When Energy Secretary Steven Chu, a Nobel laureate and undeniably brilliant man, pushed to make a $535 million loan to Solyndra, the secretary didn't have to consider market forces. We all know that worked out badly.
Think of that Solyndra loan when you read this tale of the two Steves:
Steven Jobs, the late co-founder of Apple Computer, and Steven Chu, the current secretary of Energy, are both examples of super-achievers. Jobs created an innovative company that is currently among the most valuable in the world as measured by stock market capitalization. Chu earned a Nobel Prize in physics and sees himself as a leader in the battle against global warming.
At this point, it seems likely that Jobs will be remembered as having contributed significantly to human progress. Chu's historical legacy is more problematic. Assuming that Chu's efforts at promoting solar power and electric automobiles are no more successful than the Carter-era effort to build a breeder reactor, they will end in dismal failure. Is there a lesson to be learned from this about where society should want its super-achievers to perform?
Arnold Kling, author of the piece, says that Apple Steve was neither smarter nor more noble that Solyndra Steve, but that they operated in different institutional environments: the private sector versus the government sector.
Kling proposes that society benefits more when its super-achievers work in the private sector. This runs counter to the prevailing wisdom in some circles, which wants the best and brightest to renounce profit for government service. But government may actually be the worst place for them.
When working in Silicon Valley, the confidence native to the super-achievers is tested by market forces. When they work in government, they make decisions without market feedback, sometimes (as in Solyndra Steve’s case) with disastrous results. In contrast with government, the private sector provides “a better form of sandpaper to rub against the super-achiever's rough vision.”
Here is the most interesting part of the article:
What if, instead of doling out loan guarantees as secretary of Energy, Steven Chu were to set up a private venture capital fund to invest in the sort of projects he thinks are worthwhile? As a private venture capitalist, Chu might not be able to exert as much leverage on the industry as he can in his role as dispenser of taxpayer-funded guarantees.
Power in the private sector is more dispersed. Most of the people who exercise it do not have credentials as impressive as Chu's Nobel Prize in physics. Still, the United States would be better off if super-achievers like Chu felt driven to pursue their goals in the private sector rather than through the institution of government.
But, of course, the reason Chu made the loan was that the private sector wasn’t willing to divvy up enough money. Solyndra wasn’t, as we now know all too well, a good risk. Investors with something at stake stayed away. Because Chu works in the public sector, we all get to pay for his mistake.