USA Inc.: Red, White, and Very Blue
Mary Meeker says that if the U.S. were a corporation, it would be sick—but fixable. Ideas for solving the U.S.'s long-term fiscal mess
Drea Zlanabitnig
By Mary Meeker
Dear Shareholder,
You probably don't think of yourself that way. Citizenship isn't an investment, it's a state of being. But by birth or naturalization, every American has more than just an emotional stake in the United States. We have a financial one, too. And by any measure, that stake is at risk.
Two months ago the federal government issued a 268-page Financial Report of the United States Government. It doesn't have a glossy cover with photos of smiling employees, and a lot of the numbers are in trillions. Except for that, it looks a lot like the corporate annual reports of the companies I have followed. You can see how the various lines of business are doing—Social Security, Medicare, etc. There's even a mission statement: "to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare and secure the blessings of liberty to ourselves and our posterity."
The United States isn't a corporation, of course. It can't exit from underperforming territories (pick your state) or auction off lines of business (the Army, Medicare). And its "customers" can reward themselves with unaffordable services because they're also the shareholders.
Still, the idea of the U.S. as a corporation is more than a thought-experiment. It's a way to reposition our approach to long-term problems. What would USA Inc. be worth? Who would want to buy its shares? And what would a turnaround expert recommend for a company that lost more than $2 trillion ("net operating cost") in 2010?
I took a deep dive into these questions a little more than a year ago, and I'm finally up for air. I reached three conclusions. First, USA Inc. has serious financial challenges. Second, its problems are fixable. Third, clear communication with citizen-shareholders is essential. If the American people embrace the need for bold action, their political leaders should find the courage to do what's right.
What you'll see on the following pages is hard to misinterpret: We have big issues, but the U.S. is in sounder shape than Apple (AAPL) was in 1997, when it lost a billion dollars. That's the year Steve Jobs returned as CEO and took extreme measures, including agreeing to make Internet Explorer the Mac's default browser. Jobs also got Microsoft (MSFT) to buy $150 million in nonvoting Apple shares—a lifeline for a company that, according to Jobs himself, was 90 days from bankruptcy court. Apple is now the second most valuable company in the world.
I'm the lady whom Barron's called the Queen of the Net in 1998. Over the past quarter-century I've covered tech companies that have created more than 200,000 jobs worldwide, including Apple, Microsoft, Dell (DELL), Amazon.com (AMZN), Google (GOOG), and eBay (EBAY). I worked for Morgan Stanley (MS) from 1991 until November 2010, when I became a partner at the venture capital firm Kleiner Perkins Caufield & Byers.
I don't pretend to be an expert on government finance, and I'm not interested in taking sides in the political debates over spending and taxes. Pragmatism is my trade, and information is my toolbox.
Since 2007 I had been salting my annual Internet forecasts with slides about trends in the broader U.S. economy. (Occasionally Silicon Valley needs to be reminded that it's not a sovereign nation.) For the Web 2.0 Summit in San Francisco in October 2009, I zeroed in on the financial health of the federal government and asked one of the savviest members of my research team, Liang Wu, to pull together a pro forma income statement for what we called USA Inc.
Who had it better than Charlie Sheen, before he threw a public tantrum that cost him (and others) tens of millions? Of course, he's not the first, or the last. A few thoughts on self-sabotage.
By Anne Fisher, contributor
By now, anyone who watches the news is all too familiar with an oddly long list of people who have thrown away their lucrative careers. Athletes, governors, senators, judges, CEOs… we all know who they are, right? These are smart, accomplished people. They worked hard to reach these heights. And once they got there, and had it made in the shade if they just kept at it, BAM. Game over.
Why?
Sigmund Freud took an incisive look at this in 1915, in an essay called "Those Wrecked by Success." He described a "surprising and even bewildering" tendency of some people to go to pieces "precisely when a deeply rooted and long cherished wish has come to fulfillment" -- let's say, being the highest paid actor on television, just as a for-instance; or being the governor of New York; or being the CEO of… -- "as though they were not able to tolerate happiness."
An enormous body of academic and clinical research has since been devoted to success as a double-edged sword: Most of us want it, or at least think we do, until we actually get it, or think we might. And then look out.
The human mind, it seems, has a little design flaw: The unconscious doesn't come with a filter. Whatever happened many years ago is still happening. Got self-esteem issues (and who doesn't)? The bigger and more conspicuous your success, the more likely it is to drag those demons right up to the surface, where they can do the most damage. Plenty of people who sabotage their own careers do so because they just don't believe they're worthy of the heights they have attained -- and, unconsciously, they won't rest until they fall.
Then, there's the inner brat. "Everyone's personality has several parts. The ones we usually show the world are calm, rational, and in control," says David Kaiser, CEO of Dark Matter Consulting . "Then there are the parts we keep in a cage."
Kaiser specializes in shining an analytic light on what's in that cage. "Many, many successful people are a troubled 6-year-old in a 50-year-old body," he says. "They are putting a huge amount of effort into squashing their own self-doubt and hiding their flaws, and the more effort goes into that, the worse it is when it finally busts out.
"If you want a metaphor, think about this: The attention-starved 6-year-old on the bus is now driving the bus. The inner 6-year-old is finally in charge, and finally getting some attention."
Yikes. And after the inevitable crash?
"One's enemies and detractors -- and powerful people always have them, of course -- are gleeful," says Kaiser. "And that's hard. But anyone in this situation always has lots of allies and supporters and friends. Focus on them, and accept that screwing up is human."
More from Fortune.com:
How much should a startup spend on marketing? The answer, according to VC Fred Wilson, is zero. The best marketing for a startup when it is just getting off the ground are kick-ass products. Great products market themselves. If you have a line item in your business plan for marketing, you are doing it wrong.
That is not to say that startups don’t need to do any marketing at all. And, let’s be clear, Wilson is taking about consumer Web startups, not enterprise startups or those in other industries. But as he writes in a post today:
Marketing is for companies who have sucky products. If you build something that is amazing (think Flipboard or Instagram or Instapaper) people will adopt it because it is amazing. And you won’t have to do much marketing, at least at the start.
Startups still need to do marketing, they just shouldn’t be spending any money on it until they need to juice adoption. But at the beginning, marketing consists of the founders themselves hustling at live events, on Twitter and Facebook to tell the world about their product. Marketing for a Web startup starts a very personal level. It is the job of the founders to get their product in the hands of potential hardcore users who need the product the most, will fall in love with it, and help spread the word. “Find an obvious group of like minded people who know each other and launch into that community,” Wilson suggests.
What about PR? “Do not hire a PR firm to do your free marketing for you,” he notes. “The best companies know how to become the story and work it,” he adds. So true. Also, being SEO-friendly is fine (lot’s of people find new products from search), but “don’t be a google bitch.”
At some point, after a company finds its natural market, then spending money to enlarge that market or go beyond it makes sense. But in the early days, it’s much smarter to spend money making your product great instead of spending it to convince people that it’s great.
Photo credit: Flickr/Duncan C
Companies: Etsy, Union Square Ventures, Outside.in, TargetSpot, Return Path, DonorsChoose.org Fred Wilson began his career in venture capital in 1987. He has focused exclusively on information technology investments for the past 17 years…In 1996, Fred co-founded Flatiron Partners. While… Learn More
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