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发帖数: 29846 | 1 By Larrey Anderson
Venture capitalism is, and always has been, the heart of capitalism. There
is nothing "new" or modern about it.1 Venture capitalism is one or more
private investors financing a risky new venture (thus, the "venture" in
venture capitalism) -- or a private investor's attempt to salvage an already
existing, but troubled, business. Venture capitalism takes the risks that
banks won't and that governments shouldn't. Crony capitalism is the system
of politically motivated handouts from the government disguised as bailouts
or "investments."
America was created by venture capitalists like Thomas Denham and Hugh
Meredith. Both men worked as partners with Benjamin Franklin. Denham and
Meredith made investments that allowed Franklin to pursue a career in
publishing.2
The rumblings of revolution can be traced to Franklin's failed effort to be
on the receiving end of a crony capitalist handout. When Pennsylvania's
Lieutenant Governor (for the British Crown) Sir William Keith reneged on his
promise to help secure financing for some printing equipment, he pushed the
young Ben Franklin to seek private partners and investors -- and soured
Franklin on British rule.
Keith had pledged letters of credit to pay for printing hardware in London.
Under the impression that financing for his new enterprise had been secured,
a teenage Franklin sailed to England. But there were no printing presses
and no letters of credit waiting for Franklin when he arrived. A penniless
Franklin found himself stranded far from home. Denham, a well-established
Quaker merchant from Pennsylvania, befriended the young Franklin. Denham had
met Franklin during the initial voyage. Although it was not a huge
investment, in 1726 Denham paid Franklin's £10 return passage to
America.3 A wiser Ben went to work in a new store Denham had opened in
Philadelphia.
The moral difference between a Governor Keith and a Thomas Denham is
staggering. Keith made lavish promises (not just to Franklin) based on the
use of money that Keith did not have or that did not belong to him. People
were seduced into Keith's "investments" because of his position in the
British government. Spending someone else's money is easy, painless, and
risk free -- for both the "lender" and the recipient. Franklin described
Governor Keith thus, "He wished to please everybody, and, having little to
give, he gave expectations."
Denham, on the other hand, could not afford to tarnish his reputation by
making promises he could not keep. Like many entrepreneurs, Denham was a
venture capitalist and a retail businessman. He loaned and borrowed real
money to and from real people. Franklin admired Denham:
There, by a close application to business as a merchant, he [Denham]acquired
a plentiful fortune in a few years. Returning to England in the ship with
me, he invited his old creditors to an entertainment, at which he thanked
them for the easy composition they had favored him with, and, when they
expected nothing but the treat, every man at the first remove found under
his plate an order on a banker for the full amount of the unpaid remainder
with interest.
A few years later, Franklin's first business was funded by another venture
capitalist. Franklin set up a printing shop in Philadelphia in a partnership
with Hugh Meredith. Meredith's father loaned his son and Franklin £
200 to start the business.4 That's how risky businesses are started -- with
venture capital.
Mark Twain was a venture capitalist. A lousy one. He poured the money he
made from writing into investments in the leading edge technologies of his
day. And he lost every penny. Standard Oil's Henry Rogers, holding Twain's
copyrights as collateral, rescued America's greatest writer from bankruptcy.
Twain was friends with Nikola Tesla. Tesla was involved in a heartbreaking
episode of venture capitalism. Outside investors supported, and then pulled
the financial plug on, Tesla Electric Light & Manufacturing. Nikola Tesla
was sent packing, from his own company, to George Westinghouse -- even
though Tesla had invented the polyphase technology that would become the
backbone of electric (AC) motors and the basis of the power grid that now
lights our planet. In a fair world, Tesla would have been the wealthiest man
in it.
And so the story of venture capitalism goes -- or used to. This is not a
fair world. Whether it is unfair to the entrepreneur who seeks (and needs)
the investment -- or unfair to the investor -- is mostly a matter of
hindsight. Markets, like human beings, can be fickle. Denham could have lost
his £10 investment had Franklin died on the voyage home. Papa Meredith
's loan might have disappeared into thin air had Franklin not been the
clever editor and writer that he was. (Hugh Meredith, the son and Franklin's
business partner, was a notorious alcoholic.) Tesla might have been a
billionaire had he not ripped up a contract offered to him by Westinghouse.
Venture capitalism is based on choice and freedom. No one forced Denham to
pay for Franklin's passage. The investors, who voluntarily pulled their
money from Tesla Electric, might have made the biggest financial blunder in
the history of the world. Unfair or not, the world is a much richer (in
every way) because of men like Denham, Meredith, and Westinghouse.
We could be witnesses to the death of venture capitalism and its replacement
by crony capitalism. If Obama is reelected, the end of unfettered venture
capitalism is all but guaranteed. Certain GOP candidates seem as dead set
against a healthy environment for venture capitalism as our current
president. Crony capitalism already drives much of the health, energy, auto,
insurance, and even major parts of food industries in America. Many (not
all) farmers, hospitals, car manufacturers, "green energy" enterprises,
small businesses, etc. look to Washington first for financing. Crony
capitalism will be the end of America, as we know it, and too many of the
GOP candidates seem to be comfortable with that fact.
The problem with crony capitalism is that it is grounded in coercion. The
government does not consult the people who provide the investment money.
Those investors are U.S. taxpayers. The taxpayer is forced to support the
government's choice of winners. In venture capitalism the investors
voluntarily risk their money. In crony capitalism the investor has no say at
all in the investment. This was as true of George W. Bush's funding of "
faith-based initiatives," as it is for Obama's "investments" in bankrupt
green-energy companies like Solyndra. In Chapter 5 of Throw Them All Out,
Peter Schweizer has shown that three quarters of the first $20 billion the
DOE "invested" in green energy went to companies with direct ties to the
Obama campaign -- including at least ten members of Obama's election finance
committee and over a dozen Obama campaign "bundlers."5
Forget political parties and ideologies. Elected government officials make "
investment" decisions for political reasons. Much to many of his supporters'
surprise, candidate Obama was not opposed to continuing Bush's faith-based
initiatives -- he just wanted to make sure that his campaign contributors
got the cash. As Obama declared in 2008:
As I've said many times, I believe that change comes not from the top-down,
but from the bottom-up, and few are closer to the people than our churches,
synagogues, temples, and mosques.
That's why Washington needs to draw on them. The fact is, the challenges we
face today -- from saving our planet to ending poverty -- are simply too big
for government to solve alone. We need all hands on deck.
Stop climate change and get a check from the Obama administration. Here's a
quick example: Your church (or synagogue, temple, or mosque) might be
eligible for a $200,000 grant to help save the planet. Click here.
If a taxpayer happens to think that churches, synagogues, temples, and
mosques shouldn't be paid for "assessing and modeling population
vulnerability to climate change" (because any effort on their part will have
absolutely no effect on the climate, and because it's a mind numbing waste
of money) -- that's just too bad. Under crony capitalism taxpayers are
forced to support investments that have no connection to economic reality --
because the government's "investment" decisions are grounded in political
expediency.
Some GOP candidates for president are openly attacking venture capitalism. A
conservative "super pac" has paid for a grossly inaccurate half-hour
special on Bain Capital that looks very much like the propaganda films I saw
in the 1980s on state-controlled television in the Soviet Union about life
in America.
Self-professed conservatives are advancing these attacks. This is not
politics as usual. It is a sign of how little some conservatives understand
the importance of free markets -- and the relationship of the Constitution
to those markets. America became the wealthiest nation in history for two
reasons: our Constitution and free markets. The former guaranteed the
existence of the latter. Apparently, a large section of the GOP is turning
its back on both. "Ignorant" is far too weak a word to describe the
Republicans who are attacking venture capitalism. Ask Ben Franklin.
Larrey Anderson is a writer, philosopher, and senior editor for American
Thinker. He is the author of the award-winning novel The Order of the
Beloved and the memoir Underground. He is working on a new book, titled The
Death of Culture.
1. Some economists claim that the financing behind Fairchild Semiconductor (
established in 1959) marked the beginning of "true" or organized venture
capitalism. But, working backward, American Research & Development was
founded in 1946. (George Doriot, who is sometimes cited as the creator of
venture capitalism, founded AR&D.) The premise that venture capitalism
begins at some time X because investors have reached a level of organization
Y is objectionable and purposefully misleading. The definition of venture
capitalism as some level of organization (however "level" may be stipulated)
provides bureaucratic cover for regulatory legislation like Sarbanes-Oxley
and Dodd-Frank. If "modern venture capitalism" began in 1959, how do its
opponents explain a need for The Securities Act (1933) and, especially, The
Securities Exchange Act (1934)?
2. Meredith's father made the actual loan. As an aside, I'm unable to find
the first name of Hugh Meredith's father. Franklin does not give a first
name in his autobiography. And it is not in the contract between Hugh
Meredith and Franklin. If anyone knows the father's first name I'd
appreciate your sharing it.
3. Denham loaned the money to Franklin. He died before Franklin could repay.
The debt was forgiven in Denham's will.
4. Or was it £ 100? Franklin's autobiography suggests that £ 200
was pledged but only £ 100 of the loan was received. (See the bottom of
page 31 in Franklin's autobiography here. Cf. page 53 in Walter Isaacson's
Benjamin Franklin: An American Life.)
5. "Bundlers" package numerous smaller contributions into a "bundle" -- to
keep the amount of money collected within FEC rules and presidential
election finance laws. |
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