IPOC Billionaire Chamath Palihapitiya: Why Private Companies Can Solve Problems Governments Cannot


Chamath Palihapitiya co-founded Social Capital with a mission to harness the power of capitalism to solve important problems facing society. In this Motley Fool Live video recorded on November 16, 2020, Bill Mann, director of small-cap research for The Motley Fool, discusses with Palihapitiya why private companies can even solve problems that governments cannot.

Bill Mann: Chamath, I want to come back to social capital a bit to follow up on what you said. You said its goal, the social mission to help entrepreneurs solve the world’s toughest problems, why are these challenges best left to capital to solve them?

Chamath Palihapitiya: I think governments are very, very good at creating incentives. The incentive that the government has created around medicare is really important. They say, “Hey you know what, I’m going to give you a way to make a lot of money by taking this tool chain and implementing it into paid health insurance.” That’s why governments are great, they’re great at creating incentives.

If you look at a different market like climate change, governments were very successful in creating an initial cap and trade system. They were very successful in creating a balance sheet support mechanism in 2008 and 2009, which, for example, You’re here was able to use to stay afloat. They created incentives that lowered the cost of PD. In so many markets, they have proven that it is better to leave the economic incentives in place to them, but implementing solutions that take advantage of these elements is best left to for-profit companies, and in particular. especially in a world where you need to apply technology to extract all this value.

In my opinion, the practical reality, forget the philosophical reality, the practical reality is that which can only be done by business and the reason is that people who know how to code, people like Andrew [Toy, chief technology officer of Clover Health (NASDAQ:CLOV)], the team he has assembled, are very precious resources, they do not exist in infinite quantities, they exist in tens or even hundreds of thousands. They are very badly distributed around the world.

You can, as a big business as one of the things, overcompensate these people and effectively put them on ice. You can pay them to work on trivial issues that don’t get the world moving. You need a capitalist incentive because how can you ask an engineer or a data scientist to leave one, two, three million dollars a year to Google come to work on climate change or come to work on health. Now, you can’t do that for a pat on the back and a gold star. You cannot expect this person to make this compromise.

That’s why I think capitalists and capitalism are accelerating change. We can put money in the hands of people like Vivek [Garipalli, Clover Health CEO] and André. They can compete and create an economic incentive for talented technicians to come to work on problems, and then they can demonstrate a return profile which then gets other institutional people to support it. Once they get to that end of the product market adjustment phase in that scale phase, the sky is the limit. I think it’s the best system in the world. This is how the world will go.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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