Opinion

Felix Salmon

Silicon Valley hubris watch, Mary Meeker edition

By Felix Salmon
February 25, 2011

Maybe it’s the Palo Alto drinking water? It’s got to be something like that, in any case — some kind of causal explanation of why so many people start fancying themselves experts on public policy the minute they become successful in Silicon Valley.

Often, this kind of thing manifests itself in hubristic runs for public office, as we remember all too well from the political ambitions of Carly Fiorina and Meg Whitman. Other times, it’s the likes of Vinod Khosla or Pierre Omidyar declaring that they’re going to save the planet by means of for-profit microfinance. This time, it’s Mary Meeker, freshly arrived in the Valley, taking it upon herself to publish a 466-page PowerPoint presentation, not to mention a BusinessWeek cover story, based on the conceit that you can analyze the US fiscal situation as though the country were a company.

The presentation will surprise no one who has been following the fiscal debate at all, except for in the stunning vagueness of its “potential policy solutions.” Actually, it’s worse than that: after more than a year of Meeker’s self-described “deep dive” into America’s finances, she declares with no boldness at all that “we do not take a view on preferred policy options.”

As for the BusinessWeek article, here are the companies mentioned, in order: Apple, Microsoft, Apple, Apple, Apple, Microsoft, Dell, Amazon, Google, eBay, Morgan Stanley, Kleiner Perkins, Morgan Stanley, Morgan Stanley, Kleiner Perkins, Harvard Business Review, Microsoft, Nokia, Nokia, Google, Apple, Microsoft, Nokia, Nokia, eBay, Facebook, Google, Yahoo, Apple, GM, GM, GM.

Well, at least she mentioned one genuinely industrial company, there, at the end. But it’s incredibly unclear what she’s advocating: first she says that GM’s restructuring “can serve as an example for the future,” but then she quickly backtracks, saying that “no one would recommend that USA Inc. follow a similar course of slashing, burning, and stiffing bondholders.”

The truth of the matter is that you can’t run the country like it’s a technology company, and you can’t analyze it that way either. And it’s impossible to know what to make of rhetoric like this:

Once you understand USA Inc.’s main problems, the solutions become almost self-evident…

There’s a lot that can be done to make USA Inc. operate like a well-run business. A corporate turnaround specialist would quickly hire an independent firm to conduct an audit of each business line…

I hope it’s clear by now that USA Inc. has a spending problem, not a revenue problem…

In 25 years of studying tech companies and working in financial services, I’ve discovered that people will sacrifice if they have a clear idea of what their sacrifices can accomplish. I think the same goes for USA Inc…

USA Inc. needs to prime itself for renewal—and prepare for brutal decisions that change how we do business.

Actually, the solutions aren’t self-evident. Try asking a “corporate turnaround specialist” to turn around a corporation run as a democracy, where every employee gets an equal vote. Auditing business lines isn’t going to help you much there. Besides, Meeker’s “spending problem” is in the future, and overwhelmingly in Medicare and Medicaid — her “negative net worth” number of $44 trillion for the USA includes $58.1 trillion in future Medicare and Medicaid liabilities. And her solutions on that front are all but nonexistent: “isolate and address the drivers of medical cost inflation” or “improve efficiency / productivity of healthcare system” are not an answers so much as just ways of restating the question.

There’s really no point in calling for “brutal decisions” while at the same point refusing to take any view on what those decisions should be. And it might come as a shock to Meeker, but you can’t really extrapolate from the rich and well-educated employees of technology and financial-services firms to Americans as a whole. Ask Wisconsin’s Scott Walker about Americans coming together to make sacrifices for the greater good of the whole.

The main conclusion I draw from this report, then, is that once again Silicon Valley has managed to produce someone who thinks that their success in the tech industry qualifies them to talk with great certainty about issues they don’t really understand. Washington is full of fiscal-policy wonks, and Meeker has spent a lot of effort recreating standard fiscal analyses. But at least the Washington types understand that fiscal policy is a political issue, rather than something which can be solved with consultants and PowerPoint. And that’s something which seems to have eluded Meeker entirely.

Comments
15 comments so far | RSS Comments RSS

well put, Felix.

Posted by KidDynamite | Report as abusive
 

Uh, isn’t it worse than that, Felix? Meeker is a sell-side Wall Street research analyst, who thoughtfully points out mere lines into her introduction that she is known as “the Queen of the Internet.”

Wall Street? Sell-side research? Surely you had a bigger target than “Silicon Valley,” no?

Posted by EpicureanDeal | Report as abusive
 

Of course the solutions are self-evident: We outsource Congress to the Chinese.

Posted by dWj | Report as abusive
 

Epicurean, Meeker left that job to join Kleiner Perkins, one of the biggest VCs in the valley. Why she has been spending her time there working on this kind of report would be a question I think KP’s LPs might want to ask.

Felix, don’t blame Silicon Valley for her. She’s not part of the valley, she’s just a parasite.

Posted by KenG_CA | Report as abusive
 

Right on Felix. I don’t get what her recommendations are either. I hope it isn’t to buy AOL, Excite@Home, and drugstore.com!

In any case, a political entity can’t be run like a company, one needs to accommodate many other perspectives, not just one’s own (see Jerry Brown’s hilarious campaign ad on the relevance of CEO skills : http://www.youtube.com/watch?v=sw_0a54S8 po ).

Posted by datascientist | Report as abusive
 

Wow! Restrain the growth in Medicare costs? Why didn’t anybody think of that!?!

Now, who is going to bell the cat?

Posted by TFF | Report as abusive
 

So Apple has its own fiat currency???

She makes that idiotic analogy to Ireland and Greece, two countries that don’t have debt in their own sovereign currency.

The idea that the US Fed Govt can’t pay interest on debts in its own sovereign currency is laughable.

While this was a particularly stupid piece by Meeker, it’s not much worse than most punditry that imagines the central government us akin to a household and needs to balance its budget. You balance a budget and you choke off private savings. The Fed govt is not there to be profitable. If anything, our deficit is too small given deflation and the high UE.

Paul Krugman was open minded enough to debate Galbraith on this topic. For whatever reason, Felix won’t touch the “deficits don’t matter” argument.

Posted by petertemplar | Report as abusive
 

USA Inc has a revenue problem, not a spending problem. the main contributor to the deficit is a huge drop in tax receipts and something called an ‘automatic stabilizer’ in the budget. Which would be a really bad idea to get rid of right now.

Posted by johnhhaskell | Report as abusive
 

“once again Silicon Valley has managed to produce someone who thinks that their success in the tech industry qualifies them to talk with great certainty about issues they don’t really understand.” good concept but not applicable here -no way is Mary Meeker a product of silicon valley, she is a hangers-on not a real techie.

Posted by AlfonzoBSwanzo | Report as abusive
 

Huh! I spent some time as a sell-side analyst, and was constantly having my focus brought to “creating actionable recommendations” and “adding value.” How exactly does a 466-page Powerpoint do anything like this?

Posted by SelenesMom | Report as abusive
 

johnhhaskell, the immediate deficit could be seen as a “revenue problem”. The long-term financial condition is dominated by projected growth in Medicare/Medicaid costs.

So depending on your timeframe it is either or both.

Posted by TFF | Report as abusive
 

So good-old USA Inc, what could be more democratic. I wonder, who owns it? Not a revenue problem – so there will never by any tax increases, ever. Nothing like “brutal decisions” to instill confidence. What could that possibly mean? Endless war? Perhaps with the Chinese or their surrogates? But how about pogroms here at home?

Is this noxious clap-trap taken seriously? It’s possible for something to become so euphemistic that it unintentionally reveals the reality behind the technocratic jargon.

Posted by frit | Report as abusive
 

The report is also frequently flawed in the conclusions drawn from the data. Or perhaps I should say the data chosen to make its points. The very first graph the Business Week article shows that entitlements are a very small part of current U.S. expenses – while the report draws very different conclusions.

Then there is Figure 6 and the 82 percent correlation suggesting that increases in government entitlements are driving down personal savings, while the accompanying graph shows no relationship before the Reagan era.

I also looked at the original slides to see if anything had been lost in translation and I discovered my all time favorite sloppy analysis slide on page 67 of the presentation. The slide attempts to defend current levels of defense spending by showing that while we are #1 in total expenditures, we have fallen way behind Saudi Arabia and Oman on a per capita basis!

Posted by backcaster | Report as abusive
 

Felix,
Your underlying logic is not compelling and your message counterproductive. You argue that (1) Meeker displays hubris in presenting the complex issues and (2) that the underlying problems are driven by political rather than analytical issues. You conclude that there is no point in discussing the problem without providing a policy proscription.

However, entirely you fail to consider the possibility that solutions to political problems can be advanced with analytically clear foundations for policy decisions. Meeker is at least helping to elevate the level of dialog from the bygone era of realpolitik that helped to create these issues in the first place.

As a result, your writing sounds like whiny babble. You can do better.

Posted by kaishakunin | Report as abusive
 

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I am a long time reader of your blog, don’t know why I actually have never commented and logged in here but still, I just wanted to thank you for such lovely and interesting posts and articles that you share with all the readers and visitors of this portal.
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Posted by MaryannGG | Report as abusive
 

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