The Golden Goose

Most everyone owns a cell phone, but few people know what happens inside ... that there are millions of transistors working hard to handle your phone calls, web browsing, text messages, pictures, songs and every other app. People take it for granted that it "just works" and they really have no reason to peek behind the curtain. This is as it should be.

There is a part of our economy that most people don't understand: venture capital. We see companies like Google, Intel, Ebay, Apple, Amazon, Dell, Amgen and Cisco (just to name a very few) and generally have no idea what made them possible. The mechanisms for bringing together ideas, people and capital into the right situation are a complete mystery to all but very few.

But Venture Capitalists might be the most important players in our lives, enabling (or having enabled) almost all the recent technological advancement we see around us. And, up until recently, the US had a near monopoly on VCs and their investment vehicles. Nonetheless, we still are the epicenter, with approximately 75% of worldwide venture based capital existing in the US. But, that number is shrinking.

VC backed firms accounted for almost 90% of US job growth in 2008. That year, these firms contributed $2.9 trillion dollars to our economy*. And these are not generally low paying jobs.

Unfortunately, unlike the cell phone, people's ignorance of this critical process can be dangerous, especially when politicians are unfamiliar with the golden goose of VC investing.

George W. Bush was the first MBA president, but I saw little evidence of it. He held back quality immigrants that are the lifeblood of young tech firms. He allowed Sarbanes-Oxley to greatly reduce the likelihood of a start-up going public (exit strategies are key to attracting capital). He allowed tariffs, entitlements and a rising debt to reduce the amount of capital available to entrepreneurs.

Sadly, Barack Obama is arguably worse. I think Bush at least understood the basics of wealth creation, but Obama has never even participated in the private sector. Never had to make a payroll. Never had to raise capital. Never had to focus on a market. Never had to navigate the enormous red tape and government bureaucracy and go to the expense of hiring lawyers and CPAs to help. It's safe to say that in any room of business people, Obama is the least qualified.

And it shows. Noticeably absent from the stimulus package was any significant private sector infusion. Actually, the private sector would have preferred not to have a stimulus package and to simply either reduce taxes or just keep the enormous debt from getting any larger. I've already outlined in an earlier blog how I feel the Health Care legislation is unfriendly to small and growing businesses. And the rhetoric coming from the White House is hardly friendly to any capitalist, let alone the venture variety.

I'm certain that many liberals have good intentions, but they have no idea how their tinkering threatens the engine of growth that gives them the resources with which to do their tinkering. I know very few liberals who have actually seen the birth of wealth first hand, which is probably why they see it as a zero sum game, with benevolence derived from redistributing it.

Watching liberals try to manage the economy is like watching a surgeon open up a cell phone to improve reception. The physician is smart, educated, well intentioned and dedicated, but the most likely outcome is a broken phone. Don't mess with the Goose.


* Source: National Venture Capital Association

That Credibility Thing

Iran is a threat to the middle east, Israel, the world economy and to its own (mostly) innocent people. The Iran government has been rushing to build a nuclear weapon for the last few years and is finally within sight of their prize. In response, the Obama administration is "getting tough". On the list of possibilities are more sanctions and, as a last resort, military engagement.

If your reaction to this is "yea, right", then this article will make sense to you.

As was discussed in an earlier blog, the left gave away any chance to be taken seriously on this topic during the Iraq war. They gave up and headed for the safe ground of opposing anything Bush did or said. The Iraq war was costlier (in terms of lives, money and good will) than anyone predicted, so the left could look smart in opposition (and their constituents did them the favor of not noticing that most of them had voted for the war in the first place). And oppose, they did. At every turn and opportunity, without hesitation.

(As an aside, isn't it nice not to have Iraq to worry about? If things continue on this trajectory, within a generation Iraq could be a shining example of peace and prosperity in a troubled region. It could take the path of Japan after WWII and again contribute to the greater good.)

But the true cost of the left's immature and short sighted behavior is just becoming evident. When an opponent negotiator does not believe you will use your last resort, they will not believe or accept any of the ultimatums that come before it. Sure, Obama can probably get some tougher sanctions through the UN, but what do Iran's leaders care? They run a totalitarian regime with very little threat of a revolution. Under sanctions, the people will suffer, but not the leaders.

Also, remember that we have no "smoking gun" or hard evidence that Iran is building a nuclear weapon; it's all speculation. Would the Democrats ever allow CIA intelligence and bluster from the enemy to be a sufficient cause for a preemptive strike? No chance, not after the words that came out of their mouth after Iraq became difficult. Wouldn't they look foolish(er)?

Ideally, the left would have remained committed to winning the Iraq war and the west could have then turned its gaze to Iran - with the desired effect. Now, Obama lacks the fear factor and, whether he would actually use the military preemptively or not, the Iranian leadership believes their path to nuclear statehood is unobstructed.

I have heard a couple of commentators question the west's right to deny Iran a nuclear weapon: "Who are we to decide who gets nuclear weapons and who doesn't?" This statement boggles the mind. Iran's leadership supports terrorism in Lebanon, Iraq and Gaza. They deny basic human rights to their people. It's like saying convicted criminals deserve weapons just as much as the police.

A free, democratic Iran with a track record of being a good citizen of the world? Sure, they can have a nuclear arsenal without me writing a blog article about them. Today's Iran? Are you kidding?

Obama and the left have painted themselves into a corner. The irony is that their lack of credibility makes military conflict much more likely. If the threats don't work, it's all that's left.