Former baseball pitching ace Curt Schilling has sung the praises of limited government. He’s also ignored a key tenet of limited-government conservatism by turning to government to boost his business ventures.
In the latest issue of Fortune, Dan Primack offers some lessons learned from the failure of Rhode Island’s $75 million loan guarantee for Schilling’s video-game company.
Stop letting politicians play venture capitalist. Most professional venture capitalists lose money, so why would amateurs in political office do any better? Create the conditions for businesses and emerging industries to succeed, and then let the private market have at it.
If they insist on playing VC, they should share the risk. The most egregious part of Rhode Island’s loan to 38 Studios was that it required no validation from outside investors. Venture capitalists, who are always said to have too much money chasing too few deals, had all passed. Did that not set off any alarms in Providence? Say what you will about Solyndra, but at least the company was required to raise private matching funds before getting federal dollars. Obviously it isn’t foolproof (see No. 1), but there is judgmental and financial value in shared risk with third parties.
Dogma mixed with dollars can be toxic. Schilling has been an outspoken conservative, loudly endorsing “limited government.” But he basically begged Massachusetts for subsidies and, when that failed, took a massive loan guarantee from Rhode Island that was financed via state-issued bonds. When he couldn’t pay the interest, he asked for film tax credits or a payment deferral. Not only was Schilling betraying his own public values, but he was also putting his company in a vulnerable position. Schadenfreude matters when you rely on public sentiment to survive. When Schilling absurdly insisted that he wasn’t looking for taxpayer handouts, he shouldn’t have been surprised when those hands turned into fists.
