Tuesday, January 18, 2011

Americans Need Not Apply.

That was a good op-ed piece by President Obama in today's Wall Street Journal, didn't you think? Sort of a fresh look at things, backed up by an executive order. To wit:

This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.

Not bad.

But just for the hell of it, let's say that some kid starts a company and in a very short period time builds an elegant (and simple) user interface which delivers a great customer experience. And in no time, 500 million people from all around the world sign up and enjoy the amazing network effect that is Facebook.

Facebook becomes a national treasure; a triumph of American ingenuity and entrepreneurial zest, arguably one of the greatest companies created in the last 50 years.

Knowing that, would you say: "let's make sure that no Americans are allowed to own a piece of Facebook, because of Rule 502c-a-3-b-12?" Or would you say: "Gee, there are a lot of pension funds out there that are under a ton of pressure to deliver high rates of return to their retirees and those soon to be retired. Maybe we should bend Rule 502c-a-3-b-12 a bit so that each one (if they so chose) could own a small piece of Facebook. That way, a lot of Americans could benefit from this national treasure.

500 million customers, monetization averaged at $200 per customer, would equal a valuation of $100 billion. Goldman Sachs is offering shares against a valuation of $50 billion. So, a possible 2x! There would be takers.

Back in the real world, what has happened is this: Goldman Sachs cannot sell shares to Americans. Too much "regulatory risk," it is said, learnedly.
Goldman is free to sell shares to Russians and Chinese and Libyans and Omanis and Somalian pirates, if they can be found off their skiffs. But sell it to Warren Buffett or Mitt Romney and its Sullivan & Cromwell on the line for you, Lloyd, $1000 an hour per lawyer, times 24 lawyers.

This is insanity.

This is Washington, DC.