What if Obama gave Y Combinator 40 Billion Dollars

http://zaid.posterous.com/what-if-obama-gave-y-combinator-40-billion-do

by landist • 17 years ago

20 33 17 years ago

zaid.posterous.com

amichail• 17 years ago

The failure rate will skyrocket as all these startups compete for users.

pg3• 17 years ago

It's not users you compete for, but needs. And those are effectively infinite. The limiting factor would more likely be the rate at which technology can evolve. But it would be kind of cool if you ever reached that point.

timr3• 17 years ago

This is just silly.

Ignoring the fact that YCombinator probably wouldn't know what to do with $40 billion (a lot of rice and beans?), the jobs created by such an investment would benefit about 1% of the country -- smart, risk-taking, well-educated young men who are willing to live in California.

The point of saving GM is only nominally to save GM. The point of saving GM is to save the industrial base of a big chunk of the US population, and hopefully keep places like Michigan from sliding into permanent and irreversible poverty. The benefit is greater than the sum of the jobs saved.

Xichekolas2• 17 years ago

Well yeah this idea is silly, but his original point about saving GM (that it's also silly) probably still stands.

His figure for GM employees is old (2005). Last I saw, the current unionized hourly workforce is 60k employees (see link below). If you simply gave those employees $125k each, it would only have cost the government $7.5 billion. That kind of money should allow all those employees plenty of time to find other jobs or get training for a new skilled career. Then if you gave the retirement/healthcare VEBA what it needed, that would be another $20 billion, for a grand total of $27.5 billion... we've already spent more than that just keeping it afloat the last 8 months.

If they let GM die, of course some parts makers would have to scale down too, but the parts industry wouldn't collapse, because they still have the other car makers to sell to.

Link to employees figure cited above: http://blogs.moneycentral.msn.com/topstocks/archive/2009/06/...

timr3• 17 years ago

The argument about GM is the silliest part. I think it's somewhat plausible that YC could find a way to use $40Bn productively.

Again, the point of this bailout is not just to save 60,000 current GM jobs. The point is to save the GM, the GM supply chain, the local economies of several large industrial states, and the millions of people in an economic ecosystem that has built up around GM. Looking at only the 60,000 jobs at GM is taking an absurdly narrow view of the situation.

baguasquirrel• 17 years ago

I'm as much for promoting startups as the rest of you, but is a massive, blind infusion of cash the answer? The thing about YCombinator, Sequoia Capital, Kleiner Perkins, DFJ, etc., is that there just aren't too many of them. There was an article on here just the other day heralding the end of VC as we know it, because the vast majority of the industry wasn't producing good returns.

Investing in startups is the most difficult capitalistic resource allocation problem you can get into because you have no "reputation" to go on. When you're investing in public stocks and bonds, you're usually dealing with companies that have an established track record, or an area of the economy where the variables are known. But that is by definition not the sort of thing we're interested in doing here.

The real question should be, how many startups can PG and team invest in and coach if money were not the limiting factor? Is money the limiting factor right now?

noonespecial2• 17 years ago

The sudden lack of scarcity would cause the quality of the investments to plummet. YC uses its money carefully because the supply is not unending.

When you only have one shot, you aim.

vaksel2• 17 years ago

not really applicable, since YC invests in 40-45 companies at a time

edit: I was talking about the "one shot" comment

mahmud2• 17 years ago

for 40B, people will get into starting up for the salary.

don't start a company to make ends meet, start it to execute a haunting vision that you can't get rid of (ever wonder why people quit their jobs, often to their financial detriment, to startup? yeah, it's a curse.)

noonespecial2• 17 years ago

Ask anyone who's ever submitted a YC application (and been rejected!) if they think that the selection process is in any way trivial.

YC invests in 40-45 of the best companies of thousands that apply. Even trying to imagine a selection process that chooses 40Bn worth of YC companies makes my brain hurt.

I think that no matter how hard you tried to stand it up, it would flatten out like warm jello to "anyone who writes a few coherent sentences on the application gets some cash".

oldgregg• 17 years ago

Ha right, how the government allocates money, "Paul Graham" would spend $39,999,999,992.07 on coke and hookers and the founders would split a frappuccino.

sho• 17 years ago

Where does a Frappucino costs $7.93 ?

paulgb• 17 years ago

San Francisco, if you can find somewhere cheap.

joel_feather• 17 years ago

Surely Paul Graham does not need that many hookers.

dave_au• 17 years ago

Perhaps the money would be to keep them away so he can get some work done...

mtpark• 17 years ago

I think a lot of you are missing the point. I could be wrong but I think the gist of the message is to look at what 40B into ycombinator would mean in terms of value added, employment created, etc. (with the wild assumption that it all scales). His point is to heavily criticize the 40B bailout of GM.

pg3• 17 years ago

If someone wanted to give us that much money to invest, I'd probably do it, just to see what would happen. We could probably cook up some schemes for scaling. I wouldn't be surprised if it turned out to be a lot like scaling software. You run into a lot of unexpected problems, but you also end up finding ways to solve most of them. Plus you get unforeseen effects of scale, some of them good.

mahmud2• 17 years ago

Please do not try to "cook up" small start ups. It's better people juice their own ingenuity on their own time, when they have something big at stake.

I grew up in a communist country and I remember how the state gave allowances to housewives in order to invigorate women's businesses. It didn't turn out that well; most women, like most men, are not interested in the ungodly effort and the labor of love that goes into enterprising.

[Edit: specifically, there came up a cottage industry of document fixers who could get you bankruptcy documents so you get to keep the federal investment AND get compensation. People looted the fund.]

pg3• 17 years ago

Don't worry, the scenario is a hypothetical one, to put it mildly.

bayareaguy• 17 years ago

I'd prefer the US government revise the operating practices of agencies like the SBIR[1] to work more like the Grameen foundation[2] to help entrepreneurs of all kinds establish or expand businesses (not just the tech/media companies which are YC's focus) and then put a few billion dollars into it. Extending 40 billion dollars of microcredit loans would make a lot of sense to me in any kind of economy.

1- http://www.sbir.gov

2- http://www.grameenfoundation.org/

vaksel2• 17 years ago

Does anyone else have a problem with assumption #1?

"First off, let's take out 25% for running Y-Combinator. This leaves $30B of cash to dole out."

tlrobinson• 17 years ago

I suspect many medium to large tech companies would come grinding to a halt as 1 million engineers left to start their own companies...

But perhaps I overestimate such employees' desire to give up job security for the excitement of a startup.

jmonegro• 17 years ago

And so the government would own 70% of YC, just like GM?

And then, they'd rebrand it to GC - Government Combinator.

rjurney• 17 years ago

I believe this has been tried before. Its called a centrally planned economy. How did that work out last time?

gojomo• 17 years ago

(1) $6K+(N×$6K) ? As if. Now $6MM+(N×$6MM).

(2) Bye-bye Ramen, hello Roman holiday!

(3) Build defensible advantages. Like, a castle with a moat to keep away all the crooks, scammers and favor-seekers. ("Make something people want to break into, but can't.")

johnnybgoode• 17 years ago

I understand that the main point was to rightly criticize the GM bailout, but subsidizing YC would be wrong for essentially the same reason. Governments are unable to allocate capital as efficiently as markets can. This holds even if Paul Graham is the central planner, no matter how much you might hope otherwise.

What if Obama gave Y Combinator 40 Billion Dollars

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