There are some unusual paradoxes taking place in the world these days. We see massive unemployment and underemployment coupled with big companies making big profits and build up piles of cash. But they aren’t using these cash reserves to fund innovation they are sitting on them letting them go idle. If these companies are aren’t going to use these funds to build value they should distribute them where they can be redeployed. We need to find a way to get them into the hands of entrepreneurs who will innovate.
That brings us to another paradox. I often hear that there are more investment funds available than there are good ideas. Yet we have so many problems in society that entrepreneurs can solve and more people than ever who want to purse entrepreneurship. Maybe we need to combine those funds with a better support system for entrepreneurs. An economy full of entrepreneurs creating new ventures, solving problems and employing people is how a market is supposed to function.
It is critical to build this entrepreneurial society for another reason. When there are few alternatives available excess funds flood into the stock market or real estate where they push up price resulting in bubbles. When the bubbles burst this value disappears from the economy. We have to make investing in entrepreneurs more attractive than the alternatives.
As someone that believes in free markets it pains me to suggest that society may need to take steps to free up this idle cash. If the markets won’t function as they should and allocate capital efficiently then we need to tax it away and redistribute it in other ways. It is not ideal but if business won’t create value through innovation that benefits the society where they earned the profits then we need to find people who will.