Belmont University

Socialized Entrepreneurship in Oregon

Oregon politicians seem to have an ambitious agenda to expand socialized entrepreneurship (this is what I call government funded and government directed entrepreneurship initiatives for any new readers). From the National Dialogue on Entrepreneurship:

The new Oregon Innovation Plan focuses on supporting place-based innovation capacity. It proposes to spend roughly $38 million to support initiatives in three areas: enhancing the competitiveness of existing industry, improving technology commercialization, and increasing the state’s overall capacity for innovation. Among the Plan’s specific recommendations are the creation of new angel networks across Oregon; the opening of new research centers for wave energy technology, nanotechnology, and drug discovery; and extensive new efforts to support existing firms in the manufacturing, food production, and seafood industries.

This is bad policy. The best thing the state of Oregon could do to increase innovation and entrepreneurship is to simplify and reduce taxes, and cut any regulations that are getting in the way of small business formation and growth. Use the $38 million to cut taxes. Also, angel investment networks don't need the government's help in getting started. Freeing up the market will spur business creation, which in turn attracts investment money. Finally, the worst part of this new policy initiative is to have politicians and bureaucrats pick winning industries. That is what free markets do best.


Posted by Jeff Cornwall on August 27, 2007 03:35 PM |

Comments

Hi Jeff,

So here I am reading this from Eugene, Oregon, flattering myself to think I know something about this subject because I teach entrepreneurship one quarter per year at the University of Oregon, and I'm president and founder of Palo Alto Software, which is also in Eugene, with 38 employees, 70% market share, and no outside investors.

While I don't disagree that politicians ought not to pick markets, you should have looked at the who's who in that committee group before you made that assumption. It's chaired by Dave Chen, one of the smartest venture capitalists anywhere. Although I've never met him, I've heard him speak and I've got a post featuring him on my blog called "Choose Investors Wisely or Not at All" and you have to admit it's a refreshing point of view for a VC. The vice chair is from Open Source Development Labs, and the group includes (along with some politicians) an honor role of high-tech business in Oregon. That means Intel, IBM, Batelle, Microsoft, some other companies you've heard of, plus two other VC firms besides Dave Chen's. It's a pretty good group.

The plan doesn't spend even a dime of government money on angel investors, by the way. The spending amounts are on the first page.

And Oregon doesn't need to cut taxes by $38 million. We're one of the last three states without a sales tax, and at the local public high school they've got teachers doing junior and senior AP Chemistry and Physics classes with 40 kids in the class.

You linked to the plan in your post. I read your blog regularly because of your knack for coming up with important and relevant information, frequently very useful. In keeping with that track record, I think you should read that plan again. They have a great executive summary, it won't take long.

-- Tim

Birdied by: Tim Berry | August 28, 2007 12:04 AM

Tim has some good points.

Also I'd note that one of the first requirements for anyone with an entrepreneurial spirit to embark on a business is a sense that it's possible. Coming from a less entrepreneurial place (Canada) I can tell you that part of the problem is a lack of role models and a feeling of frustration with finding sources of capital.

Young people with the notion of starting a business are going to see a government program as being far more accessible, thusly realistic and possible, than existing Angel networks. Cutting taxes does little to incentivize entrepreneurs; I'd hardly believe that one might think to themself "oh man, the taxes are just too high in my state to start a business. I guess I'll just find a job."

Birdied by: Tyler M | August 30, 2007 05:47 PM

I read it again and I stick to my guns on this one. I don't care who is on the committee. Free markets work best when they are, in fact, free. When we subsidize industries and grant largess to particular businesses, the results are clear -- we end up with poorer results than if we get government out of the way and let markets work.

We are moving toward a system of corporate welfare for venture capital -- that is a sad, sad development.

Birdied by: Jeff | September 4, 2007 02:52 PM

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