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How To Create More Jobs
TechDirt is spotlighting a call by Michael S. Malone, a columnist for ABCNews.com, for letting Silicon Valley create jobs once more. Malone argues that Sarbanes-Oxley and other attempts at accounting reform have done little to prevent fraud, but in fact have managed to kill off an entrepreneurship-venture capital-IPO cycle, centered in Silicon Valley, that has taken 30 years to nourish. Here's TechDirt: "...it's time to roll back SarbOx and other accounting rules that have acted more for theatrical purposes rather than any legitimate reason. Basically, all they've done is create new reporting requirements that do little to nothing to either prevent fraud or clarify a company's actual financial position (its intended purpose). I'm all for radical transparency in financial info, but that's not what has been done. Instead, we've made it burdensome to actually grow a company — and that doesn't help create jobs. It helps kill them."
As I said in a previous comment, the current model of entrepreneurship is broken. VCs have left. In 2009, capital will be really hard to find. But there is a silver lining: capital is no longer necessary to start companies.
Again, fairsoftware.net among others is allowing people who don't have any money and don't have any VC buddies to start businesses together.
It will work because for software at least, a few smart developers can beat established software giants. Groundbreaking software can now be built quickly and cheaply by reusing a lot of existing code. You can thank the Open Source community's efforts for that.
I have a lot of respect for Mike Malone, the author of the article. He wrote one of my favorite books: "Going Public: Mips and the Entrepeneurial Dream". If you have any ounce of entrepreneurship in you, this book will reveal it. I'm sure it started vocations. But in today's piece, I disagree that Sarbanes-Oxley is the main problem, although it did reduce the number of IPOs.
The best advice I ever received for starting a company? Drop Powerpoint and your VC pitch. Write code instead.
Why we need more Jobs? I think one instance is enough.
It created a whole breed of IT "professionals", people who creep out of the woodwork and latch onto the latest buzzword-compliant, (typically) Government-sponsored/mandated thing, and ride it until the next one comes along.
I want to delete my account but Slashdot doesn't allow it.
SOX is for publicly traded companies, not startups. By the time they are publicly traded, the need for VC is generally in the distant past.
There should be a unified Single tax. This way there would be a lot less paperwork to do. That tax should be a Money transfer Tax, for example 15% when you get paid, buy something, transfer money. etc. It would also promote saving which is quite good at this moment in time.
Ummmm, that's been the plan for YEARS. The only thing that changes is the name of the company that you hope will buy you.
I could make the argument that it is "IP" patents that are the real problem.
Then they need to get rid of it because it isn't working, but they are going to need to replace it with something else that does work.
Currently, part of the problem is that the financial world is hidden. Oh just trust us, we know what we are doing. Well after 2 bubble bursts, people are really wary of investing in anything, because there isn't any reliable information and there isn't any repercussion if someone lies about financial dealings.
So I don't think repealing Sarbanes-Oxley is the answer, unless something is put in its place that will help give investors confidence in their investments.
I for one have pulled completely out of the market and I know of others that have also. Now the big question is if and when do we get back in. Right now there is nothing happening in the financial market, that indicates to me that things are going to improve. So why should I put my money into something that is going to crash again in 2 or 5 or 7 years.
He who said 1,000,000 monkeys on 1,000,000 typewriters would eventually type the great novel, never saw an AOL chat room
1: Cancel all H1/L1 programs indefinitely, but with a condition that they return at some point in a more regulated form. 2: Reclassify transplant manufacturers as import manufacturers of that particular nation and tax accordingly. 3: Zero taxes on businesses that would comply with a strengthened "Patriot Business" standard. That is, loopholes would be removed. 4: Domestic preference for education and funding thereof at all levels. 5: Put a moratorium on new fuel taxes or changes that effect an increase of any kind. 6: Revert all of the environmental standards for vehicles to 1980's standards.
I own a small business and have been considering hiring someone part time. Unfortunately I have no idea what paperwork needs to be filled out. What do I need to know as far as taxes, etc? If I could simply say, "I'll give you X dollars for N hours of work." It would be much simpler AND there would be one less out of work programmer.
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I work in disconnects for businesses for a major telco, and we have a lot of auditing requirements due to SOx. I'd hate to think of what records would look like without these requirements. Sure people can still cheat, but it's also a CYA for the company that is doing the reporting.
There is still slamming now and then, but there are far fewer disconnects in error, where the telco is at fault. Usually it is the business customer not knowing which location they actually wanted to disconnect on their side, or not reading what they wanted to disconnect.
It would be nice to not have the reports. But you know if a business is not required to do it then there will be no tracking of any type done, which is where major abuses take place.
I don't mind doing the reports in addition my normal workload because I'd been able to go over others work that I am auditing and get it back on track if there is a mistake in it.
Too many qualified Americans rejected so that H1Bs can replace them (for the same money). Makes no sense whatsoever. Cancel the H1Bs.
SOX was passed so that politicians could look like they were "doing something" after the whole Enron debacle. Okay, fine; politicians have to look like they're "doing something"--but unfortunately for us, "doing something" involves passing new laws, and every law that passes is a minor freedom that is revoked.
The real irony of Enron was not that it was a failure of having the right regulations in place, but a failure of enforcement: the guys running Enron went to jail for breaking pre-SOX laws.
That's the thing that irritates me the most: politicians always have to look like they're doing something, when in fact, the right thing for them to do is nothing, except, perhaps, hold a hearing to find out why enforcement failed. And sadly, enforcement fails more often than not because we don't spend enough money on enforcement because we're busy trying to figure out how to enforce the new legal requirements.
The whole legal framework is bug laden and a perfect example of the Lava Flow Anti-pattern. What we need is for politicians to go through and rewrite the law to simplify it, rather than to add more and more layers of nonsense.
As a footnote, every time someone says that some section of our economy is insufficiently regulated, I laugh out loud: nearly every aspect of the financial system (such as financial derivatives) exist as a side effect of the current regulatory framework. It's not that we don't have enough regulations--it's because the existing framework is buggy.
One sure way that would work is to mandate that all products sold in the USA have a particular percentage of American Content; and this does not refer to simple "value added" per se.
What I am talking about is the gross importation of finished, ready-to-use goods like automobiles and other big ticket items. If this mandate were in place, there would be thousands of jobs created across this great land.
There was talk that Boeing's 787 Dreamliner is more than 67% "foreign!" This is unacceptable. There was a report that if the liner were just 70% American made, this would create 27,000 jobs.
Can we even count the jobs that have gone to Mexico and Canada? GM's Silverado and Suburban are all made in Mexico. Those jobs would be right here.
Simple as that. The boat sinks when you try to make it float with too much brass on board, and you don't win wars with more officers than soldiers. Likewise, you don't run a business sensibly when most of your workforce is concerned with administration and organisation instead of production. There are productive companies here (Siemens, I'm looking your way) that are already called "banks with a real estate branch, and a production department so they don't have to adhere to banking standards".
Get back to production. Produce something that the economy needs instead of administrating your own demise.
And to do that, I do agree with the original poster. Get rid of worthless "auditing standards" that didn't produce anything but new jobs for more beancounters. The SOX doesn't do anything. It is another standard to fulfill to the barest minimum whenever some auditing goon arrives, who in turn doesn't care jack whether the company's bosses embezzle money but who just wants to check whether the requirements are met. Tell you something: The requirements are pointless. There are already more than enough ways to circumvent them and go ahead with the old fashion ripping off of investors that always existed. Either start really auditing (but then, some companies would get into serious troubles...) or do away with it. What we have now is a band aid that does at best cover up the bleed, but only 'til it's soaked. Then we slap on another band aid and hope nobody notices that the wound does not close and needs surgery. Yes, that's expensive and it could kill the patient, but either is better than having a thousand people bleed for blood donations time and again.
Ok, away with bad analogies. I'm sick of seeing my taxes being poured into companies that should by all means crash and burn. If you want to save them, save them. Pick them up, fire everyone from management (NOT the workers, please, they're the one that MAKE money, management is what BURNS it!) and replace them with people who can do their job. I really don't understand why one would give people who have clearly shown they are incompetent and unable to handle the responsibility even MORE money to sink MORE money. Fire those fuckers, replace them with people who know their job, and you can have my tax money!
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Seems like an obvious solution.
Give a hand, not a hand-out.
The problem is how does one value an asset that one is holding and that one has not sold yet, since the real value of an asset is what I could get for it on the open market.
Mark to market simply says that I need to value that asset at the current going rate for similar assets on the open market.
Now here is where the banks got screwed, and the fun part about this example is that it is currently going on today. Say I bought a 10-year treasury bill for $70 five years ago which will mature in 10 years at a face value of $100, earning around 4% annual interest. What is that asset worth?
Well, you could say that the asset's value is growing at 4% compounded interest, so the bond is worth $85 today.
WRONG!!!
Mark to market says that the asset is worth what I could get for it if I sold it today on the open market. Well, in the open market there is such a rush for cash liquidity that people have been dumping their bond holdings (including treasury bonds). And as we all learned in Economics 101, high supply, low demand translates to depressed prices.
Which means that if I tried to sell that $100 treasury on the bond market, I may only get $50 for it.
So, according to mark-to-market accounting, my $100 treasury bought five years ago for $70, whose face value if I simply computed it's value by compound interest would be $85 is actually only worth $50. And it means if I have the regulatory requirement to have a certain asset to liability ratio, my treasury bonds, which are completely and totally secure--the U.S. Government so far has not defaulted on a single treasury--is insufficiently "secure" for accounting purposes.
It's the primary reason why some people want to do away with mark-to-market rules: because many mortgage backed securities were trading at perhaps 10 cents to 20 cents on the dollar, even when the most pessimistic default rates in the mortgage market would cause the underlying assets (the houses themselves) which comprise the mortgage backed security to be worth maybe 85 cents or 90 cents to the dollar. This 9x deflation in the face value of the instrument was what killed AIG: they had no choice but to value the asset lower than the underlying homes would have been worth in the event 50% of the land mass of the United States was destroyed in a nuclear exchange with the Soviet Union.
I mean, all those short-sighted boards focused on the next quarter to pacify greedy shareholders don't seem to be good for innovation or the long term.
Blar.
"capital is no longer necessary to start companies"
That's right. Food is now free. Power and equipment is free. Rent has been abolished. Accountants are free.
Repeat after meee, everything is freee in the new economeee.
When you don't tax capital, it moves too quickly, and causes too much boom and bust. That's why western countries have rules against capital flight, and some european countries have a token tax - a fraction of a percent - for every stock transaction to slow people's overreactions.
Personally, I have a somewhat libertarian ideal - eliminate corporations as they are known, and remove the corporate veil of protection for most companies, except for special charters given to insurance companies and other temporary projects - bridge building, mass transit, internet service, etc. There's no reason to grant a corporation special status unless it is doing something beneficial for the community.
I think it would keep companies small and healthy, and keep large, sensible corporations very well regulated. Just require total transparency, and you'll keep the crooks out. But while the crooks are still ruling the White House, the rich are still making the rules.
Silicon Valley used to be about manufacturing. ICs were actually made here, along with many of the products that used them. Intel, National Semiconductor, and HP all had big manufacturing facilities in Silicon Valley. National Semi watches and HP calculators were made in Silicon Valley. Amdahl mainframes were made here. Dozens of disk drive companies made hard drives. Apple used to make Macs in Fremont.
When the manufacturing went offshore for cheaper labor, the production engineering followed. Slowly the fab technology industry moved to Japan and Taiwan. Then the actual IC design work went offshore. Now, the entire consumer electronics industry is outside the US.
Anyway, Sarbanes-Oxley doesn't apply at all while you're venture-funded. Only at the IPO stage does it matter. At that point, you have to provide a very detailed prospectus, which isn't a new requirement. Sarbanes-Oxley isn't that much of a hassle to comply with for a straightforward manufacturing company. Only when the financial structure is "creative", with special-purpose entities, multiple corporations under one parent, and similar gimmicks, is compliance a problem. That's why the WSJ is grumbling - it makes financial gimmicks less desirable.
Not recently, they don't. For the past decade or more, small companies build the new stuff and either get bigger or get bought by big companies.
"We returned the General to El Salvador, or maybe Guatemala, it's difficult to tell from 10,000 feet"
SOX was the reaction to a series of big financial scandals, with the Enron affair being the best remembered. But back then, the reaction of many financial experts was to point out the deficiencies of SEC oversight and the weaknesses of the American GAAP accounting rules. The suggested answer was to seriously improve SEC oversight and adopt international IAS standards for accounting.
Instead we got SOX, an only too typically American solution, which puts its faith in forms and auditing. I think at the root of this is the Protestant mindset brought along by the Pilgrim Fathers, which insists that if something is printed on paper it must be true. It is the same mindset that requires travellers to the USA to confirm in writing that they are not terrorists.
And we got -- yes! -- another big financial crisis, caused by lax SEC oversight and creative financial practices. Well, even bigger and badder, if that helps.
Some people never learn...
Ok, you've got my interest, but please state your affiliation. Are you involved with fairsoftware in any way? I read your previous comment, and that made me look the company up, but I didn't do anything at that point.
I've tried twice to start the same company (MMO games programming software house) in the last two years, but each time I've failed because the people who stated interest weren't really keen on the amount of work involved.
Skeptical I may be, interested I am, but I have a good memory, so be honest, are you affiliated? Or just a satisfied customer?
A learning experience is one of those things that say, 'You know that thing you just did? Don't do that.' - D. Adams
The first pillar of Basel II already addresses your issue regarding the risk of sovereign debt.
AIG was killed by ridiculous exposure to credit default swaps, not CMOs on their books. It was predefined how they were to pay out in response to mortgage defaults (which they failed to model accurately).
With regard to banks, it's ridiculous to say that they got "screwed" as they were using the value of overpriced assets to overleverage during the credit boom. That rule works to their "benefit" in boom and forces them to stay solvent (or close) in bust.
Frankly the problem isn't that MTM rules are being used too strictly, rather they are being applied too loosely--and we have walking dead banks that NEED TO GET CLOSED soaking up capital from the Fed and refusing to lend. The Japanese had this problem and are warning us not to repeat it.
Sarbox kills productivity. I have a customer who won't let me log in to do work because their auditor claims that if they ACTUALLY LET ME WORK, they'll have no control over, nor knowledge of, what I've done -- and Sarbox requires that they have both. It's an evil law and MUST DIE.
Don't piss off The Angry Economist
I would like to know where you are so that I can relocate, around here there are generally 50+ qualified applicants for every real IT/development job advertised. A lot of qualified people with college degrees in CompSci/CompEng are doing first and second line tech support at various call centers in the area because there are so few "real" jobs available...
/Mikael
Greylisting is to SMTP as NAT is to IPv4
How much would you pay for swamp land in Florida? Those homes (and their mortgages) are worth as much as people are willing, or able, to pay. If you've got lots of homes that cost over a million to build, but you only have a few millionaires and most people with far less in assets and income, then only the nicest homes that can actually be sold to the millionaires are worth that much. The rest are only worth as much as people are capable of paying for them. So you can sit on them until inflationary pressures raise incomes to the point where the homes are affordable (and thus lose the value to inflation over time, and pay the property taxes during that time) or you can take the hit now and sell the homes at the price people can afford. At least then you can reinvest your remaining money in a different venture and maybe recoup part of your loss.
Those securities may be worth more than 20% of face value, but they're worth a lot less than 80% or 90%, because the values of the houses they covered was often hyper-inflated due to too easily accessible credit and occasional deliberate over-assessment by some involved in the house purchase cycle (realtors, mortgage brokers, speculators). The house prices those securities depend on are now adjusting to the real value of that real estate in a sane lending environment.
The reason why the mortgage-backed securities are at 20% of face value is that the banks or managing agencies don't want to have to pay the property taxes on empty houses for 10 years and yet there's no qualified buyers to sell to. Renting the properties isn't a solution because market rental prices can't cover the mortgage payments. If the defaulters can't pay the mortgage payment, then they won't be able to pay rent to cover the same so the owners will still take a partial monthly loss even if they managed to rent the place while looking for buyers. The boomers with cash are retiring and they don't want their money tied up for the 20 years it's going to take before those homes can be sold without taking a bath at even half of the last assessed value. Due to deregulation, the banks are over-leveraged, so they can't afford to take the loss over that long a period of time. So the house prices are dropping and they are going to continue to drop (in real terms initially or against inflation longer term) for quite a while and the value of those securities is reflecting that.
That's what you get when you try to treat a durable good as a commodity that people can play speculation games with. When enough speculators decide to leave the inflated market for some reason, market values readjust to their natural state. Have you checked the price of crude oil lately? An inelastic demand curve can account for some of the recent roller-coaster ride in that market, but oil demand isn't so inelastic as to account for >3x price fluctuations on relatively small consumption changes (percentage wise). Speculators who manipulate prices suddenly developing a need for liquidity and pulling out of the market on the other hand...
Laissez lire, et laissez danser; ces deux amusements ne feront jamais de mal au monde. - Voltaire
Small companies like Toyota with hybrid cars? Or the advances in cell phone technology like Samsung and Nokia? High definition television? the International Space Station? The fact is most innovation comes from bigger companies. Google is so amazing because PageRank was an innovation. Most other startups are only applying existing technologies in a new way.
Why doesn't Slashdot ever get slashdotted?
I am not quite sure how recycling lots and lots of existing code leads to "groundbreaking" software.
I am not even convinced that code is the roadblock.
Microsoft gambled on "the ribbon" and won.
But Microsoft has the money and manpower to study office work and the office worker in depth.
It can bring graphic and UI design teams into the picture. Experts in a dozen specialties. It can recruit thousands or tens of thousands of test subjects.
The developer living out his fantasies of independence on a diet of Jolt Cola and Ramen Noodles isn't going be able to do that.
'Creating jobs' isn't necessarily a good thing, no matter how many times people say it.
What really matters is output and a person's time. It's possible that more jobs will output more, whilst also offsetting the disadvantage of the time taken for that new job.
However, ideally, we should be looking to *reduce* jobs, whilst maintaining efficiency/output, or even increasing efficiency. When certain tasks become automated, that happens naturally, and it doesn't become a loss of output, but frees up someone's time. Which is a Good Thing.
In the end, we can use that time for socialising and become explorers, artists, composers, writers, thinkers, recreationists and scientists/researchers (that's not so easy to automate of course).
Leaving the work to robots/computers.
Why OpalCalc is the best Windows calc
Then there's an opportunity for some Silicon Valley co to create great software to simplify the Sarb-ox. reporting so that it's not an impediment.
Table-ized A.I.
Toyota didn't invent hybrid drivetrain technology (which has been around for ages) or even the hybrid car; they didn't really invent much, just applied lots of existing technology and used their size and market presence to bring it to market.
Cell phone history seems to include lots of big names like Bell Labs and Motorola, so one point to the big guys there.
HDTV doesn't count as much innovation in my book. It's... TV, just more pixels. Image processing circuitry had been driving computer monitors with higher resolutions for years -- the ball was on the tee for them, all they had to do was not pull a Charlie Brown.
I think you're acknowledging that Google wasn't even a company yet when its founders came up with PageRank, right? Ever since Google got big we've seen them buy more neat stuff than they've written. And generally take on projects that require big size more than big ideas.
Eliminate capital gains taxes. The total revenues raised by capital gains tax is around 117 billion a year, which makes an interesting comparison to the magnitude of bailouts already appropriated.
If cap gains tax was eliminated, there would be an historical market rally. The current strategy of trying to stimulate the economy with ever-larger doses of inflation can't work: see Zimbabwe.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
One of the best things that we could do to promote new job creation, is to bring down the barriers to public equity for small businesses. As things stand today, it's just not realistic to go public until you need at least ten million bucks in funding, just because the regulatory requirements for public trading are so onerous.
If local businesses could sell shares to the public, then a lot of people would invest in their own communities, entrusting their capital to people they actually know and do business with, instead of handing it over to enormous mutual funds. For the small businessman, being able to raise private capital means he doesn't have to get bank funding and pay interest for his operating capital.
The SEC doesn't protect us from the likes of Enron or Bernie Madoff, and it's not at all surprising that they fail at their ostensible mission. The SEC has nothing to lose when they fuck up. No bureaucrat is going to lose his job for ignoring the warnings and red flags they should have acted on. In fact, just like the public schooling cartel, the SEC will probably get more funding because they failed to do their job.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
If you don't think that SOX is necessary, then you don't understand what it does.
Sarbenes-Oxeley is forcing all public companies to formalize their financial processes. What it is akin to is forcing programmers to document their code, not just comment it, but to create product and design specifications. This is so that it creates transparency so that outsiders, such as investors or auditors, can understand the flow of finances throughout the company. For most large companies, it probably didn't make a huge impact, but where it did make the most impact was for small and medium-sized public companies. It sucks, but it protects investors.
Why did they implement it? Because of the widespread fraud from the dot-com boom/bust. Before some fly-by-the-night startup can go IPO and make billions of dollars, they will need to submit themselves to this formalization of financial processes so that people can understand exactly what is going on. It sucks, it is onerous, but it is necessary.
i've worked at two publicly traded tech companies in the sales department. it is way worse than this article describes. besides the larger trends described, there are opposite effects that drive innovation out of the google type firms the author says are centralizing technology. the revenue recognition requirements on newly innovated technology for a publicly traded firm is so onerous that publicly traded companies simply get out of certain lines of business rather than go through this. for those of us keeping score at home: a small company can't do it for reasons described in the article, and large companies can't do it for reasons i describe. the whole SOX debacle is revenge of the bean counters. THEY were at fault for not calling enron on their bullshit, and now THEY are punishing US to "ensure" it will never happen again. had they been doing their jobs honestly to begin with, enron, et al would never have happened. now bean counters are enriching themselves by being the "expert" that can get ordinary transactions approved by the auditors. forget the complicated stuff. we REALLY need to throw off the yoke of excessive regulation if silicon valley is ever going to take off again.
Remove the veil of corporate protection from officers and members of the board of directors. Make them, explicitly, jointly and severally, personally liable for all debts and obligations of the corporation. Make them criminally liable for any acts committed by the corporation.
Then you can eliminate SOX. There will still be problems, but you'll have asses to kick.
Is it just my observation, or are there way too many stupid people in the world?