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Primack: Lessons to learn from 38 Studios

BLOOMBERG FILE PHOTO/TONY AVELAR
THERE ARE four important lessons to learn from Rhode Island’s 38 Studios disaster, according to Fortune Magazine Senior Editor Dan Primack.
Posted 6/15/12

NEW YORK – There are four important lessons to learn from Rhode Island’s 38 Studios disaster, according to Fortune Magazine Senior Editor Dan Primack.

In order to prevent the next 38 Studios, Primack says politicians need to stop playing at being venture capitalists.

“Most professional venture capitalists lose money, so why would amateurs in political office do any better?” asked Primack in his article “4 lessons from Curt Schilling’s 38 Studios fiasco.”

If politicians insist on pretending to be venture capitalists, then they should share in the risk, said Primack, adding that “the most egregious part” of Rhode Island’s $75 million loan guarantee to 38 Studios was that it required no validation from outside investors.

In addition, “dogma mixed with dollars can be toxic,” said Primack, pointing toward Schilling’s outspoken conservative values.

Although the former Red Sox pitcher famously endorsed limited governmental power, he “begged” for film tax credits or a payment deferral when his company was unable to pay the interest on its loan.

“Not only was Schilling betraying his own public values, but he was also putting his company in a vulnerable position,” said Primack.

Primack’s final piece of advice was that it is difficult and rare for someone at the top of one field to reach the top of another, unrelated field.

“Schilling did try to hire experienced gaming execs to help fill in the blanks, but ultimately he was an ex-ballplayer in charge of a digital content corporation.”

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There is nothing wrong with Curt schilling trying to live his dream and attempting to finance it as best as he can.Clearly he had some poor financial advice or ignored it. He is allowed to do that.....some of history's greatest successes occurred when people took huge chances with their own money as well as that of others. RI should not be in the business of financing companies of that size and risk.The upside for was unclear at best. That being said, one big issue in 38 studios was the issue of disclosure. Its clear to me that there was not an adequate vetting process before the loan was guaranteed and unfortunately the monitoring of the loan was deeply flawed as well. The whole thing will be investigated for public corruption and we will likely find there were conflicts of interest. I don't believe Mr Carcieri was at fault and I hope we find out the truth soon enough so that we can refocus efforts on legislative misconduct regarding the Institute of Sport where there appears to be outright fraud across multiple state lines.

mg riley

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