Separating the wheat from the chaff as we invest in our future
Thomas Frey: As we begin the process of thinking through the places where we can insert the electrodes and shock new life into the global economy, I would propose a new way of reviewing proposals, allowing the best of the best to rise to the top. I propose we only consider projects that can provide at least a 10X rate of return on our investment dollars.
As most taxpayers who are watching this process unfold, the idea of borrowing today against future revenue streams becomes a contentious issue with severe implications for almost everyone. If we invest the money poorly, there will be no revenue streams in the future to pay the money back, a scenario that will not end well.
However, if the money is invested into some truly remarkable developments with the ability to not only jumpstart the economy but also pay handsome dividends in the future, we will have created a win-win situation that everyone will benefit from.
So what are these 10X projects and how do we decide if they have the explosive potential needed for the situation we find ourselves in today?
Let me begin with framing our thinking a bit. Small companies take on small projects. Large companies take on large projects. But for the colossal huge projects requiring massive amounts of capital expenditures, this is an area reserved for the very deep pockets of national government.
Similarly, small projects only inspire small amounts of confidence and colossal huge projects will inspire colossal huge amounts of confidence. As an example, building a new train depot in a small town in the Midwest will do little to rally national enthusiasm.
If we apply the 10X ROI test to the ideas being proposed, it’s easy to see why some will be a bad investment.
- Bailing Out States: Individual states have their own economies and using national money to compensate for poor decisions made on an individual state level is a bad investment.
- Repairing Roads and Bridges: Fixing our existing infrastructure should be something we pay for on an ongoing basis, not something we use special funds for. Repairing roads and bridges will give us a better grade of road, but nothing new, and will not yield a 10X rate of return.
- Building Schools & Higher Teacher Salaries: Investing money in school buildings and paying teachers more does not improve the system. It does make everyone more comfortable, but does little to change the caliber of students coming out of our schools.
- More Government Jobs: Government jobs compete directly with private industry when it comes to attracting top talent. Unless the jobs are directly related to the development of a new system, or the deployment of a new strategy, the accruing expenses will not be recoverable.
- Bailing Out Corporate America: Corporations need to live or die based on the success of their products or services. If they are going out of business because of some underlying governmental system, then we should fix the system rather than patch over it with bailout money. While in some rare instances, money given to companies can yield a 10X ROI, it sets a bad precedent. Companies today are far too global to be dependent on a single government to survive. When one company fails, others will rise from the ashes.
The Bar Has Been Raised
In the past, money spent on a national power grid, interstate highways, railroads, GPS satellites, and the space race worked well as a way to stimulate innovation and build a solid platform on which new forms of business could be conducted. But times have changed, and we have raised the bar substantially.
The primary benefit from these systems happened early on in their lifecycle, so doing more of the same, such as building more highways and railroads, will yield only marginal benefits unless they offer some unusual breakthrough.
Additionally, low paying make-work jobs are not very exciting. We are looking for something that will challenge us, something risky, where the accomplishments are both inspirational and motivating.