Saturday, February 11, 2012

Sharks!!

Shark Tank is an hour long show airing Friday nights in the ABC line-up, now in its third year. The format is of interest to any libertarian. People with entrepreneurial ideas--some brilliant, some apparently crazed--are invited to pitch their concepts and products to major businessmen and women...people like Mark Cuban, owner and chairman of HDNet (and the Dallas Mavericks); venture capitalist Kevin O’Leary; Lori Greiner, “Queen of QVC;” technology innovator Robert Herjavec; fashion and branding expert Daymond John; real estate mogul Barbara Corcoran. All of these people are “self-made.” None was born into wealth. They are now at the least worth hundreds of millions of dollars each. Cuban and O’Leary are both billionaires.
Each week, on hearing the pitch, five “Sharks,” as these wealthy wheeler-dealers are called, may shoot down the idea, explaining why they think it won’t work. Or one may make an offer, perhaps less than the entrepreneur wishes. Or they may fight among themselves, offering progressively more lucrative bids if they think the idea highly profitable. Or 2 or 3 may form temporary alliances to overcome another bid, or to avoid offering “too much” to the “contestant.” 
Some “contestants” leave without a deal. Some leave with a deal less than they desired. Some leave having sold a product to a Shark. Others leave with a needed cash infusion in return for partnering with a Shark, who then has a profit incentive to mentor the contestant so both can make money. None of this is “made-for-TV.” These all represent real products being launched or expanded, and the potential gains and losses are real as well.
Even those who “lose” in the Shark Tank may get insight into how to make their product better. On the latest episode, Kelly Chaney, a young woman, pitched her four-year-old business, Puppy Cakes, which produces cake mixes for dogs. She asked for $35,000 in return for 25% equity stake in her company. Several Sharks asked for her current sales. In four years running the business she hadn’t yet broken into 6-figure revenue. But, she explained, that was only because she hadn’t had the capital necessary to make it to the national trade shows where she could make the necessary contacts. “Have you gone to local pet stores to try and get your product out?” she was asked. “No. Sales is not really my strength,” she replied. No Shark was willing to do the deal with someone not eager to promote her own business. In addition, several were concerned that dog birthdays come but once a year, and suggested she consider expanding into other doggie delicacies. Interviewed after leaving the Shark Tank, she thanked the Sharks for showing her what she needed to do to succeed. And if you go to her website now, she has a “Let’s Show The Sharks They Missed Out” sale. 3 cake mixes for only $20...
Sometimes even contestants who couldn’t convince a Shark to invest find their exposure on the show highly profitable. They get calls on returning home. Someone saw the show and is eager to invest when the Sharks were not.
Sharks use their own money to invest, and make or lose money depending on how things turn out. This is the best educational example of capitalism I’ve seen on national television. Everyone wins. People’s lives change in an instant for the better, not from alms, but from people excited to help them in exchange for a return.
And ABC calls it the Shark Tank...Sharks are evolutionarily ancient, the current versions not that much different from when our ancestors diverged from theirs 460 million years ago. They are highly evolved killing machines, programmed for nothing but predation, achieving little else while they live. They are fearsome destroyers. And thus they represent the typical caricature of capitalism. 
Yet all who walk out of ABC’s Shark Tank have benefited. Some greatly, moving rapidly from the lower middle-class to affluence. Some slowly, getting advice that they use to improve their ideas or their products and try again. Even the viewers gain, not merely from the entertainment--and the show is hugely entertaining--but from the educational experience of seeing how successful people quickly grasp the value of an idea, see how to make it better, recognize its flaws, search for ways to overcome them. Perhaps from this viewers might begin to appreciate the value added by some who are members of the 1%. 
The show also teaches basic economics. Donny McCall lives in a depressed part of North Carolina. He has developed a collapsable rack for the back of pick-up trucks that allows better cargo management. It can be locked into place or unfolded in seconds. Several Sharks are initially interested in McCall’s idea, and his offer of 10% of his new company for $100,000. But then it becomes clear that Donny has a secondary goal of making sure everything is made in America, to help his neighbors. McLeary points out it doesn’t help his neighbors if his plant closes because he can’t keep his costs down, and suggests the rack could be made for much less overseas. McCall is resistant, and McLeary is out. McCall pleads with Robert Herjavec, now worth hundreds of millions but born into poverty, whose father was a miner. Herjavec can barely hold back tears telling him how he understands the plight McCall and his neighbors are in, but ends up explaining he cannot invest in a company not dedicated to keeping costs low; that business is different from charity; that his customers have also been hit by the Recession, and can’t afford to pay more; that it is better to make a profit and use it to support his community than to start a business for the main purpose of employing workers. In the end, no Shark invested in Invis-a-Rack. And viewers learned something about global competition. Meanwhile Invis-a-Rack still benefits from the exposure, including McCall’s compelling story and link to his company on ABC’s Shark Tank website.
No, Cuban, McLeary, and the others are not Sharks. The term for venture capitalists who invest their own money in promising start-ups is "Angel."

Sharks destroy lives. Sharks take a bite out of you. Sharks are remorseless at taking what they want. Sharks live at the expense of others. People like that exist, of couse, but Cuban et al are not examples. 

ABC could do a show that better lived up to the title of Shark Tank. A show set in Washington, D. C., with President Obama and key leaders in the House and Senate, on both sides of the aisle, could justifiably be called Shark Tank. Each week special interests could plead their case, and be rewarded with tax-dollars, as viewers see how large a chunk of flesh each deal will cost them. But if the continued drop in audience for the State of the Union, and the flat to falling turn-out in GOP primary races now compared to 2008, are any indication, THAT would be a show no one would watch. Sad...it, too, would be very educational.

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