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No Mercy No Malice

Welfare Queens

August 19, 2022

What’s the most successful venture capital firm in history? Kleiner Perkins and Sequoia Capital backed many Internet-era success stories. Andreessen Horowitz? No, one organization towers above. This firm was there before the first transistor was printed, and it will be there after we receive brain implants. One investor funded the computer, the internet, speech recognition, last-mile distribution, mapping the human genome, the core technologies of fracking, and the first horizontal shale drill, and today it’s driving down the cost of solar and wind power below that of coal. Even better news: If you’re a U.S. taxpayer, you’re a limited partner.

The Firm

Founded in 1776 by General Partners Washington, Jefferson, and Madison, and headquartered today in a Beaux Arts corporate campus in the District of Columbia, the U.S. government is the world’s premier funder of technological and commercial innovation. The Inflation Reduction Act (“IRA”) is being hailed/hated as a climate bill, but it’s really just the most recent investment by Eagle Capital. Opponents of the legislation claim it’s a poor investment. Eagle Cap’s track record suggests otherwise, and we can expect big returns.

The IRA (awful name) will direct $369 billion to a variety of clean-energy initiatives, largely through tax credits. The largest investments are for solar, wind, and nuclear power generation, where Eagle builds on a track record of success. The government has invested over $3 billion in wind power R&D since 1976, and it’s been offering tax credits for wind and solar since the 1990s. Just since 2010, the cost of solar has dropped 85%, and the price to harness wind energy has been halved. Public funding, through R&D and tax credits, has been instrumental to that progress. Ninety percent of U.S. coal-fired power is now more expensive to operate than replacement wind or solar sources. And that’s not for lack of investment in coal. Conservative accounting puts government subsidies for coal at $20 billion per year, and the IRA includes investments in carbon-capture technology intended to support coal energy for several years.

Eagle Cap’s $528 million loss on solar cell manufacturer Solyndra, which declared bankruptcy in 2011, was a notable miss. But failure is inherent to venture investing. One analysis found the best-performing VC firms have more money-losing investments than the average funds. The key difference is the magnitude of their successes and aggregate portfolio returns. Solyndra was a miss, but the $30 billion Department of Energy loan program that funded it turned a profit. There are many notable wins; one business that took a $465 million loan from the same program in its early days: Tesla. You likely didn’t know that, as its CEO spends more time shitposting America than crediting it.

Going Deep

Early-stage, future-leaning research is riskier and requires large amounts of patient capital. Private industry struggles to justify long-term, mammoth investments in deep science. The most enduring societies have one thing in common: Their governments play the long game. In the 1960s in the U.S., this meant computer and networking technology. At its peak, federal R&D spending approached 2% of GDP. The most cutting-edge work was done by the Defense Advanced Research Projects Agency (“DARPA”), which developed or funded the development of almost every building block technology of our tech infrastructure, from the Internet and the mouse to graphical user interfaces and GPS. More recently, DARPA has been a major funder of AI projects, notably speech recognition — both Dragon and Siri spun out of DARPA. Speech illuminates the difference between government and private R&D: In the 1950s, private Bell Labs (aka the phone company) did pioneering work on speech recognition — but only on phone digits zero through nine.

The government also invests upstream by supporting public education and universities. Stanford established leadership in engineering thanks to a unique three-way partnership between the university, industry, and government contracts, centered around the Stanford Research Institute, where many DARPA innovations have been created. Marc Andreessen coded Mosaic, the first consumer-friendly graphical web browser — it was the precursor to Netscape Navigator — while attending the (publicly funded) University of Illinois and working at the federally funded National Center for Supercomputing Applications. Again, did you know that? Why would you? According to an MIT study, technology developed at universities and then licensed to industry between 1996 and 2010 created $388 billion in GDP and 3 million jobs.

Double-click on any major tech product or company, and you’ll find government-funded tech. Apple, Intel, and Qualcomm were all beneficiaries of a loan program similar to the one that funded Solyndra and Tesla. Google’s core algorithm was developed with a National Science Foundation grant. Economist Mariana Mazzucato, in her book The Entrepreneurial State, calculates that U.S. government agencies have provided roughly a quarter of total funding for early-stage tech companies, and that in the pharmaceutical industry (a sector requiring immense experimentation and a willingness to fail), 75% of new molecular entities have been discovered by publicly funded labs or government agencies.

Fifty years from now, the field most likely to spawn more value than digital computing is genetics, and similar to digital computing, genetics is an Eagle Cap portfolio industry. The Human Genome Project cost U.S. taxpayers $3.8 billion, was completed under budget and two years ahead of schedule, and has generated $966 billion in economic activity and $59 billion in federal tax revenue. It’s estimated the federal government’s $3.3 billion in annual spending on genetics projects generates $265 billion in economic activity annually. This number doesn’t account for the improved health outcomes and quality of life flowing from genetic breakthroughs — which have an estimated value of $1 trillion per year and growing. One of Eagle Cap’s recent wins in this space: the Moderna Covid vaccine, the result of a $25M DARPA grant to the company for developing RNA vaccine technology.

Eagle’s Biggest Critics

The biggest critics of the government are, oddly, some of its biggest beneficiaries. Tech billionaires are often the first to shitpost America, even as they continue to harvest wealth from the investments taxpayers make via the U.S. government.

In fact, the biggest bitch(er) may be the biggest (financial) beneficiary. Elon Musk says we should “get rid of all” government subsidies, that “the government is the biggest corporation with a monopoly on violence,” and last week mocked Washington for hiring more employees at the IRS. Let’s be clear: Elon didn’t build an EV company in South Africa or start a rocket company in Canada. He built Tesla and SpaceX in the United States. And both continue to be heavily dependent on U.S. government support. 

There would be no SpaceX without NASA, its largest customer. Tesla built its Fremont factory with a $465 million DoE loan in 2010, and its first 200,000 cars benefited from tax credit subsidies of up to $7,500. For years the company was able to report profits thanks to the “sale” of emissions credits to other carmakers. All told, the company has accepted an estimated $2.5 billion in government support.

Marc Andreessen says he’s “pro-gridlock,” because “when the government does things, it usually doesn’t end well.” Except for providing the state-sponsored platform for his career — the University of Illinois and NCSA. Now @pmarca is making news because he’s concerned about our nation’s “housing crisis.” We aren’t building enough houses, he wrote recently, and that’s “a driving force behind inequality and anxiety.” Except when the housing is near … his house.

Another outspoken billionaire, Peter Thiel, says the U.S. government is “socialist” and believes we have “much worse outcomes than the Soviet Union in the 1950s.” (His solution is to take up seasteading — i.e., building floating autonomous ocean communities that aren’t subject to regulations or taxes.) But Thiel’s current venture, Palantir, is a government contractor that provides data analytics to the CIA, DoD, and other government agencies — and these contracts make up almost 60% of its revenue. Note: Palantir has lost money every year of its existence. That feels like a Soviet outcome.

Mother of All Welfare Queens

In his 1980 presidential run, Ronald Reagan advocated tearing up our social safety net on the manufactured claim that it offered nothing more than handouts for lazy people. He popularized the notion of the “welfare queen,” someone living large on the government dime, having more children to generate more welfare income. It was a classist, racist stunt. And it worked. Twenty-two states passed laws banning increased welfare payments to mothers who had additional children, and we’ve been slashing and burning the government ever since. Reagan’s welfare queen was a caricature, a country club cocktail fantasy of the ungrateful beneficiary of hard-earned tax money. The new welfare queens are tech billionaires. The only difference is, they’re real.

VCs claim they partner with entrepreneurs (many do), bring unique insight (most don’t), and care about the founder (read: money). What’s clear is that the economic model of 20% carried interest — investors and VCs get 80% and 20% of the gains on capital, respectively — has been flipped on its head re: public investment, where investors (taxpayers) often get less than the VCs and entrepreneurs they back. Ironically, a Democrat held up the legislation until the most obscene tax break in our tax code was restored. I hope someday somebody loves me the way Senator Sinema loves VC and private equity.

Lemonade Stand

We’re on vacation and my kids made $27 from their lemonade stand yesterday. They then spent $29 on Nerds and Airheads candy, and were 100% confident they should have unfettered access to their returns (before/during/after dinner) … as they earned it. The gap in the math was that Dad spent $38 on supplies (table, sign, market, pitcher, cups, lemonade mix, etc.). Take this times a trillion, and you’re starting to get warm re: the relationship between taxpayers, Sand Hill Road, and the innovators they back.

Citizenship

A wonderful thing about our country is that the people who are most patriotic are the ones who’ve made the greatest investment: veterans. Less heartening are the individuals who’ve registered the greatest benefit, are the least grateful, and are often the most critical: VCs who relocate to Miami and, before buying sunblock, disparage (constantly) the state they built their wealth in. Also, mega-welfare queens who cash EV subsidy checks and sell carbon credits as they mock the elected leaders who passed those laws. BTW, nobody believes you moved to Florida or Texas for better governance — you wanted the chance to recognize a capital gain at a lower tax rate than the middle-class taxpayers who funded your infrastructure. Fuck off.

The first trillionaire will likely be an entrepreneur who builds a layer of innovation on top of the bold investment American citizens are making to address climate change. Let’s hope they display more grace and citizenship and our elected leaders demonstrate more backbone representing investors, the lower 99.99%.

Life is so rich,

P.S. My Brand Strategy Sprint is coming up on September 19. If you haven’t taken it, I’ve heard it’s pretty good. Enrollment closes September 13 – sign up now.

120 comments

  1. Fran says:

    A successful venture capital firm is one that makes money. It makes money if the companies it invests in, use that money efficiently rather than wastefully.

    The US Government is not a successful VC at all. I worked for years in government contracting, and the vast majority of its “investments”–I’d guess at least 90%–produce nothing. Usually, everything is thrown out because the government sponsors didn’t actually want it in the first place, or had lost interest in it by the time the project was completed. Those that produce something, typically produce something only a few people want, because they didn’t bother talking to clients to find out what they wanted, because they didn’t need to make money.

    I worked on one NIH project which produced a great product after 20 years of research, but it’s almost never been used by anyone because the project leader just doesn’t like to let other people use it, and nobody in the NIH has any motivation to do anything about that.

    I also worked for Craig Venter, who ACTUALLY sequenced the human genome (instead of just saying it had and trusting reporters not to check), with no government assistance, at 1/10th the cost of the US government’s failed attempt.

    While working for Venter, I wasted about 95% of my time struggling to port, customize, compile, install, patch, and maintain ancient, bug-ridden, incompatible software. It’s difficult for any company to make a profit on bioinformatics software, because the government subsidizes bioinformatics software heavily with grants, and the grantees are always biologists who don’t know how to write good code or make user interfaces, don’t write good documentation, and abandon it after the grant is finished. So every bioinformatics projects involves gathering up the source code for dozens of unsupported programs, written by biologists instead of programmers, for compilers, interpreters, and libraries they’re no longer compatible with; and hammering them into some Rube Goldberg contraption that will keep working just until you turn your back.

  2. Antony T says:

    We need more good men with courage who can become leaders in America. Don’t leave. You’re right about them.
    Have to read this again.

  3. Suzanne GW says:

    Spot on!

    • Kieran says:

      Absolutely spot on AND look at that investments in roads and highways that enable trade and connections. These would never make sense based on private money. Not to mention the brilliant idea of setting up a judicial system – that protects commercial rights. There is NO successful economy in the world that is genuinely ‘pure capitalist’.

  4. Walt Hodge says:

    Great Post Dawg. Always spot on with what we are all thinking. Keep grinding my man.

  5. Zack says:

    Silicon Valley VCs are investing too much in bullshit. Pushing shopping and consuming more stuff instead of real things like a clean high speed rail system. You have Elon with „cars in the tunnel“ or e-waste called e-scooter. Finally you got the hate machine FB. Congrats!

  6. edgar says:

    Thank you. Love this guy.
    As i was reading this post, i kept voicing what he finally stated out loud to those bithers, fuck off.
    Can’t recall who said this, no one make a billion, they take a billion.
    from all of us, society, by tax dodging, by fighting for inequity, running companies with minimum wage employees who then cause this, so called inneficient government to subsidize their most basic needs, gouging customers, gouging the system (legally or illegally), not giving back a fare share (at least 15% of all that one or corporations earn, across the board) to the country that afforded them the life they blatantly boast about.
    Sadly and unfortunately sooner than later, unless they help turn this tide and make this country more equitable for the rest, we’ll see the pitchforks on the streets.
    So hell yes, FUCK OFF.

  7. Dave says:

    Scott Galloway is my idol. Worship this dude. Scott I hope at some point in my life I am just a little bit like you. You rule.

  8. Lisa says:

    I cannot express how much I enjoy your rants. Thank you

  9. david says:

    ‘ Also, mega-welfare queens who cash EV subsidy checks and sell carbon credits as they mock the elected leaders who passed those laws. BTW, nobody believes you moved to Florida or Texas for better governance — you wanted the chance to recognize a capital gain at a lower tax rate than the middle-class taxpayers who funded your infrastructure. Fuck off.’ – dead, love your work <3

  10. T says:

    Ummm… Scott are you a Florida resident for income tax purposes? Were you when you sold L2 and hopefully earned a healthy capital gain?

  11. Bryan Rich says:

    Bingo. And these great investment outcomes only come because pension money flows heavily behind the government money, and only because they know the govt (the seed money) will adjust rules along the way for the desired outcome. It’s all about power, not vision or investing acumen. Carried interest is the incentive for the private money to follow the govt money in multiples, and forcefeed the directive of the state (the origin of it all).

  12. Andrew Hayward says:

    Great letter, definitely your best in the 1+ years I’ve been reading.

  13. mw says:

    they were eating the candy during dinner? i hope they put it on a plate…

  14. JB says:

    I always love about 50% of Scott’s rants. The problem is the self righteousness combined with leaving out the details like what is the ROI on typical government spending vs that in the market.

    I think when you compare those, the government doesn’t look so good.

    In other words, what is the opportunity cost of increasingly grossly inefficient application of tax dollars? That is much harder to know, but you only have to look at how much of PPP loans were expected to be fraud to be mad about it. The same goes for the FDA graveyard of all the things that don’t happen due to the onerous labyrinth to get drugs through the meat grinder, what we miss out on because the economics due to regulatory burden don’t make sense.

    And that’s where the caricature of libertarianism is always such a lame straw man. I’m not mad about government spending, I wish R&D funding was much higher than it is and with far fewer strings attached.

    It’s the lighting of money on fire that could get applied elsewhere by someone with better ROI that I get mad about. This is what progressives totally fail to grasp and have an answer for.

    • Steven Hessing says:

      What does PPP have to do with government investment in R&D? Oh wait, I think I know what the answer is: nothing!
      So Scott is 50% wrong because he doesn’t cover your pet peeve?

    • Noah says:

      One problem with the efficiency argument is that you could (correctly) say the same about VC versus more traditional loans. Waiting for tech to be proven out and making only smaller, more conservative, shorter-term bets will *always* be more efficient than moonshots or less-likely things, and will *always* be higher-variance.

      You could say, “but what about gov’t versus private for longer-term higher-variance bets?” and I’d say, well, the private market has mostly handled that by just not investing in the more speculative things, and instead chasing more reliable returns.

      The VC market is, overall, a loss leader. The best VC firms make a profit but most don’t. They exist, at a loss to their limited partners, to supply a particular profit/risk level to big portfolio investors. They are *phenomenally* inefficient, though not as much so as genuine long-term research required for the big long-term bets;

      So the questions isn’t public vs private. The question is public versus just not doing it.

      The efficiency argument doesn’t work here, unless you want to just scrap the category, which would be *really* shortsighted.

      • Noah says:

        Er, will always be lower-variance. Moonshots are higher-variance. You know what I mean.

    • mercy says:

      Literally nobody is more “mad” than Scott about PPP. Just read his earlier columns on the topic.

  15. JR says:

    I mean I get your point about the bigger welfare queens being billionaires. That’s absolutely true. But to paint actual, real welfare abuse as nothing more than a figment of conservative imagination is a cartoonishly ridiculous assessment that kind of eats at the credibility of the whole piece.

    • paul m whalen says:

      Said the privileged American White Guy…

      • Enrique says:

        Excellent retort! If he were neither white, nor American, nor “privileged” (I’ll take you at your word that he is), I’m curious what criticisms you would’ve levied against his post.

  16. Sheela says:

    Today I read about the number of wealthy people that took PPP and it was forgiven. We passed on PPP and worked things out on our own. No small business operator lives on Easy Street like so many of the wealthy do in dollars, power, and connections.

  17. Bob Wyman says:

    I would like to see corporate financial reports include an accounting of non-transactional government transfers received. (i.e. the benefits from tax credits, expensing, grants, etc.) Making these transfers more visible would, I think, impact public perception of their value.

  18. Lei Jin says:

    Thank you for the article! I wonder if US is better off with less investment at the top and more at the bottom. The richest country is definitely not the nicest place or the happiest, many technologically middling European countries have far higher quality of life for every citizen. Honestly when inequality is this high, even the ones near top are not that well off, the potholed roads, public discord and distrust, the guns, etc. It’s too late for such sentiment now …

  19. Dutch says:

    Thanks for writing. A lot of misinformed cranks who call themselves “Libertarians” would be impoverished without the many benefits they received from government funding over their lifetimes.

    Complaining now that they have had a lifetime of benefits paid for by others is just typical behavior.

    To refer to them as hypocrites would be akin to calling Rembrandt a sketch artist.

  20. Ed says:

    Even a genius like Isaac Newton recognized that he stood “on the shoulders of giants”. It is true in scientific development and probably even more so in engineering where money is required to create practical results. That so much of that money is publicly funded seems indeed to be a fact utterly forgotten by our newly minted billionaire technologists.

  21. DAVID PENSKY says:

    Thank you!!

  22. Beatrice B. says:

    If you want government off your back, get your hand out of government’s pocket.

  23. Chris Randall says:

    Sigh. Al Gore would be so proud. Incentives still drive human behavior Scott. Governments have an agenda and incentivizing entrepreneurship through capital is a tool to achieve those means. No one is contesting the importance of the triad of government funding, university research and private enterprise. To cherry pick a few arrogant pricks to represent the body of innovators while painting the US government as some clueless victim furthers the progressive narrative so popular in our current culture. As for Texas and Florida, why is it a Fuck You to respond to ridiculous social and taxation policies in places like CA with “see ya later Newsolini”.

    • Tom says:

      Any credibility built in a comment is immediately wiped out when you use demeaning nicknames.

      • Josue says:

        Are Scott’s comments easily written off when he refers to some entrepreneurs as mendacious fucks?

  24. Relancio says:

    Elon Envy Disease keeps clouding your view

    • Ed says:

      He did benefit from massive government subsidies. Sorry, that is a fact.

    • Truth says:

      Imagine being obsessed with a billionaire who openly mocks every day people such as yourself. Go outside and talk to others

  25. Neal Shore says:

    Fellow Galloway subscribers; of course, an article as detailed /well researched , and overflowing with unabashed righteous commentary is always prone to thoughtful and respectful commentary(I read and applaud all of the earlier comments). THANK YOU,Scott Galloway!

  26. Gary R. Moss says:

    Brilliant!

  27. Edward Kierklo says:

    “Most don’t”. Exactly, most VC is a novel way of extracting money from some dependable source (i.e. CMS)

  28. Mmatu says:

    Another humdinger! Excellent.

  29. walt says:

    A good one, Scott.
    I appreciate the breadth of your comments. Add 250 pages of detail, and that’s a great book I (and this country) need to read.

  30. Josh says:

    I enjoyed this piece. Thanks for writing!

  31. Adam says:

    Preach! Amen, brother. Libertarianism is the most profound hypocrisy.

  32. c cook says:

    Maybe update the history lesson a bit. In the past few decades, we have made ethanol instead of food/animal feed that the world needs to gather farm state votes. Obama blew up $500M on Solyndra, against advice from his own DoE Secretary because a campaign financier needed be bailed out. EPA invested Billions in ‘clean air’ initiatives, yet a couple of Grad students and an independent lab found the VW cheat. EPA doesn’t even test now. Nor test water, a la Flint, MI.
    As far as education, how much taxpayer money is being incinerated from defaulting student loans? Bill is currently $1.5T. Not people who will lead the world with scientific breakthroughs, but FemLit and Sociologists who make Lattes for minimum wage and cannot pay back their debts.
    Now we have an ‘Inflation Reduction’ package that floods the markets with more liquidity, all to keep Hedgefund campaing contributors happy. Then there is the 87,000 ARMED IRS agents who will be harassing hair dressers and catering firms.
    WPA and Space Programs helped drive our economy THEN. Now, all we have are ‘Welfare Queens’ stuffing their faces with taxpayer dollars.
    On that issue at least, Reagan was correct.

    • Ed says:

      The independent lab that requested the real world study of three cars, including the VW, was the International Council on Clean Transportation. It’s funding has expanded but in 2015, the earliest year I could find, it was funded by foundations who have the public interest in mind, including the Rockefellers, Hewlett, Packard, ClimateWorks Foundation, and the European Climate Foundation, etc. etc.

      The actual testing was done at West Virginia University.

      I just don’t know that a story where the idea came from a private environmental interest group funded by civic-minded liberal foundations, the work was done by a public university laboratory, and where the cheating was done by the giant VW corporation really undermines Mr. Galloway’s case.

      • C cook says:

        Funded by private foundations… to my point.
        So where was the government (EPA)? Why are we funding a massive bureaucracy that the left seems to suddenly trust so much if they are not doing their job?

  33. Devin says:

    Well put Scott.

  34. Douglas Fletcher says:

    Another thing Eagle Capital pioneered was the safest nuclear reactor built to date. Oak Ridge National Lab built a molten salt reactor in 1960. Molten salt reactors by physics can’t over heat, can’t give off radioactive gas and can burn waste from light water reactors. If the USA had followed the path set forth by ORNL we would have been energy independent by 1990. The molten salt reactor lead is now with the Canadians, Chinese and Danes.
    Here is a propaganda video put out by the government shortly after the reactor closed. https://youtu.be/tyDbq5HRs0o

  35. Robert says:

    I often tell my hard core libertarian friends that if government is so bad, they ought to be moving to Somalia, Afghanistan, or some other place where effective and competent government institutions and the rule of law no longer exist.

    • C Cook says:

      I ask what the most efficient government project of the last 50 years was. I vote for the plan to close unneeded military bases and turn them to productive civilian uses.
      That was accomplished completely by retired military figures and a CEO of a large retail chain. Together the accomplished what Congress could not.
      Private group of experts vs self-serving and at least partially corrupted Congress.
      Government should be the last resort, not the first.

  36. Edvd says:

    Musk and Thiel are now against government subsidies because they’ve already made their billions and they don’t want competition from a new entrepreneur who might outdo them. And they certainly don’t want to pay taxes to enable this. It’s a classic case of pulling up the ladder after they’ve already climbed it. Just like every time you see someone with an Irish, Italian, Jewish, Polish, etc. name railing against immigrants. Zero shame and self awareness these people have.

  37. Steve says:

    Oh, so true.

  38. Oneyedracoon says:

    You are a genius! Thanks for this article. It confirmed my beliefs.

  39. Joe says:

    I love all of these No Mercy, No Malice posts, thank you. I will respectfully part ways with you as it relates to Senator Sinema and her motivations. To state the obvious, she’s a home grown Arizona elected official going back to her days in the state legislature. There are no hedge funds domiciled in Arizona to speak of. But she represents many GPs in the real estate industry involved in putting capital and sweat equity to work. Long term capital gains treatment for carried interest helps things get built out here in the wild, wild west.

  40. Val says:

    On the point regarding space X and NASA – didn’t Elon have to sue NASA so they would contract with space X? There is certainly some benefits to industrial policy – see China – but there are draw backs too. Same thing with the human genome project. Craig Ventner I recall closed the project faster than the government sponsored version. Worth having some balance of pros/cons.

  41. Claire says:

    Excellent. And accurate. No company is going to pay for basic research. If they wanted to, they could do so now. The government is not stopping them. Nothing is stopping companies from offering grants for doing basic science – except that it’s not profitable on a timescale most investors would find acceptable.

  42. Reeves says:

    Tax credits are NOT the same thing as direct investment. Even if the alleged spend on this bill was 100% direct investment, it is woefully short of the kind of $$$ needed to begin bringing our economy into a 50-50 equilibrium between investment and consumption (currently it’s at 20/80, which in farm parlance means we’re eating our seed corn). The bill is also chock-full of other disgusting things that actually will result in basically superheating our environment now in exchange for modest, whack-a-mole-type fixes in the out years of this bill. And at that point, the coasts will be underwater and the interior of the country will be an incinerated hellscape.

  43. Mark T. says:

    There is no political creed more simultaneously self-serving and skin deep than libertarianism. Thank you for calling these guys out for being exactly the opposite of their self image. They are not self-reliant, they are not even self-made, and I’m exhausted by their sense of self-importance. Thank you for turning an appreciative lens back on the system frequently great people (and occasionally fools) spent 240 years creating, amending, and thanklessly putting into practice. Huzzah for Eagle Cap, and for this column.

    • Reeves says:

      The brilliance of FDR was that he immediately realized that direct investment- bypassing Wall Street and the private sector completely- was how to stop the country from careening into fascist collapse and civil war. We now require the same sort of leadership in addressing the climate catastrophe. If we continue with the half-measures, tax credits and various sops to VC ghouls like Andressen, Thiel, et al, the money will be vaporized in the giant circle jerk between this useless tier of rent-seeking losers and the government that they’ve captured.

      • C Cook says:

        That was then. Biden is no FDR.
        And, science no longer rules policy. We want to built out green energy, but block extraction and processing of the materials and energy needed to accomplish that. Subsidize EVs, which only rich can afford now.
        Current government in braindead.

        • Dathes says:

          No, ‘we’ don’t want to build out green energy. The democrats do but republicans prefer to vent over critical race theory and not support any policies that might get us out of the environmental mess before it gets completely out of hand.
          And 50% of the EV subsidy will be focused on cars with batteries using materials mined in North America. That wouldn’t really work if they block extraction.

  44. A says:

    Well said Scott. I remind people all the time of the wind from Govt investment but most are totally unaware. Govt needs a better publicist!

  45. harvey charles zeller says:

    The thing with Thiel is, he’s snappish and effete.l.. scared to death, wants to hide in NZ.

    • Robert Reisner says:

      It’s ok for a bureaucrat like Obama to ‘hide’ in Hawaii and Nantucket but bad for a successful business person like Thiel to spend time in NZ??? I’m fine with each spending their own money on their own lifestyle choices.

      • Reeves says:

        Obama isn’t a fascist man-boy. Sorry, just not an equivalency there.

        • Robert Reisner says:

          You comment is not a constructive addition to this conversation. Irrelevant comments add little and reflect poorly on the author.

      • Joe Hiker says:

        Last I checked, Hawaii and Nantucket are both still in the US and residents pay US tax.
        Thiel is trying to run from his responsibilities as a citizen. You pay tax, I pay tax. Why shouldn’t he?

        • Robert Reisner says:

          Joe, Is Thiel not paying any of the taxes he is legally obligated to pay? Does a citizen have the requirement to pay more than the law expects? Is it unpatriotic to be tax efficient?

          It seems that you are ‘condemning’ Thiel for things you don’t like as opposed to actual wrongs.

      • Daniel T says:

        They don’t call my state Taxachussetts for nothing. Your dumbass comment makes no sense. Go Tweet that on Truth Social so you can get your pat on the back.

  46. tony says:

    Your best written piece ever. Epic, sir!

  47. AmyD says:

    Thank you for finally telling the story in this manner. A true brand strategist’s work. Well done.

  48. Saunders says:

    👏👏👏👏

  49. Chris says:

    Good job Scott. I’m sure you make Claus proud.

  50. Mark (MT) Moorhead says:

    Love your work, Professor. We part ways on a few points, such as nuclear waste disposal, but largely agree with your thrust. My path was 20 years of schooling, 40 years of the shop floor and, so far, 7 years of retirement. My attitude is Gratitude, for WW2 parents and adaptable genes. Stay strong. Cheers.

  51. Robert Reisner says:

    Musk’s move from California may have been a perfectly rational (and legal) decision to save billions of dollars. What obligation does Musk owe CA? He has paid all his legal obligations and has chose to do some other legal path for the future. A very rational action.

    A look at the Tesla facility in California shows that California has reaped a huge return on it’s investment …. jobs and taxes. For a greater return, perhaps California should have invested in Tesla equity. I don’t know that Musk or any one else stopped California from doing this.

    And same for the Feds. Tesla California, Nevada and Texas alone provide the a huge benefit to the Federal government. Again jobs and taxes. The tax on Tesla worldwide income is just icing on the cake.

    How many jobs and industrial facilities did GM create with it’s $7,500 per car subsidies?

    • harvey charles zeller says:

      GM & Tesla were both bailed out by the federal government. To diffarentiate, Mark Twain: the difference between a dog and a man, if you make a dog wealthy, it won’t bite you. Whose biting?

      • Robert Reisner says:

        Harvey,

        Please describe the Tesla bailout. I am aware of money Tesla received for production and some for Freemont startup but what exactly was the ‘bailout’.

        I’m only aware of a $465 million loan to Tesla part of a program for companies making fuel efficient cars. Ford got $5.9 billion. Tesla fully repaid the loan in 2013, about 10 years early.

    • Reeves says:

      What you’re essentially advocating is a fascist paradise.

      • Robert Reisner says:

        Please explain how lawful behavior by someone not in government is fascist?

    • Christopher Hoyt says:

      Musk is a fraud. I wish his innumerate minions would wake up and see that. How many years has it been that that cyber truck and electric semi truck will be ready in a year? Musk also never planned to build a hyper loop. That was based on an idea though of and discarded over a century ago and he only trotted it out to make the California State legislature think building high speed rail is a bad idea because wonder boy will build them a Hyperloop dirt cheap. What’s also not dirt cheap for the government is Space X. Meanwhile, Muskrats believe in the biggest cult of personality since Hitler and Stalin as Musk cashes out Tesla stock (fools’ gold) for actual money and laughs behind his follower’s backs. Tesla robot? Behave.

  52. JI says:

    Because government is naturally inefficient a larger public sector lowers median standards of living. Why? In a world of limited resources policy that wastes the least provides the most aggregate benefit and a limited government wastes less.

    Well intentioned but misguided policy is frequently worse than the original problem. Good intentions aren’t enough.

    Many people look to government to solve these very problems the government itself created by adding even more government- making the problem even worse.

    Minimum wage raises the income of those at the bottom at the cost of decreasing the number of jobs available- again a trade off that hurts some of those it intends to help. Higher costs are passed on by business in the form of higher prices hitting those at the bottom disproportionately. Negative externalities.

    Rent controls distort the market causing shortages and lowering property values. Rent controls reduce the supply of new housing by reducing the return on investment hurting the very people the policy was intended to help.

    Our government schooling produces relatively poor results while spending larger sums of money in part because of tenure and a lack of competition. Teachers serve their administrators instead of their customers- the parents and children.

    Similarly, with health care, powerful interest groups ensure that the supply of physicians is limited by cronyist politician-appointed state medical boards, and the cartelization of medical schools.

    There are government limitations on the importation of affordable drugs, and the FDA ensures that only the wealthiest and most politically powerful pharmaceutical companies can obtain approval for new drugs.

    Local ordinances and state laws ensure that few new hospitals are built.

    Affordable healthcare is a great example. Our regulations have created a marketplace where pricing is opaque and people have no skin in the game- leading to abuse. The insurance industry actually benefits from this bureaucratic mess.

    The student loan program actually increases demand and makes college more expensive- actually harming the people it intends to help.

    Government run programs that provide free services are always inefficient and wasteful. Why? Because free is over used/ abused. It causes limited resources to be wasted on those that either don’t need them or don’t need them as urgently as someone else. Effectively one is left with a triage system in which only the most urgent timely receive care or one in which the care level is relatively poor. Delayed medical care is actually no-care while the patient waits in pain.

    This is basic economics. When a good or service is underpriced the demand exceeds supply and it becomes unavailable. Conversely, if the good or service is overpriced it is widely available in excess and not utilized. Only a free market system can properly allocate resources by balancing the supply with demand resulting in the least waste.

    Conversely- Plastic surgery costs have declined because insurance usually doesn’t cover it. Less regulation/ government interference equals lower prices.

    “Similarly, government mandates increase the cost of transportation by maintaining monopoly powers for taxi services while clamping down on cheaper options like ridesharing.

    Government zoning laws and subsidization of highways reduce urban density which is necessary to make transportation options like bus lines and street cars economically viable.

    Countless government regulations and programs like Cash for Clunkers that encourage the destruction of old cars drives up the price of used automobiles.

    Government mandated sub prime loans to those that could not afford them and enabled the resale through Freddie Mac and Fannie Mae in great part causing the housing crisis.

    The government was the root cause of the Great Recession by interfering with the free markets by mandating sub prime loans that never should have been made and setting up Fannie Mae and Freddie Mac to purchase these loans- further enabling interest rates at below market rates. Both policies created moral hazards that led us to the eventual collapse in 2008. The collapse was exasperated by the FASB’s “mark to market” banking requirement which caused a death spiral in the banking industry- which once rescinded almost immediately reversed the collapse.

    The list is endless.

    Government- The folly.

    • Mark says:

      A long screed on what you perceive to be the problems with government, but I note zero solutions to those problems. What’s your alternative, anarchy?

      • Robert Reisner says:

        Mark,

        Perhaps the alternative is less government.
        And more of the market system.

        The most efficient and customer friendly segments of the economy are those that have the least government influence / direction / subsidy.

        Apple and enterprise software are both areas of limited government involvement and both seem to do very well. Supermarkets seem pretty customer friendly and have minimal government involvement.

      • C Cook says:

        Seems obvious.
        LESS GOVERNMENT.
        Policies of Washington are misdirected, self-serving, and nearly always incompetent.
        Remember “Shovel Ready’ projects from Obama? No one else does either.

        • D Cooq says:

          I think “less government” is a rather meaningless answer because it could mean anything, and most of it would not be what anyone wants.

          • C Cook says:

            It is very meaningful.
            The government is your last resort, not the first. Interstate commerce, foreign relations, defense, standards, some R&D support (eg COVID or Space Programs). But, only when private industry is not the best choice.
            We are now a nation of grifters, using tax money and government first because it has fewer financial checks and balances.

    • harvey charles zeller says:

      It’s amazing that every prescription you advise is simple and wrong. You are a poster child for simpletons.

    • Reeves says:

      Ayn Rand cashed all her social security checks.

      Also, my life is way too short to devote time to your unhinged screed.

  53. Jeffrey says:

    That’s a compelling read- and it’s not the final word. I believe- as it cannot be proven or disproven- that the private sector would have accomplished more had government not interfered- outside of issues of national security.

    Big government: The largest and most dangerous monopoly is government having no competition and no market mechanism to measure success or failure. And it grows and grows using threats of coercion and violence to enforce its will.

    A governmental monopoly is one that breeds corruption and mediocrity- as compared to private enterprise where competition/ merit defines one’s success- assuming not over regulated- which would just reintroduce corruption and crony capitalism.

    Limited government is a great achievement, a recent achievement in the sweep of history, and history teaches us that it can be lost. Appreciating where it came from and how rare and fragile it is will help us to preserve it.”

    • Kieran says:

      Really??? “Limited government is a great achievement, a recent achievement in the sweep of history, and history teaches us that it can be lost” Limited Government is every warlord in Syria, DRC etc. It was very fashionable since the stone age. American exceptionalism can’t see that ‘big’ government in places like Germany and Sweden in VERY successful. P.S. America has the highest medicine and credit card costs in the developed world because of very bad government. Good Gvt is not equal to Small Gvt and Big Govt is not equal to Bad Gvt. Bad government is bad whatever size it is.

  54. Robert Reisner says:

    Government funding crowds out other types of funding. And forces funding into projects that are often economically unreasonable.

    Tesla type EVs would have happened without government funding. Elon would be worth a lot less and a combination of VCs and industrial companies would be bigger beneficiaries. But EV’s would happen.

    Ditto for SpaceX. The SpaceX advantage is so clear and extreme, we know that funding would have happened eventually.

    And without the heavy hand of government, we would still have the big industrial research labs and capital to develop new ‘stuff’.

    Wind is a great example of the heavy hand gone wrong. Government subsidy and restrictive regulation crowded out gas generation and other solutions (better nuclear?) in favor of empty energy calories. Most wind generation is useless generation because it cannot be base load without really large load storage (battery or ?) that doesn’t exist. Electric generation by wind guarantees less base capacity and lack of needed power when the wind stops (and it does). Private solutions would not create energy that has no real economic value.

    I never understand why people believe that non technical bureaucrats who by force reduce private investable capital (taxes) with the advice of technical people who have never run businesses or created anything of consequence are the ‘go to’ people for technical and economic progress. Government is not the better path.

    I’m deeply sorry that you are one of these people.

    • fan says:

      LOL at “non-technical bureaucrats” – who do you think works in these organizations? https://en.wikipedia.org/wiki/Stefanie_Tompkins

      • Robert Reisner says:

        “…non technical bureaucrats who by force reduce private investable capital (taxes) with the advice of technical people who have never run businesses or created anything of consequence …”

        In my context Stefanie Tompkins is one of those technical people who have never run a business or created anything of consequence. If Elon Musk was head of DARPA, I might revise my remarks.

  55. Thorsten says:

    Go Eagle Cap! Also, go Bruins. UCLA ‘91. This immigrant owes his success to that great public institution too! See you in the Brand Sprint.

  56. Mark says:

    “BTW, nobody believes you moved to Florida or Texas for better governance — you wanted the chance to recognize a capital gain at a lower tax rate than the middle-class taxpayers who funded your infrastructure. Fuck off.”

    This times 1 million. Musk sucked on the teat of the Federal and California taxpayer for two decades, and now he’s suddenly a Trump-level genius who did this all himself with no help at all. Fuck off indeed.

  57. Gieo says:

    Thank you, Scott. This article sums up my perception (with facts) of the incalculable value that public-funded institutions create. As a graduate of a land grant college (Go U-Mass) my entire personal fortune is a result of publically funded scholarship.

  58. Zach Wheat says:

    Your best one yet Scott.

  59. Bernadette says:

    Spot on! Thank you!

  60. Hulk Hogan says:

    Amen, brother.

  61. Frank says:

    Next talk about USPS vs FedEx! Or the ROI on endless war, or municipal seizures of cash from minorities. Anything to give an at least a modicum of balance to this diatribe.

    I don’t mind the government, but lately there’s an over-reliance on cherry-picking victories and leveraging wins from 3 decades ago. Today UncleSam is full of MBAs hacking it for max returns. Nothing had changed to up accountability or police corruption in meaningful way that I can tell.

  62. Ruth Macleod says:

    Pithy. Punchy. ❤️

  63. Jenn says:

    BOOM. 🎤
    Way to lift up their skirts up and expose what they really are—greedy bastards!

  64. Mark Kreloff says:

    Bravo for calling our these bastards – not to mention Bezos’ tax free enterprise.

  65. Steve says:

    You commentary should be required reading for all billionaires. They are the most narcissistic selfish group on earth.

  66. John says:

    Great article and spot on!!!

    • Frank says:

      Next talk about USPS vs FedEx! Or the ROI on endless war, or municipal seizures or cash from minorities. Anything to gift an at least a modicum of balance to this diatribe.

  67. Stephanie says:

    On point in countless ways!! Thx

  68. Srinivas Sunder says:

    This feels more like a July 4th post than an August 19th post. But it’s right on point.

  69. Gary E Frimann says:

    Well said. Well sourced. I live in Silicon Valley. The Libertarian streak here is baffling. Honestly, I used to be Libertarian, but am now “No Party Affiliation” due to the nutjobs that make up the libertarian party. I was a Poli Sci major at UCSB (state funded University) and have been against two party system. I am, however, now at 65+ years old, believe in a mixed economy. Government incentives are wonderful. Put us on the moon. Again, great article Scott!

  70. Andrew B says:

    Home-run post!
    Share it EVERYWHERE

  71. Steve B says:

    Brilliant, well said.

  72. Camilo says:

    Of course I follow the tech billionaires but your assessment of how the governments are usually talked about is spot on…. we should all be more thankful about our governments and kill the real evil… corruption.

  73. Ed says:

    Scott – The statistics you post on wind power and its costs are misleading. I think the cost numbers are too low, but regardless, they ignore the cost of batteries when the wind speed is too low for the turbines to create electricity. When the cost of batteries is
    included wind is not competitive with natural gas, nuclear, etc… For proof, look at Germany. They are the world leader in wind energy but in 2021 their electricity cost per kWh was about double the U.S cost per kWh.

  74. David says:

    Genius post! Love the clear conceptualization of how the ungrateful tech bros’ riches came from in terms we all and esp. Musk and Thiel can understand. Maybe your best post ever – which is saying something.

  75. Marc Morrison says:

    Spot On!!

  76. Catalin says:

    Well said Scott. VC hypocrisy is incredible, and incredibly dangerous.

  77. Brian says:

    It’s often that I want to stand up and cheer when I read your stuff after a lot of nodding. This is certainly another one of those times. Well done.

  78. Terry P says:

    Best. Post. Ever