OK, corporations are people too, but I never knew that a building could sue somebody.

Schilling has moved to join the estate of Veterans Stadium as a required third party.

I'm starting to feel kinda bad for Schilling.

I'm honestly not. I really want to like the guy, but he played a con on Rhode Island, and he's highly unlikely to pay a commensurate price.

As explained by Yglesias at Slate, Schilling was looking for $75M from the government because venture capitalists all said no. The state of Massachusetts then said no. Rhode Island wanted to bring 38 Studios to the state, but they had only $50M in their budget for loans to growing companies. So they allocated a brand-new $75M to that budget and gave it all to 38 Studios.

The primary bad actor here, of course, is the state of Rhode Island, who set $75M in taxpayer money on fire because they got played by Schilling and his company, but I think a secondary, still significant amount of blame also goes to Schilling.

(I'm also not expecting the forensic accounting to find that 38 Studios was a haven for ethical money management, but we can wait until that comes out.)

Quick question: If corporations are people, would an openly evil corporation like those you find in the movies be charged with murder? Because that totally sounds like the plot of a good movie.

At what point does Tommy Caffee have Michael Caffee take care of this?

The primary bad actor here, of course, is the state of Rhode Island, who set $75M in taxpayer money on fire because they got played by Schilling and his company, but I think a secondary, still significant amount of blame also goes to Schilling.

Unless Schilling was flat out lying (and I think he was more "optimistic" as business owners typically are) I put this on the state of Rhode Island. As you say, several other people passed on this deal but then RI jumps in and says "no no, we'll give you the money, here take some more!"

Just because Tom Sawyer offers to let you paint the fence doesn't mean you grab a brush.

Where is the money now? I doubt Schilling transferred it all to his Swiss bank account. I think it was paid out in overly-generous wages to an overly-large team of game programmers and marketing specialists. As such I would not say he "played a con". I would say that in this case the goal of the state of Rhode Island was to make it easier for businesses to grow and become stable and employ people in the long term. And they made political decisions to end up only creating jobs for two or three years instead of creating businesses with sustainable futures.

It doesn't seem that different from the million and one situations of a town telling some company that they don't have to pay taxes for the first five years if they set up their call center here and employ 150 of our worthless peons, and then the company leaves and takes its jobs elsewhere after 4.99 years.

There's a reason startups are financed with equity, not debt (leaving aside convertible debt). It was obviously a very foolish decision for Rhode Island to make. I don't begrudge Schilling taking it, although I would appreciate if he could tone down the anti-govt rhetoric - hypocrisy is always tough to swallow.

Further to #8, in fact in this case, everyone involved seems to have had good intentions.

Just because Tom Sawyer offers to let you paint the fence doesn't mean you grab a brush.

Right, but if Tom Sawyer is going around telling people that he just can't wait to blow $75M of taxpayer money on a video game startup, Tom Sawyer bears some secondary responsibility for blowing that money when someone gives it to him.

I don't begrudge Schilling taking it,

I do. I think that ethics don't stop at the point where business begins. When you run a company with dozens of employees, when you take out a huge loan from the state, you have an ethical obligation to run a good business, have a good plan, and be worthy of the loan.

EDIT: To clarify, everything I've read about 38 Studios suggests it was a vanity project with a business plan worthy of the underwear gnomes. That's the part where I blame Schilling. Good businesses fail, people can make no or few mistakes and still end up bankrupt. I'm not blaming Schilling just because of the results, but because my understanding is that Schilling's process was practically guaranteed to lead to this result. And when you run a large business and take out a loan from the state, it's not just yourself you're hurting with your bad business plan.

There's a reason startups are financed with equity, not debt (leaving aside convertible debt). It was obviously a very foolish decision for Rhode Island to make. I don't begrudge Schilling taking it, although I would appreciate if he could tone down the anti-govt rhetoric - hypocrisy is always tough to swallow.

Pretty much. It was just a lot of bad decisions all around. Can't blame a guy for chasing his dream, though, as quixotic as that dream may have been.

When you run a company with dozens of employees, when you take out a huge loan from the state, you have an ethical obligation to run a good business, have a good plan, and be worthy of the loan.

I agree with this. Schilling obviously isn't a very good businessman. He sounds like the prototypical crazy entrepreneur I run into a lot in my career. These people are often stunningly successful (at least for a period of time) because they don't believe in "impossible." If you look into the founding of a lot of great companies, many of them were started by people like this.

Two points on this. First: when times get tough, crazy entrepreneurs are not the person you want running a company, because they are typically not great at planning for the worst case scenario - they are optimists by nature, and their life experience confirms to them why things will turn out alright (they always have in the past). This can make them very difficult to deal with in crisis situations.

Second, it's the job of the financier to evaluate a company's business plan and its management team when making an investment. Schilling thought he had a good business, a good plan, and was worthy of the loan; all crazy entrepreneurs do. I don't fault him for that. I fault RI for not running a more thorough underwriting process and for concentrating all its credit risk into one loan. If I was a citizen, I'd be furious at the state for making the loan. But I understand why Schilling took the money, even if it's something I would not have done.

At what point does Tommy Caffee have Michael Caffee take care of this?

Every time I read about this story, I keep wondering why those two haven't stepped in yet.

Further to #8, in fact in this case, everyone involved seems to have had good intentions.

Sure but you can be liable even though your intentions were not pernicious. Here you have an inept government with an inept business man and, on the surface, inept bankers. The public ends up footing the bill, because everyone is too ignorant to understand how to effectively analyze a business. Kudos to all and their good intentions.

I do. I think that ethics don't stop at the point where business begins. When you run a company with dozens of employees, when you take out a huge loan from the state, you have an ethical obligation to run a good business, have a good plan, and be worthy of the loan.

I'm sure Curt didn't start out thinking he had a bad business, a bad plan, and was unworthy of the loan. Schilling deserves blame for being incompetent, but not unethical IMO. Its like blaming a crappy ballplayer for not trying hard enough. Its not that the guy isn't trying hard enough, its that he sucks. Its not his fault the manager plays him all the time. Its his fault he sucks.

I do. I think that ethics don't stop at the point where business begins. When you run a company with dozens of employees, when you take out a huge loan from the state, you have an ethical obligation to run a good business, have a good plan, and be worthy of the loan.

EDIT: To clarify, everything I've read about 38 Studios suggests it was a vanity project with a business plan worthy of the underwear gnomes. That's the part where I blame Schilling. Good businesses fail, people can make no or few mistakes and still end up bankrupt. I'm not blaming Schilling just because of the results, but because my understanding is that Schilling's process was practically guaranteed to lead to this result. And when you run a large business and take out a loan from the state, it's not just yourself you're hurting with your bad business plan.

I think you are presuming that Schilling is intelligent enough to understand that his business model was a joke. I don't share in your presumption.

I do agree everyone probably intended for this to do well, they were just too incompetent to understand that it never had a chance.

You see this everyday in every town in America. Someone has an idea for business but doesn't analyze the challenges ahead and the environment necessary for that business to succeed. Next thing you know, you end up with vanity cupcake shop in the ghetto with the owner shocked the business failed because, dammit, his/her cupcakes are so damn tasty!

Its like blaming a crappy ballplayer for not trying hard enough. Its not that the guy isn't trying hard enough, its that he sucks. Its not his fault the manager plays him all the time. Its his fault he sucks.

Businessmen bear responsibilities that ballplayers don't. A businessman bears a responsibility to his employees to run his business well, and he bears responsibilities to his creditors - particularly if those creditors are the public - to take loans he can repay.

I'm working with a sort of negative liberty model here - Schilling's ethical responsibilities begin when he starts hurting others with his lack of business competence. "I'm an idiot" isn't a valid excuse for hurting people.

I still remember the day an air bar opened up on Main St Philly. I think it lasted about a month before it closed.

Speaking of business...how dumb is it to invest in a bar?

The state should never have given him money. Period. End of story. Almost everyone else involved said no to Schilling and his crackpot idea. In terms of just the asking I can't see how Schilling is at fault. Now if he blew the money on lush carpets and foie gras then he is at fault on how he spent the money.

I think you are presuming that Schilling is intelligent enough to understand that his business model was a joke. I don't share in your presumption.

I'm really not. Being deluded isn't nearly the get-out-of-moral-responsibility-free card everyone seems to be claiming it is. You have a responsibility not to be deluded. If you're deluded, that's your failing. If that failing leads to a huge loss of jobs and publicly-backed capital, you bear responsibility.

Again, primary responsibility here for the misallocation of public funds lies with the state, but I don't see how Schilling gets off scot free, morally.

Speaking of business...how dumb is it to invest in a bar?

Depends.

If you invest in a bar you have to be there everyday.

An air bar?

If you invest in a bar you have to be there everyday.

My brother is opening a bar in Pittsburgh and wants me to invest. I'm only knowledgeable on the consumer end of that business.

An air bar?

What a fantastically nutty fad that was.

Businessmen bear responsibilities that ballplayers don't. A businessman bears a responsibility to his employees to run his business well, and he bears responsibilities to his creditors - particularly if those creditors are the public - to take loans he can repay.

Schilling was the investor, not the CEO. He hired a management team to actually run the company. He basically paid $38 million of his own money (and is on the hook for a lot more) to his employees to produce a video game that was never completed. I don't think that, ethically, he owes them anything more. Every employee should know there is substantial risk in going to work for a startup.

My brother is opening a bar in Pittsburgh and wants me to invest. I'm only knowledgeable on the consumer end of that business

The first rule of family investing is don't.


Some absentee investing can be good. For instance if you get involved with a turn key type seller who has a good history it might be a good investment.

Schilling is giving entrepreneurship a bad name. Unless proposed by someone like Gates, all start-ups have to assemble a detailed business plan which lists sources and uses of funds, management investment, board, advisors, three to five years of pro forma financials and a prototypes of the new item in order to have any hope of funding at the initial stages or the angel or mezzanine level.

I'd love to see the paperwork that he submitted to the state describing his business model and plan.

Quick question: If corporations are people, would an openly evil corporation like those you find in the movies be charged with murder? Because that totally sounds like the plot of a good movie.

I suggest ENRON be played by Sir Anthony Hopkins.

Isn't it also a big assumption this was necessarily a bad business model/horrible incompetence? Businesses fail for a myriad of different reasons - bad business models and poor management are only a fraction of them. Could be the industry fundamentally changed in a way no one could anticipate, the recession hurt more than was anticipated, the technology just wasn't there, etc.

Has there been a detailing on why this failed? I'm guessing that will come after the audits.

Look, I'm no Curt Schilling apologist and I do find certain amount of schadenfreude in seeing free-market enthusiasts get their comeuppance when publicly subsidized, but I think people are jumping the gun in accusing Schilling of being unethical and/or terribly incompetent when its not clear he had much of anything to do with management.

I'd love to see the paperwork that he submitted to the state describing his business model and plan.

Did a little digging and fortunately since Schilling got the money from the state his business plan is publicly available.

The first rule of family investing is don't.

I'm not enthusiastic about the project. If I did it, it would be for familial bliss and I think I'd have to mentally write the money off. Family is a pain in the ass. I can't really win here.

An air bar?

Yes. They're really stupid.

The primary bad actor here, of course, is the state of Rhode Island, who set $75M in taxpayer money on fire because they got played by Schilling and his company, but I think a secondary, still significant amount of blame also goes to Schilling.

Governments piss away taxpayer money all the time. Aside from it being "Schilling is a Republican" related, I can't see why people who aren't bothered by the gazillions of other dollars governments piss away would be bothered by this.

My brother is opening a bar in Pittsburgh and wants me to invest. I'm only knowledgeable on the consumer end of that business.

You have to simply take a pretty hard look at how much your trust your brother as a bar owner, as well as your relationship with him, honesty-wise. I loaned my brother a four-figure amount to help finance and fix a house top to bottom. I was fine with that and it worked out fine, as he knows those things well and I trusted him to do well. But he also wants to open various businessness, and I probably wouldn't give him 100 bucks for that.


The first rule of family investing is don't.

I'd say it depends on the family, but YMMV, certainly.


EDIT: Just saw #32. Yeah, that's a bummer.

Schilling's the equivalent of the producer of Heaven's Gate or John Carter. If he acted in good faith and didn't lie, I can't see that he deserves any criticism for his ethics.

The fact that the economic climate is such that governments seemingly have to pay for jobs is a bigger problem than anything Schilling did. His story is more about the inherent problems with crony capitalism than anything else.

Governments piss away taxpayer money all the time. Aside from it being "Schilling is a Republican" related, I can't see why people who aren't bothered by the gazillions of other dollars governments piss away would be bothered by this.

They also print a bunch of money up, too, to distribute. It's kind of a crazy system, if you think about it.

You have to simply take a pretty hard look at home much your trust your brother as a bar owner, as well as your relationship with him, honesty-wise.

He's never done this before so I'm just assuming it will fail. It just seems like a tough, tough business. Plus, he wants to sell scotch in Pittsburgh. They're going to wonder why their Rolling Rocks are flat!

Governments piss away taxpayer money all the time. Aside from it being "Schilling is a Republican" related, I can't see why people who aren't bothered by the gazillions of other dollars governments piss away would be bothered by this.

People have a connection with Schilling as a public figure they don't have with thousands upon thousands of other startup doofuses who are all just random anonymous doofuses.

Businessmen bear responsibilities that ballplayers don't. A businessman bears a responsibility to his employees to run his business well, and he bears responsibilities to his creditors - particularly if those creditors are the public - to take loans he can repay.

I have to agree with other people here... this just sounds like you're blaming a guy for being ignorant. I have no doubt that Schilling had no clue about the kind of spending that was needed to make an MMORPG. However, in the end, when you have a bad business plan that is clearly just going to blow up all the money that's put into it, is that really the fault of the guy with the bad business plan or is it the fault of the person who sees the badness of the plan but gives him the money anyway?

If Schilling was paying himself on the side for something more than the market rates I'd hold him culpable for that amount. In fact, that was my first thought when I heard about this story. I was like "wasn't Kingdom of Amalur actually rated pretty well? Someone must be skimming something off the top." However, if there really was no wrongdoing and just a grossly inexperienced CEO getting in over his head, well... we don't blame the victims of scam artists for being ignorant and I don't see why we should blame a guy with a bad business model because someone else gave him money to pursue this.

But if it turns out that there was fraud involved I reserve the right to change my opinion at any time.

Governments piss away taxpayer money all the time. Aside from it being "Schilling is a Republican" related, I can't see why people who aren't bothered by the gazillions of other dollars governments piss away would be bothered by this.

Schilling's qualifications for running a video-game company - or even his qualifications for deciding which video-game company might be successful, if he truly hired a management team and absented himself from the day-to-day operations - appear to be that he was an excellent baseball pitcher who really, really liked playing MMORPGs.

If he just had to be in the video-game business, he could have easily invested in an existing company, rather than asking a government to subsidize his own vanity project.

His being a Republican makes Schilling more of a hypocrite, but the whole endeavor was stupid to begin with, and would be if he was a Republican, Democrat, Green, Tea Partier or Communist.

If he just had to be in the video-game business, he could have easily invested in an existing company, rather than asking a government to subsidize his own vanity project.

I agree. So he's a hypocrite. Yay. That doesn't distinguish him from scores of people who receive money from taxpayers.

This does sound like (Famous optimistic business owner + poor business acumen + ####sucking politicians) = Taxpayers money down the drain.

I agree. So he's a hypocrite. Yay. That doesn't distinguish him from scores of people who receive money from taxpayers.

But he was a baseball player and an attention whore, so that makes him a piñata for BBTF.

But he was a baseball player and an attention whore, so that makes him a piñata for BBTF.

Yes, but that doesn't allow enough intersection in the persecution complex Venn diagram.

His pinata status here is because he is a vocal Republican.

EDIT: Mind you I have no use for him. I think he's in some respects a blowhard who happened to be really good at pitching a baseball.

That doesn't distinguish him from scores of people who receive money from taxpayers.

It is virtually certain that Schilling's name and his fame/success in that part of the country helped him to get access to the pols who made the decision to give him the money. Also, he has been very outspoken about his political views on numerous occasions. Those are the reasons he is getting more blowback than another guy who did similar things would get, and why this is a story.

Can someone here who is knowledgeable about the topic substantiate exactly WHY they are so certain that the business plan was a joke and/or he's ignorant and/or the company was a terrible idea? Aside from the fact that, obviously, it didn't succeed?

It seems the consensus is that the business was doomed to fail, etc., but I have no idea why. I'm with everyone above in panning the crony capitalism and the fact that it's a shame that Rhode Island had to give the loan and lost so badly on it. I'm just not clear on those of the people above who are certain it was a disaster from the outset.

It is virtually certain that Schilling's name and his fame/success in that part of the country helped him to get access to the pols who made the decision to give him the money.

Yes. Just like any other well-connected person.

Are people actually surprised at how this works? It's what many of us have been complaining about for a long time.

I'm just not clear on those of the people above who are certain it was a disaster from the outset.

Internet be experts, yo.


Yes. Just like any other well-connected person.

This is pretty goofy.