
paltry amounts being thrown at entrepreneur programs, but to the larger
amounts in things like Social Security, Defense spending, etc...

Although I'm not a fan of excess Defense spending, you would be well advised
to remember that the Internet would not exist without it.

~~~
tlb
So, you're saying it's good for the gov't to give a lot of handouts, but to
ensure fairness all citizens will have to get involved, follow politics, lobby
their congressperson, to ensure the pork is divided fairly.

How about just making the government hand out less pork. Wouldn't that be more
efficient? As pork approaches zero, it's not only fair, but founders won't
waste all their time writing grant proposals and we all won't have to waste
our time getting involved in politics.

~~~
jhancock
I agree with the first part of your response although its not really a goal of
this form of stimulus to hand out "fairly". The goal is to provide for macro-
economic stimulus.

The second part of your reply depends on many factors. Not every form of
stimulus ends up being a "handout" or "pork". Most stimulus can be debated ad
nauseam as to if it had the intended effects and most likely if you can
measure the effects, you have to do so in longer stretches than 2/4/6 year
election cycles.

I completely disagree that people should not "waste" their time in politics.
Government is an investment. Its foolish to not oversea and provide/demand
input to what you have invested in. This is a core problem with the U.S.:
people think they can just pay taxes (preferably low) maybe even be so
bothered as to vote once every few years, and government and the economy will
run smoothly.

To put it as bluntly as possible: "Democracy belongs to those that show up".
If you do not get involved you will most likely find yourself eternally
dissatisfied with the results.

------
ColemanF
A bureaucracy meant to increase entrepreneurship...maybe he should make an
Office of Government Non-Intervention, too.

------
jonallanharper
Seeds of fascism, my friends.

Let me guess... after I receive funding from GovCo venture fund, they get to
strong arm my company with infinite stipulations and rules about diversity,
salary caps, mandatory participation in government sponsored community
service, or whatever the vote-buying scheme du jour is.

~~~
parse_tree
Why'd this get down voted? What he describes in paragraph 2 is not far from
what happens with a lot of the current government ventures into the economy.

E.g., private company's wishing to get in on government contracts need to
publish their "diversity policies" to ensure they are diverse enough (I
guess):

[http://www.personneltoday.com/articles/2008/06/19/46401/priv...](http://www.personneltoday.com/articles/2008/06/19/46401/private-
firms-bidding-for-government-contracts-must-publish-diversity-info.html)

~~~
dejb
There are countless first world countries that have programs like this and
you'd have to be batshit insane to start calling them facist nations. Maybe
the people doing the voting down are from some of those countries. In
Australia we have a programs like this.

------
lehockib
Just out of curiosity will this program fund the artists in America? I ask
because as a ceramic artist I work out of my studio in my barn. I give an "Art
for Kids Program" that was created to be affordable to children in the Myakka
City, Florida area. And, even still at the price of $10.00 per 3 hour class,
they still cannot afford the program.I started the program because Myakka City
is approximately 30 miles away from the nearest business establishment a child
can go to for entertainment. The program is meant to get children off the
couch, away from video games, and up from the computer doing something
creative. I have been lucky enough to get a few businesses to donate clay,
glazes and tools for the kids to work with, but the problem still remains that
they can not afford the $10.00 to attend with today's economy. There are
programs out there for artist, but an artist has to be nominated for the
award, or the awards are so small that it barely pays for studio equipment. It
is a worthy program of sponsorship, but then the problems remains as to, how
do I afford to pay employees, and provide insurance for them, if the grants
available to artist are so small. Read more about the "Art for Kids Program"
at <http://www.ladyhawkofheartland.spaces.live.com>. Or am I off my rocker,
for wanting help with a program that would open the minds of young children,
and cause them to challenge themselves to do better and achieve more. I am
thinking that the program shows Entrepreneurship, or am I incorrect in my
thinking. Blondell Lehocki.

------
JCThoughtscream
So, wait, the federal government will actually actively help and support
startups.

...

No, drawing a blank. Can't find anything wrong with this at all. This is
actually how federal money should be spent, after all - investing in capital.
Even if you view this through a lens of cynicism, the fact still stands that
companies'll probably survive and thrive a lot more with governmental help
than without. Which benefits everybody - more people make more money, which
means they pay more taxes, which means the government can fund more startups,
etc.

I like it. I hope it works out as intended. This is definitely one of the few
inarguable ways to get an economy moving along.

~~~
pelle
Europe in particular but also states, cities and regions in the US are filled
with these types of programs designed to promote startups. When I was younger
I've been in them both in Denmark and in England.

I'll go out on a limb and say that they have not helped one successful
startup, who wouldn't have made it on their own.

The real benefit of these programs is that politicians get to say they are
being proactive about helping startups. All we really need is less red tape
and general meddling in what we do.

~~~
ryanwaggoner
_I'll go out on a limb and say that they have not helped one successful
startup, who wouldn't have made it on their own._

Out a limb is right...come on, this kind of statement has no place in an
intelligent debate. It's not even anecdotal, just baseless speculation.

~~~
pelle
I would say that I have plenty anecdotal evidence, but I prefer baseless
speculation.

Anecdotal evidence is that a small (probably less than 10) prolific European
investors like the Skype founders, Fon's Martin Varzavski et al have done a
fantastic job promoting entrepreneurship Europe wide.

My baseless speculation is that they have probably done considerably more in
the past 10 years than the last 20 years worth of EU and state sponsored
'enterprise programs' and my guess is for a fraction of the money spent on
setting up all the 1000s of enterprise agencies, regional enterprise centers
etc sprinkled throughout Europe.

US state and local governments are also filled with these local business
development agencies and startup one stop shops. I just haven't spent any time
looking at them, so yes I can only speculate that all of them together have
had less positive effect on the world than one Paul Graham.

Of course since Obama unlike all the governments of Europe always surrounds
himself with the smartest people in the world, this is sure to be different.
This time government will finally come through for us and help us out.

~~~
JCThoughtscream
While I'm sure your point is valid, how much of it is tainted by the fact that
mom-and-pop startups simply aren't the sort that gets sexy coverage? Exactly
how many regionally-locked businesses were actually dependent on these
government business aid programs for their initial creation? And how many of
them continue to thrive?

I rather suspect the tech industry may be somewhat self-absorbed in its own
successes. Just because we managed to pull it off without government aid, for
the most part, doesn't mean that our success stories are the norm. Besides,
pushing a lawnmower through the red tape's quite a bit of help on its own.

------
arithmetic
Let this new office get serious about founder's visa and immigration issues,
and then we'll see if there's any truth to all the startup love.

~~~
tptacek
Why is that? There appears to be nothing resembling unanimous support for
"founders visa" among entrepreneurs.

~~~
pg
There's pretty near unanimous support among people who care about the issue at
all. Startups that have immigration problems mostly would like such an option.
And to those that don't, what difference would it make if another few thousand
(mostly smart) immigrants were allowed to come to the US?

~~~
runningriot
_There's pretty near unanimous support among people who care about the issue
at all._

pg, this is absolutely false. Maybe you haven't been reading all of the recent
HN threads on this issue, but the highest-rated comments tend to oppose
founder's visas.

 _what difference would it make if another few thousand (mostly smart)
immigrants were allowed to come to the US?_

Multiple people have pointed out that a founder's visa program would have
larger ramifications, and you've replied to at least one of them so you must
have seen answers to this question.

~~~
netsp
There is widespread support for the idea of allowing founders to immigrate.
There is scepticism that this can be executed in a way that is a net gain.
Some people are sceptical at a practical level and others at a theoretical
one.

~~~
jhancock
thanks. I think that sums it up very nicely.

