Steve Jobs was a successful entrepreneur. He started with nothing but intelligence, a partner, and his parents’ garage. And a government start-up loan. (More)

Picking Winners and Losers, Part III – A League of Our Own (Non-Cynical Saturday)

This week Morning Feature considers the conservative talking point of “government picking winners and losers.” Thursday we saw that phrase used to argue against an innovative industrial policy. Yesterday we considered how that phrase is applied to social welfare policy. Today we conclude with how to discuss “government picking winners and losers” with Fred, our archetypal median voter.

A self-made winner?

The right were quick to leap on Steve Jobs’ grave and describe him as the epitome of their vision of America. The day after Jobs’ death, conservative think-tanker Diana Furchtgott-Roth wrote that Jobs and Apple never received federal loan guarantees:

Apple Inc. was located in the San Francisco Bay area, not far from Solyndra, the bankrupt solar panel company, in which in which taxpayers have a $528 million exposure.

Unlike Solyndra, Jobs didn’t get government loan guarantees for his first Apple computer, or for the Mac, iPod, iPhone or iPad.

With Solyndra’s bankruptcy, surely September would have been a good time to halt the Energy Department’s loan guarantee program and understand why the government can’t pick winners.

The next day, Joseph Perkins at CalWatchdog expanded on the theme:

There’s another aspect of the Jobs legacy that has been underreported, that has nothing to do with his technological prowess, or his keen entrepreneurial instincts:

In launching Apple, in building it into one of the world’s foremost companies, in helping to make California’s Silicon Valley the world’s high-tech capital, Jobs never relied on government subsidies.

A week later, Libertarian Party vice presidential candidate Wayne Allyn Root gushed that “Jobs lived for risk and adventure, and asked for nothing from government – the epitome of rugged individualism, self-reliance and American ingenuity.” To raise their start-up capital, the story famously goes, Jobs sold his Volkswagen van and his partner Steve Wozniak sold his scientific calculator. Truly a dazzling story of a man who needed no government help.

Not exactly….

If true, these paeans to Jobs’ individualism would form an interesting anecdote, albeit still only an anecdote. But they’re not even true. A few minutes on Google revealed that Apple Computer received a start-up loan through the Small Business Investment Company program. These SBICs are public-private partnerships. Private investors put up the money, but the Small Business Administration processes the applications and guarantees the loans.

If that sounds familiar, it should. It’s the same kind of funding structure that lent $548 million to Solyndra … the horrible “government boondoggle” against which Jobs’ “self-made success” is contrasted.

And Jobs’ government assistance didn’t end with that start-up loan. As Duane Roberts at Orange Juice reported, Jobs built Apple on sales to and tax breaks from government. Roberts quotes a 1990 Infoworld article:

Apple Computer’s involvement in elementary education in the early 1980s was a work of marketing genius. The then-fledgling company offered to donate one Apple II system to each elementary school in the country – that is, once the government guaranteed them certain tax advantages in exchange for their corporate largesse.

Many schools accepted Apple’s generosity. Immediately, they all faced the same question: “What does a school with hundreds, or in some cases thousands of students do with one computer?”

For many, the answer was to buy more Apple computers, build computer labs, and create computing programs. And, as schools began equipping labs with discounted Apple equipment, parents of elementary school children began buying up Apple II computers for use at home, paying full price.

None of this detracts from Steve Jobs’ brilliance. He was a genius and worked hard, and the ideas he helped market revolutionized computing and personal electronics. Each year, the Small Business Administration and other federal and state programs approve tens of thousands of loans. Some of those businesses succeed, as did Apple. Others fail, as did Solyndra. Some of the difference is individual brilliance and hard work, and some is good or bad luck.

Another winner

Either way, government help for fledgling businesses and needy individuals is not “picking winners and losers,” any more than the National Football League will pick Aaron Rodgers as a winner or loser tomorrow. The Packers and Vikings will decide that on the field. Some of the difference will be individual talent, preparation, and hard work. Some will be good or bad luck. And none of what happens in that game would get much attention, but for structures provided by the National Football League.

The league sets rules and hires officials, negotiates standard contract terms with the players’ union, sponsors the annual scouting combine and college draft, sets up the season schedule, negotiates broadcast licensing agreements, and distributes league money to the teams. Without all of that, the Packers and Vikings – if they played at all – would be just a bunch of guys playing ball in a local park.

The NFL doesn’t pick which teams win or lose, but the league does try to limit teams’ losses. Rules and mandatory safety equipment reduce players’ injuries. The teams with the worst records get the first picks in the next year’s draft. Season schedules are weighted so that last year’s winners play each other more often.

Most important, broadcast money – most of the league’s revenue – is split evenly among the teams. The Packers are popular this year, and their games draw TV viewers from across the nation. But the Packers don’t get extra TV money. In effect, they subsidize less popular teams. But just a few years ago, when they were losing, fewer people tuned in to watch the Packers. In those years, the Packers were subsidized by other, more popular teams. Without that revenue-sharing, a tiny city like Green Bay could not sustain a team through the lean years.

None of this detracts from Aaron Rodgers’ brilliance. He worked hard to develop exceptional talent, and last year he helped propel an injury-riddled team on a storybook journey. But even Rodgers would tell you he didn’t do that on his own. It was a team effort. What’s more, it was a league effort.

Our league

The United States is our league. “We the People” formed it, and the words of the Preamble – “more perfect union,” “common defense,” “general welfare,” “ourselves and our posterity” – reflect a sense of collective purpose. Like the NFL, our league creates the structures within which we pursue our dreams. Our game is no more a free-for-all than an NFL game. Our league sets rules to encourage success and reduce the risk of injuries.

And yes, our league uses revenue-sharing, both to give a boost to those who could not get started on their own and to limit the losses of whose who fail.

Our league and its structures don’t crush our liberty or squander our achievements. Our league and its structures protect our liberty and enable our achievements. Without the NFL and its structures, Aaron Rodgers would be just another guy playing with a ball in a local park. Without our government and its structures, Steve Jobs would have been just another guy tinkering in a garage.

Helping start-up businesses and others in need is not “picking winners and losers.” It is sponsoring the game itself.


Happy Saturday!