100 Startups Are Better Than 1

This week we saw another example of politically connected firms transferring wealth to insiders by way of government technology grants and subsequent asset flips to overseas investors.

$10 million that went to Endace to create R&D jobs in New Zealand. Those were very expensive jobs. And the asset value created has been captured by insiders with very little return on investment for taxpayers.

If the goal is to actually stimulate high-skill employment, rather than transfer taxpayer wealth to politically connected entrepreneurs, any technology grant policy needs to be far more cognisant of how the real world works.

Entrepreneurship is a trial and error occupation.

We have no idea which ideas will work until they’ve worked.

So trying to pick winners by giving one firm almost $10 million is bad policy.

There is no guarantee that Endace would get bought out thus justifying the grants they received!

It would be far smarter to give 100 startups just $100,000 each and free office space in a building in Wellington previously occupied by public sector tenants.

Something like BizDojo, but shifting the cost of a startup to buying yourself a laptop and using your grant money to cover server expenses and low level contracting like web design or more experienced developers.

The spillover effects from a density of young (no baby boomers need apply) developers, engineers and researchers living on mince and hot desking for 12 months would be far smarter than the current policy.

I think that Lightning Lab is far better policy but nowhere near the scale necessary to produce a major boost to high skill employment and wealth creation led by technology innovation.

Leaky Homes Fiasco and FAP

The multi-billion dollar assistance scheme for leaky home victims is called the Financial Assistance Package.

It is clear no one at MoBIE realises how funny this is.

Mr Rainey asked the Ministry of Business, Innovation and Employment for details of FAP payouts, and was shocked to discover that although 1232 victims had lodged expressions of interest by the end of September:

Only 186 homeowner agreements had been finalised by the claimants and the ministry.

35 claims were proceeding, of which 31 had received one or more contribution payments.

Only 12 had received their final payments.

The FAP scheme, started last year, is a joint Government and local council plan to help people avoid having to sue and to enable them to get their houses fixed.

Are the government having a laugh with respect to leaky home owners getting assistance? Or do they really want them to just have a FAP?

The leaky buildings fiasco is one of the worst indictments of regulatory failure in the developed world. The ongoing cost that ratepayers and taxpayers will have to bear while culpable builders and industry executives waltz off into the sunset is appalling.

It is not a good thing that billions of dollars has to be spent fixing what should have been built properly in the first place. Anyone thinking that the rebuilding process will “save the construction industry” should read up on “The Broken Window Fallacy”.

The leaky homes fiasco represents billions of dollars in lost potential investment in higher productivity. It’s a major drain on the construction sector and with some homeowners saddled with hundreds of thousands of dollars worth of rebuilding expenses, a major drain on private sector consumption and saving.

NB: For those of you unaware of the meaning of “FAP” it’s a NSFW image search.