As I write this, days after the 2012 presidential election, I’m probably not alone in feeling relieved that the political jeering and soapboxing that reached a feverish pitch during the seemingly endless campaign season has finally subsided. Yet amidst all the partisan cheerleading and name-calling, there has been some discussion of substance. One particular four-letter word has been used pervasively by candidates of all stripes: Jobs.
U.S. Department of Labor statistics show that an estimated 171,000 new jobs were created in the month of October. While better than expected, this increase still wasn’t sufficient to lower the unemployment rate (7.9%) as more people entered the workforce. Moreover, that figure doesn’t reflect millions more who have either left the labor force or remain underemployed, working part-time or in unskilled positions that don’t utilize their education and work experience. As The Economist put it, comparing U.S. growth to other developed countries, “It isn’t difficult to be the least dirty shirt in the hamper these days.”
Setting aside short-term questions of fiscal stimulus and macroeconomic conditions, in the long run, America’s challenge is to consistently create well-paying jobs in abundance for skilled workers, fueling economic growth and building a bridge from the industrial economy of the 20th century to a post-industrial “knowledge economy” that capitalizes on innovation, creativity and ingenuity. Political candidates can give all the stump speeches they want, but ultimately, the prescription is simple (though not easy): Entrepreneurial innovation.
As a business lawyer working with startups in technology and digital media every day, I’m fortunate to have a front-row seat as entrepreneurs create value out of thin air. As a native of Silicon Valley, I’ve witnessed the creative destruction of wave after wave of innovation as nearby corporate campuses repopulated themselves: From defense contractors to data centers, computer mainframe manufacturers to Internet search engines. Google, a company that didn’t even exist 15 years ago, is now valued at more than $200 billion and employs over 50,000 people. Apple was mostly a curiosity in the late 1970s, when I played with the children of some of its early employees and had the privilege of playing then-state-of-the-art games on their Apple II computers in glorious monochrome ASCII. Today, it’s one of the most valuable companies in the world, with a market capitalization of more than $550 billion, directly employing 47,000 and supporting a far larger economy, from contractors and suppliers to iOS application developers.
Granted most startups will never become another Apple or Google. Nevertheless, there are literally thousands of other examples scattered around the country, each of which grew from a founder or two with an idea to a successful growth company employing scores, hundreds or even thousands of skilled employees, with the attendant benefits to the local and national economy. In San Francisco alone, according to Mayor Ed Lee, the technology industry added 13,000 out of the 25,000 new jobs created in the past two years, bringing the city’s unemployment rate to the third-lowest in California. What can we do on the public policy front to turn the United States into one giant Silicon Valley?
Most of the technology industry is notoriously apolitical. Arising in a mostly unregulated business sector, even large players weren’t forced to come to the table in Washington until relatively recently, in sharp contrast to industries like securities, insurance or pharmaceuticals. There is tolerance for a wide range of personalities at startups, with individuality reflected as much in their political views as in their dress. Yet a series of issues have come to the forefront in recent years, each of which could have a meaningful impact on the future of tech entrepreneurship — and hence job creation and economic growth — in America:
- Immigration. The Startup Visa movement is aimed at a pain point that is near and dear to my heart. America’s immigrants opened more than a quarter of all new businesses in 2011; per capita, they’re more than twice as likely to do so as people who were born here. Particularly in scientific and technical fields, foreign-born individuals make up a disproportionately large percentage of the brightest minds, drawn to our world-class universities. (According to one study, 76% of patents awarded to ten major research universities had immigrant inventors.) I have met with countless entrepreneurs looking to found new ventures who are trapped in situations where they will be required to leave the country immediately if they leave the large company that sponsored their visa and strike out on their own. Whenever one of these talented individuals is forced to leave the country and founds a new startup back home, the U.S. misses an opportunity.
- Securities Regulation. In April 2012, Congress passed the JOBS Act, which authorizes equity crowdfunding and liberalizes some requirements regarding the issuance of securities by privately held companies. Now all eyes are on the SEC as it adopts regulations to implement the new law with the hope that it won’t get tied up in red tape. I’ve gone on the record as a vocal skeptic regarding equity crowdfunding, but as Bob Rice has written previously, there’s much more to the JOBS Act than that one section. Giving privately held companies maximum room to maneuver as they raise funding from accredited investors and participate in secondary markets can only strengthen the startup ecosystem.
- Intellectual Property. Patent reform is high on the list of priorities for most of the tech industry, particularly in the areas of software, Internet and mobile technology. This is a complex subject worthy of an article in its own right — stay tuned for my own take on the “Appsung” patent war — but the more entrepreneurs and investors educate themselves on the basics, the better equipped they will be to push for change in the right direction. Broadly speaking, meaningful patent reform could involve making it harder to patent insignificant or trivial innovations; severely limiting or abolishing software and business method patents; limiting damages that can be awarded; and reducing or shifting the enormous costs involved in patent litigation.
- Free Speech. The political firestorm over SOPA / PIPA may have been an inflection point in which ordinary Internet users (essentially the entire population) emerged as an interest group to be reckoned with in its own right. Many online business models would be eviscerated by laws like SOPA that seek to essentially deputize private companies as agents of content owners and law enforcement agencies, coerced into policing their own users (customers) at great cost in both dollars and resources.
- Healthcare Reform. Yes, really. Data from Massachusetts’ so-called “Romneycare” experiment is still coming in, but logic dictates that reducing or eliminating knowledge workers’ dependence on employers for health insurance will increase the mobility of labor — enabling aspiring entrepreneurs to quit their “day jobs” and focus full-time on new ventures, for example, or talented engineers and business people to migrate from large companies to smaller, early stage startups that haven’t yet reached the stage where they can afford comprehensive employee benefits.
Reasonable minds can differ on all of the above topics. Nevertheless, with the notable exception of healthcare reform, political polarization along partisan or ideological fault lines is less likely on these subjects than in many other areas of public policy. That presents the tech entrepreneurship community with a genuine opportunity to influence outcomes. Regardless of the party affiliation of the elected officials who represent your state and district, giving voice to these concerns can help push laws and regulations in the direction of startups, entrepreneurs and their investors — creating more good jobs, more economic growth, increasing productivity through innovation, and preserving America’s clearest comparative advantage in an increasingly competitive global economy.
As if on cue, Bloomberg BusinessWeek published an article the day after this post entitled Stanford’s Gift to the World: Alumni’s Vast Economic Impact. Keeping in mind that this is one university, a report on one of the largest studies of its kind ever conducted found that:
- 39,900 active for-profit companies and some 30,000 nonprofit organizations can trace their beginnings back to Stanford
- Businesses with Stanford roots generate combined annual revenue of $2.7 trillion — which, if it were a nation, would make it the 10th largest economy in the world
- These businesses have created an estimated 5.4 million jobs since the 1930s
Further details on the study, as well as links to the full report and executive summary, can be found in this Stanford Report article.