A Fundamental Change: Venture Socialism


Our President, who promised to “fundamentally transform” America just days prior to winning in 2008 has broken new ground in terms of economic development ideas.

Historically, venture capital firms have been a major driver in funneling investment to start-up companies in newer or emerging markets and product categories.  Now it appears that our “smartest-guy-in-the-room” President has developed a new idea for not only funding these emerging technologies, but doing something that venture capitalists have never been able to achieve.  He is using the coercive power of the Federal government to insure that the winners that he picks will actually be, well, winners.

Venture capital firms are staffed by people with enormous amounts of experience in evaluating business plans, marketing proposals and the competence of the managers who are asking them for sufficient funding to help them achieve their dream of ultimately becoming the next Wal-Mart, IBM, Microsoft, Federal Express or Intel.

Before making an investment of any kind, venture capital firms are extremely thorough in their evaluations of the proposed plans, management experience, production capabilities, projected budgets and overall economic health of an embryonic organization before they part with a single dollar of cash.  Why, one might ask, are they so cautious?  Well, primarily it is due to the fact that they are not only risking their own money, but they would like to get it all back, and then some.

Yet a recent estimate of how well venture capital firms actually do in picking winners is only about one success in three.  Or, to put it less happily, two out of three firms in which they invest are failures.

This is almost always because of the one thing that investment firms can’t do all that well.  They can’t predict with complete accuracy the reception that the new company and its products will receive in the marketplace.  Consumers are remarkably independent and unpredictable when it comes to voting with their wallets.

Compare this to the confidence that our President voices when he says that he and his economic team will be able to guarantee that our tax dollars will only be “invested” in winners.

Of course, to put that assertion of guaranteed success into some kind of perspective, one need only listen to the talking heads on ABC, CBS, NBC, MCNBC, CNN, Fox News and other media to judge by how often other economic news is accompanied by the word “unexpected.”

Of course President Obama and his coterie of economic advisors possess an ability that no ordinary venture capital firm can do more than dream about.  They have the power of the Federal government to coerce consumers into doing exactly what they want.  Now THAT’S the way to guarantee a successful “investment.”

Once Obama and Company, the leading venture socialist organization on the planet became the largest investor in General Motors, they then had the power to force GM to develop, build and sell, at a loss, the Chevy Volt as a sop to the connoisseurs of environmentalist kool-aid, who support Obama’s organization wholeheartedly.

This new car has met serious resistance from the consumer, largely because it isn’t simply a replacement for the vehicles that are currently on the road.  It’s so expensive that it has to be subsidized to generate any consumer interest at all.  It requires driving to be limited to within a few miles of home, so if you have a commute of thirty miles or more to get to work, you’d have to learn to love walking home.

Here is where the venture socialist advantage comes into play.  With the stroke of a pen, Obama and company can decree that all auto companies must increase their average fleet mileage to 54.5 mpg, which makes the Volt, and others cars like it, the only viable option.

That’s 54.5 mpg versus the current mileage requirement of 27 mpg.  Impressive increase, isn’t it?  Actually a 101.9% increase in anything is impressive.  But even more impressive is that this new mileage standard makes electric automobiles almost mandatory.  Wow, that means the Volt will sell!  Now that’s prescient, isn’t it?

One must ask how Obama and Company determined that a doubling of fuel efficiency is even possible, much less that it is economically achievable by 2025.  Is their vast experience in manufacturing or in mechanical engineering being applied here?

Or could it be that the people in the current Washington ruling class feel this is merely a reasonable demand to make of recalcitrant auto makers (who are undoubtedly acting in collusion with the evil and polluting oil companies) are the same people who also determined that with an $800-plus billion stimulus that unemployment would never exceed 8%?

Perhaps Mr. Obama should consider alternative career options for himself in 2013 and beyond.  Someone should suggest that he cross management consulting off his list of things to try.

Maybe he should stick to motivational speaking.  It appears that talking about things about which he has very little real knowledge truly is, as he told Harry Reid, a “gift.”

 

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About Jim Yardley

Retired after 30 years as a financial controller for a variety of manufacturing firms, a two-tour Vietnam veteran, and independent voter.
Gallery | This entry was posted in Business, Economy, Government Spending, Political Doubletalk. Bookmark the permalink.

9 Responses to A Fundamental Change: Venture Socialism

  1. SK Dutta says:

    automakers have agreed to this deal (at least in principle) – http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6319599 so lets just leave it to the people who makes automobile to decide if it is possible or not!

    • Jim Yardley says:

      True, the automakers have agreed. But wouldn’t you think that their agreement might have something to do with the coercion exerted by the White House and the Dept of Energy? After all the government owns a fair sized piece of two of the three automakers.

  2. Sawyer says:

    Setting aside that Obama is a moderate…

    I’d agree that whether or not it was avoidable or agreed on, choosing particular companies doesn’t seem to have the Obama nuance, but perhaps a greater good was disaster relief to these hard-hit areas – this is decidely different than bankrolling multinationals like Wal-Mart.

    What about the “little” oil, gas, and farm subsidies Obama’s tried to cut? Or is the investment in obstruction greater than honesty and sense of proportion?

    With record corporate profits and record income gap, our plutocrats say we have to buy golden parachutes for the fat cats who triggered the great recession. But that belongs in an article “Venture Capitalism”…

  3. Sawyer says:

    Sorry my reply earlier was a bit hasty and offtopic. I do have my critiques of the guy, a few blunders, but mostly along the lines of being too establishment and compromising – but nice to visit and see different viewpoints. ;)

    • Jim Yardley says:

      No need to apologize, Sawyer. You’re entitled to your opinion as much as I am to mine. The only comment that you made that engendered any sense of frustration for me was “What about the ‘little’ oil, gas, and farm subsidies Obama’s tried to cut?” Farm subsidies, yeah, they really are subsidies. As for oil and gas, I think Obama is not using the term “subsisdy” properly. It sounds like the words of Indigo Montoya in the film “The Princess Bride” when he says “You keep using that word. I do not think it means what you think it means.” A great deal of what the president refers to as subsidies are normal business tax deductions, with the possible exception of depletion allowances which are very specific to the energy sector. But the consumption of inventory in any sector of the economy is a normal part of cost accounting, and if it were eliminated for only the energy sector, I believe SCOTUS would find itself involved i on the grounds that it creates a higher tax threshold for energy sector firms as a bill of attainder. That’s naughty of him and SCOTUS might slap his hand for it.

    • Jim Yardley says:

      I posted your first comment and the second as well. My response is posted on my blog so we’re all playing on the same field, so to speak.

      • Sawyer says:

        (I like my opinions to be well-informed, on-topic and civil ;))
        Thanks for the informative reply. I did assume his “bad subsidies” were to particular sub-sectors – in particular, oil over solar/wind/nuclear, etc. but as you point out it gets a bit complicated.

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