Here’s How The Government Can Fix Silicon Valley: Leave It Alone(techcrunch.com)
techcrunch.com
Here’s How The Government Can Fix Silicon Valley: Leave It Alone
http://techcrunch.com/2010/06/07/heres-how-the-government-can-fix-silicon-valley-leave-it-alone/
34 comments
Totally agree - TechCrunch really misses the mark sometimes but not on this one.
Wasn't Silicon Valley built by major government handouts in the form of defense spending?
"Handouts" is an excessively and inaccurately pejorative way of describing all that.
The military was buying real stuff, e.g. RADARs, that had real, measurable characteristics (can you detect a plane at this distance).
And it was used in real life:
In the mid-late '50s my father was the First Lieutenant on the USS Searcher (http://en.wikipedia.org/wiki/USS_Searcher_%28AGR-4%29), a radar picket ship stationed in the North Atlantic. While based in Newport, Rhode Island, she would occasionally stop in Boston for installation of a new RADAR system, most likely the product of Route 128 and/or Silicon Valley.
She would then steam out for a few days to shake it down, drop back to Boston to drop off the civilian technicians and return to station.
The military was buying real stuff, e.g. RADARs, that had real, measurable characteristics (can you detect a plane at this distance).
And it was used in real life:
In the mid-late '50s my father was the First Lieutenant on the USS Searcher (http://en.wikipedia.org/wiki/USS_Searcher_%28AGR-4%29), a radar picket ship stationed in the North Atlantic. While based in Newport, Rhode Island, she would occasionally stop in Boston for installation of a new RADAR system, most likely the product of Route 128 and/or Silicon Valley.
She would then steam out for a few days to shake it down, drop back to Boston to drop off the civilian technicians and return to station.
I was responding to the last paragraph of the blog post:
We don’t want handouts. We don’t want "public-private
partnerships," and we sure as hell don’t want legislation.
And I firmly disagree with your characterization of customer-vendor relationships as being any of the above three.
With the single exception of the post-WWII government supported basic and applied research model. This would sometimes produce the basis for new toys the military then bought, but it's most certainly not the sense in which "public-private partnerships" is used today.
Again, the government was buying "stuff", abstract stuff, I grant you, but we're not talking about e.g. "investing" half a billion dollars in a solar cell factory who's production will only find a market due to hefty government tax breaks.
With the single exception of the post-WWII government supported basic and applied research model. This would sometimes produce the basis for new toys the military then bought, but it's most certainly not the sense in which "public-private partnerships" is used today.
Again, the government was buying "stuff", abstract stuff, I grant you, but we're not talking about e.g. "investing" half a billion dollars in a solar cell factory who's production will only find a market due to hefty government tax breaks.
The poster you're responding to is correct. Michael Arrington uses heavy rhetoric, so we should probably translate "handouts" to mean expensive economic intervention which benefits an industry. Silicon Valley's fundamental innovations were driven by government research and intervention, through the military.
http://www.nytimes.com/2005/04/02/technology/02darpa.html?_r...
Arrington actually argues in favor of heavy government intervention: high speed trains, subsidized computers for children, etc. Just not the kind which might conceivably worry Silicon Valley investors.
I agree with some of the article's stances -- like on net neutrality and probably copyright.
http://www.nytimes.com/2005/04/02/technology/02darpa.html?_r...
Arrington actually argues in favor of heavy government intervention: high speed trains, subsidized computers for children, etc. Just not the kind which might conceivably worry Silicon Valley investors.
I agree with some of the article's stances -- like on net neutrality and probably copyright.
No he doesn't, he's saying "if the government wants to spend money on innovation" then do it in leveraging infrastructure. He makes it clear that this is a "first do no harm" sort of thing in the closing "Heck, put a woman on the moon. I don’t know if that last one will do much, but at least they’ll be busy not screwing up Silicon Valley while they’re at it."
Governments like to spend money, he's suggesting what he sees as the least harmful ways to do that, not suggesting, at least in this post, that they do it in the first place.
(While he's not making it here, there's a strong argument to not do "unnecessary" government spending since it crowds out what the market would choose. Every dollar borrowed to build high speed trains is a dollar plus overhead not available to fund a startup.)
Governments like to spend money, he's suggesting what he sees as the least harmful ways to do that, not suggesting, at least in this post, that they do it in the first place.
(While he's not making it here, there's a strong argument to not do "unnecessary" government spending since it crowds out what the market would choose. Every dollar borrowed to build high speed trains is a dollar plus overhead not available to fund a startup.)
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The military played a huge part in the growth of the Valley. Here's Steve Blank's presentation: The Secret History of Silicon Valley. http://www.youtube.com/watch?v=ZTC_RxWN_xo
That was a part of it to be sure, but I wouldn't say it was entirely "built" by defense spending alone:
http://en.wikipedia.org/wiki/Silicon_valley#History
Political and economic conditions are also vastly different now than they were in the 1950s, so it's apples and oranges to compare today's U.S. government to that of Eisenhower's time.
http://en.wikipedia.org/wiki/Silicon_valley#History
Political and economic conditions are also vastly different now than they were in the 1950s, so it's apples and oranges to compare today's U.S. government to that of Eisenhower's time.
It certainly wasn't built on defense spending alone. But after a phrase like "I’ve always believed that government tends to screw up whatever it touches", he comes across as a bit silly.
It's quite arguable that government (i.e. the US Federal one) has gotten a lot less competent as of late, compared to the post-WWII through the '50s period. He's only 40, the government he's directly experienced is much later than the Silicon Valley seeding period we're talking about.
There are a whole lot of things you could (and people do) argue. Doing so is probably best left to other sites, but I guess I just don't like those sorts of statements. The government screws some things up, just like it gets some things right. Same goes for people and companies.
The author doesn't seem particularly opposed to handouts:
If the government wants to help innovation in this country they should get busy with infrastructure. Lay fiber to every home and business in the U.S. Actually start building some of these high speed train networks to make travel easier. Get computers into the hands of every child in the country as soon as they are physically able to press buttons.
The article mainly seems to be asking for better regulation/handouts, not none. Except for the last paragraph.
If the government wants to help innovation in this country they should get busy with infrastructure. Lay fiber to every home and business in the U.S. Actually start building some of these high speed train networks to make travel easier. Get computers into the hands of every child in the country as soon as they are physically able to press buttons.
The article mainly seems to be asking for better regulation/handouts, not none. Except for the last paragraph.
The entire federal budget was about 500 billion in 1960, inflation adjusted. The current federal budget is nearly 3 trillion. Yet today, we seem to be spending less money building infrastructure investments that create economic booms and more money to pay people to sit around. Perhaps he's arguing that we should be spending less on entitlement programs (handouts) and more on infrastructure investments like high-speed internet.
See my response to politicalist; at least in this posting, he's not, which is particularly clear if you continue the above quote.
The government is going to screw up the delicate system of venture funding how, by eliminating the loophole that allows them to dodge taxes on the carry income they earn for managing other people's money?
I know there's multiple things on the table that could impact VCs (onerous reporting requirements for small investments among them), but it's hard to judge them when the valley (Arrington clearly among them) is so obviously militant about retaining bogus tax loopholes.
I know there's multiple things on the table that could impact VCs (onerous reporting requirements for small investments among them), but it's hard to judge them when the valley (Arrington clearly among them) is so obviously militant about retaining bogus tax loopholes.
Strawman: Arrington specifically referenced Dodd's insane regulations + net worth increase in the latter's financial regulation bill, which most certain would have screwed things up. As it is, the current compromise of excluding an angel's primary home from his calculated net worth is going to remove a lot of angels from the game.
I'm referencing Arrington's comments on Feld's blog.
Could you supply a link (doesn't have to be to the exact comment)?
Google "VC carry interest". Feld's blog post owns the search results page for it.
The first page of my Google results doesn't even have a link to his blog.
My top 100 for [VC carry interest] include no Feld links, either. Perhaps TPtacek is seeing highly personalized Google results?
Sorry, add "tax" to your query. But if it doesn't come up this time, I'm sure you can find Feld's post yourself.
Still no luck, and since it is you who is claiming that Arrington is referring to the carried interest tax hike proposal "screw[ing] up the delicate system of venture funding" (something not evident in his comment on Fred Wilson's blog noted by gojomo), it is incumbent upon you to specifically support it rather than sending us on a wild goose chase.
[deleted]
You must mean Fred Wilson, because this post meets your description (including an Arrington comment), while no feld.com posts do:
http://www.avc.com/a_vc/2010/05/why-taxing-carried-interest-...
http://www.avc.com/a_vc/2010/05/why-taxing-carried-interest-...
Crap, sorry.
VentureBeat made a valid point that an earlier version of the Senate's financial reform bill created a big problem for venture-funded startups, by requiring an SEC filing and associated 120 day waiting period for all companies seeking funding. http://venturebeat.com/2010/03/26/angel-investing-chris-dodd...
However, this language was removed during the floor amendment process, but Arrington doesn't mention that small example of the state acting sensibly (the Senate, no less--which is arguably the most dysfunctional institution in the whole apparatus.) http://www.techjournalsouth.com/2010/05/senate-approves-fina...
However, this language was removed during the floor amendment process, but Arrington doesn't mention that small example of the state acting sensibly (the Senate, no less--which is arguably the most dysfunctional institution in the whole apparatus.) http://www.techjournalsouth.com/2010/05/senate-approves-fina...
That's one sentence in a wide ranging essay on policy and he properly qualified it with "that could have".
It's hardly "acting sensibly" when something that would have devastated angel funding was even on the table, let alone that it took a major effort to mostly fix it with a comprise that will remove a bunch of angels from the game.
It well supports his thesis and especially his preceeding sentence: "Our government is just way too interested in mucking around in Silicon Valley by creating and enforcing rules based on little or no understanding of the consequences."
It's hardly "acting sensibly" when something that would have devastated angel funding was even on the table, let alone that it took a major effort to mostly fix it with a comprise that will remove a bunch of angels from the game.
It well supports his thesis and especially his preceeding sentence: "Our government is just way too interested in mucking around in Silicon Valley by creating and enforcing rules based on little or no understanding of the consequences."
This article really doesn't make any sense. My support of network-libertarianism notwithstanding, Arrington's major bone to pick is raising the angel limit, and his opening paragraph is about how Obama hasn't pushed through enough legislation to benefit the valley?
I don't get it. Seems like an article written out of frustrated cognitive dissonance, not one out of any cogent thinking.
At the end of the day, the system is the system. It's way easier to work the system's rules to change it (especially with the wealth that silicon valley has) than to ignore the system and tell it to go away.
I don't get it. Seems like an article written out of frustrated cognitive dissonance, not one out of any cogent thinking.
At the end of the day, the system is the system. It's way easier to work the system's rules to change it (especially with the wealth that silicon valley has) than to ignore the system and tell it to go away.
Given his view on the government's role in Silicon Valley, why didn't he endorse Ron Paul? Did he just ignore him?
What a heap of self-serving, nutrition-free bullshit.
Mostly because of the broken promises. From my interview with [Barack Obama, pre-election]:
He is staunchly in favor of net neutrality, and has promised to make it a priority to reinstate it in his first year in office. He has proposed intelligent programs for increasing technology education and access to children. He doesn’t believe the FCC went far enough in their proposed rules for opening up the 700MHz spectrum auctions. He wants to see increases in the number of H1-B visas given out each year. He strongly supports research into renewable energy sources and he has a realistic, market based approach to capping carbon emissions.
None of these things happened, nor seem likely to happen under his presidency.
But it’s more than broken promises. Our government is just way too interested in mucking around in Silicon Valley by creating and enforcing rules based on little or no understanding of the consequences. A perfect example – recent proposed financial reform legislation by Senator Chris Dodd added on a few random provisions that could have devastated Silicon Valley’s delicate venture capital ecosystem.
So basically government would be good if it delivered specific results that you like but it's bad because some of its proposals would lead to results that you don't like.
Net neutrality? Liked by tech companies, loathed by communications companies. Shut down (at least temporarily) by the supreme court, not the action of the executive. Meanwhile the FCC is drawing up a new policy which would enforce net neutrality, ariousing the ire of libertarians and those who think governments shouldn't tell telcos and ISPs how to operate their routers and switches.
Spectrum auctions, I have not paid attention to. Neither has Obama, perhaps.
H1-Bs? Good for investors in tech industry and holders of advanced STEM degrees, both of whom need each other. Not so popular with voters, many of whom feel the program has been abused by employers who want lower wages and onerous employee commitments. Of course some objections are also grounded simple xenophobia/racism, but given the unlucky coincidence of high unemployment and a relatively large population of illegal residents, overcoming the popular antipathy to importing more workers from abroad is extremely challenging in political terms.
As for renewable energy/carbon markets, surely it can't have escaped Arrington's attention that issues of fuel sources and environmental policy are among the most bitterly disputed policy debates between the two main parties, and that the administration is opposed from the left by hippies who think solar panels are free and anything which smacks of technology or markets is evil, and opposed from the right (at least until very recently) by a large body of people chanting 'drill baby drill'. Not to mention the more substantive questions of just how we should fund the transition to renewables, which technologies we should prioritize, and what effect a mandatory market for carbon credits would have on energy costs and economic growth.
So the financial reform bill first arrived in Congress with a policy tweak that might have limited the amount of investment $ for startups if interpreted over-literally by the two regulatory agencies involved. After a fuss was made, the provision was excised as part of the normal legislative process, and nobody went broke or had to go to court or got saddled with massive new legal compliance costs because the policy tweak never even became law.
This editorial is shallow and insubstantive, amounting to little more than 'government never gives me what I want and sometimes saddles me with things I don't want. All I want is to have a good time and government keeps ruining it for me and my friends. I hate you, government!' and since there's always a ready audience of people who like to complain about the government and how useless it is, at least some of his readers can be relied upon to cheer this tantrum - though looking at the TC comments, I see I'm not alone in my skepticism.
Mostly because of the broken promises. From my interview with [Barack Obama, pre-election]:
He is staunchly in favor of net neutrality, and has promised to make it a priority to reinstate it in his first year in office. He has proposed intelligent programs for increasing technology education and access to children. He doesn’t believe the FCC went far enough in their proposed rules for opening up the 700MHz spectrum auctions. He wants to see increases in the number of H1-B visas given out each year. He strongly supports research into renewable energy sources and he has a realistic, market based approach to capping carbon emissions.
None of these things happened, nor seem likely to happen under his presidency.
But it’s more than broken promises. Our government is just way too interested in mucking around in Silicon Valley by creating and enforcing rules based on little or no understanding of the consequences. A perfect example – recent proposed financial reform legislation by Senator Chris Dodd added on a few random provisions that could have devastated Silicon Valley’s delicate venture capital ecosystem.
So basically government would be good if it delivered specific results that you like but it's bad because some of its proposals would lead to results that you don't like.
Net neutrality? Liked by tech companies, loathed by communications companies. Shut down (at least temporarily) by the supreme court, not the action of the executive. Meanwhile the FCC is drawing up a new policy which would enforce net neutrality, ariousing the ire of libertarians and those who think governments shouldn't tell telcos and ISPs how to operate their routers and switches.
Spectrum auctions, I have not paid attention to. Neither has Obama, perhaps.
H1-Bs? Good for investors in tech industry and holders of advanced STEM degrees, both of whom need each other. Not so popular with voters, many of whom feel the program has been abused by employers who want lower wages and onerous employee commitments. Of course some objections are also grounded simple xenophobia/racism, but given the unlucky coincidence of high unemployment and a relatively large population of illegal residents, overcoming the popular antipathy to importing more workers from abroad is extremely challenging in political terms.
As for renewable energy/carbon markets, surely it can't have escaped Arrington's attention that issues of fuel sources and environmental policy are among the most bitterly disputed policy debates between the two main parties, and that the administration is opposed from the left by hippies who think solar panels are free and anything which smacks of technology or markets is evil, and opposed from the right (at least until very recently) by a large body of people chanting 'drill baby drill'. Not to mention the more substantive questions of just how we should fund the transition to renewables, which technologies we should prioritize, and what effect a mandatory market for carbon credits would have on energy costs and economic growth.
So the financial reform bill first arrived in Congress with a policy tweak that might have limited the amount of investment $ for startups if interpreted over-literally by the two regulatory agencies involved. After a fuss was made, the provision was excised as part of the normal legislative process, and nobody went broke or had to go to court or got saddled with massive new legal compliance costs because the policy tweak never even became law.
This editorial is shallow and insubstantive, amounting to little more than 'government never gives me what I want and sometimes saddles me with things I don't want. All I want is to have a good time and government keeps ruining it for me and my friends. I hate you, government!' and since there's always a ready audience of people who like to complain about the government and how useless it is, at least some of his readers can be relied upon to cheer this tantrum - though looking at the TC comments, I see I'm not alone in my skepticism.
What Government should do is lay the groundwork to incentivize a coast to coast robust fibre optic network with fair access for all it's inhabitants. Fast, cheap, reliable communications access is the new transportation network. There are roads and highways that go to every location you can find on a map in this country. Why can't a lot of these places get good internet connections?
Speaking of transport, the Government can just keep bettering our transportation infrastructure. You know, all the shit we need to exist so that UPS can deliver our Amazon orders overnight.
Has anyone here been on a flight recently? It sucks. I'm just thankful when I land in one piece, safely. Let's get those newfangled super trains functioning. What's wrong with America when places like France and China have train networks that make us look like we're in the stone age?