Meeting Austan Goolsbee
I am supposed to meet Austan Goolsbee who is the Chairman of President’s Council Of Economic Advisors. I have watched him on Sunday morning shows and he certainly comes across as someone who would be fun to engage with if you really got an opportunity.
I don’ t have high expectations given the this will be a breakfast with 15-20 people. The topic is something to the effect that what are the barriers to growth. Presumably I am supposed to bring Denali experience.
I thought it would be a good excuse to write down what I would really recommend if there was time to engage. I have two perspectives – one from before the acquisition and one from after.
From before acquisition the biggest issue was clearly healthcare. Fortunately, we were doing well enough so it never became a crisis but having to stare at 15% increase in premium while the inflation was almost nothing and the industry as a whole was flat was really painful to deal with every year. Purely from job creation perspective we are going off a cliff if we don’t do something. This is a bigger issue for smaller companies with smaller purchasing power and maybe more need to be prudent with cash.
But there is another interesting question which is worth thinking about. Under what conditions would Denali have been a bigger engine for job growth. Some companies, which have a big first product, Facebook being the most recent one, can punch through and become viable independent companies. Others create something meaingful and then are absorbed by large organization. Larger organizations are supposed to provide “scale” for deploying the product to a wider audience but are more suited to providing this scale by taking the cost out rather than creating jobs.
The macro question before us is that if we are better off creating policy condition such that more companies are incentivized to not only create but also scale their products. Andy Grove talked about it in much discussed opinion piece but in a different context.
How about a policy which lower the capital gains tax down even further, maybe to zero, if you held the stock for at least 10 years and created at least 200 US jobs?
In case of Denali, in retrospect it is hard to have made a different financial choice. Scaling would have meant going public and then waiting for a decade to sell the stock. On a risk-adjusted basis it is hard to see why the intelligent decision was not to enable quicker scaling inside a large company.
There are probably other thoughts but I believe at this stage that incentivizing more “owners” to stay in the game and build large companies is probably one place to look for stimulating growth. I am sure in older economies job growth can come from large oligapolies because access to captial can mask lots of likely inefficiencies in organic growth in large organization. Access to venture capial has created a whole new economic engine for creation of ideas and products which are then scaled by large companies. The IPO path was available to very few. Facebook and Twitter are trying new approaches for accessing capital markets and maybe it will lead to some more innovation. But maybe a policy response is needed to look for more ways for good ideas and good products to become large engine for job growth.
Sanjay
