-Caveat Lector- <A HREF="http://www.ctrl.org/"> </A> -Cui Bono?- @NY Vol. 5, No. 21 Issue 5.21 January 21, 2000 http://www.atnewyork.com Everything You Need To Do Business in Silicon Alley ^ < VIEWPOINT > ^ In the Age of Networks, All Roads Lead to Washington ^ ^ By Tom Watson ^ ^ Quick, name the most successful formal organization of human beings of the last century. You'd be tempted to name the fastest-growing companies - Standard Oil, General Motors, IBM, Microsoft. How about the New York Stock Exchange, the United Nations, or the Internet itself? Or perhaps, if you're sports-minded, the New York Yankees. Good choices, but not correct. The answer of course is the Federal Government of the United States of America. In little more than a hundred years, it went from the loosely centralized hub of an agrarian society to the power nexus of the world's most influential social and economic system. You can argue all you want over what causes the power to reside in the United States government -- is it cause and effect or effect and cause, did the Federal government save and preserve our capitalist system or does business thrive in spite of government? But you cannot argue that it is where the mightiest power resides. It is no accident that the Presidents we revere from that time, whether they were "big government liberals" or "no government conservatives," are the ones who increased the power of our central state. Both Roosevelts, Wilson, Truman, Johnson, and Reagan. In business, we love a free market. We are ardent capitalists. But in a century of awe-inspiring growth, and especially since the New Deal, we have never lived under a true free market economy. Our markets are highly regulated and policed. Our monetary policy is centrally controlled. We do not tolerate harmful trusts and monopolies. Our taxpayer-funded diplomats cut deals for us overseas. We subsidize this, we subsidize that. Our government guarantees financial instruments that underlay the bond markets and the savings accounts of average Joes. We all complain about taxation and regulation and the limits imposed by government. But we all work within a government-guaranteed safety zone and benefit from a balance between free market principles and the legislated version of "the greater good." The power of the U.S. Government has grown right along with the size of the gross domestic product, the total capitalization of the stock market, and the average American salary. The charts march in lock-step. But here comes the Internet. There are those who suggest that the network of networks is the greatest threat yet to strong centralized government. The theory goes something like this: the Internet is the ultimate populist tool and it allows its members to break free of the shackles of government, creating both "friction-free" markets and the possibility of direct democracy. The Internet, it is said, is chipping away at the power of the Federal government, returning it to both geographical communities and virtual communities of interest, a true and democratic decentralization. That, of course, is nonsense. The rise of the Internet is only increasing the power and reach of centralized government. And whether you're a Jeffersonian populist or a Hamiltonian governor -- and particularly, if you own a business -- the cool realization of that clear fact will influence how you operate in the Internet age. Why else would Kevin O'Connor hire a lobbyist? O'Connor is the driven CEO of DoubleClick, Silicon Alley's most successful homegrown company, the clear market leader in the Internet advertising space, and a company that's comfortable in its own skin. That skin has been carefully crafted by O'Connor, who, judging by his public remarks, is a committed free market man, not very big on government and its regulatory habits. His is a viewpoint shared by many of our nation's brightest and most successful technology executives. Notwithstanding its CEO's views, DoubleClick this month brought on Josh Isay, the former chief of staff for Democratic, big government type Charles Schumer, the junior U.S. Senator from New York. Isay, a liberal who has spent his career battling conservative Republicans, will be the company's director of public policy and government affairs, DoubleClick's link to the governmental bodies that will help to determine its future in the areas of regulation, taxes, exports, patents and the like. It was widely seen as both a good hire and the start of things to come. It's no accident that in the statements accompanying the announcement, DoubleClick executives spoke repeatedly about the need to "educate Washington" about the high tech industry and its needs. People on both sides, business and government, believe there is a disconnect between our booming technology sector and the Federal government. But there was some irony in a successful Internet company hiring a professional political operator to "educate" the body that created the Internet. The strange thing is that the Federal Government has something of an odd first-mover advantage (to use the parlance of the day) in the Internet space. Sure, most Federal Web sites are just barely passable, we need a national infrastructure policy, and not a single Congressman you meet seems to understand our business. But there are several ways in which the original funding of the Net by the Feds is coming back to pay off better than any venture investment in history. It's the EBay of governance. First of all, the rise of the Internet has extended the reach and power of our unofficial language throughout the wired world. Who can doubt the entrenchment of English as the language of the Internet? Will anyone invest the time and money to displace it? And where is the seat of power in the English-speaking world? Secondly, we're on the cusp of fighting another (and perhaps the last) battle over states' rights in this country, and Internet taxation is the battlefield. Clearly, this will be a sizeable fight, one that splits parties. A growing number of governors are growing wary of the Internet as a tax-free commerce zone, predicting that eventually, their coffers will grow poorer as shoppers leave the local malls and Main Street for Web stores. It's ironic that the most ardent anti-tax advocates tend to be fairly conservative Republicans, long-time boosters of a smaller central government, because their stand against Net taxes only makes the Federal Government stronger. Why? Because the only solution will be a national one, with revenues redistributed by our central government. The longer and more protracted the battle is, the more likely a national settlement. Internet taxation is clearly coming, and it will devolve power from the states on a permanent basis. Thirdly, the raft of vital Internet-related issues of our day, including taxes, privacy, security, and free speech, will all be fought on the national level and will all require the involvement -- if not the intervention -- of the Federal government. When the "friction free" crowd argues for self-regulation, who do they make that argument to? Who has to grant the always-limited ability to self-regulate? If government doesn't have a clue, you can't route around it, as DoubleClick rightly understands. And the national nature of these larger questions will continue to devolve power from local governments. Fourthly, and in a somewhat sinister vein, what organization in the world alone has the ability to gather the greatest amount of personal data and use it for its purposes? Again, the Federal Government. I've heard intelligent folks from across the political spectrum talk about the technical reach of the United States security establishment in the network. If they wanted to, they could. Enough said. Finally, the very success of the American Internet industry brings more power to the government it operates under. That's Power Politics 101. America's industries beat back fascism and communism within the same four decades. As they did so, they used government and its military hand to strike the blows. In the international power struggles of the next century, early American dominance of the world network will again concentrate power in the United States, in the hand of the government. Indeed, the Internet industry (which will someday include media, telecommunications, and finance under one umbrella) is coming around to the idea that the Federal government is not an enemy, but a powerful business weapon. There is no reward for isolationist companies, for isolationist industries. Smart business people in a growing economy understand this, whether they like big government or not. They know that government has many more shareholders than they do, and that the only way to prevent the misuses of the power the government will gain from the Internet, is to show up at the shareholders' meetings. That's why companies like DoubleClick have someone to send to Washington. * Tom Watson ([EMAIL PROTECTED]) is co-founder and co-managing editor of @NY. He collects vintage political pins from the last century, favoring those of the great Republican (TR) and the great Democrat (FDR). <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are not allowed. Substance—not soap-boxing! 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