Reason On How and Why 38 Studios Went Bust

cathyreisenwitz writes "The 2012 bankruptcy of Rhode Island-based video-game developer 38 Studios isn't just a sad tale of a start-up tech company falling victim to the vagaries of a rough economy. It is a completely predictable story of crony capitalism, featuring star-struck legislators and the hubris of a larger-than-life athlete completely unprepared to compete in business." Reason makes no bones about its view of this kind of public-private "partnership."

Re:How is this Crony Capitalism?

[Anonymous Coward]

Insofar as the governor making the call was a (R), and the ceo of the company involved was a notable (R) campaigner (and there was serious talk of him running as (R) for senate a few years back, for the seat Scott Brown won)... it did indeed smell of "politically motivated favor to a friend of the political party" at the time.

At a minimum, Curt probably had a leg up over other CEOs in getting in to see the governor and talk about his great company, even if the decision itself wasn't biased -- even those who are trying hard not to bias decisions directly have a hard time not having a serious bias in that they talk to their political allies a lot more than their political foes.

The article doesn't go very deep into that aspect of it though.

(disclaimer: I worked at 38, and I disagree with some aspects of the article; in particular, it fails to mention that the new (D) governor of RI jerked the company around by cancelling payments to the company which _caused_ the sudden cash crunch that pushed it off the cliff, as revenge for the above... What the crony giveth, the anti-crony taketh away. But the original deal did smell funny, and management was surely also at fault for dancing so close to the edge of a financial cliff that one failed payment from the state could push them over, so the article isn't too far off the mark.)

Re:blah blah Capitalism Evil blah blah

[phantomfive]

Crony capitalism is different than capitalism. Crony capitalism means a company gets special favors from the government that give it an advantage over their competition. Crony capitalism is why, despite a 35% corporate tax rate, some corporations (like Whirlpool [google.com]) paid no or negative taxes last year. Arguably one of the best things Reagan did was to simplify the tax code to get rid of a lot of crony capitalism (to be fair the idea was being heavily promoted by a democrat before being picked up by Reagan).

In general, crony capitalism==bad. Capitalism==good. This is something agreed on by both parties: both sides hate the crony capitalism of the other side, but tolerate it.

Re:Article very lacking on how and why.

[afidel]

Average Manhattan commercial realestate is $58/sq ft on an annual basis, round it up to $60 or $5/month. Average cubicle is 8x8, assume a really inefficient layout of half cube half shared space, you get 128sq ft per employee or $256k per month. The numbers aren't coming close unless someone on top is taking a hell of a lot out of the company or they're spending a good part of the loan on bribes.