Nothing better than a good old fashion smackdown

Part of the fun of being a blogger who reads a lot of different blogs each and every day is that you get to watch events unfold that develop into a really good smackdown. Such was the case that started on Saturday with a post in the New York Times where Thomas Friedman offered up a Op-Ed called Start Up the Risk Takers. Friedman’s basic principal was that instead of handing over billions of dollars to perpetually failing companies the Government should cut a deal with the top 20 Venture Capital firms in America.

As he put it

G.M. has become a giant wealth- destruction machine — possibly the biggest in history — and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labor agreements and new visions. When it comes to helping companies, precious public money should focus on start-ups, not bailouts.

You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.

This of course brought out the indomitable VC man himself – Fred Wilson who said pretty much .. thanks but no thanks to the idea. In fact the problem right now with venture capital as Fred sees it is that venture capital has too much capital (huh?)

I understand the point Tom is making – that we ought to be investing in the future instead of the past. And for that, I applaud him.

But the venture capital business, thankfully, does not need any more capital. It’s got too much money in it, not too little. Just ask the limited partners who have been overfunding the venture capital business for the past 15-20 years what they think. You don’t even need to ask them. They are taking money out of the sector because the returns have been weak.

And the top 20 firms in the venture capital business are the least in need of a bailout of any group I’ve ever thought about. These firms, the Sequoias and Benchmarks and Accels and Kleiner Perkins etc etc can raise a fund anytime they want. Accel raised a ton of money last fall in the midst of the worst global financial meltdown in my lifetime.

Now this probably would have been a great end point point to the discussion but lo’ and behold what happens next is Michael Arrington’s stand-in for February – Sarah Lacy decides to chime in with her two cents under the Techcrunch banner. Once she got over the techie geographical I know better than you attitude Sarah goes on to suggest that the old and stodgy car industries should be left to go bankrupt because it is inevitable that they will fail in the long run. So better now to get over the pain and agony instead of dragging it on longer than need be.

She then goes on to wax poetically about why she loves living in the valley amongst all the real movers and shakers

My above views are precisely why I live in Silicon Valley: A place that not only lacks an artificial reverence for an old stodgy company, it actually celebrates when a younger, nimble startup takes it down. How, could Friedman get why the Valley continually creates strong multi-billion dollar companies and then turn around and propose a government subsidy for us? Investments in agencies like DARPA are one thing, but government subsidies are crutches for non-performing industries. And hit by the recession or no, Silicon Valley doesn’t want or need that crutch.

The remainder of her 900+ words continued this love affair with all that the Valley and venture capitalist bring to the table and why Friedman was basically clueless in his assessment of what should be done with the bailout money. Now of course combining both the Techcrunch name with that of Sarah Lacy and you can be assured that the comments and rebuttals would be flowing hot and heavy; which they were with some 124 comments so far on the actual post at Techcrunch.

However what had been intended as a simple comment by Michelle Greer ended up being one of the best smackdown posts I have read in a while. As I read through each paragraph of Michelle’s post at her blog – Michelle’s Blog – my smile got bigger and bigger. You see there is an art form to a really good smackdown and it doesn’t always involve snarky language or over used sarcasm. Nope .. sometimes the best smackdown is the one that take each and every part of what you are arguing against and shows how it is wrong while backed up with facts you know from personal experience.

As with any good smackdown you first line up your target which is what Michelle did within the first section of her post

In sum, Sarah Lacy thinks that if the government offers stimulus money to VCs in a sort of competition for someone to find the cleanest tech, that this is somehow “bailing out winners”. OK, let me get this straight: the U.S., which is falling desperately behind in creating clean energy cars behind countries like Japan, Germany, and even India, shouldn’t give money to promote innovation even though energy independence is key to our national defense and economy? Is that correct?

Target set .. shot number one:

Here are some facts that Friedman probably knew that Sarah Lacy apparently does not:
1.) Electric vehicles are currently not very profitable. I knew a manager at Toyota. The Prius is a loss leader for them and is quite expensive to produce. Without government subsidies, it would be unlikely to be on the roads at all. The only reason why this manager liked carrying it is because customers would come looking for a Prius, find out how expensive it was, and then buy a a Corolla. If you think any company would take on the massive overhead with the hope that these vehicles will be cheap to produce, you aren’t being very realistic. The American people stand to gain the most by having clean air and energy independence. These cars can eventually be profitable, but it’s going to take some investment initially and I don’t see enough of that coming from the private sector.

Shot number two – go with facts you absolutely know

2.) The U.S. is currently exporting biodiesel to Germany, a government that does subsidize it because it promotes cleaner air and energy independence. How do I know this? I visited a biodiesel plant that actually did the exporting. Other countries see the value of bipassing the oil industry, which is capital rich but doesn’t actually employ a lot of people. Using alternate fuels means we can ignore corrupt governments like Saudi Arabia, Venezuela and Iraq. They will cease to be world players

For shot number three show you know something about the other person’s home turf

Before you go on and on about the Tesla, ask them how much of their cost is invested in their technology, and then figure out if you think the average American could actually afford that. Or how that person would actually go on a road trip when their car only goes 225 miles without a charge which takes 3.5 hours at least. The Tesla is still a bit of a toy. Sorry.

Yup .. all in all it was a smackdown as good as you would see on the WWF or at a PETA rally but a lot more fun.