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Tech Industry

Meet George Bush's tech policy guru

When the president wants to talk tech, he turns to Floyd Kvamme for advice. And the former venture capitalist is not shy about voicing an opinion.

     

      
       
    Meet George Bush's tech policy guru
    By Lisa Bowman
    Special to CNET News.com
    May 18, 2001, 12:00 p.m. PT

    Venture capitalist Floyd Kvamme first got involved in politics in 1996, making him a pioneer by Silicon Valley standards.

    Kvamme, a partner at venture capital firm Kleiner Perkins Caufield & Byers, first jumped into the political fray at the urging of his wife, who couldn't stand news that then-President Bill Clinton and the Democrats were successfully wooing the high-tech region once again. So Kvamme urged hundreds of tech honchos to sign a letter in support of Bob Dole, leading one of the first major coordinated Republican political efforts in the Valley's history.

    A year later he was one of the Republicans who helped found the bipartisan tech lobbying group TechNet, cementing his role as one of the Valley's major political players.

    This year, when President George W. Bush was appointing cabinet members, there was some speculation that Kvamme would be tapped as Commerce Secretary. Although those plans didn't pan out, Kvamme is enjoying his first official policy role as co-chair of the President's Advisory Council on Science and Technology, a group designed to guide the administration on high-tech issues.

    One of the best parts about being one of the administration's tech policy gurus? "I have great access," said Kvamme, who holds two engineering degrees and whose tech resume includes executive positions at National Semiconductor and Apple Computer.

    Kvamme speaks with obvious affection and admiration for the president (both he and his wife have donated thousands of dollars to the Bush campaign and the Republican Party). But there's one thing about the press coverage and gossip surrounding the president that really ticks him off.

    "There's this thing about him not being very smart, which is the part I think I hate the most. The first president ever who has an MBA, and he's not very smart? That's interesting," Kvamme said, shaking his head.

    In a recent interview, Kvamme talked about numerous tech issues facing the new administration, including privacy, the Microsoft trial and the FBI's online eavesdropping tool Carnivore.

    Q: So why did you take the role? What appealed to you?
    A: This country has been awfully good to me, and I kind of came around saying, "If the president asks you to do something, can you really say no?" I think there are times when giving up some of our privacy can have great benefit. And so when the administration asked if I would be willing to serve something in Washington, I said there would really be two caveats to that: Number one would be that I felt I could contribute in that role, and number two would be they would want me to do that particular thing. So they came up with something that I think I can contribute in. That's yet to be proven, but I will give it a whirl.

    To what extent do you think the council will be able to drive policy and effect change? Will people from the Valley come to you and say, "We really need you to help us out on this issue"?
    That's not its primary function, frankly. Yes, we're supposed to be a sounding board for what is important so that if things are important, something happens. Our real role is to advise the president on areas that are going to come to him naturally through the legislative and regulatory process and say, "This doesn't make any sense," or, "This makes a lot of sense, and we ought to go down this path or that path or whatever."

    So it is an advisory council by its very nature. It is not an ombudsman as such for industry, but clearly that plays a role because technology moves rather rapidly. Government doesn't tend to move that rapidly. Regulation can be very bad or it can be helpful, depending on what the circumstances are. So believe me, I'm all ears. As these stacks of paper can attribute (pointing to his desk), a lot of people are wanting to get their word in.

    The Valley has been criticized at times for not taking an active role in politics, not having good communication with the folks back in Washington. What do you think the state is now of the relationship between the Valley and the Beltway?
    I came to Silicon Valley in 1963, and there's just no question, we never talked about Washington. Concerning Washington, the semiconductor industry grew, and through the '70s we had no contact--through the '80s we had very little contact. So the Valley, it's very true, was very disconnected. But when you have a situation where arguably 40 percent of the growth in productivity in the economy in the last 10 years has been as a result of things that are technology-related, certainly the government got very, very interested in that.

    And I think as we got more involved with communications and exports and those kinds of things, there have been more regulations coming our direction, and therefore there's been more of a requirement to know more about what's going on back there.

    Would a lot of people in the Valley prefer it like it was in the early days? I suspect the answer to that question is yes. Is that realistic in light of the size and the impact of the technology industries in our economy? I think the answer to that is probably no.

    What do you think the new president's priorities should be when it comes to technology?
    I think the president has said it all through the campaign; I think he's saying it still. When we had the meeting with him at the end of March, I think he said it: Government doesn't create jobs; industry does. We have to create a proper environment for industry to flourish...and that has to do with things like energy and having an energy policy. He's very committed to having an energy policy that means when you put the plug in the wall, the lights go on and you don't have to worry about the availability of energy.

    He's very worried about the competitiveness of America. And that feeds the whole issue of education and having an adequate work force come to us. That's also a question of making sure that we don't have export controls that hamper what we can get done. In the course of the last eight or so years, our trade balance has gone from $40 billion negative to $400 billion negative. We ought to be supplying more products to the world markets, and I think he sees that as something we have to do, and he's encouraging that.

    He's also very committed to this whole notion of education...which plays off the work force thing, making sure that the educational system is appropriate. I think the program, for example, for math and science teachers is a heck of a good deal. A young person gets out of college, $17,500 extra dollars a year from the federal government to pay off those students loans if they'll teach for a few years. That's tax-free money paying off a loan. So it's environmental issues: energy, trade, work force, a strong economy.

    One of the issues that's kind of been on-again, off-again in Washington is privacy. What do you think is going to happen on that front? If the president came to you and asked for advice about privacy--do we legislate, do we let self-regulation run its course--what would you tell him?
    I was just talking to somebody about that a minute ago, actually. I think that there is a right to privacy in this country, and so I think that's a fundamental. But I also believe that the marketplace can kind of sort it out. I think frankly here there is a role for those in the media and those in the press to help people understand what privacy currently exists.

    There are awfully good privacy opportunities that people can evoke in their Internet correspondence that are not quite well understood. I think the marketplace can contribute there. And having said that, I think there is a flip side. And this is not an administration comment, it's a personal comment: I think there is a flip side.

    Is it government's responsibility to provide some protection for things 
the marketplace is saying we're not interested in? I don't think so. I think there are times when giving up some of our privacy can have great benefit. You probably heard the famous story of the Iceland thing: In the country of Iceland, they agreed to have their genetic codes gone (into) and they tracked all this. And some believe that they may have found one of the keys to Alzheimer's as a result of that. Now, everybody gave up a piece of their privacy, but that country happens to have a high incidence of Alzheimer's disease. I lost my dad to Alzheimer's; that is ugly, ugly stuff to live with. I mean, one of our biggest problems in medical research today is that everybody's record is in some brown manila folder on some doctor's shelf, and the data aren't available to the researchers.

    Pharmacological data is available, but not public data. What would happen if people would allow (that to be) available to researchers so that (there could be) cures to various things that people see in common? I could imagine that we could know a whole lot more about Alzheimer's, about influenza, about leukemia, about a whole lot of other things if that data were available to researchers.

    So while I agree that privacy is important, I think in a community from a civilization point of view we have to understand that researchers need data and spot data...It's a little late when you're diagnosed with some terminal situation that maybe could have been predictive and maybe something could have been done.

    On the financial thing, I see very little need for divulging financial information. I don't see the benefit on the other side to society for that. But I think there is a fundamental right to privacy. I think the president is right, and I think the marketplace can figure out how to make sure that's there so that we don't get a whole nest of regulations.

    What about copyright issues? That's becoming one of the hottest policy topics. What if the president asked you for advice about that, or alternatively, what do you personally think of the Napster case and some of these cases where the entertainment industry is clashing with some of the smaller companies?
    Actually, I don't know a lot about those cases. So what I've read is only what I've read in the press. If I understand correctly, the Napster case is actually at a point of law, and the entertainment industry obviously feels they're being ripped off, and Napster believes there is a legal precedent that has something to do with how radio...I guess when radio started to play songs, they had exactly the same problem. So this thing was set up.

    I can't even remember what the acronym is...this organization that now keeps track of which disc jockey plays which song and the radio station forwards a certain amount of money to this entity and this entity parcels out this money to these folks. Obviously if somebody wants their material protected, that's what the copyright laws are all about, and they have that opportunity. Clearly, though...again, I'm not expert in the entertainment field, but you clearly can imagine an entertainer--they certainly want their songs played on the radio. So there was some benefit to them going along with this program now.

    Somebody has got to find--if it's not the Napster case, maybe it's these new consortia that Microsoft and some other companies are (forming)--(a way to) more or less take on that model and funnel funds back to the recorders and the recording companies and the entertainers and the artists, etc., to get that done. That's going to have to be sorted out.

    And just like people were worried about people not showing up for concerts if they could get it over the radio, well, that didn't turn out to be a problem...Or television was going to kill the movie studios; well, that didn't turn out to be a problem because people figured out how to compensate there somehow or another. I'm sure the problem that both sides are facing is that whatever the solution is will live for a long time, so they want to make sure they get it right, and something will happen in the courts.

    Do you think that Congress and the administration have a role in that debate?
    You know, I kind of hope not. I would tend to say that I would hope they could come to some accommodation without more legislation, more regulation.

    On another topic, around here, as you've seen--as we've all seen--with the dot-com bust, a lot of people lost their jobs, lost their options. What role do you think government should have in that, in boosting the tech sector? Is there a role there?
    Again, I think on the general things, on the economy, we've had our recessions out here lots of times. I remember the mid-'60s, the '74 one, the '81 one and the '85 one, the '90 whatever it was, '91, '92, whenever that one was. So there have been a number of them, and having a strong economy is clearly an important part of what that is, of what government ought to encourage.

    But not all of this falls into the administration's responsibility. Clearly, the Federal Reserve has a role to play here in terms of the amount of money in circulation and the interest rates...I guess I personally come away saying that when you have a business model that doesn't work, the likelihood of your business failing is high...Is it government's responsibility then to provide some protection for things that the marketplace is saying we're not interested in? I don't think so. You're going to have those kinds of failures. And those are going to affect other parts, and there will be a ripple through. I don't think government should get involved in whether people take risks. The risk business is the risk business, and some fail.

    What about the Alternative Minimum Tax? It seems like a lot of dot-commers were surprised by their tax bills this year.
    Yeah, I guess I can see both sides of that discussion. Alt Min today is not what Alt Min was originally intended to be. Alt Min originally was trying to catch up with folks who had no W-2 income, but had purely stock income. And suddenly, because of the way the tax code worked, it has worked its way down to a lot of other folks that it wasn't intended to.

    Having said that, I believe there is a real responsibility on the part of corporations when they give out options to explain to folks what's going on, because clearly people wouldn't have an Alt Min problem if, on the day they exercised, they sold 20 percent of their shares, because they would have covered the tax. Why didn't people do this? Well, I suspect that there was a little greed involved in that. They thought it was going to keep going up, and then when it started to go down it meant selling 30 percent of their holdings...and then it was 40 percent of their holdings and pretty soon it meant 300 percent of their holdings because they didn't have 20 percent of the value left and they got into trouble.

    Not accounting for the tax liability at the time of an exercise of an option to me is a little like buying stock on margin. There is a piper to be paid at some point in time, and that's a dangerous game to play, and a lot of people played that dangerous game, maybe unknowingly...But you're right: They got caught, and I think there should have been some warning on the part of their employers, particularly for those folks who were well down the organization chart and may not have understood that rule.

    I find it difficult that any executive who had hundreds of thousands of dollars at risk here or even maybe more didn't understand Alt Min because that's pretty well-known in the Valley. So there's two sides to that. It's certainly catching people that it wasn't intended to catch; folks that got caught in that I genuinely feel sorry for. But I also believe that they either got some very bad advice or no advice, and they should have gotten advice because that is not a big secret in the Valley, how the Alt Min works.

    The president talks a lot about "leaving no child behind," yet his budget plan has come under some fire for not addressing the issue in detail.
    On the digital divide front, at the end of the day I think you have to say that the education program has got to be the key there. Not accounting for the tax liability at the time of an exercise of an 
option to me is a little like buying stock on margin...and that's a 
dangerous game to play. And I'll be honest--I do not, for the life of me, understand the objections, even to the voucher portion of the program. I mean, I hear it and I hear people say, "Well, we don't want to give money to institutions of, religious institutions, etc." And I hear it, but we do that all the time at our college and university system. The whole veterans-going-to-school bill after World War II and after the Korean War and after the Vietnam War--they got tuition to go to college, and that was just as good at Notre Dame as it was at USC. So for the life of me, I can't understand if a parent is trapped in a situation why they aren't given some tools to get out of it. I think it's being enormously unfair to parents in those situations.

    And my response to those folks who think that that part of a program is wrong is, OK, give me your solution to failure. Because what we're talking about is how do we deal with failure? State takeovers haven't worked. District takeovers haven't worked. Those schools are still failing schools. Let's try something on the other end, at the customer end, the parent end.

    On top of that I think there is this point the president makes that is a very, very valid one: that the goal also is to make sure that there are adequate services besides that--telephone services, electric services, etc. And I think as broadband rollout comes, we have to make sure that it is equivalent so that everybody at both ends of the spectrum has the appropriate plugs, you might say, to plug into broadband in their community as in a wealthy community.

    So where does the money come from for something like that if it doesn't come from E-rate, which I'm assuming it doesn't, since that program has sort of come under fire?
    The big issue on the broadband side, of course--and I think these all came into focus because of the AOL-Time Warner merger and the things that were required of AOL Time Warner to make that merger all happen--is open access. It's a complicated issue, but it's not dissimilar from a lot of other issues in industry. If you have a situation where you have a large amount of capital expenditures that are required here and require a large amount of dollars to get something built, like a broadband thing...like developing a prescription drug, like developing a semiconductor factory--there's a lot of things in industry today that take a huge capital investment to get them done. Now you do the broadband rollout, you spend all the capital, and you start your rollout.

    So you have to have a program where people who make capital investments have an avenue to get a return on their capital investment. An idea that is purely mine--not the administration's, but one that I'm talking to a number of people about--is, let's take after what was called the Orphan Drug Act...How that worked was the government said, "Look: If you will work on maladies that have 100,000 or fewer people in the country that have that particular malady (and there are tons of them), we will give you (I think it's) a 10-year protection that you'll have exclusive use of drugs in that field to look after this form of some weird skin disease or some other thing." Well, it worked tremendously.

    Well, what if you said on the open access question that for the next seven years (pick a number--I don't know if it's a good number or not) you're not going to have to fight the open access battles. Open access after that so that applications can go on to the broadband network, because in thinking about this 40 years from now, we're going to want it 20 years from now, 10 years from now...We're going to want to have applications sitting on top of that network that exists there. But somebody has got to build the network, so answer the open access question with a governmental agreement that we're not going to push you for open access for a given period of time.

    There was a lot of speculation when the administration took over that they would back off the Microsoft case. Any thoughts on that, whether the DOJ should keep pursuing the case as aggressively as it has been?
    I think it's kind of a done deal. I think they see that as something in the courts, and the courts are going to sort that out. Now it's under appeal, I don't think the administration is particularly interested in getting involved in things that are already ongoing from a legal point of view. It's been brought to the courts. It's pure speculation as I have been led to understand; it's pure speculation as to whether it would or wouldn't have been brought in this administration as opposed to the last administration. We can speculate all day long--who knows? Because that's not only speculation about the administration...that's speculation about a specific lawyer in the antitrust division. And who knows? I certainly don't.

    One thing we haven't heard a lot about from the president is filtering--the bill that requires public schools and libraries to filter or risk losing federal funds, passed in December. What do you think of that?
    Well, I think it was the president that made this comment, and I thought it was a pretty good one: Again, in the home there's some parental responsibility there. But in libraries, maybe you put the screens in the most public place in the library. If you have these private little rooms where some youngsters can do anything they want, you're playing with fire, probably. So again, I think maybe there may be some things that don't require as much legislation as you would because the promoters of that kind of crap are going to find a way around that.

    So if you allow for it to be very, very private, it's going to be a problem. And therefore, like I say, I think the notion of making the four terminals in the library right in the center of the library where everybody can see what anybody is looking at--why is that a bad deal for kids? It may be a bad idea, but somebody might say, "Well, I don't want anybody to know what my kid is looking at." Well, then I don't know. You don't believe in community then, I guess.

    The FBI's Carnivore program has drawn a lot of criticism. One of the arguments is that the communications of innocent people could potentially be intercepted as well as those of terrorists and criminals. What's the administration's role in that?
    There clearly is a role in that particular case because what you're talking about is to what length can the police or is the policing authority in a free society allowed to protect the citizenry. And that's always going to be a subject of debate in a free society.

    And I guess I can see both sides of that also. Certainly I don't want some cop standing in front of my house until I have a burglar. And then I want him there right away. Well, the same thing is true...I think if somebody is planning something, you don't want that to happen. I don't know if you've heard this story, but apparently it is true that police intercepts heard the transmissions that were the planned blowing up of the World Trade Center. They just didn't happen to understand Arabic, and therefore (the transmissions) turned out to be useless to them, and they only knew them after the act because they had the tapes or whatever.

    In my way of thinking, it sure would have been nice, and I'm sure there's a lot of people that worked in the World Trade Center on that day (who would agree) that it would have been awfully nice, had somebody understood Arabic and had that intercept capability. But we don't want a police state. So I think Carnivore and similar things like that are going to be issues forever in a free society.