End of the silicon honeymoon

 

 

Technology firms and Barack Obama

End of the silicon honeymoon

The love affair that technology firms had with America’s president is fading fast

Oct 28th 2010 | SAN FRANCISCO

 

PASSING through California on a mid-term campaign swing, Barack Obama made a point of stopping off to see Steve Jobs, the boss of Apple. He also hob-nobbed with executives from Google and other Silicon Valley companies. More than any of his predecessors, Mr Obama likes to pay homage to the titans of technology. They, in turn, have lavished him with praise and political donations. But now many tech folk are worrying out loud that his government is not as serious about supporting innovation as it purports to be.

 

The tech crowd thought the latest occupant of the White House was one of their own. An enigmatic politician with strong convictions, Mr Obama in many ways resembled the driven young spirits that venture capitalists love to take a punt on. And during the presidential campaign he wowed Silicon Valley with an elevator pitch that envisaged using social media and other technologies developed there to fashion a new and radical political order. Everything from Mr Obama’s addiction to his BlackBerry to his keenness to see maths and science promoted in schools suggested he would be the most tech-friendly president in history. Small wonder, then, that the techies swooned over him.

 

Nor is it surprising that many of them are now starting to feel badly let down. “There’s a strong feeling that this government really lacks direction,” says Gary Shapiro, the head of the Consumer Electronics Association. Many of its 2,000 members, he adds, are unwilling to invest in new initiatives while there is so much uncertainty about future policy.

 

That is a familiar refrain. Michael Splinter, the boss of Applied Materials, which makes equipment for the semiconductor industry, is one of several prominent executives who have called on the government to do far more to tackle measures that deter investment. Another source of friction is the reluctance in Washington to reduce hefty taxes on foreign earnings repatriated to America. As many American tech firms make a large share of their revenue and profit outside the country, they are particularly exercised by the government’s reluctance to lighten this burden.

 

To make matters worse, tech leaders have been outraged by Mr Obama’s willingness to demonise employers for outsourcing work to foreign countries, which is especially popular within the IT industry, and by his grating sermons on the evils of corporate greed. “We’re praised for creating jobs, while being spanked at the same time,” complains Mark Heesen of the National Venture Capital Association (NVCA), which represents funds that invest in technology start-ups.

 

This may seem like sour grapes. After all, the tech industry has been a big beneficiary of the Obama administration’s efforts to stabilise the economy. The government is investing over $100 billion to spur innovation in everything from renewable energy to health-care IT and electric cars. And it has at least taken some steps which the tech companies have long been lobbying for, including appointing a chief technology officer to promote technology innovations within the federal government, encouraging the Federal Communications Commission to roll out a national broadband plan and stepping up efforts to promote science and engineering skills in schools and colleges.

What about cleantech?

 

Tech firms and venture capitalists welcome these initiatives, but are deeply frustrated by a lack of action in other areas. For instance, many cleantech start-ups and their backers were betting that Mr Obama would push through an energy bill that would force America to embrace alternative sources of energy more aggressively. But that came a cropper in the Senate.

 

Entrepreneurs complain bitterly about the government’s failure to deal with frustrating red tape. Luka Erceg, the boss of Simbol Materials, a start-up that produces lithium and other metals from brines and effluent, reckons he has spent hundreds of thousands of dollars in legal and other fees applying for funds from the federal stimulus package. “There is just too much friction in getting capital to flow,” he says.

 

Then there is the thorny issue of trade. Some tech firms accuse the government of failing to put enough effort into trade agreements that would help to boost their sales. “We need fair and open markets and that takes a lot of work,” says John Chen, the chief executive of Sybase, an American software firm owned by Germany’s SAP. There are also worries that friction with China over exchange rates and other issues could damage the interests of American tech firms which have Chinese subcontractors and factories.

 

The tech industry is also concerned about the difficulty of importing skilled labour. Tight visa controls on highly qualified immigrants have been a huge headache for firms such as Microsoft and IBM. And they infuriate venture capitalists, who claim the controls are robbing America of entrepreneurial talent. Demand for visas from skilled workers dipped during the recession, but it is likely to become a problem again as the economy recovers.

 

Here again, Mr Obama has proved to be a disappointment. Many hoped he would try to convince Congress to separate skilled people from broader immigration issues, but he has been reluctant to do so. Might that change after the mid-terms? Mr Heesen of the NVCA points out that the notion of making it easier for America to attract the best and brightest has already won some bipartisan support. John Kerry, a Democratic senator, and Dick Lugar, a Republican one, have sponsored a proposal to give visas to some immigrants keen to start new businesses.

 

Tech folk have not given up on Mr Obama altogether. The Valley’s campaign donations to Democrats still greatly outpace those made to Republican candidates. No doubt they are hoping that the first “tech president” will at last live up to their expectations. In a speech in Silicon Valley, Mr Obama reiterated that he wants to create the conditions in America that would give rise to the next Google and the next Hewlett-Packard. But he will have to do much more to convince the tech industry that he really means it.

 

http://www.economist.com/node/17361426