Mark Cuban Ends the Great Recession

 

Or, at least, he tries.

In a provocative and zany post on his blog, billionaire Mavericks-owning former-internet-mogul Entourage-guest star Mark Cuban suggests a way for government to create jobs.

First, he outlines the problem:

As the Republicans and Tea-Party will tell you, we have a spending problem.  The reality is that the problem isn’t how much we spend, it’s what we spend it on.  Our government is not very good at funding projects/investments that generate much if any return. Our government is so overhead laden that just to get the money from the Treasury to a project automatically starts it in a hole. Plus our federal government loves to hire people. That isn’t a problem in and of itself. The problem is that they over pay and let them keep their jobs forever. A basic tenet of business is that it is rarely a good idea to borrow short term funds for long term projects or employees unless you are damn sure of the returns. Our government never is.

He identifies jobs and economic growth as the most important problem we face, and breezes on:

How is this for a revolutionary thought: Companies that would create jobs if they had more cash know who they are. Right ? If you own a company and are thinking to yourself “Self, if I could borrow or get an investment into my company I could hire X more people to grow the company/meet demand/release a new product/whatever”  So rather than guessing and hoping what might happen, why don’t we let companies self identify themselves ?

And not only should they self-identify themselves as companies, they should be able to bid on Government Loans or even actual equity investments. Call me crazy, but I think we should be playing a game of “I Can Name that Tune in X Notes” re-named and reformatted as “I Can Create X Jobs for Y Amount of Money”

Seriously. Call me crazy (and Im sure many of you will), but there is no reason why we can’t quickly create a federal website that allows existing companies to say to the Federal Government how much money they need and how many jobs they can create for that money and for what duration are they committing to maintain those jobs for the money.

Okay, I’ll go first: you’re crazy.  Government shouldn’t invest, or lend, or have anything to do with financing companies, whether it would “create” jobs or not.  The reason the free market works is that everyone has something to lose.  Once you socialize the risk of an enterprise — once taxpayer-backstopped Fannie and Freddie buy up bad mortgage securities; once public school teachers can’t be fired; once public pension benefits are “negotiated” among public pension beneficiaries — a lot of stupid and expensive decisions get made.

That’s ultimately the problem with these kinds of tech-loving, enthusiastic, let’s-build-a-website solutions: the only way they’ll work is if, somehow, those immutable laws about free market economics didn’t exist.  And Cuban implicitly acknowledges this when he comes up with (inevitably) a complicated additional bureaucracy to administer his “bold” plan:

Who would be the decision makers ? I would set up multiple 5 person regional committees across the country.  I’m not quite sure who would pick the members, or what their exact qualifications should be,  but I can tell you what I would set as a requirement. People would only be eligible to be on the committee if they had not made a political contribution of any kind directly to a politician or to a PAC of any sort in the last 5 years.  This can not be a politically dominated decision process.

And in about three weeks, the Federal Regional Committee on Federal Investment and Job Growth will look a lot like a local public school district administrators meeting.

Sometimes, when people think “outside the box” the result is something interesting and revolutionary.  And sometimes all they do is remind you why there was a box in the first place.

There are 27 comments.

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  1. Profile Photo Inactive
    @MelFoil

    Limited government: necessary evil.

    Unlimited government: evil.

    Proceed accordingly.

    • #1
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    @DanHanson

    Gah. Someone save us from the technocrats with their big ideas. The market just can’t be planned like this, no matter how good the people on these 5-person panels are. We’ve seen this nonsense before.

    In my province, the government at one time decided to ‘invest’ in technology. It announced a large number of grants that any company could apply for to help them do basic research. At the time, I worked for a small chemical lab that was doing innovative work. We didn’t get the grants, because we didn’t have the connections or the lawyers to go through the grant process.

    Our big competitor WAS connected, and got all sorts of government money. Did they do more research? No. They just shifted the numbers around so that their current research was paid with government money, allowing them to use the money they used to spend on research to lower their prices and undercut us and other labs. The ultimate effect was to crowd out actual research and reward the politically connected rather than the most innovative.

    You can expect the same kinds of shenanigans from a plan like this.

    • #2
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    @ForrestCox

    In a strong field, this may be your best post ever…

    • #3
  4. Profile Photo Member
    @

    Have you ever watched Mark Cuban’s antics at a basketball game, or worse, tried to listen to him speak? Moron.

    • #4
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    @ThinkSo

    The SBA already does this, am I missing something? Right now they use business plans and applications to do due diligence – would his process be different somehow? What about disillusionment or under performance, does the government then become the owner and/or broker too?

    • #5
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    @TommyDeSeno

    Often the Ricochet contrarian, let me see if I can’t pull something good from Cuban’s post.

    Before I get to that – I agree his whole idea of government being involved is awful. I don’t trust government to sweep a floor.

    But Cuban is addressing a perpetual issue here: Access to capital. It amazes me that in a capitalist society, so little attention is paid to the people’s access to capital.

    The flow of capital, when controlled by a few (traditionally WASP) bankers, is rather anti-American philosophy, don’t you think? A very few people for a very long time were able to decide what companies rose or fell, or what companies had access to cash to perform buyouts.

    Then along came Michael Milken, who re-directed that power away form the old bankers and over to Drexel Burnham.

    Less than coincidentally, he went to jail over very minor technicalities and gray areas in reporting requirements. They even let him keep his wealth – what was truly wanted and received was that Milken be banned for life from the market.

    Access to capital – it needs more discussion.

    • #6
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    @VanceRichards

    Mark Cuban is concerned about getting Americans back to work? Then how did “Center for the Dallas Mavericks” become a job Americans won’t do?

    • #7
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    @TheMugwump

    Want jobs?

    Eliminate the Dept. of Education and replace with vouchers and watch the market react to the demand for private education.

    Eliminate the EPA and allow all regulations to be state mandated. Off-shore drilling can be placed under the administration of the Coast Guard.

    Eliminate the Dept. of the Interior and sell off federal lands or give them in block grants to the states.

    Eliminate the Dept of Commerce and sell NOAA to the Weather Chanel.

    Eliminate the Dept. of Labor and replace with the help wanted section at Craig’sList.

    Sell NASA to Richard Branson.

    De-fund and/or eliminate the other alphabet agencies as needed. Sell the properties or strip their buildings for salvage.

    Roll the Veteran’s Administration into the Dept. of Defense.

    We’ll keep defense, state, justice and treasury under the feds, but that’s the sum of it.

    • #8
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    @VanceRichards

    double post, nevermind

    • #9
  10. Profile Photo Member
    @MarkWilson
    Rob Long:

    Sometimes, when people think “outside the box” the result is something interesting and revolutionary. And sometimes all they do is remind you why there was a box in the first place. ·

    This excellent principal must somehow be traceable back to the Fundamental Theorem of Conservatism, if one exists. I propose we hereafter refer to this as Long’s Corollary.

    • #10
  11. Profile Photo Member
    @
    Rob Long: Government shouldn’t invest, or lend, or have anything to do with financing companies, whether it would “create” jobs or not. The reason the free market works is that everyone has something to lose. Once you socialize the risk of an enterprise…a lot of stupid and expensive decisions get made.

    This would have an opposite yet parallel effect of 90% top tax rate. Under those rate, you losses are all your on, but nearly all of your gains to the government. Thus no incentive to take risk.

    In Cubans case, when all your losses are paid by someone else — think of how Obama blames the failure of all his problems on G.W.B. and suffers less political fallout — as Rob said there is less to stop you from making stupid decisions.

    If the process of getting money to people is the primary hurdle, how about simply not taking the money out of those entrepreneur’s hands to begin with?

    • #11
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    @WhiskeySam

    Cuban might want to start with reading the Constitution. The he might want to read it again and again until he finds the place where the federal government is supposed to be funding private enterprise. That should keep him occupied long enough for the rest of us to not have to put up with his sophomoric ideas about government.

    • #12
  13. Profile Photo Inactive
    @WhiskeySam
    ~Paules: Want jobs?

    Eliminate the Dept. of Education and replace with vouchers and watch the market react to the demand for private education.

    Eliminate the EPA and allow all regulations to be state mandated. Off-shore drilling can be placed under the administration of the Coast Guard.

    Eliminate the Dept. of the Interior and sell off federal lands or give them in block grants to the states.

    Eliminate the Dept of Commerce and sell NOAA to the Weather Chanel.

    Eliminate the Dept. of Labor and replace with the help wanted section at Craig’sList.

    Sell NASA to Richard Branson.

    De-fund and/or eliminate the other alphabet agencies as needed. Sell the properties or strip their buildings for salvage.

    Roll the Veteran’s Administration into the Dept. of Defense.

    We’ll keep defense, state, justice and treasury under the feds, but that’s the sum of it. · Aug 15 at 5:14pm

    Edited on Aug 15 at 05:23 pm

    Can we talk you into running for President?

    • #13
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    @RawPrawn

    England has a “reality TV” show like this idea. I accidentaly saw a bit of it when I was channel surfing.

    • #14
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    @Todd

    “they should be able to bid on Government Loans or even actual equity investments.”

    We have that already, it’s called the capital markets. Companies compete for capital, and investors and lenders compete for the best investment opportunities.

    The better the investment opportunity, the less the companies need to pay to investors and lenders in the form of interest and equity. And the riskier the opportunity, the more they have to pay.

    How does he not know this?

    • #15
  16. Profile Photo Inactive
    @TheMugwump
    Whiskey Sam

    ~Paules: Want jobs?

    Eliminate the Dept. of Education and replace with vouchers and watch the market react to the demand for private education.

    Eliminate the EPA and allow all regulations to be state mandated. Off-shore drilling can be placed under the administration of the Coast Guard.

    Eliminate the Dept. of the Interior and sell off federal lands or give them in block grants to the states.

    Eliminate the Dept of Commerce and sell NOAA to the Weather Chanel.

    Eliminate the Dept. of Labor and replace with the help wanted section at Craig’sList.

    Sell NASA to Richard Branson.

    De-fund and/or eliminate the other alphabet agencies as needed. Sell the properties or strip their buildings for salvage.

    Roll the Veteran’s Administration into the Dept. of Defense.

    We’ll keep defense, state, justice and treasury under the feds, but that’s the sum of it. · Aug 15 at 5:14pm

    Edited on Aug 15 at 05:23 pm

    Can we talk you into running for President? · Aug 15 at 5:33pm

    No, I’ve had my colonoscopy for the year.

    • #16
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    @MarkWilson
    Whiskey Sam: Cuban might want to start with reading the Constitution. The he might want to read it again and again until he finds the place where the federal government is supposed to be funding private enterprise. That should keep him occupied long enough for the rest of us to not have to put up with his sophomoric ideas about government. · Aug 15 at 5:32pm

    You must be one of those pre-Change dinosaurs who still believes in limited government. That idea is so 2007.

    • #17
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    @Misthiocracy

    The sad truth is that we are never going to slay corporate welfare entirely. So, AFTER government budgets have been balanced, how can we reform corporate welfare to reduce the harm it does? After the budget is balanced, I like the basic idea of forcing corporate rent-seekers to compete for taxpayer dollars. Instead of throwing subsidies out willy-nilly, set out a single pot of money and force companies to enter a competitive bidding process for government “investment”. It’s not ideal, but it’s better than now.

    • #18
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    @user_83937

    Anecdote:

    When I went Galt, I left a successfull engineering company that still employs me part time and they asked me, if I had any ideas, to tell them. I was the single most profitable employee in the entire firm, earning well over our 24% target on projects.

    I put together a meeting with industry experts and pitched several ideas, only one of which was not dismissed as typical CJrun harebrained nonsense. I put a business plan based upon the idea everybody liked and then…silence. Silence from everybody; private individuals with money to invest, as well as my bank.

    In my experience, everybody is sitting on their money for two reasons:

    1] Private investors are scared and buying commodities; and

    2] Banks have enormously higher requirements for capital reserves, which is the regulatory tool the government used to get all banks to buy into the TARP mentality. Even BB&T and Wells Fargo have had to toe the new line.

    In my opinion, even pseudo-no-brainer business investments are dead, right now, as people invest in commodiities instead, and banks are requires to hold greater reserves to cover the junk on their balance sheets.

    No mystery!

    • #19
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    @WesternChauvinist

    Considering the Obama administration has exactly zero ideas for bolstering employment in the free enterprise system, I expect the Obama Campaign to trot this out in 3…2…1…

    This is exactly the type of thing Obama loves. It gives him the gloss of the appearance of caring about free enterprise capitalism while actually increasing the size and reach of government.

    The next worst thing after the soft-despotic European democratic socialism Obama favors is the crony capitalism we have right now. Not because it favors “greedy” capitalists, but because it empowers and emboldens power-hungry politicians. The 5-person panels would be the most powerful bodies in the country after the politicians currently deciding the winners and losers. Cuban’s idea is so horribly bad, you can count on Obama’s people going for it. Just wait.

    • #20
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    @OneEyedJack
    Todd: “they should be able to bid on Government Loans or even actual equity investments.”

    We have that already, it’s called the capital markets. Companies compete for capital, and investors and lenders compete for the best investment opportunities.

    The better the investment opportunity, the less the companies need to pay to investors and lenders in the form of interest and equity. And the riskier the opportunity, the more they have to pay.

    How does he not know this? · Aug 15 at 5:42pm

    Edited on Aug 15 at 05:43 pm

    Indeed, how does he not know?!! The man graduated from Indiana University with a degree in business administration, started his own company and became a billionaire. I dropped out of IU after a year and a half. Now I’m a very low level manager in a multinational corporation. How is it that this man comes up with an idiotic idea that I can immediately see won’t work? What’s wrong with this picture? By all rights this man should be the wise one who understands the market and I should be the dreamer that comes up with foolish ideas.

    • #21
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    @user_59824
    • #22
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    @user_59824
    Michael Wilson: Have you ever watched Mark Cuban’s antics at a basketball game, or worse, tried to listen to him speak? Moron.

    Cuban may be the most obnoxious franchise owner in the history of sports, but a moron he is not.

    This from the sportswriter Marcas Grant:

    For as much as Stern seems to have enjoyed penalizing Cuban (he’s reportedly paid more than $1.6 million in fines during his time as Mavs’ owner), the Commish should be embracing him. Cuban made basketball relevant in Texas, where football isn’t a religion…it’s much more important than that. He took over a team that had spent the previous decade needing a stepladder to climb up to mediocrity.

    And this quote from Cuban makes a whole lotta sense to me!

    …. our federal government loves to hire people.That isn’t a problem in and of itself. The problem is that they over pay and let them keep their jobs forever. A basic tenet of business is that it is rarely a good idea to borrow short term funds for long term projects or employees unless you are damn sure of the returns. Our government never is.

    • #23
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    @wilberforge

    Rob Long: Government shouldn’t invest, or lend, or have anything to do with financing companies, whether it would “create” jobs or not. The reason the free market works is that everyone has something to lose..

    Not that we should ever visit the not so distant past in this. Recall how the Continental Railroads were financed and the first Corporations were founded here ?

    Take a look back and qualify who won and who lost and what part the government played. Then compare that to today…

    • #24
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    @DavidFoster

    If you make government investments based on a “jobs created per dollar” metric, then you are *inherently* directing funds toward investments with low labor productivity.

    Let’s say we’re at the early stage of the Industrial Revolution, circa 1800, and looking to hand out some government investment. Three companies approach us:

    –Company 1 does spinning using the traditional spinning wheel approach

    –Company 2 does spinning using the much more productive but still human-powered Spinning Jenny

    –Company 3 uses mechanized spinning equipment powered by water or steam

    The companies at the top of the list will do much better on a “jobs per investment dollar” measurement….they will also disappear in the face of competition from Type 3 companies.

    • #25
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    @JosephEagar

    Corporatism? Don’t we already have that in Congress? He’s trying to dance around an unpleasant fact: we need an economy-wide wage cut. The idea is to fund the lower labor costs now through deficit spending, and put off the actual pain until later.

    It’s a pretty stupid solution. Inflation will eat away real wages for a few years, and the economy will recover. Maybe Congress will swap the corporate income (and employer payroll) taxes with a VAT; that would speed things up quite a bit. Regardless, corporatist bargaining between the well-organized at the expense of the not-so-well-organized will do nothing but make our unemployment problems permanent (as in many European countries).

    • #26
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    @JosephEagar
    Tommy De Seno:

    Access to capital – it needs more discussion. · Aug 16 at 5:10am

    Edited on Aug 16 at 05:12 am

    I agree. Microfinance was supposed to be the solution, but it’s an abysmal failure. Some sort of cheaper bankruptcy process (for credit cards, I guess) might work, to bring down interest rates. Or forced-savings schemes. I dunno. It’s complicated.

    • #27

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