ARTICLE DATE: 01.20.09
John C. Dvorak PCmag.com Article
Today, as I write, Obama takes the oath of office and a new era is born. Ideally the new president will make some changes in the direction of the country. But will any of this fix the doldrums in the computer scene? Can we get back to 1997? Please?
Obama’s trinity of messages—Hope, Change, and Yes, we can—earned him a victory in November. These catchphrases are now out the window: We hoped for and got our change from Bush to Obama. That’s a done deal. And he won, so yes he could.
During the run-up to the inauguration everyone was trying to get into the act. Hollywood went renegade and is now trying to develop themes and catchphrases from the wannabe propaganda ministers who think they know better. This first horrible video emerged during the election and exploited children; now there’s the “I Pledge” video, which I find hard to take—and very pretentious.
The structure of the Obama campaign invited all this freelance campaigning, and now it has become a distraction. Luckily for us, the Silicon Valley technologists, including Eric Schmidt, John Doerr, and many of the Valley’s deep pockets, were big into Obama. A few will be on the podium when he takes the oath of office. Unless these guys drop the ball completely and lose the ear of the President overnight—as in “Thanks for the money, chumps, see you in 2012” —things should get back on track and we can get out of this slump.
We Must Reemphasize R&D
I think Obama needs to reemphasize R&D, which means two simple things: First, a return to the good old Research and Development days; second, a return to the days when a small company could get financing from an IPO—the initial issuance of stock.
People don’t generally realize that R&D alone is what made the personal computer revolution and the Internet. Period. And I’m talking about the kind of R&D that is stimulated by huge tax benefits or an out-and-out government handout. This is a good use of government money.
No matter what you think about the virtues of the corporation, hardly any dedicate much effort to R&D unless it’s related to marketing. And while some interesting patents do appear from these companies, few are on the scale or importance of the invention of the first transistor, done at Bell Labs.
Two things have changed since the personal computer revolution began. The way R&D is taxed is not nearly as beneficial as it was during the era in which Novell developed its networking scheme. And just as important, the onerous Sarbanes-Oxley law was passed.
Sarbanes-Oxley Must Be Repealed
Sarbanes-Oxley makes it nearly impossible for an American start-up to make a public offering and survive it. Designed to curb the excesses and crookedness that lurked behind the Enron scam, MCI, and other financial catastrophes that took place in the early part of the decade, this law contributed to the out-and-out financial meltdown we are now witnessing. And how did it benefit anyone?
What Sarbanes-Oxley has done is add an outrageous reporting burden, which costs an estimated 4 percent of revenue to implement. All American corporations are immediately put at a disadvantage to the tune of 4 percent off the top. And what’s the point of these new requirements? Simply to get accounting firms off the hook for cooked books or criminal activity. It has nothing to do with protecting the public, just protecting the accounting firms.
Venture capitalist Tim Draper once told me that a company has to make $300 million a year to be able to afford the overhead required to comply with Sarbanes-Oxley. Less than that and public corporations just bleed to death.
No matter what you think of Sarbanes-Oxley, one thing is very noticeable: Since the law’s inception, the number of little Silicon Valley start-ups that went public is close to nil. This is the worst IPO market in years, and it’s stifling the country. IPOs have been a traditional form of wealth creation and corporate protection unlike anything else. And you’ve seen what has happened without them. It’s no coincidence that the economy is tanking. Sure, you can blame the housing bubble. But I blame the whole financial collapse on Sarbanes-Oxley and a moribund Silicon Valley.
If any savvy business people can manage it, they need to get Obama to lead the way in repealing this stifling and corrupt law immediately. It’s done us no good whatsoever and promises to continue to slow progress. The country will be perpetually in a recession unless we realize what’s at the root of the problem.
Have a nice inauguration week.