Silicon Insider: The Next Four Years

Nov. 11, 2004 -- -- Mr. President:

Now that the election is over (thank God!) we only have about 30 months until the next one begins and we are all once more distracted by stuff that doesn't much matter while failing to attend to a lot of the stuff that does.

Given that brief window, it seems to me that the time might be better spent by all of us worrying less about the things that divide us and more about the things we agree upon. The biggest thing we Americans, Democrats and Republicans alike, desire, after security, is a robust, growing economy that creates both prosperity and jobs. Implicit in that is also the very American desire for Progress: to see an endless parade of new products, services (including medicine) and ideas that will make the lives of our children even better than our own.

We know how to achieve this. Small, young entrepreneurial companies are the primary source of new jobs and new wealth in our economy. High-tech companies, mostly electronics, but increasingly telecommunications and biotech, are the greatest source of new products, services and ideas in our society.

We also know, from experience, that these entrepreneurial ventures need certain key ingredients to thrive and keep America competitive in the world. These include a supportive regulatory and tax environment, free and fair competition, venture capital, a strong educational system, secure intellectual property law and healthy securities markets.

Above and beyond all that, it seems to me that we also know two other big things: that entrepreneurial societies only thrive if the culture honors such maverick behavior and the society's largest institutions -- especially government -- establish the ground upon which these start-ups can grow. In other words, a government that protects young companies from the predations of both big companies and bureaucrats, and that invests in large research initiatives that no single company, or even industry consortium, can afford.

With some exceptions, we had just such an environment beginning with the Reagan administration and continuing through the Clinton years. And if it got out of control toward the end, this entrepreneurial era still produced one of the greatest economic booms in human history.

That all ended with three devastating shocks: the bursting of the dot-com boom, the exposure and prosecution of corporate malfeasance during that boom, and most of all, 9/11. For all of its reputation for being pro-business, your administration has been comparatively indifferent to both tech and entrepreneurship. This is somewhat surprising, given that most of the new jobs created over the last year (underpinning the positive labor numbers that saved your reputation on the economic front ) and much of the new military hardware (that made the assault on Iraq so swift and precise) were both largely the product of small new companies. Equally ironic is that the Bushes are a classic American entrepreneurial family: you understand better than anybody how a Texas wildcatter can become not only rich, but president of the United States.

But it's a new term, and if your administration was understandably distracted by external events over the last four years, the way is now mostly clear to make up some lost ground domestically. And this is not a mere sideshow. We are now entering an economic war that may last a generation. The United States must decide whether it will continue to lead the high-tech revolution -- and enjoy the economic, cultural and military advantages that result -- or allow others to take that lead and hope for the best.

If this sounds apocalyptic, just look at the number of software programmers emerging out of India. Or consider the matter-of-fact comment made to me recently by a very senior Intel executive: "Yeah, I'm spending a lot of time in the Far East these days. Have to. The consumer electronics industry sailed away to the far side of the Pacific Rim two years ago and it ain't coming back." China, meanwhile, is now the world's leading consumer of personal computers -- and will soon hold that title in manufacturing as well.

These anecdotes don't spell immediate doom for American tech competitiveness -- as some of the more extreme anti-outsourcing types would have you believe -- but in the long run they do represent a serious economic threat. The low-grade Asian and Indian assembly lines of two decades ago have morphed into well-run companies that have grown into business giants -- and are now incubating a first generation of smart tech entrepreneurs. Bottle fed on Andy Grove and Bill Gates, Steve Jobs and Jeff Bezos, these off-shore entrepreneurs are coming. Fast.

The United States remains the world's greatest creator of high-tech start-ups, the greatest wellspring of trained entrepreneurs and the heart of the world's venture capital industry. But we would be fools to remain complacent. We have been spending down the huge caches of intellectual capital created by the brilliant basic research of the 1950s and 1960s, without fully replenishing it. We have treated our hot new start-up companies like they were cash cows, ready to be milked for billions and capable of handling any added pressures from regulation, taxes or red tape we want to pile on them. And most dangerous of all, we have treated entrepreneurship as if it was a natural phenomenon, as reliable as the rain, and not a rare cultural trait that must be taught, nurtured and rewarded.

Mr. President, that is a recipe for losing competitiveness. Here are some ideas for keeping the United States economically dominant for the rest of the 21st century:

Mr. President, a second term is the perfect time to do all of this. Free marketers will complain about the expensive new government initiatives, and collectivists -- who share, with big business, a hatred of entrepreneurs -- will decry the individual freedom, the loosening of regulations and the tax breaks. Screw them all, Mr. President, you aren't running for office again. And both sides will happily play in the powerful, revitalized and enduring economy that you will leave as your other legacy.

Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. He has covered the Silicon Valley and high-tech for more than 20 years, beginning with the San Jose Mercury-News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist, and Fortune, and for two years he was a columnist for The New York Times. He has hosted two national PBS shows: "Malone," a half-hour interview program that ran for nine years, and in 2001, a 16-part interview series called "Betting It All: The Entrepreneurs." Malone is best known as the author of a dozen books. His latest book, a collection of his best newspaper and magazine writings, is called "The Valley of Heart's Delight."

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.