Bob Plain is the editor/publisher of Rhode Island's Future. Previously, he's worked as a reporter for several different news organizations both in Rhode Island and across the country.

36 responses to “38 Studios and the ‘Job Creator’ Logic”

  1. RightToWork

    “Where was the Tea Party on this one?”

    I can’t speak for the “Tea Party,” but I and other free market advocates were right here on RIFuture, AnchorRising, OceanStateCurrent, and various news blogs predicting that precisely this result would occur from the start. Sam Howard might have been on the ball on this one, but I can name a number of other “progressive” contributors here who were cheering this deal through or justifying it, even while acknowledging the inherent riskiness of it.

    How many more failed loans, credits, stimulus, etc. to private companies is it going to take before progressives are willing to admit that central economic planning doesn’t work and government shouldn’t be picking winners and losers in the economy? Solyndra, Evergreen, 38 Studios – it’s the same sad story again and again. These companies sell a pitch to the arrogant “central planning board” (or whatever it’s called), they go on a massive expansionary binge with public funds, paying outrageous salaries to grow as quickly as possible and taking all-or-nothing bets with overly risky investments, and then they collapse a few years later under the weight of their own inefficiency and bad incentives. Then the progressives and politicians who caused the mess in the first place want accountability, blame corporate greed, and demand everyone else’s head put on a pike.

    We were right here, sounding the alarm bells and explaining the inherent economic folly of these corrupt public-private investments. Where were you, Bob?

    1. turbo

      To sum up: Governor Carcieri is now a progressive.

      1. RightToWork

        No, he’s a corporatist. As you’ve acknowledged yourself in past posts, progressives support corporatism when it’s a cause or a company they happen to like.

        1. turbo

          There is literally no one who plays by any other rules.

           

          1. RightToWork

            This is just another example of how “a thief believes everyone steals.” Just because you have no principled stance on public funding of private for-profit enterprises doesn’t mean that nobody else does. I and other Austrian economics advocates oppose this kind of corporatism in all of its forms, and I challenge you to provide an example where I have indicated anything to the contrary.

            1. turbo

              ” I and other Austrian economics advocates oppose”

              This is so important. Pay attention. Your opposition is meaningless. You are an anonymous commenter. No one knows who you are. You have no impact.

              Neither does Austrian school economics.

              No one who functions in the real world plays the game by any way other than relying on various kinds of public subsidy.

              You are a person of no consequence who advocates for a situation that does not exist and cannot exist–which is not a counterpoint to actual, real-world activity. 

              It is vital, for your own sake, that you learn the difference between fantasy and reality. 

               

    2. PinkHatLib

      “I can name a number of other ‘progressive’ contributors here who were cheering this deal through or justifying it”

      That’s simply false. Here’s a typical comment from Dan McGowan

      [quote]
      The problem is that no matter who is attached to the project, and really, no matter how good the game actually is, 38 Studios probably needs to get lucky for the game to become a smash hit.  There is no guarantee.  And in an election season where everyone and their Virgin Mary statue wants to preach fiscal responsibility, it seems like taking a chance on a video game company ran [sic] by a guy whose credentials essentially amount to being really good at World of Warcraft is far too risky.
       
      $75 million for a couple hundred jobs and we’re left to be the mop up men if Schilling can’t deliver. Let’s just hope the EDC holds on to those autographs. 
      Maybe eBay will help us get some of that money back if 38 Studios goes belly up.
      [end quote]

      1. RightToWork

        Ok, so McGowan wasn’t one of them, but that doesn’t make my statement “false.” A number of contributors and commenters here were supportive. Contributor “Frymaster” has been a vocal proponent of these types of public investments and justified the 38 Studios loan on this site. I believe you provided me with a link on the virtues of “state capitalism” in just such a thread, using China’s public investments in its companies as an counterexample to my prediction that these types of loans are destined to fail. I notice that the single comment to McGowan’s post from progressive commenter “Mach” was supportive of the loan.

        1. PinkHatLib

          Now it’s morphing into something else (what I can find from Frymaster was supportive btw). Saying progessives support public investment and saying progressives supported this deal are not the same thing, in fact my criticism at the time was that you could fund 100 start-ups with the kind of money being staked on this single bet. You also initially said contributors. I don’t doubt that there might be some supportive foiks in the comments (that’s what we do… argue!).

          1. RightToWork

            I acknowledge that the response here was mixed. My point was more to counter Bob’s message that the tea party, taxpayer groups, free marketers, fiscal conservatives, etc. were all hypocrites or asleep at the wheel while progressives were taking some principled stance against this type of thing. The reality is that a significant number of progressive voices here were justifying this loan and it was the free market crowd who were united in vocal opposition. I can’t think of anybody on Anchor Rising, for example, who took any position other than opposition to this particular loan and this type of public-private investment generally.

    3. turbo

      Also, this is another example of your massively overinflated sense of your own importance.

      Bob asked where an organized political group was on this issue. You respond by detailing the positions of commenters on websites of no influence. You should be able to see the discrepancy in power to determine public policy, and it’s disturbing that you don’t.

      Listen to the drama in your characterization of yourself: “We were right here, sounding the alarm bells” No one cares! No on knows who you are! Bob’s talking about actual policy makers and organized political groups, not random, anonymous commenters. 

      By your own account, you’re not even a Rhode Island tax payer, but, then, you’re anything from a lawyer to an astronaut, depending on the authority needed by whatever evidenceless statement you happen to be making.

      In short, you haven’t responded to Bob’s point at all, but merely used his post as a means of your own–bizarre, anonymous–self-aggrandizement.

      Thanks for less than nothing! 

      1. RightToWork

        You don’t like me. I get it.

        1. turbo

          Yes. Whenever someone points out how wrong you are, it’s simply an expression of dislike.

           

          1. RightToWork

            Your Carcieri comment contained (limited) substance, so it received a substantive reply. This comment was just more “You have inflated self worth. You suck. Die in a fire.” hate-blather so it didn’t get a substantive response. Expect the same for future comments.

  2. jgardner

    Why didn’t taxpayers? Where was the Tea Party on this one?
     
    Bob, people of all political stripes were decrying this loan.




    “This time the issue seems squarely to be that the public servants simply placed too much faith in private sector.”
     
    Nonsense. It’s not the private sector’s fault central economic planning failed. The private sector didn’t guarantee a complete unknown $75M. This is crony capitalism and it’s blowing up in the taxpayer’s faces.
     
     
    “It’s high time Rhode Island realizes that, whether it’s tax cuts or tax giveaways, such an economic strategy is far too risky keep placing so much blind faith in.”
     
    On that point you’re right. RI should be making it attractive for all types of businesses to move here. Making one-off deals for this or that company will blow up in our faces far more frequently than it not.

  3. Kiersten

    Sad that this happened, and even sadder, as Dan McGowan said, that we have to be the mop up crew.

  4. Alias Smith

    Here’s a link to one of the 38 Studios convos

    And jgardner is correct that people all over the political spectrum thought this deal was way too risky; I’d say that most people expected a bad outcome on this one – it’s not like anyone is surprised that 38 Studios is in trouble. 

    As always, there’s plenty of blame to go around, but Don Carcieri was the biggest cheerleader for 38 Studios.  

  5. David Pepin

    What it comes down to is that too many powerful people in Rhode Island wanted to do business with a celebrity (who happens to own two Red Sox World Series rings and, oh by the way, logs plenty of studio couch time on “Fox & Friends”) without realizing what they were getting into. They were acting like the girl in that old Rolling Stones tune “Star Star” (the chorus of which probably should not be repeated here).
    God forbid if Pauly D ever walked in here with a proposal for the remaining $50 million.

  6. mangeek

    This whole thing was a really interesting look at how people behave when the rubber hits the road.

    Conservatives should have hated this because it’s market interference, liberals should have hated it because it was corporate welfare. Instead, most RI’ers seemed to like the idea. I can’t tell you how many people from both sides were saying ‘well, if it gets 400 jobs, then we should do it!’. Absolutely no thought was given to the cost or the value of the jobs.

    For the record, I think this sort of micro-managing is a major distraction for our lawmakers and executives. You get a lot more economic bang-for-your-buck by doing the hard work of governance. Unfortunately, you get a lot more political bang-for-your-buck by crafting deals that allow you to attend ribbon-cutting ceremonies.

  7. John McGrath

    Part of the original problem with 38 Studios was the percentage of the state’s venture capital fund that it consumed. I do not know the figure but I remember it being above 65% and probably higher.
    Venture funds are supposed to spread the risk over 5 companies to bet on, with the expectation that 2-4 might fail, but 1-2 successes will net a profit. Everyone knows this, yet the Rhode islanders controlling the fund put all their eggs in one very dubious but, in their eyes, “sexy” and trendy and youth-oriented basket. People who like glitter in their eyes should not be controlling a  venture fund. If they want youth  and glitter they should go to a rave.

  8. Bill Monroe

     
    This was never about a legitimate business deal.  Rather it was simply another transfer of wealth from RI wage earners to a member of the moneyed elite by the political class.  A swan song if you will, from our own King of Crony Capitalism, Don Carcieri. Remember, the “Don” was a relatively simple minded man whose expertise and success was limited to knowing how to take orders from the right people.
    Thank God now we have our Savior and Financial Genius Gina Raimondo to straighten this out!!

  9. rhodeislandblue

    Tonight, on a very special Frontline, in one dramatic weekend, outgoing President George W. Bush (Governor Don Carcieri), President Elect Barack H. Obama (Governor Lincoln Chafee), Fed Chairman Ben Bernanke (EDC Executive Director Keith Stokes) and J.P. Morgan CEO Jamie Dimon (38 Studios owner Curt Schilling) preside over the greatest transfer of public largesse in U.S. (Rhode Island) history from a gigantic investment venture gone awry. Were there warning signs? Could anyone have foreseen the inevitable? How will the devastating costs be Socialized, while the profits are silently Privatized? Should these giants of Business and Policy be more abundantly rewarded for their obvious Business Acumen? We’ll probe the answers to those questions and more on Frontline.

    1. Bill Monroe

      Beautiful analogy, masterfully stated!!
       

      1. rhodeislandblue

        Thank you, Bill…

          

  10. rasputinkhlyst

    rhodeislandblue…I like your post here!  The notion that History repeats itself is a useful one too….

    1. rhodeislandblue

      Thanks rasputinkhlyst!!

  11. Jake Paris

    This was a horrible loan from any number of perspectives: first and foremost, when the loan was made, 38 Studios had not a single product on the market. It was basically venture capital from that perspective… risky by nature.

    Secondly, from a gaming perspective, although Sam Howard is right in that successful MMOs generally make significantly more money than single-player RPGs, I think 38 Studios would have us draw the wrong conclusions about the potential success of their new game. They are a small player in a BIG world: World of Warcraft had around 10 million subscribers at the end of last year… but of course that game was developed by one of the most well-established and successful game companies of all time. One of the next-largest and newest though is Knights of the Old Republic, at a comparatively tiny 1.7 million. Others like Age of Conan couldn’t even stay solvent under a pay-for-subscription model, and dozens more die out every year.
    Nothing about this deal made sense, except that Rhody has a serious inferiority complex and loved the idea of having a big name like Schilling and a potential national product. The jobs, potential tax revenue, and payback on the loan seem like afterthoughts.

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