David Brooks in today’s NYT (Sept. 6, 2011) talked about where jobs aren’t. Great question. The column dives into the government spending on green jobs and various mechanisms with which it assist companies. This is worth talking about.
I have heard from every politician from Vice President Biden to every congressman or Administration official I’ve met in my role at the NVCA who says, “The government should not pick winners or losers.” SO TRUE! So why does Uncle Same go ahead and pick companies to back in either tax incentives, loan guarantees, and other measures. This backhanded picking distorts reality. Digging into details as Brooks does reveals some favoritism in the process. UGH! I think it is impossible for a government process not to be political, if even only 1% political. It tries to put in lots of red tape to cleanse a picking process but this is not good either. The only way to eliminate unnatural forces in picking winners and losers is the private capital markets, or venture capital.
Venture capital is the greatest invention in the history of the world to pick winners and losers. It is the most efficient allocation of precious capital and human capital towards a problem. Creating a company is very very hard and the constraints are many. It is these complications and many moving parts that if a company survives makes it a winner. Entrepreneurs are special people who see problems and go about solving them in the hopes of profits and doing something great all along knowing that if it works out well, it will create wealth. You all know the great examples of these successes – Intel, Apple, Genetech, Cisco, eBay, Google and many many more.
Venture capitalists don’t always get things right. But in the long term over a variety of investment opportunities it gets it mostly right. Otherwise the industry would die – and it hasn’t. And it is not going to die.
Since energy companies take more time, usually more capital and have inherently different risk than many other startup companies including the Valley of Death, it would be best to let the professionals take on the task. So here is my proposal. Let the USG put in side by side capital into venture-backed energy deals. Capital is precious and time is a startup company’s biggest enemy. Vetting by the venture capital industry means that a company has been given a “market” chance to try their business plan. Red tape is minimum and the risk is shared by all. This capital will provide time for the startup to get it right. Some will not work for sure. But some will. And when they do, then good things happen. Jobs, jobs, jobs. It is early days for Green Tech. We should not give up now. We should support investment in energy but through a market mechanism the US perfected – venture capital in partnership with the US taxpayer.