[A]lmost every move the new Administration has made regarding entrepreneurship seems to be targeting at destroying it in this country. It has left Sarbanes-Oxley intact, added ever-greater burdens on small business owners, called for increasing capital gains taxes, and is now preparing to pile on cap-and-trade, double taxation on offshore earnings, and a host of other new costs. Even Obamacare seems likely to land unfairly on small companies.
Entrepreneurship has been the single most important contributor to the economic health of this country for at least a century now – and if you were going to systematically destroy that vitality, you couldn’t come up with a better strategy than the one Washington has put in place over the last six months.
Once you understand this dynamic [that big tech fears little startup tech more than it fears other big tech], a lot of the paradoxical recent business behavior in high tech suddenly becomes explicable. For example, why did the big tech companies embrace such regulations as Sarbanes and stock options expensing – even though they would cost them billions of dollars with no obvious gain? And why would they support a Presidential candidate who seemed to have little understanding of, or sympathy for, market capitalism and business?
Because it was the best strategy to crush the start-ups.
And there it goes. See below.
And for the most part, that strategy has worked. High tech has only seen a handful of new companies go public in the last five years – compared to hundreds per year before that. Less noticed is that this means most hot new start-up companies, instead of enjoying an IPO and becoming rich enough to compete full-on against the big boys, now can only grow to a certain size then offer themselves up to be bought by the giants. What had once been hugely valuable competition has now been reduced to a farm system for acquisitive mature companies. …
The Administration’s brute force handling of the Chrysler and GM take-overs, seemingly violating contract law in the process; its mutterings about managing executive bonuses; its creation of industry czars without the need for Congressional approval; and the prospect of endless debt, economic stagnation and runaway inflation waiting in the wings – all have to be making the same CEOs pretty darn nervous these days . . . and asking themselves if they’ve made a terrible mistake.
And that’s only the start. Intel, already getting hammered by a billion dollar-plus fine by the EU, is now facing a similar punishment from the U.S. Justice Department. And poor suck-up Google, which tried to be the President’s BFF, now finds itself facing multiple Federal probes regarding its recruiting policies and its book database settlement – not to mention a Justice Department that appears to be opposing it on net neutrality.
And you’ve got to figure that’s only the beginning. No doubt right now somebody in the White House is looking at the low levels of union membership in high tech and vowing to do something about it. And don’t forget anti-trust. And woe be it to any shareholders or creditors of a big tech company that finds itself in financial trouble as this recession drags on – you saw what happened to Chrysler’s shareholders and creditors.
I was talking to my mother the other day about something-or-other that one of my grandparents had sold and that that was it, man, game over, it’s gone forever for all us cousins and all future generations, because “none of us are going to make a mint. That doesn’t happen anymore.” Here we are working for startups and I keep waiting for everybody there to suddenly figure it out and ask, “What on earth are we doing this for?” There’s not gonna be an IPO, sonny. Google’s not gonna make your wildest dreams come true in this economy. And VCs aren’t gonna give you millions of dollars to make the next job right because how on earth would they ever strike it big if the most they can hope for is you building a steady, modestly profitable, incredibly bourgeois “small business”?
The scary thing to think about, though, is this: If what was cheap as chips in the 50s, 60s, even the 70s, is now dizzyingly unattainable to my generation (die, Boomers, die, etc), what sorts of things are we scraping by with that are going to seem like an equally hopeless gilded age to the next ones down the line? “Grandma lived in a 600 square foot condo! With a balcony! And trees outside! Golly it must’ve been like Versailles!” Or is it truly just that we’re being made to feel horrible about our prospects because of how screwed up the post-War economy was?