Monday, June 25, 2012

Let them eat start-up!

There was an interesting piece in called "The New Busking" in the Times "Week in Review" section (or whatever they're calling it these days) by musician Terre Roche, ex-of a band called the Roches. In it she laments how using crowdfunding sources to fund new recordings/releases devolved into a huge waste of time for her, emailing, soliciting, responding, etc.

This rings oh so true. I remember a couple of years ago reading Stephen Johnson's book Emergence, in which he details a variety of phenomena demonstrating that a "bottom-up" paradigm was taking shape that would fundamentally reshape the way we do a whole range of things.  To his credit, he did a great job explicating how ant colonies work together in ways that are very difficult to understand, and tied that in to other things going on in the world in an interesting way.

But what was hard to swallow in Johnson's basic line of argument was that bottom-up was necessarily good.  Yes, as aging punk rockers and people weaned on the Jeffersonian tradition of entrepreneurialism and the little guy, we like bottom-up stuff. Who doesn't love the story of the small shopkeeper made good?

And yet, how well does bottom-up work for everybody?  Much as we love to rag on them, where would we be without Bill Gates and Steve Jobs, Sergei and Larry, shit, Henry Ford?  Our prosperity is built on the back of enterprises that scaled, the mass production that came of it, and the standards they put in place.  Their stories are great because they started small and then they built into something bigger, so that things got cheaper.  And at the end of the story, there's always the people at Foxconn/Hon Hai, workers ground to parch so fine that they jump out of dormitory windows to their deaths. And the guys at the top became, each in their own ways, simultaneously control freaks, assholes, saints, and heros.

Similarly with government.  The idea and promise of the Giving Pledge is that all these people who got super rich -- aided by effective tax rates made low by accountants who help the affluent and corporations minimize tax bills -- can aggregate capital and then disburse resources in a way that's more cost effective than can government: Let the Gates Foundation assume the functions of the NIH and, eventually, HHS.

It has not been demonstrated that they do a better job.  Non-profits can, in fact, cherry-pick the causes that are more amenable by focused solutions.

There is a bubble just now in start-ups and social entrepreneurship specifically just now, ironically at a time when the IPO market has dried up, making it more difficult to build a business and exit. If a social entrepreneur venture cannot scale effectively, it is, as we say in IT terms, "lossy." Markets will weed this out in time, as they should.

This shouldn't all be taken to mean that I am anti-bottom up, pro top-down, nor do I think that the government will or should solve everything.  There is a healthy ferment of ideas in the entrepreneurial world that can at once help governments and non- and for-profit enterprises deliver services more efficiently and scale more effectively and at the same time pressure them to do so.  But just having a start-up should not earn someone a gold star.

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