New Bailout Plan - $700B to go to Startups. YC on steroids.

New Bailout Plan - $700B to go to Startups. YC on steroids.(blog.magenic.com)

3 points by ericksoa 17 years ago | 4 comments

This wouldn't work, for the same reason that the subprime derivatives bubble collapsed. If you increase the amount of funding available to people, then more marginal teams/ideas/homeowners get funded. The actual success rate will be far lower than the historical 1 in 10, because the driving factors of success (having a market and sufficient technical ability to go after that market) remain constant, yet the pool of people going after success increases.

Same effect as the dot-com boom, or the Web2.0 boomlet.

If I were to craft a bailout plan with those $700B, I'd do it like this: $400B to go towards undergrad scholarships and graduate research fellowships for science & engineering fields; $200B to be spent directly on basic research; and $100B as a venture fund for entrepreneurs pursuing wildly ambitious ideas based on emerging technologies.

Currently, there's a glut of Ph.Ds and inadequate research funding, so many physics & math Ph.Ds end up working on Wall Street. This is a huge waste of talent; instead of performing basic research that could expand the capabilities of the human race, they waste their time shuffling money around. $200B could fund between 500k-1M new professors. Imagine the potential breakthroughs they could discover.

1M professors is definitely more than the pool of qualified Ph.Ds, so $400B goes toward increasing that pool. This could fund 2.5M college educations, or 5M man-years of graduate school stipends. Combined with increased research funding for after they finish their Ph.D, this would make grad school more attractive relative to law or business school - the old "default options" for bright young individuals who don't know what they want to do with their lives. Imagine if everyone said "I want to be a physicist" instead of "I want to be a lawyer".

pedalpete 17 years ago | |

I think the article, and the above response are both reactions in the 'to a hammer, everything is a nail' analogy. And as I use to say to my father, it only works for the hammer!

These two solutions are only address small parts of somewhat unrelated problems. Will more start-ups strengthen the economy? likely! Will more phd create more technology for the start-ups? likely!

But what is missing is the scale of employing thousands if no millions of people. I know history says the original trickle-down economics of the Reagan era didn't work, but that was giving people money in the hope they would spend it rather than invest. The new version is keep financial institutions alive so that they can continue loan/borrowing activities - though hopefully without making the same dumb moves they have made in the past.

Start-ups are theoretically small in nature at the beginning, and therefore are potentially a long road to recovery. Same with PHD's? How many individual auto-workers or even accountants are going to become PHD's. Though you (nostrademons) do say 'many physics & math Ph.Ds ' are not using there Ph.D abilities, that will hopefully change due to the lack of potential in the new Wall St. Though you could also argue that this is the time when Wall St. actually needs those Ph.Ds the most.

ericksoa 17 years ago | | |

True, but isn't the combination of money, IQ, and courage to take a risk the world's only known universal hammer?

ericksoa 17 years ago | |

So it is more of a scale issue then? I will admit, the 700B is arbitrary - an attempt to make it as inclusive as possible and match the magic 700B that is the number de jour. Perhaps you do 1/10th the numbers, do some of the things you talk about, and reach a similar result by funding the really good ideas to a greater degree - or spreading the program over a longer timescale.

The basic idea is to bridge the gap between fundable ideas and funding. There are a ton of people with ideas who are locked behind desks, but who see not a lot more left to lose.