Was Solyndra a Victim of its own Affluence?

I wish I had published this sooner, because the evidence is already coming out in various articles in the media. Better later than never.

The issue is Solyndra's rapid downfall. The scandal is the company's bankruptcy very shortly after taking a $535 million loan from the U.S. Government. It has been raided by the FBI. The media coverage has strongly implied that the company must have misused the money for it to run out so soon.

When all of the factors are in, I would not be surprised if all of the official investigators will be stumped, because my guess is that Solyndra died from a lack of frugality. It isn't the kind of judgment that usually results from detective work, because the cause is too subtle for some to see.

Sometimes the worst thing to happen to small businesses is that they start out with too much money. If you have too much start money, you don't learn discipline. Then you spend it too fast, and when bad times come, and they always come when you are running any business, you have no skills to apply to the problem. I'd much rather invest in a business where I know that the founders went through some lean times at the beginning, scraping by and eking out a living by saving a nickel and a length of pipe. It isn't necessarily a matter of building character either. I am talking about discovering facts about the real world that will not be discovered until necessity forces you to learn the lesson.

From the very earliest news reports it smelled like Solyndra executives had never learned any lessons about frugality or how to run their business on less money. The most critical clue is the Government loan itself. $535 million is a lot of money for a new business to handle. And any company that spends it all at once, over the course of a year or two is almost certain to have wasted a lot of it.

I will skip commenting on the politics. Any investor, whether government, or private, should know about this learning dynamic of new businesses before putting in their money. The net effect here was to fuel the lack of discipline that seems to have been present at Solyndra.

Starting any new business is tough on the founder. I know that it doesn't seem like I am helping them when I suggest that they starve for funds in order to learn. In the long run, however, the winners among a group of starting businesses will be those who made the best use of limited capital and figured out how to cut their inputs and expenses. The customers benefit, the employees benefit, and the resulting mature, stable business is a much more attractive work of art.