Silicon Valley's Year 2000 Priorities

Participants

• Roberta Katz, President and CEO, TechNet

Agenda

SILICON VALLEY'S YEAR 2000 PRIORITIES

A New America Foundation Roundtable Discussion
with
Roberta Katz, President, Technet

TED HALSTEAD My name is Ted Halstead, and I am President of the New America Foundation. It's a real pleasure to welcome you here to Roberta Katz's presentation. As you all know she is the President and CEO of Technology Network, or TechNet for short. I apologize for the crowded nature of this room, but I'd say that speaks volumes for Roberta's draw as a speaker and also my colleague Steven C. Clemons' ability to pack a room in short order.

The reasons that I am delighted for Roberta's being here are three-fold. First, obviously, because being at the helm of TechNet she has an important voice. The second more subtle reason is that TechNet and the New America Foundation are just embarking upon some very exciting joint projects. And the third reason I am so thrilled to have Roberta Katz here is because in her own right she is just such a remarkable person.

I had the pleasure of meeting Roberta within the first week of her new job as president of TechNet. Frankly I expected to find someone with a fairly conventional business background. What I found instead was a person with quite a renaissance background. In addition to her legal training, Roberta has a Ph.D. in Cultural Anthropology from Columbia University. She has been a long-time student of social and technological change, and for that reason, we immediately hit it off.

What's so remarkable about her new leadership of TechNet is that she has taken it upon herself to expand the mission of this group. As many of you may know, TechNet is recognized as the leading lobbying arm of the I.T. industry and of Silicon Valley. Roberta has encouraged high tech leaders to take an ever more proactive role in considering many of the larger public policy challenges of our day--even the ones that don't pertain directly to the world of information technology. Its really out of her desire to move TechNet in the direction of social contributions and New America's interest in the broader realm of public policy that we being to explore various collaborations together. I will tell you about these in just a moment.

To fill out her background, Roberta, just prior to this position, was the Senior Vice President and Chief Council at Netscape. In terms of her topic for today, my colleague Steven C. Clemons came up with a jazzy acronym, "Y2P," which stands for "Year 2000 Priorities." In essence, what Roberta is going to share with us is what she sees as the evolving priorities for Silicon Valley and in the Information Technology Industry. The usual format for these events is a 20 to 30 minute presentation by the speaker followed by an hour-long interactive discussion and Q&A with the audience. I know that's the part of this session that Roberta is most interested in. After that, we will adjourn to cocktails in our lobby, and I hope that all of you will be able to stay.

My final announcement has to do with the joint project that I mentioned between TechNet and New America. We are convening what we are calling "The Next Generation Leaders Project," the goal of which is to bring 30 of the most promising young high tech entrepreneurs of the country together with 30 of the most promising young public policy entrepreneurs. It's sort of an East coast meets West opportunity for the high tech entrepreneurs to develop their civic sensibilities as well as an opportunity for the policy advocates and analysts to really develop a deeper understanding of the dynamic thinking that is going on in the high tech and biotech sectors these days. So with no further ado let me introduce Roberta Katz. Let's give her a warm hand.

ROBERTA KATZ Thank you. It is a really pleasure to be here. I have to tell you it so different standing in front of a crowd here than when I stand in front of a crowd in Silicon Valley because you guys are dressed and it's nice. I like to tell the story of my first interview at Netscape. I knew Jim Bostel from my former job at McCaw and he called me up--this was early early in Netscape's life--and he said, "Just come on down and look at this little company. We don't have a clue where it's going but just come take a look." So I got there, and there were all of about five people at the company at the time, and this kid walked in wearing cut-offs and a T-shirt. I just assumed he was the office messenger. I thought it was odd that they had a messenger for such a small office. And it turned out that was Mark Andreesen. So it's been interesting. Just to show you were the industry is going, Mark is now dress in sartorial splendor, but we have all matured.

I know this is a mixed group in terms of your familiarity with TechNet. So what I want to do is bring us all to the same place--give you a little of the history. For those of you who know this story I apologize if this repetitive or boring but I'll speed through it. TechNet is only two years old. Most people don't realize that. it was started in 1997. It was the brainchild of John Doer, the venture capitalist. He started it not because he was thinking about starting this organization. There was a plaintiff's lawyer in California who introduced a proposition that was going to make it much easier to sue technology companies. With volatile stocks, those kinds of securities lawsuits were very much a threat to the Silicon Valley companies. And when this proposition was introduced that would have made it a slam dunk. John went around and tried to convince his fellow CEO's and fellow venture capitalists that in fact a campaign could be waged and that the proposition could be defeated. These people all looked at him and said, "What? I do not understand. What is a proposition to begin with? And why would we want to do that?" John said, "There is a campaign to be waged." So single-handily John organized the group. They collected money; they waged the campaign successfully. I think it was a real eye-opener to people in the industry that in fact they could play in this political space effectively. At the end of that campaign there was money left over and the campaign started to refund the money to the contributors and a number of them just said, "Just hold on to it. Maybe there will be something else down the line." And that was the origin of TechNet. They had money in the kitty. But then they said if they had an organization what should it be. We want it to be different. Well how do we make it different? First thing was it had to be CEO driven; it was not going to be run by government affairs people in the company. It was going to be CEO driven. It was going to be a network--the word network is very consciously chosen --of CEOs that would act together. They would advocate policies that would support the new economy. What does that mean? Well, "the new economy"--everybody has got their own definition and everybody claims to have invented the term. John Doer believes he invented that term. He did by spelling out what he saw as the new way of doing things and the old way of doing things. Among other things, the new way of doing things included: creative approaches to problems. It meant flat organization; it meant organizations that were employee-owned. It meant the focus was on problem solution, working together, cooperating. It was an affiliation of companies to get things done. It was based on the kind of world Silicon Valley was evolving into where companies work together to accomplish some kind of greater good.

The other theory was that not only would TechNet be CEO driven, not only would it be a network, not only would it advocate policies that will support the new economy but it would be political. This was a novel theory. It would be political in a different way. It would be bipartisan. Politics would serve the policy. So we'd come up with the policies and then we would use the political connections to advocate on behalf of the policies. It's not that unusual for people here but it was a very novel concept in Silicon Valley at the time. It really was to create a form of cross-cultural communication. Because at that time policy makers, largely here, in Washington, realized that technology was becoming pervasive in their lives. They realized that they didn't really have a good handle on where technology was going or what kinds of impacts it was having on the lives of their constituents.

At the same time these technology CEOs were beginning to realize that the policy makers where more and more interested in their businesses. And they really and truly did not know how to talk to each other. I'd like to remind people that these CEOs by and large were not the kids in the civics classes, or the poli-sci classes, or even the English and history classes. These were the guys in the basements tapping on their computers, programming. They avoided the history classes. And so they have a lot to learn. A lot of these folks have grown into very wealthy, very powerful people, who have big employee bases and whose products are having a major impact on the lives of people. And they do not have the skills set, they are developing it, but in general that they don't have the skills set that allows them to address--or even understand-- the kind of concerns that the policy makers deal with on a daily basis.

TechNet's mission has been to bring these people together to build a bridge, to find away to communicate so that the CEOs learn what the policy makers are concerned with--what governance is. And the policy makers hopefully have a trusted resource to go to learn about technology as it evolves.

So if you look at what TechNet has done, it has become a portal for policy makers who what to have an entree to the industry. The new economy industries include biotech, high tech: computers, software, service. In addition our membership includes venture capitalists, lawyers, accountants, and the rest of the service industries that support these new economy companies. We bring them all together and we then choose issues to advocate. Now what have those issues been? Well, securities litigation reform was a natural. Everybody cared a lot about that. If you go back a couple of years UNS legislation was very important, creating national standards on securities litigation. Immigration reform was another area. Particularly when it came to H1B visas. There is a real shortage of personnel for these high tech companies and so we started advocating on behalf of lifting the H1B visa caps.

We looked at charter schools. Education was always the number one issue for TechNet. Why? If you think about who these CEOs are by and large they are people who pulled themselves up by their own bootstraps. Education was a very important part of their success. Most of these people did not come from money, power, or any base that would have suggested that they would be CEOs of any company. But what they were was smart. And they took advantage of their education. So for these people, they understand the value of education. That's one thing. The other is that you can't have an information age if you don't have informed citizens. Whether these informed citizens become workers in your companies or customers of your product, the information age requires an ability to understand information, to use information, to process it. That comes from education. When TechNet set down and looked at education questions they said, "We are not educators. We wouldn't presume to be educators. But what we do understand is the value of competition at creating innovation." That's what the charter schools do for the public school system. So TechNet in the last two years has put a lot of support behind charter school efforts. Not vouchers but charter school per se. This has been done pretty much at the state level.

Another issue that we have taken at the federal level is R&D. Why R&D? Because in the United States, as a percentage of GDP, our funding of basic research has declined. This is a question of international competitiveness. What is the basic research? It's the kind of basic research that led to the Internet, that lead to recombinant DNA. It's big disruptive research. And that is not research that a company generally can fund. Why? Because if it is basic and disruptive the company is in essence funding something that could put it out of business. So that's very hard for the management of a company to justify to the shareholders. So we have been advocating increased R&D spending. This year we are getting increased IT spending, for the first time in a long time. The other thing we advocated was an increase--a longer-term extension--of the R&D tax credit. The R&D tax credit has been renewed annually for many many years. It has always been renewed but there is always a campaign that has to be fought. What we were just able to accomplish was a five-year extension.

Now some people say, "That just looks like corporate hand-out. Why are you getting that?" Well the reality is that this credit supports applied research. Basic research comes from this federal funding, but the applied research that individual companies do to then enhances the products of basic research. A lot of the drugs that we have, a lot of the Internet innovations have been the product of companies doing research, which are enhanced by the tax credit. So then, finally, the other issue we've worked on as TechNet is not a legislative issue but FASBY---which sets the accounting standards--is taking on the question of how to deal with intangibles. It is the industry's belief that the government is not approaching FASBY standards in the proper way. So we are testifying in FASBY hearings and we are working on the various FASBY issues. I won't go into those unless you want more because we'll get into arcane accounting jargon, but I'm happy to talk about these issues during our discussion if you like.

What about fundraising? Everybody says that TechNet is just a money machine. It is not. We are not a PAC. That's the first thing--everybody assumes that TechNet is a PAC. We are not. We have a PAC. Our philosophy again is to get the CEOs involved in the political process. So what we do is we meet and greet and we fundraisers for candidates of all parties. We say to the TechNet members, "Here's who's coming to town. We want you to come out and meet these people and support whomever you want." We don't endorse anybody. We are, again, directed in a very bipartisan way. But our intention is to get people involved in the process. Now the question is "Isn't this just paying to play?" No, the theory is that we don't want only wealthy people running for office. And part of the participation in the political process can be supporting campaigns.

The other question that comes up is who owns the industry. I get this question all the time, "Are the Democrats or the Republicans making better inroads into Silicon Valley?" My answer is I think it's 50/50. This is a really interesting constituency. You count on basically one hand those of our members who are hardcore Democrats and those of our members who are hardcore Republicans. Silicon Valley is--and I use that term loosely to mean the industry as a whole--really is a meritocracy. So what everyone is looking for is someone nimble. Are they creative? Are they far-thinking? Are they bright? Can they process this information? Can they deal with this transition that we are going through in our culture? So every issue, every campaign, I believe, is a jump ball. And these people come and evaluate. I say to people it's not like Chicago. In Chicago if you are born a Democrat then you are pretty much a Democrat, and if you are born Republican you're a Republican. It does not work that way in Silicon Valley. People are much more focused on what are you saying. Do you mean it? Do you have integrity? Will you carry through? And I think the parties are starting to understand these concerns and are speaking to them.

The other thing about TechNet is that we are going national. As other technology centers have opened in the country, they have called TechNet and have said, "Come help us organize a local TechNet." We did just that in Austin, Texas. We opened a node in Austin earlier this year. That, again, was at the urging of a lot of the technology companies in Texas. A lot of them are based in Austin, but there are biotech companies in Houston and high tech companies in Houston, Dallas, and San Antonio. So the entire state has now formed Texas TechNet. We have an Executive Director down there, and it's being set up just the way we set up the larger TechNet. We are also in the midst of doing the same thing in a number of other states where there is now a nucleus of technology companies.

Now let me look ahead just a bit to the year 2000 and what Ted has alluding to in terms of "Y2P" priorities. When I was hired--I've been in this position only since June 1st--John Doer, Jim Barksdale, and John Chambers, who have kind of assumed the leadership of the organization, came to me and said, "It's our belief that TechNet is an incredible collection of resources, brain power, financial resources and understanding of this transition that we are going through. "It is also our belief," they said, "that we have only tapped into 10% of it's potential. We want you tap into the rest of it."

That was actually what appealed to me. That was part of the hook that got me interested. And I started thinking more and more about what was missing. What did TechNet need to do? And I realized that TechNet is at a remarkable place in terms of the intersection between business and politics. TechNet has spent two years developing tremendous political credibility here and in other centers of government. At the same time these CEOs have spent two years learning about the role of government and civics and the broader implications of the technology that they are creating. Now what it is time for us to do as an organization, and what we will be doing, is addressing some of the human impacts of technology. For the last many years these CEOs have been creating the technology. It's more than a full-time job. They haven't had time to think about some of the broader social and political questions. Now as an industry we can come together and start to do some projects that will try to apply our own creativity and additional resources to some of these more human questions.

Let me give you an example of some of the kinds of thinking we are looking at. There's a school that I became aware of where ninety percent of the students are at poverty level. And this school has won an award for innovative teaching because they've been very creative in how they've approached educating these students. The assumption has been that every one of the kids in the school is an accelerated learner. They have made tremendous progress. I happened to ask the principal of this school what they were doing about technology. This woman just sighed. She said, "Oh, technology. Here's the problem. Number one we don't know where to begin. We are filling out grant applications right now for government grants. But we don't really know what to do with the money. It's not just a question of buying computers, because what happens when those computers don't work together or when they become outdated? It's not just a question of getting the software, because what happens when we can't figure out how to make the software work or when the software falls apart? It's not just a question of wiring our school. We can wire our school but, by the way, we are short of electrical outlets to plug in the computers. But most importantly," she said, " in addition to all these other problems, it's not just a question of training our teachers and training our kids. It's about how to have the technology support the curriculum because in too many cases the technology overwhelms the curriculum. People don't know how to have the technology come in in support of the curriculum. We like our curriculum; it's good, but we need to have a much better way of understanding how to integrate technology into the educational curriculum."

Well these are some of the broad problems that can't be solved by any one company. A computer company can't solve it all. And a Telco can't solve it all. You need coordination because it's multi-faceted. These are also long-term problems. These require a new approach to thinking about these kinds of systemic issues. You have to have the ability to follow through. If you are going to bring together, under one umbrella, a lot of different companies from a lot of sectors of the industry, how do you follow through? How do you create a program that has legs?

It's that kind of program that we are looking at now. We are very enthusiastic about our partnership with the New America Foundation, which is taking Washington by storm and asking the important questions that TechNet wants to be a part of. We've spent two years just laying the groundwork for this, getting technology leaders to understand the role of government and of governance. And two years helping the policy makers understand that the technology leaders bring something to the party. And now we can use this groundwork to create something bigger. And that is what we intend to do.