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Ponderous Economics

Forked_tongue_ii_2Speaking with a forked tongue really bothers me. We’d all be a little bit better off,especially in the corporate world, if we said what we meant and meant what wesaid and provided fair context to our opinions.

But, duplicity lives on—especially in magazines with contributors and freelancers and diverging opinions.   

Forbes Magazine ran an op-ed piece last month that is, tosay the least, frightening. In the onepage column, Veronique de Rugy, economist, theorizes that funding smallbusiness is bad—at least small business for the sake of small business. She instead posits that growth companieslike Google should really be the funding targets.

The danger in this article is her denouncement of the SmallBusiness Administration—a program that guarantees up to 85% of the bankslending value in the event of a default.

Because everybody loves small businesses, everyone wants to dosomething for them, whether it’s targeted tax credits, specialregulatory treatment or preferential access to government contracts.Thus it is that we have an agency specifically designed to addresstheir needs, the Small Business Administration. The President’s latestbudget proposes to shower a budget of $605 million on the sba, whichincludes money for counseling and training targeted at a myriad ofsubgroups, such as women, Native Americans, veterans and Spanishspeakers. In addition the sba has arranged for $28 billion in bankloans to small companies, guaranteeing repayment of up to 85% if theborrower defaults. These are not loans that the banks would have madeon their own. Congress appropriates no money for this program. Instead,small businesses are charged fees, but if the economy tanks and thedefault rate shoots up, taxpayers are on the hook for the balance.

The real danger here is, besides the academia/think tanknature of this that doesn’t take the real world into account, and the fact thatall businesses have to start somewhere and the VC-backed Google’s of the worldserve to act as example of the exception, not the norm, but, again, the realdanger here is the fact that 95% of all wine produced in the world is producedby a small business owner. Ms. de Rugy attempts a grab at sympathy from the reader indicating that ‘taxpayers are on the hook for the balance.’  Unfortunately, for that to resonate with taxpayers, they have to have a correlation in between the taxes they pay and where it goes in spending.  That, however, is a function of our society that stopped existing with FDR, really.  And certainly every politician likes a good pork project

If wineries all over: California, New York state, Ohio,Virginia, and elsewhere were denied lines of secured credit or protected loans,how many people would chuck their corporate job for a chance at beingpassionate about something? This nottoo mention the fact that even starting a winery is one of the most capitalintensive risk endeavors that an entrepreneur could undertake.

This inherent disrespect for the risk involved in starting abusiness is enough to create some incredulity.

But, the real smack your head moment comes when Forbesstarts pimping it’s wine club that features—from, yes, you guessed small,boutique vintners that, without a little help either A) would have never gottenstarted or B) would have never grown to build a reputation.

Or, this article that extols the virtues of the smallproducer from said magazine.

On the other hand, Tom Eddy of Tom Eddy Winery looks “exclusively tohillside vineyards to produce a rich, intense, structured CabernetSauvignon showing both the complexity derived from differing vineyardsand the consistency of hillside locations.” Blending vineyards withsimilar characteristics (such as hillside locations) will produce winesexhibiting specific characteristics while taking advantage of themultiple contributions each property offers. 

One thing can be certain, in a The World is Flat kind ofway, boutique winery fans can count on me being critical and providing criticalanalysis of French educated economists living in America downplaying the absolute significance of entrepreneurs with a passion having some help side from a loan program. 

Oh, and by the way, I don’t really know if Tom at Tom Eddy Winery has an SBA loan, but I did some curosry research on the winery and they do well under $1M a year in sales with 3 employees.  And, that’s the S in SMB business if I’ve ever seen it.

Like Casey Kasem in the infamous "snuggles" outtake—it’s just ponderous



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