Can Hot Companies Survive Obama, McCain?

Nothing in McCain's campaign suggests that he understands any of this, or will change the status quo. To look more hip and in-the-know about the tech world, the senator likes to point to the fact that eBay's Meg Whitman is his campaign's advisor on business.

She is, in fact, one of the finest business executives I know, but Meg is not an entrepreneur. And this suggests that a McCain presidency is not going to come to the aid of America's entrepreneurs -- and that the best we can hope for is that it will get out of the way, at least when it comes to taxes. That may work, but it will be a long, slow recovery.

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As for Obama, leaving aside all of his other proposals for massive social change, the single most frightening plank in his platform is his plan to increase the capital gains tax. If there is one single factor in the U.S. economy that defines the rate of new company creation, it is taxation on capital gains -- in particular, the differential between the capital gains and regular tax rates. To understand the long Reagan/Bush/Clinton boom of 1980-2000, you need only look at Reagan's slashing of that differential.

Assuming that his comments about "corporate greed," etc. indicate that he has no intention of getting rid of Sarbanes-Oxley or any other crippling corporate regulation, then Obama's plan to raise the capital gains tax will all but kill creation of new companies -- especially new tech companies -- in America. No new Apples or Facebooks or Twitters, no explosive new industries spinning off endless amounts of money and jobs, no new competitive advantages in the global economy.

I don't see how you can accomplish real change, finance massive social works and raise up the poor and middle class when you are stuck in a 1970s-type economic doldrums with the inevitable cultural malaise that follows.

I had coffee yesterday morning with a Silicon Valley veteran who is a serial entrepreneur and staunch Obama supporter, and I asked him about this dark scenario. He didn't disagree with my assessment, but only replied that Obama was a smart guy and that he hoped the president-elect would surround himself with equally smart guys who would explain it to him.

I told him that was a pretty dangerous kind of hope.

So who does get it? Ironically, it may be my own governor, Arnold Schwarzenegger. Two weeks from now he is convening in L.A. a Conference on Small Business and Entrepreneurship (I'm one of the keynote speakers). The last time anybody attempted this was President Reagan back in the early 1980s -- so long ago that the hot technology topic was the fax machine. I suspect Schwarzenegger is going to come away with an earful -- and a far deeper understanding of what really drives California's economy.