Is It Time for the Public-Private-Piggyback System to Step Aside?
Pathways outside the algorithm open onto alternate worlds.
Pieces of a puzzle I have been trying to put together are falling into formation by following a path that could not manifest until the twenty-first century.
The path begins with this newsletter which I created because no other local media voice was speaking for me. The newsletter began one day in 2009 when I decided to enter a competition for what I believed was a grant but later realized was a venture capitalist award, infinitesimally small by venture capitalist standards, and everything hinged on “the exit strategy”.
I made my 5-minute pitch in the first round. The person to whom I was presenting, whom I will call John, responded “Excellent!” Do you have anything more to say about the network?” With about 30 seconds left in my time, I said, no, but upon reflection I realized that John was fishing for me to say “As an exit strategy, I will sell the network” which could easily be said in thirty seconds. It was a sentence routinely repeated by most of the contestants who made it through to round two.
Fatefully for me, I was new to the lingo and in preparing for the event, I was too consumed with mixed emotions about the set-up of the event to pay attention to a detail contained in a short sentence. My impression upon reading the invitation was of contestants being used as a feature of the Fair’s entertainment. It was a time before the official newspeak had morphed from “the creative economy” to the “innovative economy”, but in fact there is little difference in the meaning of those two terms, with the meaning of both being new tech startups. The amount of the award was so small one might wonder why it attracted so many contestants who told of their billion-dollar funders for companies which had discovered the secret of transforming ocean water into energy.
I wasn’t thinking clearly, I was processing my emotional conflicts and not zeroing in on the absurdity in the small print. If I were doing this for the first time today. without the arguments with myself about whether to do it or not, I would look up the term “exit strategy” but I had received the invite through the Maine Arts Commission, after a year of receiving emails about available grants for which only non-profit organizations need apply. This was the first email about an award available to the free enterprise sector for an amount that makes sense only as a grant or a loan.
The event was organized by the Small Enterprise Growth Fund, a program created by the Maine Legislature that includes a board chartered as a “body corporate”, which means “corporation”. Beyond the identification in the chartering statute of the Small Enterprise Growth Board as a corporation, it is difficult to find out information about the board, or corporation, which is not uncommon with boards.
Article IV Part Third Section 14 of the Maine Constitution forbids the Legislature from chartering corporations by special act of legislation unless the object of the corporation cannot be otherwise attained. It can be argued from both sides as to whether the board of the Small Enterprise Growth Fund violates the intent of the Maine Constitution:
Section 14. Corporations, formed under general laws. Corporations shall be formed under general laws, and shall not be created by special Acts of the Legislature, except for municipal purposes, and in cases where the objects of the corporation cannot otherwise be attained; and, however formed, they shall forever be subject to the general laws of the State.
Funding appropriated by the FAME corporation for the Maine Venture fund was described by the panel of judges as an arrangement in which private investors invest nine dollars for every one dollar invested by taxpayers. The entire panel, one after the other, exclaimed how wonderful it is that the taxpayer investment keeps on rolling over in the manner of a non-profit, never asking for a return on the investment.
And yet, one would think from the manner of the presentation that investors who matched the public’s contribution by nine, were doing the public an angelic service, or maybe the panel was simply celebrating the win for the investor community without factoring in the public. Taking the system as a whole (program funds), the public roll over fund likely pays the administration costs of the Maine Venture Fund and the private investors reap the gain.
The public invests as if it were a nonprofit organization, never seeing a return on the investment. If there is any gain, it is rolled right back into the fund that is then merged with the side funds to create a general fund that the board can administer at its own discretion.
Title 10: Chapter 13 The Small Enterprise Growth Fund
1. Creation of fund. There is established the Small Enterprise Growth Fund, which is a revolving fund used to provide funding for disbursements to qualifying small businesses in the State seeking to pursue an eligible project.
On the public side of the partnership, the primary source of the funds are bonds approved by the Maine voters and then redistributed by the FAME corporation. The primary function of the Small Enterprise Growth Fund is to accumulate and distribute capital funding. The funds can come from any source and are then re-distributed via the board to private businesses located in Maine via terms negotiated by the board.
In 2009 the Legislature authorized the board to create unlimited side funds each with their own terms of agreement as negotiated by the board.
3-A. Program funds. "Program funds" means the Small Enterprise Growth Fund and any side funds created by the board. [PL 2009, c. 475, §2 (NEW).]
Side funds have individually crafted terms of agreement determined at the exclusive discretion of the board:
5. Side fund. "Side fund" means a fund other than the Small Enterprise Growth Fund administered by the board that is invested as determined by the board.
The Small Enterprise Growth Fund is the name of the public revolving fund into which public money is deposited by the FAME corporation (The Financial Authority of Maine)
The authority will serve a public purpose and perform an essential governmental function in the exercise of the powers and duties conferred upon it by this chapter. Any benefits accruing to private individuals or associations, as a result of the activities of the authority, are deemed by the Legislature to be incidental to the public purposes to be achieved by the implementation of this chapter. [PL 1985, c. 344, §5 (AMD).] Financial Authority of Maine Purpose Statement
The Maine Venture Fund is the name of the entire public-private fund, including the Small Enterprise Growth Fund and the side funds. Pay attention to the signifiers used to identify the funds in the statute. It’s tricky!
The statutory definitions for Title 10: Chapter 13 The Small Enterprise Growth Fund state that “fund” means the Small Enterprise Growth Fund and “Program Funds” means the Small Enterprise Growth Fund and the side funds:
§382. DEFINITIONS As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings. [1995, c. 699, §3 (NEW).]
1. Board. "Board" means the Small Enterprise Growth Board. [ 1995, c. 699, §3 (NEW) .]
2. Fund. "Fund" means the Small Enterprise Growth Fund. [ 1995, c. 699, §3 (NEW) .]
3. Program. "Program" means the Small Enterprise Growth Program, which encompasses the Small Enterprise Growth Fund and any side fund created by the board. [ 2009, c. 475, §1 (AMD) .]
3-A. Program funds. "Program funds" means the Small Enterprise Growth Fund and any side funds created by the board. [ 2009, c. 475, §2 (NEW) .]
The similarity between terms which have distinctly different meanings makes understanding what is actually being said confusing. If the term “fund” is used without the modifier “program” it has a legally different meaning than it has with the modifier, but in general use it is understandable if one conflates the meaning of “fund” and a “program fund”. This is typical of how laws governing public-private relationships are written.
As you can see above, 2009, the year I encountered the centralized economy of Maine was also the year that the side funds were introduced in statutory law so the event that I attended was one of the first when side funds were authorized, underscoring the primary importance of "the exit strategy” which means agreeing to sell the business which creates an ownership opportunity for the board, an opportunity authorized in the statute governing the program funds.
Once again, “The Maine Venture Fund” signifies the program funds which uses the public as a roll-over (non-profit) investor in a fund that it then combines with the side funds that are created by a corporation called the Small Enterprise Growth Board.
General Laws vs Special Interest Laws
The public fund has set rules (it always rolls over) the side funds do not. The board is free to innovate the rules of the side funds without restrictions.
The Maine statutes use the same organizational and distributive structures over and over again. The structure of the Maine Venture Fund is repeated in LD 1845, An Act to Amend the Educational Statutes enacted in April 2022. The rules that govern general public education can be waived for certain special schools that can innovate their own rules, separate from the rules that govern the rest of the public educational system, while being funded by the public educational system. That describes the character structure of a repeatable organizational element. The public part is governed by rules (general law) and subsidizes the private part which makes up its own rules and are often the governing authority over the public part. This formula is repeated throughout the public-private-piggyback system. It transfers governance to corporations as is seen again in the housing concentration zone planned by The Boothbay Regional Development Corporation- via BRDCs retention of land ownership, which is equivalent to private investors owning the network that I am proposing, except I am not proposing that. I am proposing a new idea, inspired by some old ideas.
Look at what follows- keeping in mind that the Small Enterprise Growth Fund is a program while the board is the administrative corporation that can create as many side funds as it wants and write its own rules for all of them.
3. Ownership interests. The board may hold an ownership interest in a private enterprise when it is determined by the board that such an interest is necessary or desirable in order for the fund to obtain a reasonable return on its investment in the private enterprise. (emphasis added-the legal meaning of “the fund” is the public roll over fund)
It is apparent from this structuring how the wealth divide becomes the ownership class working class divide. Here the use of the term “the fund” identifies the public fund that always rolls over so that the investor, the public, never realizes a return on the investment as the fund is merged with side funds and redistributed by the board to private industry, with the board taking its piece of ownership along the way, and repeat that over and over again!
Since the exit strategy, satisfied by saying “As an exit strategy I will sell the business” was a requirement to make it through to round two, all the words in the above statute after the first mention of “private enterprise” can be dismissed as rhetorical scenery. There was no determination process just as there is no return on investment that needs to be protected on a public fund that rolls over to benefit private interests.
The public funder is being referenced as if it is a shareholder with expectations of a return on a fund that continually rolls over to benefit private interests. All that is apparent is that the fund will increase the program funds and the board will have more money to invest in private companies of its choosing. The only “public purposes to be achieved by the implementation of this chapter” is the illusionary trickledown effect that has been established by years of use to only trickle up.
The Financial Authority of Maine involvement is like merging a stream into a river making it ever more difficult to identify acquisitions. Such knowledge is likely bound up in the side deals, and morphs into the private sector where privacy laws apply.
1-A. Creation of side funds The board may create one or more side funds for placement of certain funds received by the board. A side fund may be structured as a revolving fund in addition to the Small Enterprise Growth Fund or as a fund in which the investor will have funds drawn and returned over an agreed time period.
2. Administrative expenses. Costs and expenses of maintaining and servicing program funds and administering the Small Enterprise Growth Program established by this chapter may be paid out of amounts in the program funds. (Emphasis added= “may” signifies an optional choice- the other choice is to pay administrative cost out of the public revolving fund)
My first encounter with the public-private centrally managed economy of Maine impressed me as being so exploitative of the small entrepreneur that I looked up the governing statute (The one discussed herein) and kept on reading the laws governing Maine’s economic development policy. It didn’t get any better.
In preparing for my pitch, I missed the part about the exit strategy. In delivering my pitch, John missed the part about the network consisting of small individually owned studios. The network is a system of governance between independently owned entities. No one owns the network, which is what I believe John thought when he heard the word “network” and why he said “excellent”. John thought the network could be for sale and it sounded like a big idea and that is why he asked if I had anything more to say about the network. John’s target was what investors could own, but, no one owns the network in my vision. It is a system of terms of agreement that protects all sides. It is a decentralized network
Pieces of the Puzzel: The Why What and How of The Network
Andersen Design has productivity assets that can be economic development assets for others but in order to release that potential we need to work out templates for terms of agreement between parties involved. The templates can be adapted as necessary to accommodate individual circumstances and preferences. This is similar to online platforms like Uber but such platforms are constructed as one-sided terms, take it or leave it. The terms should be interactive. This is an advantage of small businesses and small networks. The members of a small enterprise network are mutually beneficial and dependent, while each is also an independent entity. Altogether the network is an industry greater than Andersen Design but because of Andersen Design’s unique assets, Andersen Design can be instrumental in the growth of a ceramic slip casting industry which is currently very sparse in the USA, while alive and well in the hobby craft industry.
The network is an alternative economic development concept to the State’s targeted industry sector in which industries are targeted because the core goal and value is to “maximize profits”. The core value emergent from the workforce voices rising on the content provider circuit is “work life balance’”, which is also at the core of middle-class values. The middle class has declined since the state started centrally managing the economy in the 1970’s and established programs like the Small Enterprise Growth Fund.
After my encounter with the corporate state program, I commenced upon independent research into the economic development policies entrenched in Maine since 1976 and wrote about what I learned in my personal blog which after many years became this newsletter. I also write on Medium but Medium uses an algorithm so that my distribution has maintained a flat line. Substack does not use an algorithm. Growth in subscriptions in March was 130% of the entire year of 2022, and a little more than twice the growth of the previous year occurred in January. Even though I write a newsletter with an unusually local focus, most of my growth is coming from beyond my local community.
The Boothbay Register provides a wider local chat forum. When I converse with some in Boothbay Register conversations, they make assertions about what is possible and what is not possible according to their professional view concerning matters such as funding low income or affordable housing. I know from my independent study that what is possible financially has been made possible by the structuring of financial instruments and arrangements to benefit a chosen class. Structural variations are possible. Groups slant conditions in their own favor. It means that there have to be other systems that slant conditions in the favor of other sensibilities and so we must ask whenever we support development, what will be the cultural impact, and when we ask such questions and introduce new concepts into the conversations, there will always be those telling us we should not be doing so because control of the public narrative is a political instrument.
Meanwhile, following the path of speaking one’s own voice opens up doors in unique ways. I published on TealFeed, a knowledge sharing platform based in India which led to being invited to apply as one of one hundred featured newsletters on that platform and later to an introduction to Tealfeed’s financial partner firm. The equity company can help me to create my pitch documents and put my pitch into a stream of likely investors but I need to raise 5000.00 to hire the equity firm. There are several avenues for raising funds. I have not yet wrapped my mind around it - but I will.
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There are always other options but when a connection is made as a response to my newsletter where I express my philosophy and values, there is greater reason to feel confident in the relationship. Last week I met online with Rayan, the contact previously mentioned from the equity firm in India. The firm provides services in preparing the pitch documents and connecting our company with suitable investors. While waiting for the investment banker to join the meeting Rayan told me that the city where he lives in India Bengaluru, used to be called a Garden City but now it is mostly tech companies and it isn’t called a Garden City any more. However, Bengaluru is promoted online as a Garden City as well as the Silicon Valley of India. I wondered what he meant but the investment banker showed up and so that conversation did not continue.
I explained the three components of my plan, the network, which is a legal structure, a physical headquarters with a gallery and a productive training facility, and the brand identity as an online platform. The investment banker asked me how long I had had this idea but I didn’t answer that question as there is no precise date in my mind. I said that it is difficult to find support locally because everything is focused on new tech and that I was interested to see that in India ceramics is valued as a creative economic development asset, that seems very much aligned with the Andersen Design philosophy.
Later, after the investment banker had left the meeting Rayan said that the company can connect us with companies in India working in our field. It is an inspirational idea. In the eighties Andersen Design was a western company that didn’t move production overseas to “maximize profits” because we were in it for the work process which is why we now have a very unique productivity assets - created by and beneficial for productivity.
As all of this was occurring a new possibility opened up of well-situated local real estate. On the day of my meeting with the Indian investment firm It was written about in the Boothbay Register that the Village Store is closing. I know no more about it than what has been publicly written but would love to acquire the location. It is a perfect example of what a Museum of American Designer Craftsmen location looks like- small and modest size for a museum, a building that is part of the community, though I do not know if the museum will be part of the developing plans or not, it is the sort of building I envision for the museum, located in many different communities as a network. It is a building on a lawn in the middle of town. At a time when the BRDC is proposing to take lawns away from homes for ordinary people, the lawn takes on a greater meaning. If Andersen Design should be able to acquire this space it would not only be beneficial to Andersen Design but significant to the future development of the community since Andersen Design has long historical roots in the community going back to that rare moment in history when the middle class was dominant. Andersen Design was the first ceramic studio on the Boothbay Peninsula and around it a cluster industry grew. Andersen collectors handed the collections down from one generation to the next. Our East Boothbay location thrived as a destination market. We can be a game changer, a shift in the political balance of a community that is feeling like it is up for grabs by warring sides. Plant a stake with long roots!
The funds to hire the Indian equity company, will leverage further funding for the acquisition of real estate, hiring legal consultants to create the legal structure of the network, and launching the Andersen Design web platform in a with a higher profile. Currently I am working alone. I need a team. Funding should help with that too, especially once there is a physical headquarters, which, for starters can be a gallery for Andersen Design vintage work and can also feature other designer craftsmen and once we have a means of production set up again, new work from Andersen Design.
Do it and do it right, alligned with the original Andersen Design philosophy of creating a handmade product affordable to the middle classes but for a different era when society faces a new fork in the road-the highway to feudalism or off the beaten track toward a twenty-first century cottage industry. What’s the right way for a rural peninsula?