A Facebook friend posted he was attending a conference at Google headquarters in Mountain View, Calif., when someone immediately asked:
“Are there Ferraris in the parking lot?”
“No. I checked. That was the first thing I thought,” he answered.
Maybe only Priuses or Hybrid Lexuses, I thought to myself. These gazillionaires keep their Ferraris at home.
The question in a funny way attempts to take the temperature of our economy. It implies what a lot of people are thinking: That big companies in odd segments of the economy are cash-rich, while small businesses or manufacturing concerns can’t get a loan to expand. It’s a picture of a U.S. economy out-of-whack. The economy is like a knotted up garden hose with expansion points in the wrong places.
For example, take the Silicon Valley. There’s so much dough in that Northern California tech mecca that the digital giants can afford to
On May 10, Microsoft acquired an Internet phone service called Skype for $8.5 billion. Skype is free and used by college kids or folks living abroad to video chat by computer with friends and family living in the states. It doesn’t make any money. Incredibly, the Internet start-up bought by EBay Inc. in 2005 for $3.1 billion was sold because — you guessed it — it never made a profit. I even read in a national magazine that Meg Whitman, remember her?, defended the purchase she oversaw while at EBay. When asked if Skype was worth $8.5 billion today, she said yes, probably.
Now, there’s so much stored up capital in these select Silicon Valley giants that they’re buying up other companies just for the engineers. As nytimes.com reported last week, Facebook bought several small companies — “with names like Parakey, Hot Potato, and Octazen” only to kill their products and hire their engineers. The demand for information engineers is so high, Facebook is willing to pay up to a $1 million per employee.
All this while basic manufacturing companies in the Southland go out of business and unemployment in the county is still way too high at 12.1 percent.
Seems like only the whiz kids with a 4.0 from Stanford gets hired these days. The economy is feeding digital companies like Facebook and Microsoft, while it starves bread-and-butter ones making airplane parts, clothing, or building new homes. This is a problem. One I don’t know how to fix. But one that I don’t see our leaders working on.
Capital is hard to come by if you are a small business. Yet, if you’re Microsoft, you have $8.5 billion laying around to buy up unprofitable companies on a whim.
We need more investment in manufacturing and construction. Or we’re doomed to see the economy continue in a stop-and-go, sputter-and-explode, garden hose trajectory. That starts with capital or dough to grow.
Many criticized the Obama administration for loaning money to American car companies. Yet, that program has been a success. On Tuesday, Chrysler paid back the $7.6 billion it owed to the U.S. and Canada.
When our editorial board met with a delegation from China, they emphasized they are loaded with yuan but regulations prevent them from fully investing it in America. Why not let them open a Chinese auto manufacturing plant in Pomona that will put Americans back to work? “We’d like your government to encourage more Chinese companies to come here and open up more factories,” one government rep told us. We should be jumping at the chance.
The mayor of Toledo, Ohio is doing just that. He just signed a deal to sell a city-owned (redevelopment) dining and entertainment complex to two Chinese investors, Yuan Xiaohona and Wu Kin Hung, who hope to revitalize the recession-plagued site.
I’d rather see more investment in local shopping centers and job-producing plants than more money get siphoned out into cyberspace. That kind of revitalization — the Toledo kind — is what our Valley, our country needs. It may not put Ferraris in the parking lots, but we’ll settle for some new Chryslers.