"The key point here is that venture capital tends to (though, certainly not always...) invest in real innovation, nurturing concepts from idea to market and beyond. Private equity, however, is more about just moving money around and looking for quick hit opportunities to get increasing returns. One grows the economy. The other does not."
Really? How does private equity succeed, increase its investment or have a successful exit if it just moves money around? Turning around underperforming businesses is just as beneficial as investing in something new. Also, how many VCs are not looking for quick hit opportunities? How many VCs are not looking to increase returns? You hear this complaint constantly about the VC world.
If you actually look at what they do, I think you would find that VCs and PEs are similar businesses with similar objectives that might just be focused on different points of a company's maturity, and even that would be a gross over-generalization. There is far more overlap between VC and PE than you seem to realize.
How are you putting out an album for only $15,000?
Also, you asked how Grooveshark is compensating musicians. I'll tell you. By making their music accessible to people like me who otherwise would not have heard it. I actually purchase physical CDs, lots of them. I also purchase music through downloads. I can't begin to tell you how much was purchased after hearing it on Yahoo! Launch (way back when), Grooveshark (which I like a lot), Seeqpod (which I liked even more and miss terribly), and Pandora (which gets really repetitive really fast, thank you licensing deals). Or how many concerts I saw featuring those artists. Or how many other people I told about those artists who also purchased their products.
So go ahead and hide your music away until I'm ready to pay for the privilege to listen. Chances are I will never hear about it in the first place.
In addition, few musicians recoup anything. In fact, many of us make music without any expectation that we will be paid and are happy enough just to have people listen to it. The public does not owe you a living or even reimbursement of expenses for your contribution to humanity. It is your responsibility to give us a reason to buy.
I'm looking forward to reading the article but wanted to make one point about Mike's analysis about transparency vs. interconnectedness as a cause of the recent economic fallout.
There was no lack of transparency. There were reams of documents and information about any aspect of what people consider to be the problem instruments. The fact that they are complicated does mean the process was less "transparent." In addition, there are volumes of regulations as to what and how this information must be disclosed.
The fact that only a handful of people were able to accurately foresee the consequence and fewer still were actually willing to put their money where their mouth was and invest accordingly, shows that the issue was not lack of transparency, but lack of ability to predict the future. A few guys saw the warning signs and acted. The fact that what happened was so counter to conventional wisdom at the time shows a problem that is more indicative of cognitive dissonance than transparency.
I'm not sure "run the company better" is necessarily the consideration. Part of the appeal of VC money versus other types of funding is that the VCs have experience and networks from which the company can draw to expand.
Rather than taking over, the VCs want some influence over the management of the company or at least a veto right with respect to fundamental decisions (sell, merge, liquidate, etc...). While protective provisions in the investment documents can provide some of this, buying a large stake on a percentage basis is helpful as well.
That said, "because that's the way its done" is not always strong argument, but when you have the money you usually have the bargaining power. In addition, some investors are simply not interested in a small percentage, passive investments and only engage in transactions where they have a significant stake in the company and influence through ownership or board membership.
I have worked with entrepreneurs who tried EMR and harnassing the power of the Web, etc. . .
There are a number of reasons why it would take so long and doesn't work very well. Determining standards for coding procedures for something that can be a very individual circumstance, differences in treatment standards geographically and across specialties, administrative differences between providers, and so on.
There is also the question of who would develop the platform and the technological standards. If you think DVD vs. Blue Ray vs. Whatever or even Mp3 vs. Wav vs. Wma vs. AAC is a tough battle, wait until you see this fight. If the government decides who wins, you can bet the system will be miserable.
However, like Mike mentioned, none of this addresses the basic issue of cost. The excessive spending has little to do with paper records and everything to do with the third party payor system. If someone else (your employer, insurance company, Medicare, Medicaid, VA) is paying the freight, you do not have any incentive to shop around nor do the providers have any incentive to publish prices. Through various rationing provisions, there is an attempt to hold prices down, but political pressures exist to provide ever-expanding benefits. The move to universal health care will only exacerbate this issue as there is no incentive to incur additional capital costs for an expensive IT system when the government is adjusting your fees downward. It is the separation of payor from customer that drives medical costs.
It is foolish to believe a "risk manager" or some other regulator is going to be able to monitor and manage "systemic risk," whatever that is.
The problem with the Lehman bankruptcy was not the collateral effects of the collapse but the fact that the government acted in a manner that was so arbitrary, unpredictable and unrelated to past behavior that no one had any idea what the ground rules would be. That is not "too big to fail." That is regulatory failure. That is what left everyone scrambling to figure out how to manage their issues and too nervous to do anything until there was some clarity about what the government would permit or prohibit and the situation stabilized.
No amount of "transparency" or regulation is going to address these issues. These companies, public and private, are subject to voluminous reporting requirements to various agencies and government bodies already. There is no lack of "transparency" (a word that has lost all meaning in the last several years anyway).
The only thing that will discipline them is the notion that their failures will actually cause them to fail rather than fall into a governmental safety net.
There is no person or group of persons in government who are smart or capable enough to perform this function, particularly if when you consider the thousands that are already charged with performing these functions. Throwing more money into the regulatory black hole and tying down companies with more bureaucratic red tape and reporting requirements will do absolutely nothing to address any issue in the current environment.
How about Sarbanes-Oxley? Billions of dollars and the beginning of the transfer of capital markets from New York to London in the name of "transparency," increased reporting, enhanced criminal sanctions for things that were already illegal, bowing to the latest trends in corporate governance and enhanced accounting standards and internal controls to address issues of risk. It only took about 5 years until this altar to regulation, transparency, and risk management crumbled into the meltdown.
Techdirt has not posted any stories submitted by ddbb.
VC vs. PE
Really? How does private equity succeed, increase its investment or have a successful exit if it just moves money around? Turning around underperforming businesses is just as beneficial as investing in something new. Also, how many VCs are not looking for quick hit opportunities? How many VCs are not looking to increase returns? You hear this complaint constantly about the VC world.
If you actually look at what they do, I think you would find that VCs and PEs are similar businesses with similar objectives that might just be focused on different points of a company's maturity, and even that would be a gross over-generalization. There is far more overlap between VC and PE than you seem to realize.
Re: RE: Labels being theives
How are you putting out an album for only $15,000?
Also, you asked how Grooveshark is compensating musicians. I'll tell you. By making their music accessible to people like me who otherwise would not have heard it. I actually purchase physical CDs, lots of them. I also purchase music through downloads. I can't begin to tell you how much was purchased after hearing it on Yahoo! Launch (way back when), Grooveshark (which I like a lot), Seeqpod (which I liked even more and miss terribly), and Pandora (which gets really repetitive really fast, thank you licensing deals). Or how many concerts I saw featuring those artists. Or how many other people I told about those artists who also purchased their products.
So go ahead and hide your music away until I'm ready to pay for the privilege to listen. Chances are I will never hear about it in the first place.
In addition, few musicians recoup anything. In fact, many of us make music without any expectation that we will be paid and are happy enough just to have people listen to it. The public does not owe you a living or even reimbursement of expenses for your contribution to humanity. It is your responsibility to give us a reason to buy.
(untitled comment)
There was no lack of transparency. There were reams of documents and information about any aspect of what people consider to be the problem instruments. The fact that they are complicated does mean the process was less "transparent." In addition, there are volumes of regulations as to what and how this information must be disclosed.
The fact that only a handful of people were able to accurately foresee the consequence and fewer still were actually willing to put their money where their mouth was and invest accordingly, shows that the issue was not lack of transparency, but lack of ability to predict the future. A few guys saw the warning signs and acted. The fact that what happened was so counter to conventional wisdom at the time shows a problem that is more indicative of cognitive dissonance than transparency.
Re: ownership
Rather than taking over, the VCs want some influence over the management of the company or at least a veto right with respect to fundamental decisions (sell, merge, liquidate, etc...). While protective provisions in the investment documents can provide some of this, buying a large stake on a percentage basis is helpful as well.
That said, "because that's the way its done" is not always strong argument, but when you have the money you usually have the bargaining power. In addition, some investors are simply not interested in a small percentage, passive investments and only engage in transactions where they have a significant stake in the company and influence through ownership or board membership.
(untitled comment)
There are a number of reasons why it would take so long and doesn't work very well. Determining standards for coding procedures for something that can be a very individual circumstance, differences in treatment standards geographically and across specialties, administrative differences between providers, and so on.
There is also the question of who would develop the platform and the technological standards. If you think DVD vs. Blue Ray vs. Whatever or even Mp3 vs. Wav vs. Wma vs. AAC is a tough battle, wait until you see this fight. If the government decides who wins, you can bet the system will be miserable.
However, like Mike mentioned, none of this addresses the basic issue of cost. The excessive spending has little to do with paper records and everything to do with the third party payor system. If someone else (your employer, insurance company, Medicare, Medicaid, VA) is paying the freight, you do not have any incentive to shop around nor do the providers have any incentive to publish prices. Through various rationing provisions, there is an attempt to hold prices down, but political pressures exist to provide ever-expanding benefits. The move to universal health care will only exacerbate this issue as there is no incentive to incur additional capital costs for an expensive IT system when the government is adjusting your fees downward. It is the separation of payor from customer that drives medical costs.
(untitled comment)
The problem with the Lehman bankruptcy was not the collateral effects of the collapse but the fact that the government acted in a manner that was so arbitrary, unpredictable and unrelated to past behavior that no one had any idea what the ground rules would be. That is not "too big to fail." That is regulatory failure. That is what left everyone scrambling to figure out how to manage their issues and too nervous to do anything until there was some clarity about what the government would permit or prohibit and the situation stabilized.
No amount of "transparency" or regulation is going to address these issues. These companies, public and private, are subject to voluminous reporting requirements to various agencies and government bodies already. There is no lack of "transparency" (a word that has lost all meaning in the last several years anyway).
The only thing that will discipline them is the notion that their failures will actually cause them to fail rather than fall into a governmental safety net.
There is no person or group of persons in government who are smart or capable enough to perform this function, particularly if when you consider the thousands that are already charged with performing these functions. Throwing more money into the regulatory black hole and tying down companies with more bureaucratic red tape and reporting requirements will do absolutely nothing to address any issue in the current environment.
How about Sarbanes-Oxley? Billions of dollars and the beginning of the transfer of capital markets from New York to London in the name of "transparency," increased reporting, enhanced criminal sanctions for things that were already illegal, bowing to the latest trends in corporate governance and enhanced accounting standards and internal controls to address issues of risk. It only took about 5 years until this altar to regulation, transparency, and risk management crumbled into the meltdown.
Techdirt has not posted any stories submitted by ddbb.
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