Krugman Misses the Point (Is that An Evergreen Headline or What?)
But [Solyndra] is indeed a terrible scandal, because the private sector never ever puts money into ventures that end up failing:
And then he puts up an ad from Pets.com, a very famous private equity disaster. My quick thoughts
- As I have said over and over (specifically comparing Solyndra to Pets.com weeks before Krugman thought to) Pets.com did not take my money. Solyndra did, and without my permission too. Yes, the fact that it was my wealth Solyndra destroyed matters.
- If my money manager had invested in Pets.com, I would have been pissed at him and demanded accountability. In fact, the entire VC sector and most of the stock market started to entirely rethink their approach to Internet investing after Pets.com blew up so spectacularly. So it is odd that Krugman would use the Pets.com example as an excuse that this Administration NOT face any accountability for Solyndra and NOT rethink its approach to investing in private companies.
- Pets.com was an investment made after hundreds of other Internet companies had been funded - it was the marginal investment, in some sense, after the low-hanging fruit had been funded. Solyndra, on the other hand, was the first company funded by this Administration under this program. It was their #1 choice.
- Public loan guarantees are always going to go systematically to the worstinvestments. As I wrote in the article linked above
...government loan guarantees go only to those companies who the free market has chosen NOT to fund. If the free market was willing to toss another half billion into Solyndra, its owners would not have been burning a path back and forth to Washington. So by definition, every single government loan guarantee in this program is to a company or a technology that the free market, knowledgeable investors, and industry insiders have rejected as a bad investment. For the program to work, one has to believe that Obama, Chu, and some career energy department bureaucrats have a better understanding of commercializing technologies than do private investors (who are investing with their own money) and industry experts.
- If it were the job of the President to be the venture-capitalist-in-chief, would you have chosen Barack Obama for this position? Would he even be in your top, say, 20 million choices? If I gave you a choice of Barack Obama or a random person snatched off the street of lower Manhattan, who would you choose to make these investment choices?
