Tuesday, February 10, 2009

Email Interview with New America Foundation Senior Fellow Joe Mathews

- The level of engagement in state politics and government by Silicon Valley and its leaders. is it on the rise? the decline? Why?

Well, Government spending as a percentage of GNP continues to rise as GNP growth falls. Silicon Valley is full of entrepreneurs that identify problems and solve them in a variety of ways. I think the Silicon Valley has recognized a big problem in government, which to some represents an opportunity for change.

- we're seeing more candidates for statewide office from Silicon Valley.
Is there an explanation for that that goes beyond the interests of the individuals who are running?

Yes. I think government is broken for entrepreneurs and venture capitalists. Sarbanes Oxley costs a fortune, so great growth companies can't afford to go public. FAS 157 forces mark to market for venture capitalists, who then have to report short term pricing on long term assets, so the investors get scared away. 409A makes it so that companies have to report income for stock options. All of these regulations were written for very large companies. Small business creates all the net new jobs in our country and they are being strangled out of existence by regulators who are focused on big businesses.

Silicon Valley, the greatest source in the world for innovation, the pride of the American Dream is being threatened, and the people of Silicon Valley know it either explicitly or viscerally. Some of the best of them are trying to do something about it.

Has that led to more interest in state issues in Silicon Valley?

Yes. State and Federal. I personally don't know why California has to add more regulation on top of the already burdensome federal regulations, but they do.

Or more political competition within the valley?

I think people of the Silicon Valley all know something is wrong with government, but they don't all know how to fix it.

- on what state policy areas are we seeing the most engagement from Silicon Valley?

Education is a big one. K-12 costs us a fortune and the biggest state ranks somewhere between 47th and dead last in math and science. We are supposed to be the technology capital. Another one is H-1B Visas. I think anyone who comes to the US and gets a master's degree in science or business should get an immediate work visa. The idea that California educates the best and the brightest from all over the world and then, when they are finally productive, deports them so they can't build the next Google here is ludicrous. Environmental issues are a third one.

People in Silicon Valley don't want to be in a situation where they run out of energy. So they are looking for alternatives. It is no surprise that the Tesla didn't come out of Detroit, but came out of the Silicon Valley. At Draper Fisher Jurvetson, we have gone after the environmental problem through the funding of start ups. BrightSource uses solar thermal technology and may be driving enormous energy supply for Californians. I personally think the environmentalists should be chanting, "more nukes." Nuclear power is proven to be cleaner, cheaper, cooler and lower in greenhouse gases than most alternatives, and it can actually make a dent in our fossil fuel use. Solar, Wind, Thermal, etc.

all add up to less than one percent of our energy use.

education? workforce development? environment and energy? Are there areas where we should be seeing more engagement? (I wonder about transportation and infrastructure; the University of California and the education of engineers; wage and hour rules; and tort reform).

Tort reform really needs to take place. Loser pays would really work better. It would keep deviant lawyers from launching low risk, high return lawsuits at businesses. I also think that class action lawsuits should have to be agreed to by a majority of the class who wants to sue before they can be launched. Right now, one shareholder with one share can make a great living suing every company he wants.

- what ideas, if any, do you have for connecting Silicon Valley and Sacramento in a more productive way?

This sounds like dangerous socialist thinking.

How do you get folks in SV interested and engaged in state affairs, when they're so busy with their companies?

They only get interested when the government is failing or messing with their lives. As it is now. Otherwise they would naturally deem it to be unproductive time.

- we saw some major SV companies take a strong stand against Prop 8.
Does that experience suggest a path to greater engagement?

No, I think people in the Silicon Valley don't want the government to determine their lifestyle.

-is the current infrastructure of engagement in the valley -- i'm thinking of technet, slvg -- enough?
For the revolution we need? Probably not. If it is just there to work around the edges, it is too much.

Overall, I'm interested in these questions because of frustration: here you have the state of California facing crisis on several fronts, and a profound need for innovative solutions. And the most creative, innovative part of the state does not seem as engaged as it might be in coming up with solutions. (Of course, the same could be of many other areas and industries in California).

Yes. With the economy taking a hit, people are focused on their businesses as they should be. I have suggested a number of cost saving alternatives to the Governor. I hope he implements them.


Michael F. Martin said...

So what's the cleanest way to improve corporate governance assuming we get rid of SOX? For my money, I say we require public disclosure of cash-flows from all accounts controlled by a corporation, and then let anybody who's interested have a shot at forecasting results instead of entrusting everything to management and directors whose incentives are not well-aligned with shareholders in many instances.

People keep telling me that all of the information was there for people to see that we were headed for a crash. Sure it was. But how easy was it for non-specialists to trace through and confirm the arguments made by specialists?

Michael F. Martin said...

The underlying cause of the problem is that there is some economy of scale in deadling with government in its current institutional forms. Whenever new legislation or policies are considered in Washington and private voices are sought for feedback, it's the bigger ones that get called. But they're not such great representatives for the new entrants, are they?

But there are already new channels, new veins and arteries, for exchanging informaton between the multitude of smaller businesses and the people in the seats of power.