Rick Lowe
You might remember this recent post about venture capital and this follow up post on the same subject?
Basically I remain concerned about the possibility of the political class forcing banks to lend their depositors money for venture capital which has to be one of the vilest propositions I have heard in a long time.
Of course, if anyone wishes to lend their money to start up businesses directly that is perfectly acceptable, but to force banks to lend other people's money is nothing short of theft in my not so humble opinion.
George Eastman of Eastman Kodak fame was also mentioned regarding how he had no capital but he had integrity and obviously a lot of tenacity and could not depend on government to force people to lend him money to build his business.
Entrepreneurship is about ideas and providing people with products and services they want or need. Sometimes, as someone pointed out about Steve Jobs at Apple recently, it's even about creating a product that people don't know they need yet.
And the idea that entrepreneurs come from monied people is just more political hyperbole.
As Dr. Burt Folsom pointed out recently:
"John D. Rockefeller, according to Investors’ Business Daily, was the wealthiest person in U.S. history, but his father was an itinerant peddler who deserted his family. Andrew Carnegie, the man who made American steel competitive, was a poor immigrant from Scotland. Robert Morris, the indispensable man in financing the American Revolution, was an immigrant from England. Henry Ford lost his father at a young age and so did Kemmons Wilson, who started Holiday Inn. Many of the greatest entrepreneurs in U.S. history started life desperately poor but they valued the freedom they had to create new products." [More…]
So let's get off this political soap box that in order to create a business we need to force other people to lend us their money. Heck the company I work for was started in 1940 and that year we sold three whole cars. And it was not until the 1970's when there was a reasonable return on the investment. That's more than thirty years later!
Regretfully business growth takes time and there are often many failures along the way. Yes there are those shooting stars once in a while, but they are the exception.
Dr. Thomas Sowell said it best (as usual):
“It is amazing how many of the intelligentsia call it “greed” to want to keep what you have earned, but not greed to want to take away what somebody else has earned, and let politicians use it to buy votes.”
This is an interesting perspective, but it seems to discount the possibility that the political class could effect measures by which Government encourages, rather than forces, banks and other institutions to lend to entrepreneurs. Successful programs in several countries already do this by (for example only) Government giving some form of guarantee for these loans which reduces the bank’s risk to a level which makes it easier for the small entrepreneur to obtain capital. This is not to encourage a giveaway; the bank’s risk assessment is still a valid tool to ensure that money is not wasted, but the Government assumes part of the risk thereby lowering the bar.
In a small country such as The Bahamas, it is not true to suggest that the availability of Capital is not an issue which limits the development of small businesses, and Government sponsored programs which address this are an essential part of developing this important sector of the economy.
Of course such a program requires an effective and robust framework to ensure that the persons who benefit from this scheme are properly vetted, but I believe that the difficulty in obtaining capital probably denies many potentially successful businessmen their break. Combination of this initiative with increased training opportunities for potential small businessmen could be a valuable tool to increase economic activity in The Bahamas.
Thanks so much for stopping by and commenting.
Certainly there is a need for Venture Capital as you point out, but certainly this should not be done by force as Mr. Gomez suggests.
Also, Mr. Gomez headed the Bahamas Government’s Venture Capital fund for 5 years or more so has first hand experience of the losses and failed ventures.
If individuals wish to buy shares in a venture capital fund or the like or even give funds directly to an entrepreneur that is fair game.
Also, governments only get the funds they use for Venture Capital from the taxpayer as well and there is never any proper accounting or transparency of what happened to the funds and how the loans to failed ventures are being paid back.