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Silicon Valley grows old enough to vote


Somewhere in the controlled airspace between Washington and California, a decision had to be made. Air Force One was heading into a hornet's nest at the center of a battle over Proposition 211, a controversial state measure that would expand the ability to sue companies over investments gone awry.

The White House advisers on board were divided along lines of competing Democratic constituencies. One faction sided with the trial lawyers lobby and consumer groups; the other backed the interests of the high-technology companies most vulnerable to such suits, a camp led by Chief of Staff Leon Panetta, long-time congressman of a district just southwest of Silicon Valley.

By the time the plane touched down, say those familiar with the rancorous midair debate, high tech had won--and what some might have considered an obscure state ballot initiative drew the public opposition of the president of the United States.

"Clinton personally read the initiative," said Patrick Burt, president of Acteron. "At the end, he said this is bad policy."

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Beyond the debate over 211's merits, the decision gave Clinton a fortuitous opportunity to repair relations with an industry he had alienated with a series of recent policy decisions. The episode will remain a defining moment in the history of a long-anonymous sector of society and the economy: Fully emerged from its silicon-lined womb, high technology is coming of age.

As with any gangling adolescent, however, the industry is finding that the process of aging is an awkward one. In dozens of interviews, technology executives, political scientists, campaign strategists, cyberculture philosophers, and legislators of both parties say the high-technology sector is experiencing some acute growing pains as it matures into a viable political entity.

"I think that the life cycle of corporate citizenship mirrors an individual's life cycle. In the early years adolescent years, little time and attention is paid to public affairs or community or government relations. A moment away from business is a moment we can't afford," said Michael Maibach, vice president of government affairs for Intel, who himself ran for Congress in 1992. "In high school, teen years, a corporation starts to wake up. A little older company like Intel is in its 20s and starts to become more responsible. Caterpillar, GM are close to 100 years old and have significant maturity in working with government."

Like it or not, the industry will have to face up to something that is pure anathema to a business that prides itself on its maverick independence: government regulation. Hence, the new-found interest in politics witnessed in the presidential election and issues ranging from foreign sales taxes to national security and First Amendment law, as well as Proposition 211.

The swing vote
But don't expect these corporate cowboys to fall passively into any established party line, political or otherwise. If technology executives and government officials agree on anything, it's that the so-called Valley Vote is entirely up for grabs.

"I just do not see the computer industry or technology industry aligning itself with either party. There's no Vulcan mind-meld between the computer industry and the Republican Party, Democrats, conservatives, or liberals," said Ted Heydinger, director of government relations for Dell Computer in Washington. "I'm not sure we will ever evolve to the place that older companies have, to that degree of doing business with the government. The downsizing of government and getting them out of our lives have become very accepted initiatives."

Nevertheless, flushed with a sense of economic power and perhaps more than a touch of Potomac Fever, a new breed of executive is emerging from the confines of suburban Santa Clara County to take on a more prominent role befitting what is often described as the most fashionable industry in the world. So it is understandable that some may have been seduced by the idea of joining the 1992 Clinton-Gore techno-political juggernaut and its idealistic values.

But the line between idealism and naivete is fiber-optic thin. In fact, Washington veterans within the industry and beyond express surprise at the lack of political knowledge they have encountered even among some experienced top-level executives.

"The computer industry, both hardware and software companies, is politically naive compared with other industries. The government had not paid much attention to them because they didn't need as much help, and they thought the government would leave them alone," said Representative Vern Ehlers (R-Michigan), who has a unique understanding of both sides as the first research physicist ever elected to Congress. "Then came the FCC, the Clipper chip, the decision on digital TV."

Ironically, it is this very quality that makes the Valley Vote so attractive to the political establishment. This cutting-edge sector has come to symbolize what American political parties have striven to capture since the first Continental Congress: youth and, therefore, the future. Computers and the Internet have given birth to a new political ethic, not unlike the way that the Space Age, Jet Age, and Industrial Revolution minted licenses to dream for previous generations. Perception of power
In terms of votes and campaign contributions, the technology industry alone is not going to decide any elections. But, as with all things political, reality is not always the most important element of a campaign. It's perception that counts.

"If we were the paper clip industry, we would be doomed in Washington. But you can't pick up a magazine without reading about something cool on the Net," said Mike Engelhardt, government affairs manager at Sybase and a Washington veteran. "There is tremendous appeal for what we have to say, and it is warranted. We are now the engine driving the economy."

There's no disputing that. By some estimates, high technology is a $150 billion industry, more than a third of its business in the United States--1 percent of the gross domestic product.

The companies that hold this economic power have a deserved reputation for moving quickly on marketplace matters, and that principle is now becoming increasingly apparent on Capitol Hill as well. While the industry has always maintained a presence in Washington, doors are now opened with an eagerness not seen before the explosion of the Internet.

"The industry's influence is increasing all the time, especially in the last year and a half. Companies are invited to participate on a lot more government commissions," said Paul Brownell of R. Wayne Sayer & Associates, a consulting firm for the industry based in Washington. "Technology does excite people on the Hill."

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Excitement doesn't always translate to favorable policy, however. The Clinton administration and the industry have locked horns several times this year alone over a number of issues, ranging from taxes to encryption exports. And nothing got CEOs' attention more than controversial lawsuits against companies over investments gone awry--an issue that particularly struck true with high technology during the Year of the IPO.

The litmus test
The industry put its political resolve to a crucial test by lobbying successfully for legislation known as the Securities Litigation Reform Act. With trade associations and government affairs officers on the front lines, the industry launched a three-year campaign that persuaded Congress to draft the legislation restricting investor lawsuits, and executives were convinced that they had the support of the White House.

Then, baffling the entire industry, Clinton vetoed the bill.

"For a lot of companies, it was a litmus test," said Mark Nebergall, counsel for the Software Publishers Association. "The honeymoon's definitely over. Whether they are separated or divorced, I don't know."

Although the industry eventually got its way--Congress overrode the veto--relations with the White House have never been the same, especially among those executives who supported Clinton in the last election. "Now, whenever anybody brings up the issue of whether high tech is supporting or not supporting him, the first words out of their mouths are securities litigation," Nebergall said.

In a effort to make amends, Clinton took the extraordinary step of opposing California's pro-lawsuit Proposition 211, a stand that seemed to contradict his position on the federal legislation. Just weeks later, the president won the endorsement of scores of high-technology executives during a luncheon at Adobe Systems' new headquarters in San Jose, California, the nucleus of Silicon Valley--support that Democratic campaign officials said should lay to rest any notion that Clinton has lost his vaunted high-tech backing.

The disenchanted
Despite widespread media reports of reconciliation following that meeting, however, many industry leaders and government officials say privately that Clinton may have suffered irreparable harm to that important relationship. Some go as far as to say that recent policy decisions by the Clinton administration have cast a pall over the entire Democratic Party, leaving them to side with Republican challenger Bob Dole "by default," as one CEO put it.

One informal poll indicated recently that more than 60 percent of executives surveyed judge the president's impact on the technology as "fair" or "poor." Even some of those who supported Clinton most convincingly in 1992 are being more deliberate about committing themselves in this election.

"Right now, I think both candidates seem pretty pro-Silicon Valley, and that's encouraging," said Larry Ellison, CEO of Oracle. "So it's pretty hard for me to pick between the two."

Others are less equivocal. "Clinton came to Silicon Valley and held out the hope and expectation that he really wanted to understand high tech and become the high-tech president. In some areas he has indeed come through--especially in foreign trade--but in the broader area of high-technology policy, I don't think we've seen a lot of leadership that you can point to," said Mary Dee Beall, government affairs manager for Hewlett-Packard. "I

wouldn't go as far as to say that Silicon Valley has turned against Clinton--but I also don't see much enthusiasm."

It has been equally difficult, however, to get enthusiastic about the opposition either.

The reason that many high-tech executives supported Clinton to begin with in the first campaign, a list that notably included some lifelong Republicans, was a sense of alienation from the GOP. Dole has tried to reverse that alienation, but many executives say he may have done himself more harm than good in the process. Some point to what seems to be a fundamental lack of understanding about technology by the former Kansas senator, specifically that he continues to emphasize defense contracts as though they were still the most important issue for the technology industry.

"The Clinton people did a beautiful job of working and organizing the valley. They had a computer industry agenda and said, 'If we?re elected, here's what we're going to do.' It was Politics 101," said one Washington-based senior executive of a large computer company who is a registered Republican. "The Republicans blew it. The only contact we had from them was a secretary calling to ask for money."

The devil and the deep blue sea
The Valley Vote is still open, however, to the Republican siren call for free markets and smaller government.

"Free minds and free markets. Do what I want, think what I want. That's what I support," said T.J. Rodgers, CEO of Cypress Semiconductor. "Regulators have put the brakes on our economy. There are 123,000 inspectors in various agencies. Government will not be able to keep pace. It's too slow and inept."

At the same time, that unwavering sense of personal freedom extends to social issues as well. Born after the Vietnam War, most high-tech companies--and some of their top executives--are not much older than the Generation Xers so closely associated with the Internet and its culture. And that relative youth is reflected in many positions long identified with liberal Democratic politics.

Therein lies the paradox for the industry and the cybercitizenry inextricably linked to it: how to reconcile this conflict of cultures--Republican economics and Democratic social issues--under the traditional platforms of the established two-party system. As one government affairs manager put it, "We're stuck between the devil and the deep blue sea."

"Newt Gingrich is appreciative of high technology, but he had to sneak in the back door when he came to the valley," said one Democratic congressional staff member. "The industry is looking for politicians who are more pragmatic, who won't get involved in policy sniping. The standards are more conservative, but they want government out of bedrooms. They're strong supporters of abortion rights, gay rights, environmentalism."

All of which points directly back to Bill Clinton.

And at least those people who showed up at Adobe last week are apparently willing to give him a second chance--something that's hardly lost on the president.

"Can you hear us clearly?" high-tech venture capitalist John Doerr asked the president, leaning over to test the speakerphone at the beginning of the event. "We can hear you loud and clear," Clinton assured his host.

Clear as a bell.