May 19, 2015--Shark Tank Losers

Thus far there are seven officially declared candidates for the 2016 Republican presidential nomination, including Marco Rubio, Rand Paul, and Ted Cruz. Another three or four have expressed interest--former Texas governor Rick Perry, former New York governor George Pataki, former senator Rick Santorum. Five or six more are formally exploring the nomination--Jeb Bush, Scott Walker, Chris Christie. Among the latter two groups all will soon become declared candidates.

Another three have expressed interest, including Congressman Peter King of Long Island and Maryland governor Bob Ehrlich. Hovering is a group of 30 or more who at one time or another ran or thought about running and may surprise by jumping into the race. Among them are my favorites Michele Bachmann, Ted Nugent, Sarah Palin, and Herman Cain.

Realistically of these 50 or so candidates and potentials only four or five have a real chance of winning the nomination--Scott Walker, Jeb Bush, Marco Rubio, and perhaps Rand Paul. They are the only ones with big bucks behind them.

Perhaps another two or three could emerge from the pack because they appeal to the Republican base which ultimately can nominate even someone unelectable in the general election--a Mike Huckabee, Ted Cruz, or Rick Santorum.

Why then are former congressman Allen West, neurosurgeon Ben Carson, Indiana governor Mike Pence, and Ohio governor John Kasich either running like Carly Fiorina or posturing and thus signaling that they might like Bobby Jindal?

I call them the Shark Tank candidates--they are in the race knowing they will lose, but in losing wind up winning.

You know Shark Tank? One of my favorite TV programs, it is a reality show where small business owners present their products or services to a panel of very wealthy investors that includes Mark Cuban, among other things the owner of the Dallas Mavericks basketball team; Barbara Corcoran, real estate mogul; and software billionaire Kevin (Mr. Wonderful) O'Leary. Usually for a few hundred thousand dollars that the aspiring entrepreneurs seek to grow their businesses, they give up 10 to 50 percent ownership in their companies. The sharks who make the deal--investing their own money--then serve as mentors for their new partners.

In almost every instance the deals work out to be very profitable with sales typically doubling, tripling, or quadrupling over a year or two.

AirBedz was a winner. The owner received $250,000 for a share of ownership in a small company that makes air beds that inflate quickly because of their internal pumps. Kisstixx, a sexy lip balm was offered $200,000 and saw its sales skyrocket. AVA the Elephant, a plastic elephant that helps kids take their meds, secured a $50,000 investment and in turn saw its sales soar.

But the losers also tend to do very well. Scan, a mobile smartphone app that enables users to read bar codes, did not receive backing but as the result of being showcased on Shark Tank began to gross millions. As did Chef Big Shake, a seafood operation that calls itself the "home of the original shrimp burger."

Studies show that it is more the very fact of appearing on ABC TV and than being repeatedly rerun on CNBC than the money that supplies the lifting power. It is calculated that appearing on Shark Tank is worth $4-5 million in free advertising.

So, in this context, how much will it be worth, personally worth to, losers all, Newt Gingrich (yes, him) or Ben Carson or Rick Santorum to appear in televised presidential debates? Millions, some calculate in speaking fees, book contracts, and the biggest prize of all (chime in Sarah Palin and Mike Huckabee), a show of their own on Fox News.

February 28, 2014--Afghanistan 2006

Kevin O'Leary was a guest last week on CNBC's Squawk Box. He is the chairman of the $1.5 billion O'Leary Fund and a co-host of Shark Tank, a TV reality show that has budding entrepreneurs pitching their business ideas to self-made millionaire investors.

During his Squawk appearance he and the hosts got into a discussion about corporate tax rates. Currently, the U.S. federal rate is 35% and is in the news as Republicans in Congress are once more pressing to have it lowered to 25%, claiming that having a 35% rate puts us at a competitive disadvantage with corporations in other countries, even socialist ones such as France where the rate tops out at  33.33%. (And while they're at it, they want to cut individual top rates from 39.6% also to 25%.)

In the UK, the GOP points out, the top rate is only 23%, in Germany 29.55%, in Denmark 25%, Norway has a top rate of 28%, and in uber-socialist Sweden it is just 22%.

Taking even right-of-center hosts Joe Kernen and Becky Quick by surprise, O'Leary said he advocated a zero tax rate for corporate profits. The same rate that prevailed in Afghanistan in 2006.

To his astonished hosts who demurred, he argued that this would allow corporations to take their resulting increased profits and invest them in corporate expansion or investment in job-creating enterprises.

Becky Quick in particular went uncharacteristically ballistic. She is usually stone faced. It's her signature persona. Being inscrutable and unflappable. But O'Leary's proposal was even too much for her and she let him have it, lecturing him that people like her and him who are among the top 1% of earners should be willing to pay their fair share in taxes, at least as much as at present.

Rhetoric aside--and what she said was rhetoric infused--what she and other co-host Andrew Ross Sorkin failed to do was cite the overwhelming, widely-available evidence about the actual rate companies pay in taxes. Not the rate that's on the books.

If on average corporations pay, say, 25-30%, maybe there is a case to be made to lower the official rate to help make them globally competitive. If there is evidence that companies that have figured out strategies to pay less in taxes and as a result have been actual job creators, again, there may be a  case to be made to significantly lower taxes for all corporations.

But the evidence readily at hand was never presented. O'Leary was never confronted with the fact that on average, large corporations' effective rate is just 12.6% in federal taxes. Even taking into consideration what they pay in state and foreign taxes, their actual (as opposed to on-the-books) rate is 16.9%.

And there is no evidence that shows a positive correlation between effective tax rates and job creation.

I'm not sure how O'Leary would have responded, but at least the discussion would have been fact-, not opionion-based.

If I know these numbers from Congressional Budget Office studies, I do not understand why Quick and Sorkin, who do this for a very nice living, wouldn't as well.