Please ensure Javascript is enabled for purposes of website accessibility

IPOC Billionaire Chamath Palihapitiya: Why Private Business Can Solve Problems Governments Can't

By Keith Speights - Jan 23, 2021 at 8:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Governments can solve some problems -- but not all of them.

Chamath Palihapitiya co-founded Social Capital with a mission to harness the power of capitalism to address significant issues facing society. In this Motley Fool Live video recorded on Nov. 16, 2020, Bill Mann, director of small cap research for The Motley Fool, talks with Palihapitiya about why private businesses can even solve problems that governments can't.

Bill Mann: Chamath, I want to pivot just a little bit to Social Capital following up on what you said. You said as its goal, the social mission to help entrepreneurs solve the world's hardest problems, why are these challenges best left to Capital to solve?

Chamath Palihapitiya: I think that governments are very, very good at creating incentives. The incentive that the government has created around Medicare is really important. They're saying, "Hey, you know what, I'm going to give you a pathway to make a lot of money by taking this tool chain and implementing it in fee-for-service Medicare." That's what governments are great at, they're great at creating incentives.

If you look at a different market like climate change, governments were very good at creating an initial cap and trade system. They were great at creating a balance sheet support mechanism in 2008 and '09, that, for example, Tesla was able to use to keep afloat. They've created incentives that have driven down the cost of PD. In many, many markets, they have proven that the framing of economic incentives is best left to them, but then the implementation of solutions that take advantage of those things are best left to for-profit businesses, and especially in a world where you need to apply technology to extract all that value.

In my opinion, the practical reality, forget the philosophical one, the practical reality is those that can only be done by companies and the reason is because people who can code, people like Andrew [Toy, chief technology officer of Clover Health (CLOV -1.44%)], the team that he's built, are very precious resources, they don't exist in infinite quantity, they exist in the tens and maybe hundreds of thousands. They are very poorly allocated around the world.

You can, as a big company like one of the things, overcompensate these people and effectively put them on ice. You can pay them to work on trivial problems that don't move the world forward. You need a capitalist incentive because how can you ask an engineer or data scientist to leave one, two, three million dollars a year at Google to come and work on climate change or to come and work on healthcare. Well, you can't do that for a pat on the back and a gold star. You can't expect that person to make that trade-off.

This is why I think that capitalists and capitalism accelerate change. We can put money into the hands of folks like Vivek [Garipalli, Clover Health CEO] and Andrew. They can go and compete and build an economic incentive for great talented technical people to come work on problems, and then they can demonstrate a return profile that then gets other institutional folks to support it. Once they get to that end of product market fit phase into that scale phase, the sky is the limit. I think it's the best system in the world. That's the way that the world will move forward.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Clover Health Investments, Corp. Stock Quote
Clover Health Investments, Corp.
CLOV
$2.74 (-1.44%) $0.04
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,178.16 (-1.34%) $-29.52
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$663.90 (-6.42%) $-45.52
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,186.26 (-1.29%) $-28.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.