Tag Archives: socialism

Entrepreneurial Philanthropy

Entrepreneurial philanthropy has been really gaining momentum in the tech sector. We know in the late 90s that a start-up could dive in just for the sake of profit and if the business plan showed promise they’d acquire investors. Then the bubble popped and sent those investors looking elsewhere for revenue.

Today it’s tough to make it mainstream, even for viable business models. However, a trend has developed that not only requires only mediocre viability, but also manages to keep investors from jumping off the sinking ship much longer. We like to call it “entrepreneurial philanthropy.”

People are bargain shoppers, and there are plenty of people in this world that are simultaneously burdened with a desire to be meaningful and make some difference in the world. Enter the entrepreneurial philanthropist (hereafter referred to as EP).

The EP has identified a niche market with capitalists who are willing to incur much greater risk on the possibility that the end product of their investment could, even in a small way, make the world better. After all, it’s the thought that counts isn’t it? Well, actually no.

1. Handing out money to beggars on the street feels good but the reality is your money is very unlikely to make that beggar’s life any better. In fact it will only enable them and neutralize any actual potential that individual had in the first place. It will make their life worse. If the EP is the beggar then the “actual potential” would have been an actually viable business model.

2. Philanthropy really isn’t about looking to make a financial return on your investment. So let philanthropy be about philanthropy and your investments be about investments. There is nothing noble nor charitable about wasting money for no profit and no improvement. As already stated in #1 the lack of improvement probably means that you are making lives worse with your money. This is the kind of wasted potential that made Dagny Taggart so grumpy.

3. I’ve rarely met a good investor that did not accept Occam’s razor except when it comes to EPs. A few pictures of hungry kids can and should move us to tears, but not to stupidity. There are proven ways to feed kids, and that is by feeding them. The EP will have more assumptions than answers in their presentations but still fools eager to be parted with their money will bow to the emotional appeal.

So beware of the EP. While viability and charity are certainly not mutually exclusive in the world of business models, charity is also not a suitable replacement for viability. If you know of an EP project that failed financially but succeeded socially please do let us know in the comments below. Otherwise, assumptions aside, viability must be important whether your investment is philanthropy or entrepreneurial. Otherwise you’ll likely accomplish neither.

Patents and Copyrights

This has been a popular topic in the past, and since we love hate mail, and since I happen to be reading “The Fatal Conceit” by Hayek, I thought I’d bring up the issue yet again.

Perhaps you remember the article January about SOPA where we posted this great video:

When I stumbled on this great quote from Hayek’s book, I was inspired to repeat this again, perhaps better articulated. Our copyright and patent laws are an affront to social evolution:

“The difference between these and other kinds of property rights is this: while ownership of material goods guides the user of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.

Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period.

It would be hard to say it any better than this brilliant economist, but I’d like to reword that last bit based on my experience: The kind of anti-competitive behavior associated with copyrights and patents lead to a WASTE of time and resources creating an imaginary race to be the first to claim rights to the next invention. Individuals and corporations alike buy their lottery ticket by funding teams that work concurrently to other teams at other companies on the exact same concepts. WASTEFUL of resources, and WASTEFUL of life. Perhaps nowhere is this more blatant than in the realm of medicine. This WASTE turns all business into another high stakes gamble. A horse race to be exact. It has the exact opposite effect that was intended. In fact the “horses” will steal any concept that isn’t nailed down in their charge for the claim of originality. In the end there is less originality rather than more.

Time and again we meet another “entrepreneur” wanting to chase a new concept that a dozen other chaps are already chasing. No capitalist in their right minds would do this if it weren’t for the possibility of beating the others out for the patent. Worse yet, then convincing the world of the value of their patent, up to and including bribing the FDA. What a mess.

Being a software engineer may be enough to make me wise to the fact that we cannot engineer society. Most importantly we cannot allow Sony to engineer society. When they do it they fight for the right to record cable shows on their VCRs and then fight against the right to copy their shows to MP3 … they fight for their profit. If we let them, they will. Stop social engineering. One less Transformers movie won’t hurt anyone. In fact, maybe the guy about to discover the cure for cancer will be in the lab instead of watching another DVD.