Entrepreneurial Grift

Politicians, Not Drivers Of Development

There are a lot of different agencies and people who know how to use connections to set up a “grift” from the government. One time I was up at my place in Grand Marais, MN, and overheard a conversation at our local brewery. One guy asked the other what he was up to and he said he was taking a break in between “research projects”. He had set up a “business” where he would do research and get paid with government grants. It wasn’t science-based life-saving research into life-saving pharma drugs. It was soft political science-based research.

If you follow Senator Rand Paul, he tweets out a bunch of these kinds of research grants during his “Festivus” tweetstorm.

Grifting the government doesn’t reside in one of the two political parties. It resides in both and it is odious. I see it in entrepreneurship frequently.

It started like this. Social justice warriors saw entrepreneurs build actual companies that solved actual problems and created a lot of value for people, raising standards of living. At the same time, politicians drooled over the ecosystem that developed over decades in Silicon Valley. They were under the impression if you just created fancy new names for things and slapped “tech” on them, along with a lot of government money, the same could happen in their backyard and they would reap the benefits.

When you combine social with politicians, bad things happen.

To be clear, there are reasons that tech ecosystems take hold and grow. None of them revolve around government intervention. The thing that made Silicon Valley was several people decided to pool pre-seed capital and invest it into companies. The people they invested in executed, and then it was lather rinse repeat.

The ethos persists today. If I were young and wanted to be in startups, that’s where I would go.

Without a large mass of very early risk-loving capital, combined with the knowledge base and mentorship to guide it, you cannot have a thriving startup ecosystem. Notice where the cutting-edge tech is coming out of today in 2024, despite the miserable living conditions in San Francisco. It has all the necessary ingredients to build.

If I were to name the broad unspecialized great entrepreneurial ecosystem in the US, I come up with three. San Francisco/Silicon Valley. New York City. Boston. This has persisted for decades and there are reasons for it, many of them cultural. You can’t have a thriving entrepreneurial ecosystem in a place that penalizes failure and refuses to take risk, while at the same time making everyone conform.

I am very familiar with Chicago’s startup ecosystem, or lack thereof. We had it going but it is my opinion that it was hijacked a while ago. Other cities are similar. Someone who has political connections can wrangle money out of the government. They get appointed to be the “President” or “Chairman” of the effort, and they make a nice buck. They get quoted in the local press. Maybe they write for Forbes which is not hard to do. They do demo days, and of course, the companies meet a perceived social good but actually meet a political good. Once the gravy train leaves the station, it’s in the budget and the money gets constantly renewed even though there is usually nothing tangible to show for it.

Meanwhile, wannabe-preneurs glom on to the effort and get some sort of title. They get recognized. They say the right things, but very few of them have actually built a company successfully or have been a great investor but they get tagged with terms like “legendary”.

Boards are formed and the “right people" are selected for them. These people look right with “fill in the blank” diversity but really don’t have the skills necessary to build a thriving entrepreneurial ecosystem.

Weekly emails are sent out touting the firms that fit the social justice profile. Firms that don’t fit the profile that merely execute and make money for investors are only claimed when they exit. The reason for that is the NGO or non-profit is looking for a donation. Awards are given! It’s like the Oscars.

On the shell, the surface, everything looks great and there is a lot of happy talk.

The ecosystem they build isn’t “thriving”. It’s hollow and it doesn’t sustain itself. When the ebbs and flows of entrepreneurship collide with the broader economy, the ecosystem takes a much larger economic shock than it would have if it had been built the same way as San Francisco/Silicon Valley.

The grifters figure out new ways to mine money out of the system. They go to the state level, and better yet, to endowments and even universities so it smacks of legitimacy. They find a billionaire who throws their money into the system because the amount is meaningless to them but it helps them achieve a halo effect for other desires. When the money runs out, they figure out a new way and get appointed to a new thing.

They might even move to a new state and the political network rewards them. They make a lot of promises but nothing comes true.

Even within the thriving ecosystems, there is a grift. There are pretenders. The reason is there is money and there are titles available that make them look good and feed their ego. Their LinkedIn profile looks great and they get invited to speak at the meaningless conferences where people on the stage speak and everyone in the audience is on their phone.

Meanwhile the people that actually take the risk, the people that actually have built and exited startup companies just keep doing what they always do in the background.