Elia Insider

This thing ain’t over. The Dow crossed 10,000 a few weeks ago? Big deal. It means nothing. Unemployment is over 10%. Commercial real estate defaults are rising. The nation’s personal debt is still sustainably high. As I wrote in July, this will be a W recession, not a standard V, and we need to batten down the hatches for that likelihood.

But this isn’t all bad as it needs to lead to a re-prioritization of government.

Here’s my philosophy: In 1980 Ronald Reagan was elected based on a great economic experiment. The experiment was that if we cut taxes on the wealthy, the money they saved and spent would go toward services and the revenues would “trickle down” to the other classes.

It didn’t work. What it did do was amass huge amounts of government debt and widen the gap between the wealthy and the poor to levels never seen before in the country. George H.W. Bush tried to reverse this, raising taxes, setting up the Clinton’s balanced budget, and contributing to the greatest economic expansion in the history of this country, all of which was reversed under George W. Bush.

Now I believe it’s time for our government to forge a new contract with the American people. The daddy state will have to be paired back, as the costs of social security and medicare will bankrupt the country. We need to reconsider our roll as military foundation for the world. As India, China, and other countries step up economically, they also need to step up militarily and do their part.

It’s time for a new conversation, one that starts with these basic issues:

• A national discussion about basic services and what we should all get and have funded out of tax dollars
• What our role in international military issues is
• How, as a government, we need to ensure open markets where everyone is working from an even playing field
• How government spending can be focused to provide the biggest bang for the buck, particularly in regards to infrastructure and education

If the U.S. has lost its edge, its that it is no longer the land of opportunity. The saying went that anyone could come to America and become wealthy, anyone could pull themselves up by their bootstraps.

Now it feels the deck is stacked against everyone who doesn’t already come from money or have the right contacts. It’s time for us to recapture the magic.

I just read a fantastic blog post by Venture Capitalist Bill Gurley on the less than free business model. What does this mean? In short, it’s when you get paid by the company instead of the company paying you. Mr. Gurley talks about this in terms of Google’s strategy, that rather than pay Google to use their services, Google will actually pay you a percentage of the revenues they make from ads.

Disruption is a major concern for every business. In the early days of Infinity Softworks it was disruption by Microsoft, who had the clout and power to knock anyone off their perch just by threatening to be in your market space.

But it wasn’t until Microsoft released Internet Explorer that this really got scary. Not only could a company beat you by charging a lower price or be a better known company, now it can kill you by offering for free what once was charged. Chris Anderson, author of Free, would argue that this is the natural evolution of the market. (I wrote about that here.)

The irony, of course, is that Google is now doing to Microsoft what Microsoft did to Netscape: killing it with free. But Google may be cannibalizing it’s own “free” business model. Instead of free, Google is gearing up to pay you to use it’s services.

So for all you entrepreneurs, how do you fend off less than free in your business? (You know, besides the obvious: pray Google buys you so you don’t have to worry about it.)