Saturday, December 17, 2011

Are Entrepreneurs Patriots and why Taxing the Rich is OK

I spend some of my time attending venture capital (VC) meetings where companies with novel products seek out investors for their products.  The products are a mix of common sense applications, sure misses, and some technological brilliance.  Many of these ideas are developed at public universities, which have offices whose sole job it is find companies to move that technology into the private sector.  Other times the idea comes from an expert teamed with engineers who come up with a solution to an identified problem.

There is nothing automatically unhealthy about all this - thought it comes with a couple of observations:  the research at public institutions sometimes seems poorly focused around economic realities and the research often done at significant public expense does not seem to provide much return on investment to the public.   The first problem is, I think, largely a problem of how we fund research in this country.  The government puts a lot of tax money into research, without enough thought given to what it will mean economically.  This is not intended to slight basic research, but what I see coming out is often too far from what the VCs want.  The second issue is that the deals seem to heavily put the money into VCs, but gain little back to the institutions, where this money could fund other research or fund the education of future researchers.

I suspect other countries do a better job of this.  However, I've talked to some Canadians once and it seemed like the government was funding the research and then taking the next step of developing the products - then they would sell the product farther down the line.  This smacks of government being in direct competition with the public, which seems like a very dangerous path to follow, since the government never will never go out of business because it is inefficient or makes bad decisions.

Yet, letting "entrepreneurs" cherry pick the best things coming publicly funded research and turning big profits without a big pay back isn't great.  It is an insiders game.  Further, I've seen the very same people tying up the IP (intellectual property) in the US, but then developing the technology abroad where they can profit more quickly.  Again, cherry picking the intellectual fruits of the US education system, but blocking the development in the US while they profit from it abroad.

No ones breaking the law and entrepreneurs are not patriots.  It doesn't mean they are evil or that their actions don't bring some great products to the market that benefit the US.  Sometimes they do.  That is when capitalism is working its magic.  However, the source of these victories is because we paid taxes,  those taxes got used to build universities, those universities educated engineers and doctors, and these people did their research of the public dime.   But we won't all benefit equally.  This is just the type of thing that the Occupy movement understands at an abstract level, without articulating the details.

We need a better way.  Probably one that has government work in a more directed toward economically useful findings.  And, when the money (taxes) society investments generates a great idea, we ought to at least fairly tax those that derive large benefits from them.

No comments:

Post a Comment