bailout 2.0

I complained about auto industry bailouts and was chastised.  Thomas Friedman says VCs should get bailed out and VCs say No No No.  Then I realized that No is not enough of an answer.  You have to propose an alternative, preferably one without the government deciding who gets the money.  That’s not how we do it in the S.V., yo. (I kept expecting Sarah Lacy to say that, but since she didn’t, I did.)

There are few who are ideologically strong enough to say that we shouldn’t have any bailout for anyone for any reason.  I’m not one of them.  This crisis is too enormous; adherence to ideology now can only be accomplished through disconnection from reality.  I do think that government bailout funds should go to stimulating the economy.  But as someone with a Silicon Valley belief in economic growth through innovation, I just don’t believe that the federal government will make the wisest choices about how to spend bailout money.

So who should make those choices?  Wait for it . . . wait for it . . .

You should, of course.

That was too easy, but let’s think hard:  Is this any worse an idea than anything that’s on the bailout agenda now?  Web 2.0 may be dead, but the underlying values of participation and collective intelligence are enduring concepts that will continue to pay off in the future.  Sure, the wisdom of crowds has many exceptions and qualifications, but I’ll gladly bet my tax dollars that the crowds are wiser than Washington.

Let’s say the government designates $100 billion for a crowdsourced bailout.  They just have to set up services to collect and analyze the input from all the social nets out there.  Twitter users could nominate worthy recipients with a #crowdbail hashtag.  Mobile camera phone users could use barcode scanners to submit deserving products, and location based services to tag retail stores worth bailing out.  There would be dozens of ways to submit suggested recipients on the web.  In order to limit fraud, the payouts could be in the form of tax credits or “consumer purchase credits” (CPCs).  I just made up CPCs – government credits that a seller can apply to reduce the consumer purchase price of goods.  For example, a business that received $100 in CPCs can take 100 items that are usually sold at $2, and sell these for $1 instead, receiving $1 in cash from the government for each item sold.

Would this work?  Is it too complicated, too stupid, too difficult?  Look, this is just half hour’s worth of musing, but I believe that any objection you can raise can be fixed with further work to at least to this standard:  it’s not worse than the government bailouts going into effect now, and it’s certainly not worse than some being asked for.  Something along these lines is in the spirit of what Silicon Valley can do, and I’d be thrilled to see more serious efforts to design something that fits with the ethos of our region.

For example, I’d bet that the folks at Virgance could come up with something that would make sense, and they’d probably be glad to implement it for less than 1% of that bailout amount.

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