From left: Charlie Giancarlo, Reed Hastings, Brian Halla, Jerry Yang and Charlie Rose

Newly Feisty Tech Leaders

February / March 2007 By: Dean Takahashi Volume 5 Number 1

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With a Democratic majority Congress, leaders of the technology industry smell change in the air and opportunities to push their own agendas. Many tenets of the tech agenda span both sides of the political spectrum and the tech leaders call for fixing many of the country's problems, such as the sagging healthcare system, as other advocates do.

The new concern of tech leaders with the political direction of the country represents a turnaround from the laissez-faire attitude and political naiveté that prevailed in the past.

During a recent tour in Silicon Valley, the leaders of the TechNet group gathered at a dinner to describe how to make the technology industry more competitive on the global stage. Founded in 1997, TechNet is a bipartisan collection of CEOs and executives who collectively lead more than 1 million employees and want to promote the nation's competitiveness. Art DeGeus, a member of the executive council of TechNet, summed up the group's position as, "Avoid calamity, reduce friction, light fires."

DeGeus said that the country has to head off calamities in education, which is failing because fewer students are pursuing degrees in math and science. At the same time, he said U.S. immigration policies are discouraging talented technologists from practicing their trades in the United States. With China graduating 10 times as many engineers as U.S. schools, DeGeus said the U.S. could lose its edge in innovation.

Anti-immigrant legislation could seriously hurt U.S. competitiveness, since about 25 percent of the leaders for companies that have IPOs are foreign-born, according to Robert Grady, president of the National Venture Capital Association.

"We're closing the door to the best minds," said DeGeus.

Speaking at the Semiconductor Industry Association dinner during the same month, Brian Halla, CEO of chip maker National Semiconductor, said, "Can you imagine today if Andy Grove (the Hungarian immigrant who led Intel to great success) applied for a visa today and was told to go home?"

Bill Gates, chairman of Microsoft, said at another TechNet event at Stanford University that the country needs to invest in universities that have made the U.S. the leader in technology in order to keep pace with rivals such as China and India.

"The U.S. has a lot of things going for it and some things that will hold it back," he said. "The U.S. has to get used to the fact that our relative share of everything—€”economic, wealth and military power—€”will be more in line with the fact that we have only 5 percent of the world's population. The U.S. has been spoiled by being a leader for so long."

DeGeus also said that industry has to do more to head off global warming, protect innovators against the rising costs of patent litigation and curtail the growing costs of accounting regulations spurred by the Sarbanes-Oxely law. The law is creating friction because it costs small public companies, relatively, just as much to comply as big companies. That is discouraging companies from going public and thereby slowing economic growth. Tom Denniston, a partner at Kleiner Perkins Caufield & Byers, said that data shows that IPOs have slowed and that many American companies are considering going public in foreign countries in order to escape U.S. red tape. Charles Kenmore, CEO of start-up Anda Networks, says his company makes about $3 million in profits a year. By going public, he expects that the company could incur $3 million in compliance costs.

DeGeus believes that Silicon Valley can light new fires to solve problems such as global warming. California's new anti-global-warming law puts caps on emissions during the period from 2012 to 2020. John Doerr, a partner at Kleiner Perkins Caufield & Byers, said he believes that global warming could become irreversible in the next decade unless trends in pollution are reversed.
But in classic Silicon Valley can-do attitude, the tech leaders aren't just trying to get new laws imposed. They're also funding "cleantech" companies that could help solve the problem by coming up with more efficient sources of energy.
DeGeus said that the price of computing power continues to drop and that allows companies to design and simulate new materials that could replace fossil fuels.
"Getting the right energy policy is a matter of economic and national security," Doerr said.

He pointed to Bloom Energy, a Kleiner Perkins-funded startup that is creating fuel cells as a source of clean and limitless electricity. Floyd Kvamme, co-chair of President Bush's Council of Advisors On Science and Technology, said that his group is preparing to recommend that the country start building nuclear energy plants in order to keep up with its energy needs and reduce dependence on fossil fuels.

"This country needs 50 percent more electricity by 2030," he said. "How do we get that? We will recommend we return to the nuclear world."

At the same time, Kvamme said that renewable energy sources such as biofuels, ethanol, solar power and others must also be pursued. Today, nuclear energy accounts for 20 percent of electric power. If current plans to build six new plants move forward, the percentage of nuclear energy provided is still expected to drop to 15 percent, Kvamme said. Meanwhile, renewables account for 0.02 percent of energy today.

"Nuclear is not the whole answer," Kvamme said. "The public is frightened of it.
But there are many nuclear plants being built in the rest of the world."

Doerr said that such issues shouldn't be viewed as partisan. "We will not solve this issue by technology alone," he said. "We have to get the right policies in place."

Lezlee Westine, president of TechNet, said that TechNet will heavily lobby Congress now that it is controlled by the Democrats and may be more receptive to changes in policy. Among the immediate needs are to make R&D tax credits permanent and to increase funding for federal research agencies.

Kvamme said some progress is being made with improvements in funding for research and development at the National Science Foundation and other research agencies. Doerr criticized oil companies, noting that they spend less than one percent of sales on R&D.

Reed Hastings, CEO of Netflix and former chairman of California's board of education, said that the technology industry has become more savvy at its lobbying efforts during the past decade. "For us, this is enlightened self-interest," he said. "It's not just because we can't hire certain people. The question is what are the policies we need to make America lead."

Dean Takahashi is a reporter at the San Jose Mercury News. He wrote this article for Innovation.