"Bad editors" #1: op-ed comparing investment in innovation vs. private equity acquisition of extant businesses

The Post had an op-ed, "Forget Bain — Obama’s public-equity record is the real scandal," by Marc Thiessen, a fellow at the American Enterprise Institute, stating that Pres. Obama's re-election campaign has a problem vis-a-vis railing on Mitt Romney's track record in private equity, because of problems that have transpired with many of the federal investments.

The reason that I say this is a problem of bad editing, although I imagine that the op-ed page editors don't provide much "guidance" to the writers, who are already pre-approved, has to do with the fact that first stage investment in new technologies is completely different from buying and fixing existing companies, which is mostly what Bain Capital was doing under Mitt Romney, with some exceptions (like investing in new companies like the Staples office supply retail chain).

So Thiessen's piece isn't comparing the same kind of track record at all. Were I one of the editors of the op-ed page, I would have had serious reservations with the piece, I would have expressed them to the author, and I would have considered not running the piece without significant revisions.

(E.g., recently I had a friendly argument with a friend-colleague who writes a column for a community newspaper in DC about an article she was preparing, because by focusing only on the "now", significant issues that needed to be addressed to present a full story, were ignored by the story, so to my way of thinking it was substantively incomplete.)

It's the job of an editor to point out flaws in argumentation and to ensure that a published piece is complete.

By definition investments in new technologies are much more risky and involve much different processes--developing the technology, setting up production lines, buying new equipment, etc.--as opposed to what companies like Bain Capital mostly do, which is to buy companies through a process called leveraged buyouts.

Through LBOs, companies are acquired mostly with debt, and to pay of the debt and earn high returns relative to the invested equity, they rightsize companies, close plants, sell off parts of the company, layoff people, etc.

Bain Capital is a private equity firm, not a "venture capital" firm, although even venture capital tends to be somewhat conservative and doesn't invest in the development of new technologies with long development periods.

Federal investments in companies like ECOtality or Solyndra are venture capital investments, not leveraged buyouts. The respective firms are at much different stages in their development as businesses, and the "success rates" between these forms of investment are not comparable.

Besides, federal investments in new energy technologies aren't exactly playing on a level field, partly because of production cost differentials and other incentives present in other countries, such as China, and because competitive forms of energy, particularly gasoline and natural gas, are much cheaper, making scaling up and being competitive with new energy technologies especially relating to solar power and electric vehicles much more difficult.

Another way to think about this is in terms of the DARPA research funding arm of the Department of Defense. These days, with mobile apps and online shopping, it's easy to forget that the "Internet" was originally created as a redundant network to support communications between universities, funded to generate ideas and approaches to maintaining communications in the face of nuclear war.

It took about 25 years for the "Internet" to begin to become a platform for communications for everybody, after multi-threading and graphical capabilities were developed for the network (by Tim Berners-Lee) which were later extended into the "web browser" which Marc Andreassen gets credit for "inventing" but he was involved because it was a project he was assigned to do at the National Center for Supercomputing Applications at the University of Illinois. The New York Times first published an article about the Mosaic web browser in August 1994.

Resources on technology development include:

- Diffusion of Innovations by Everett Rogers
- AnnaLee Saxenian's writings on differences in how technology firms and clusters are organized and how this impacts innovation
- Geoffrey Moore's work on the "crossing the chasm" between selective use of rew technologies versus widespread adoption

In short, Mitt Romney wasn't focused on developing new technologies and building new firms (and employment opportunities) so much as he was focused on wresting any vestige of profit out of businesses that had been around for decades.

That's fine, that's important (but bloody and comes at great human cost with extranormal financial returns for those placed to benefit) but it's not venture capital.