would you invest in a company that lost $2 trillion last year and has a net worth of negative $44 trillion?
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.
