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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.
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.
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.
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...
I thought mom and dad provided all that.
And if you get busted, do the fines exceed the money you saved by hiring a cheap foreign slave? No? Then why bother comply with it?
In a business, the question whether or not a law is heeded hangs on three questions: How much do I save by breaking it? How likely is it that I get caught? How much is the fine when I get caught? There's nothing else that determines whether a company breaks a law.
Yes, we have laws against dumping oil in the ocean. Why is it still done widely? Because it saves you heaps of money, because it's almost impossible to get caught and the fines are a joke. When the fines do not exceed the money you save by breaking the law, fines are seen as part of the cost of operation.
How about shutting down companies that break the H1 visa laws for a few months to audit them throughly and make them ineligible for more H1 applications? AND create an agency that actually watches over you like a hawk when you hire people from abroad (it's not like the government doesn't know if you do, ya know, you had to get them through a process that involves the government...). You'll weed out those abusers of the worker visa program pretty quickly. Either they stop doing it or they get caught and are forced to stop.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
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 am for essentially open immigration into the US. ... provided that we back way-off of the redistributionist, cradle-to-grave welfarism that our government has descended into.
The statue of liberty doesn't say "give me your top 1%, at any cost, and let them contribute to our tax base". It talks about the tired, the hungry, etc. If they're willing to work, I want them. If they want to be looked after, I don't. And I want the federal government to stop "looking after" people born within US borders first.
Ideally, foreign born people who work hard will come to the US and kick _out_ the lazy asses who were born here and expect to be waited on hand and foot by their government (which really means their harder working neighbors).
Unlike many other cultures or nationalities, definitionally, there is no common ethnicity, culture, bloodline, geography, or anything else that makes citizens of the USA "Americans". We are (historically) United only by our voluntary adherence to the rule of law. When we lose sight of our shared law, what are we? We have nothing else in common.
It is my opinion that the current generation of Americans (and who knows how many prior generations) are hardly Americans at all. We're more than willing to dispense with the rule of law and to vote ourselves or our interests more powers than are strictly legal, should it so suit us. The new generation of Americans thinks themselves something different than those bound by a common constitution that is applicable to any man who chooses to live under it. And the result is that we're back to the same old tricks of juding people based on where their parents came from, rather than how hard they work and how well they can keep our laws.
Rules regarding how much a man can sell his labor for (i.e. minimum wage laws) are some of the most insidious repressants of the poorest and least talented members of society.
The H1B system is quite odd: people who are talented wage earners cannot afford to float between jobs looking for something better and must jump at unattractive positions in order to stay employed. Yet people who are low-skilled or who elect not to work at all are not deported, and if they score the trifecta and add _another_ dependant entity to our welfare system (i.e. they have a kid) then they have cemented their place in the US legally.
As usual, our foolish government meddling works against us. We ensure that unemployed people stay in the US and "in the system". And we make it hard for high-skilled people to negotiate effectively for their true worth.
Finally, I do a fair bit of tech interviewing. There is a real shortage of US-born/US-resident workers that meet our requirements. I'm not talking about a shortage of people that will work for the palrty wage we're offering: I'm talking about people that we're willing to make an offer to at all. We look for them anywhere and everywhere, and I interviewed 25 people at a college campus recently. Half of them where white-bread America and half of them were foreign-born US students.
My opinions are my own, and do not necessarily represent those of my employer.
Or you could make the application fee on the H1-B optional in size, non-publicized, and non-refundable. And the highest 'bids' get to have the H1-B.
At this point it really becomes a matter of 'we MUST have this guy because he's the only guy in the world that can do this work' and kick in a massive $40,000 as your application fee, guaranteeing that you get him. The top 65,000 applications (ie, the ones that sent in the highest application fee) get visas. The rest of them get absolutely nothing, but they don't get their application 'processing' fee back.
Make the visa good for 1 year, and they need to repeat the process each year or the guy goes back home.
All of a sudden, the companies that really need a certain skill get it. That's what the program is all about, so lets insure it works in a strong fashion.
250,000 applications averaging $10,000 apiece = $2.5 Billion. That is a LOT of money that could be poured into the education system, teaching our next generation to do the work that needs to be done by our employers. Pretty simple.
Glonoinha the MebiByte Slayer