Tag: regulation

RANT! How dumb are the oil companies?

RANT! How dumb are the oil companies?

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I am sure that you have heard of the current oil leak in the Gulf of Mexico.  If you haven’t, here is a link – please come back after you have caught up with current events.

I am just aghast at how stupid these companies are. Current reports are that they didn’t install an “acoustic switch” on the well. From NewsInferno:

The Deepwater Horizon oil rig that exploded last week was not outfitted with a safety device that might have prevented the massive oil spill now nearing the U.S. Gulf Coast. The device, known as an acoustic switch, is a last-resort protection against underwater spills, and is required by regulators in Norway and Brazil. Unfortunately, the U.S. has no such regulation for oil wells operating off of its shores.

According to a report in The Wall Street Journal, an acoustic switch is a remote control device that a crew can use in an attempt to trigger an underwater valve that shuts down a well that’s damaged. The switch is meant as a last resort, as the primary shut-off systems almost always work on wells when they are out of control. It can be triggered from a lifeboat if an oil platform has to be evacuated.

According to the Journal, U.S regulators did consider requiring the acoustic switch on offshore wells, but drilling companies resisted because of its cost, and questions about its effectiveness. To be fair, the switches have never been tested in real-world situations, only simulations. U.S. regulators also maintain they are prone to causing unnecessary shutdowns.

Are these guys just plain stupid.  Didn’t they see Jurasic Park where the pessimistic mathematician, Ian Malcolm, talks about if something can go wrong then it will go wrong?

BP AND ITS KIN SHOULD HAVE BACKUP SYSTEMS FOR THE BACKUP SYSTEMS THAT ARE BACKING UP THE BACKUP SYSTEMS.  IF THEY DON’T HAVE 6 FOOLPROOF WAYS OF TURNING OFF A BROKEN WELL THEN THEY SHOULDN’T DRILL!

Why we shouldn’t regulate venture capitalists

Why we shouldn’t regulate venture capitalists

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With any downturn in the economy, there are always new rules and regulations that are discussed or passed to prevent the previous calamity from occurring again. The same is true for this latest downturn with a variety of efforts and attention being shown to the banking and mortgage industries.

Now attention is also being shown to the venture capitalists. This is not necessary. Nothing in this current downturn can have VC activity pointed to as the cause. In fact, VCs are fairly well self-regulated by the activity of the stock market and they take a sizeable set-back when the tech bubble bursts (most notably in the early part of this decade).

No VC is too big to fail and no VC has a huge majority of the market. It simply doesn’t make sense to overly regulate this industry when so much of what we enjoy on a regular basis is the result of VC activity (nearly the entire IT industry including the technology that makes this blog possible and your ability to read it).

Here are a few thoughts taken from a column at the Wall Street Journal:

Just when the economy needs risk-taking the most, risk-takers are under the most threat. The Treasury now wants venture-capital firms declared as systemic risks and put under tight restrictions as part of the broader re-regulation of financial firms. Venture capitalists argue that since they don’t use debt and their firms are comparatively small, they shouldn’t come under rules designed for highly leveraged, too-big-to-fail banks.

How this debate turns out matters, because some 20% of U.S. gross national product is created by companies that were formed through venture backing. They include Intel, Apple and Google. How policy makers treat venture capital is a measure of the amount of innovation and enterprise that happens in an economy, with more regulation leading to less innovation.

This is a tough time for venture capital, with investments by firms falling more than 50% in the second quarter. The 700 or so venture-capital firms in the U.S. are mostly small partnerships, with a modest voice in Washington. They say the industry as we know it can’t survive if firms are regulated as investment advisers, which would mean complying with rules for disclosure, compliance, record keeping and privacy designed for huge firms.

Uncertainty about which regulations applied to early-stage investing slowed the growth of venture capital. It wasn’t until deregulation in the late 1970s that the industry took off. The capital gains tax rate was cut to 28% from nearly 50% in 1978, and for the first time pension funds and other fiduciaries could include venture capital as part of an overall portfolio. During this vital period venture firms began to nourish what are today’s high-tech leaders, from information technology and the Internet to genetic research and health care.

The proposal now to tighten how venture firms operate suggests that we are in a stage of the regulatory cycle closer to the New Deal than to the entrepreneurial era that followed. Adding regulatory burdens would do nothing to help the investors in venture funds who are willing to take the big risks, knowing that about half of venture-backed companies fail. It would only increase the costs of doing business and make risk-takers more risk-averse.

No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise.

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