Ricky:

Actually, when a VC loses his investment, he writes it off his corporate earnings and is taxed lower. So to an extent the loss is indeed "socialized".

Only if the VC is profitable which proves my point that VCs know what they are doing.

Ricky:

Should the company move to profitability they have to pay the loans back, with interest.

Thanks for the lesson in high finance. The interest rates that are charged are too low to pay for the program and the default rates. If they were self funding (as are the VCs) it wouldn't be an issue. And it has to be self funding over the long term!

Ricky:

If it does succeed in helping create a competitive alternative energy sector in the US, it will pay off remarkably well.

I think we will get there with or without the federal government and their political loans. The issue isn't whether there are great alternative technologies. The issue is whether the government has the capacity to figure out which ones are going to be profitable in the next 3 years. They should stick to basic research and let the private sector determine design and manufacturing which is what Fisker is about (and why I posted the latest news on the subject).

Ricky:

But thats the essential measuring stick that really should be applied. After all the program is working in an area where the VC community didn't have the capacity to fund a large economic development.

Says you. There have been hundreds of billions invested in this area by the private sector (which I have previously linked to). The good projects are funded. The ones that cannot get sufficient VC funding go to the federal government and use their political connections.

fate

Fine, but a venture capital company that invested primarily for ideological purposes and consistently invested in obvious losing ventures would not last too long.

This is true.
But:
Did you take note of the rate of failed investments by private VCs?
Did you note the low number of failed companies funded by the DOE program?
The fact is that the current investment record of the DOE program is pretty good compared to the average VC ....

ray

Only if the VC is profitable which proves my point that VCs know what they are doing

Which is why 90% of their investments crap out?

ray

Thanks for the lesson in high finance. The interest rates that are charged are too low to pay for the program and the default rates.

Sounds like you have some evidence here you aren't sharing/... What are the terms and the default rates?
From what I found the DOE program has had few defaults...

rickyp wrote:fate

Fine, but a venture capital company that invested primarily for ideological purposes and consistently invested in obvious losing ventures would not last too long.

This is true.
But:
Did you take note of the rate of failed investments by private VCs?
Did you note the low number of failed companies funded by the DOE program?
The fact is that the current investment record of the DOE program is pretty good compared to the average VC ....

Really? Are you kidding?

Just look at Solyndra. VC stayed away. The DOE doubled down. Conveniently, those who donated to Obama wound up ahead of the taxpayers because of a deal the DOE cut.

Now, is that good investment or crony capitalism?

When the government invested billions into setting up the internet and making it accessible globally, it did not make a 'return' in the direct way a venture capitalist would. But indirectly it is getting increased income from the activity generated (and if Amazon and Google paid taxes rather that use offshoring to escape them, it would be even more).

Similarly investing in fracking technology.

Government is not a typical VC.

Ray Jay wrote:Ricky:

Actually, when a VC loses his investment, he writes it off his corporate earnings and is taxed lower. So to an extent the loss is indeed "socialized".

Only if the VC is profitable which proves my point that VCs know what they are doing.

Assuming that a Venture Capitalist only does being a Venture Capitalist, and doesn't reserve a lot of capital to be invested in safe bets or have other streams of income.

And of course losses can be carried forward into future years as well, so it applies just as much to a VC who is periodically making a profit but in more years makes a loss.

Most VCs worth their salt would not invest in new ideas any money they could not write off.

Doctor Fate wrote:Fine, but a venture capital company that invested primarily for ideological purposes and consistently invested in obvious losing ventures would not last too long.

Fate, this pretty much described how the Bill and Melinda Gates Foundation runs: Ideologically oriented, they invest relatively small amounts in large numbers of ideas to address largely health issues in the third world with the expectation that only a small percentage of those will bear fruit and merit further research, but the vast majority of their investments are complete losses by design.

It's fair to question the gov't investments in for profit organizations, but I would also say it is equally fair to question gov't investments in places like the Los Alamos National Laboratory ("where good scientists go to die."), or Argonne, or NASA or small business administration loans, or the TVA, or the Joint Strike Fighter that no one but the companies making them want. Like it or not, the gov't is shoveling money everywhere and while the spotlight is on Fisker and Solyndra, I'm sure there are dozens (hundreds?) of much larger even less effective recipients out there.

geojanes wrote:

Doctor Fate wrote:Fine, but a venture capital company that invested primarily for ideological purposes and consistently invested in obvious losing ventures would not last too long.

Fate, this pretty much described how the Bill and Melinda Gates Foundation runs: Ideologically oriented, they invest relatively small amounts in large numbers of ideas to address largely health issues in the third world with the expectation that only a small percentage of those will bear fruit and merit further research, but the vast majority of their investments are complete losses by design.

Interesting, but supports my point.

It's fair to question the gov't investments in for profit organizations, but I would also say it is equally fair to question gov't investments in places like the Los Alamos National Laboratory ("where good scientists go to die."), or Argonne, or NASA or small business administration loans, or the TVA, or the Joint Strike Fighter that no one but the companies making them want. Like it or not, the gov't is shoveling money everywhere and while the spotlight is on Fisker and Solyndra, I'm sure there are dozens (hundreds?) of much larger even less effective recipients out there.

So, we shouldn't worry about the DOE wasting money because that's what government does?

Or, what exactly are you trying to say in this paragraph?

danivon wrote:When the government invested billions into setting up the internet and making it accessible globally, it did not make a 'return' in the direct way a venture capitalist would. But indirectly it is getting increased income from the activity generated (and if Amazon and Google paid taxes rather that use offshoring to escape them, it would be even more).

Similarly investing in fracking technology.

Government is not a typical VC.

True, but Solyndra et al, are not the government researching anything. It is the government investing in companies it either knows will fail or should know will fail. Solyndra is the poster child because even after the company's fate was fairly clear, the government kept pressing ahead.

That is not something a person would do if he/she had to feed a family or keep a job.

But, because the DOE is playing with "someone else's money," it is unrestrained by common sense.

Doctor Fate wrote:That is not something a person would do if he/she had to feed a family or keep a job.

I doubt very much that real venture capitalists are reliant on their success to feed their families. They will already have access to plenty of capital and would not be risking any capital or income that they cannot afford to lose. They will likely have another source of income or capital - after all, what often happens is that someone builds up assets in one sphere and then 'graduates' to being an investor, you don't get many people who make a living purely out of Venture Capitalism all their life. And even then, most will be hedging with 'safe' investments at the same time.

With hindsight, we now know that Solyndra would fail. However, that doesn't mean (as much as you insist), that it was guaranteed at the outset.

Over here we saw a promising line of industry falter because it could not get loans from private industry or government - well, it was going to get a government loan but it was cancelled after the 2010 General Election as part of the austerity drive.

However, the loan was to enable that company, Forgemasters, to develop in order to produce components for the nuclear energy industry. Since then, the same government has decided that we need to build new nuclear power stations. Who will be supplying parts for that? Not Forgemasters (and no other UK company as far as I can tell), meaning we are going to be reliant on imports to fit out what are being seen as a vital national infrastructure assets.

I don't favour toal autarky, but there are times when it is in a nation's interests to keep up what may seem to be failing or ailing industries. Sometimes, that will still fail. Sometimes it won't end up making much difference. But sometimes it will lay the foundation for improvement.

The Solyndra investment does not look all that great (again, with the 20:20 hindsight), but that does not invalidate the worth of government investments in principle.

Indeed, when it comes to ideology, the trope that government can't do anything right and the market will always be better is ideological. Many other countries are ignoring it and investing in just the same kinds of industry, not because they are idiots, but because they are looking to steal a march on new industries for their national benefit.

So, they market is already being distorted - to favour investment in Chinese or European countries. America can choose to remain ideologically 'pure' and rely on the market, but that would be your choice.

danivon wrote:

Doctor Fate wrote:That is not something a person would do if he/she had to feed a family or keep a job.

I doubt very much that real venture capitalists are reliant on their success to feed their families. They will already have access to plenty of capital and would not be risking any capital or income that they cannot afford to lose.

So, venture capitalists are fine with frittering away money?

That's weird. I've heard the Left call them "greedy." I'm not familiar with them being termed "indifferent to losses."

With hindsight, we now know that Solyndra would fail. However, that doesn't mean (as much as you insist), that it was guaranteed at the outset.

Actually, that's not what I said. If you knew about Solyndra, you would also know better. What I said:

Um, just think what MIGHT have been done with the money instead. Imagine if the market was allowed to work instead of the political hacks of the Administration investing and reinvesting in a loser. Remember--they were the morons who agreed to let Obama's buddies get in line in front of the taxpayers, which just happened to be a violation of the law.

Now, from wiki:

On 7 October 2011, newly revealed emails showed that the Obama administration had concerns about the legality of the Department of Energy's loan restructuring plan and warned OMB director Jeffrey D. Zients that the plan should be cleared with the Department of Justice first, which the Department of Energy had not done. The emails also revealed that as early as August 2009, an aide to then-White House Chief of Staff Rahm Emanuel had asked a Department of Energy official if he could discuss any concerns among the investment community about Solyndra but that the official dismissed the idea that Solyndra had financial problems.[

In other words, questions about Solyndra were ignored beginning in 2009. Furthermore, in spite of financial trouble, the government restructured its loan to Solyndra so that the taxpayers would be in line BEHIND other investors, who just so happened to be Obama contributors.

That's something private VC companies just can't match!

Solyndra is a symptom. The disease is the idea that the government should and can steer entire sectors of the economy. Obama is sold out for green energy and he will risk as much of our money as he has to.

Awesome.

Doctor Fate wrote:

danivon wrote:

Doctor Fate wrote:That is not something a person would do if he/she had to feed a family or keep a job.

I doubt very much that real venture capitalists are reliant on their success to feed their families. They will already have access to plenty of capital and would not be risking any capital or income that they cannot afford to lose.

So, venture capitalists are fine with frittering away money?

That's weird. I've heard the Left call them "greedy." I'm not familiar with them being termed "indifferent to losses."

Not sure you understand the difference between investing money you can afford to lose and being indifferent to the losses.

They are gambling. Clever gamblers don't stake money they can't afford to lose, but make bets that they are hoping on balance to win. They will still not be happy to lose (especially not lose all they stake). Dumb ones keep going.

Enough of the "Left say X" bs, too. Whatever I may or may not think of Venture Capitalists, I'm trying to bust a few myths about them.

Solyndra is a symptom. The disease is the idea that the government should and can steer entire sectors of the economy. Obama is sold out for green energy and he will risk as much of our money as he has to.

Awesome.

[/quote]Yesh, a good job that the government didn't 'steer' the internet. Or fracking. Imagine the disaster if they had!

danivon wrote:Not sure you understand the difference between investing money you can afford to lose and being indifferent to the losses.

Not sure you understand English.

They are gambling. Clever gamblers don't stake money they can't afford to lose, but make bets that they are hoping on balance to win. They will still not be happy to lose (especially not lose all they stake). Dumb ones keep going.

Yes, but do they take gambles they KNOW are bad? Do they ignore pertinent information? Do they restructure deals to make sure they are the last ones to get paid back?

That's what the government did in Solyndra.

That's what you fail to grasp.

It's not my problem. It's yours.

Enough of the "Left say X" bs, too. Whatever I may or may not think of Venture Capitalists, I'm trying to bust a few myths about them.

By introducing the "truth" that they can continually invest in losers without ramification?

Yesh, a good job that the government didn't 'steer' the internet. Or fracking. Imagine the disaster if they had!

Apples and asteroids.

Here, do this and you will win the day: write an essay comparing and contrasting Solyndra with the Internet. If you can successfully argue, according to the readers here, that Solyndra was much like the Internet, I'll concede.

fate

Yes, but do they take gambles they KNOW are bad?

Maybe they do? VCs are wrong 90% of the time.... But maybe sometimes they actually do make investments that they know aren't likely.... With a 90% failure rate, thats not inconceivable...

Solyndra was a huge cock up and a failure. But the evidence indicates that so far, the DOE program is way more successful at picking winning investments than the private VC community.
Solyndra isn't representative of the entire DOE investment program. Its one of only three companies that were involved that have folded since the inception of the program.
As I said to Ray when he first posted, the program is performing pretty well based on VC standards.... If at the same time it achieves its goal of helping create a competitive American Alternative Energy sector its a success....
Maybe not as successful as the money spent on early stage Frakking , or on the Internet or on the Tennessee valley Authority or on the early stage development of the computer.... Well yet.... Sometimes those investments took a few decades to completely pay off ..... But when they did they created enormous advantages for the US in the global economy.

Doctor Fate wrote:

danivon wrote:Not sure you understand the difference between investing money you can afford to lose and being indifferent to the losses.

Not sure you understand English.

It's not about 'English' it's about timing. When you make an investment you should not expect to see the money come back. When time has passed and it fails or succeeds, you will care. Yes, you'd care more if you bet the farm, but that's the sort of thing that idiots do.

They are gambling. Clever gamblers don't stake money they can't afford to lose, but make bets that they are hoping on balance to win. They will still not be happy to lose (especially not lose all they stake). Dumb ones keep going.

Yes, but do they take gambles they KNOW are bad? Do they ignore pertinent information? Do they restructure deals to make sure they are the last ones to get paid back?

That's what the government did in Solyndra.

If you want to look back at the dotcom bubble, you will see that several VCs did invest in total rubbish simply because it was a dotcom.

But government is not a typical VC - it may put the loan at the end of credit, but taxes would be at the front.

Enough of the "Left say X" bs, too. Whatever I may or may not think of Venture Capitalists, I'm trying to bust a few myths about them.

By introducing the "truth" that they can continually invest in losers without ramification?

Of course there are ramifications. If they invest all they can afford to without affecting them, and lose, then they can't invest any more (absent some other income). If they win, they could win BIG. In between, they will be able to continue, may learn for future investments, may build up relationships that offer new opportunities etc etc.

Maybe you haven't done much gambling in your life - I realise it's not as socially acceptable or fully legal in the 'land of the free' as it is in our stuffy old place. If you are a sensible gambler (and I consider myself to be one of those), you don't gamble to lose, and you do care about it (and you want to gain the profit from winning in the aggregate). But you don't gamble more than you can afford, and you certainly don't spend you winnings before you realise them.

Venture Capitalism is a form of gambling. Sure, they do research (just as a sports bettor studies the form), but ultimately without being prescient they can't be sure which investments, if any, will pay off - or even how much. We all know that sometimes the highest risk bets/investments have the biggest payouts.

The difference is that sports gamblers know ahead of time what the odds are (although the odds may change as the market does if they use the SP), and there's usually a House that is shaving to make a profit within a zero-sum game. With VC, the odds are only known afterwards, and it's not zero-sum, but dependent on the overall economy.

However, the government is not (as I said a few posts back) a typical VC.

Here, do this and you will win the day: write an essay comparing and contrasting Solyndra with the Internet. If you can successfully argue, according to the readers here, that Solyndra was much like the Internet, I'll concede.

You were extrapolating from Solyndra to a principle:

"The disease is the idea that the government should and can steer entire sectors of the economy."

I pointed out two sectors where the government could and did steer them. You ain't my teacher, and I'm not writing an essay for you to 'prove' a point I wasn't making.

Neither is this about "winning". I'm just trying to show that your broad-brush statements can be challenged.

rickyp wrote:But the evidence indicates that so far, the DOE program is way more successful at picking winning investments than the private VC community.

Says you.

I've seen the articles that try to prove this and they have to go through advanced gymnastics because it's not true. You can't cite a company that does what the DOE has been doing, so a comparison would not be terribly valid.

Furthermore, as I said and quoted, DOE dismissed concerns about Solyndra before the investment was made.

After the investment was made and after the company was known to be in difficulty, the loan was restructured to put the taxpayers on the hook. Who does that?

Only government employees looking to payback those who "invested" in Obama.

Solyndra isn't representative of the entire DOE investment program. Its one of only three companies that were involved that have folded since the inception of the program.

That's not true. I just saw a CNN article from October that said it was five.

More are on the way! Don't worry!

DETROIT — No one answers the phones these days at Fisker Automotive. Its visionary founder has quit; its employees have been laid off or put on furlough without pay. Production of its sleek plug-in hybrid car, the Karma, ended months ago.

Veering on the edge of bankruptcy, without a buyer in sight, Fisker has become — to lawmakers and others — the Solyndra of the electric car industry. Not only private backers but millions of dollars in government loans gave life to a company, some would argue, that was a shaky investment from the start.

No electric vehicle initiative backed by Washington seems more of a debacle than Fisker, which was given a $529 million federal loan in 2009 to advance the project. Two years later, after Fisker repeatedly missed production targets and other deadlines, the Energy Department suspended the loans.

As I said to Ray when he first posted, the program is performing pretty well based on VC standards.... If at the same time it achieves its goal of helping create a competitive American Alternative Energy sector its a success....

False. Unless you can show that VC companies are this bad.

Furthermore, there is no evidence that the "alternative energy sector" is going to be competitive with fossil fuels anytime soon. The government keeps trying to raise traditional energy prices (albeit indirectly) to help, but that's not working because the market (fracking, etc) is too smart and too fast-moving.

Maybe not as successful as the money spent on early stage Frakking , or on the Internet or on the Tennessee valley Authority or on the early stage development of the computer.... Well yet.... Sometimes those investments took a few decades to completely pay off ..... But when they did they created enormous advantages for the US in the global economy.

There is zero indication that these will ever pay off.

As for fracking, Wiki says:

Due to shale's high porosity and low permeability, technology research, development and demonstration were necessary before hydraulic fracturing could be commercially applied to shale gas deposits. In the 1970s the United States government initiated the Eastern Gas Shales Project, a set of dozens of public-private hydraulic fracturing pilot demonstration projects. During the same period, the Gas Research Institute, a gas industry research consortium, received approval for research and funding from the Federal Energy Regulatory Commission

Now, that sounds like a broad-based group of energy folks representing different companies came together and received government assistance.

I'm not sure how you would compare this to what the government is doing now--in process or scope.