Monday, April 9, 2007

Global Warming and Venture Capital

We're coming up on the 100th anniversary of the Panic of 1907 (Join our cult, get the calendar free!). The Boston Fed. did a great paper on the panic that should have gotten a wider audience.

It's not that often you see a sub-head like "In Which the Downfall of a Prominent Speculator Rocks the Financial System, and a Prominent Millionaire Saves the Day" in a Fed. Bank Publication.

Rereading this got me thinking about the differance between J.P. Morgan (Our Hero), and the current crop of VC's flogging their new-found green credentials. Where were they six years ago? Oh, that's right: Webvan and and and Even Queer Company blew through $5 mil.

Compare that to Morgan six years prior to the Panic, during the Northern Pacific squeeze of ought-one. J.J. Hill flying across the country in a commandeered train, counting on one of the few guys on the planet who knew as much about railroads and financial markets as Hill himself (or for that matter as much as Hill's nemesis Ed Harriman- E.H., famous for saying "I can distribute more stock on upticks than I can on down"); some things never go out of style.

Morgan knew the railroad business. The current batch of VC's probably couldn't diagram an ethanol molecule. Even Vinod Khosla, a very, very smart guy, putting his money into cellulosic and Brazilian cane ethanol, said on the Charlie Rose Show that he flies around carbon neutral.

C'mon Mr. K., in the first place it's not the same as changing your lifestyle! Secondly and more importantly, it either takes a whole bunch of tree's one year to suck up the carbon from one Heathrow-LAX or it takes ten trees 40-50 years. And then you have to guarantee that they never burn or rot, or you've accomplished nothing but a temporary salving of the conscience.

If you ever want to bring a VC down a notch remind him that Microsoft didn't use venture capital. Then give 'em a hug, it's a tough way to earn a billion.