This is the month when pundits and politicians are liplocked to network microphones. Republicans gather in San Diego. Democrats convene in Chicago. Both sides wave signs, wear silly hats, talk through boring speeches, drink bartenders to their knees, and grind out their mechanical nominations. [The men and women creating the new economy won’t be watching.]
After the conventions, Bob Dole and Bill Clinton will continue to declare that Americans face a crucial choice. “The differences are profound and fundamental,” says Dole. “We now have two very different visions of change before the American people,” says Clinton. [The men and women creating the new economy aren’t buying it.] “Dole is ossified in his thinking,” says Ralph Miller, president and CEO of APX International, an advanced- engineering company that designs prototypes for auto companies around the world. “He’s General Motors 30 years ago. Clinton is incredibly bright but totally misdirected and ineffective.” Scott McNealy, president and CEO of Sun Microsystems, is even harsher: “It’s like one particle of dust touching another particle of dust in the universe. That’s the choice we have.”
But there is another election — unofficial and powerful — taking shape in American business. It is, in many ways, the real election: a debate among business leaders at the vanguard of economic change about the meaning for America of the forces reshaping business. It is an election to define the political order of the next century and the next economy.
This all-business debate doesn’t separate along traditional dividing lines. It isn’t about Democrats vs. Republicans. “Nobody other than politicians can truly describe themselves as Democrats or Republicans anymore,” says Rick Inatome, the chairman of Inacom Corp., a $2.2 billion wholesaler of microcomputer systems. Instead, business is dividing into two proto-parties: Cyber-Libertarians and Techno-Communitarians.
Both sides agree that the promise of faster, cheaper computer technology and the demands of sharper, wider global rivalries have transformed the nature of competition. Both sides believe that the rules that guide their own companies — decentralized authority, accelerated decision making, rabid innovation — are the design principles for the nation as a whole.
Political theorists aligned with both sides agree on a final and central point: in American history, the organization of the political world follows the organization of the economic world. In the Agrarian Era of the 19th century, America was governed lightly and mostly locally. In the Industrial Era, mass production encouraged massive institutions: big business, big labor, and a big federal government to balance the interests of the two. Now the incentives of the Information Age point once again toward smaller, more decentralized institutions and less control from the center.
The implications of this transformation for government and society are what divide the two sides. The Cyber-Libertarians, clustered in Silicon Valley, take their inspiration from Ayn Rand, Milton Friedman, and Fredrich Hayek. They see a future in which the decentralizing logic of computer networks allows individuals to reclaim their freedom from big institutions, whether bloated corporations or corpulent government. Their ideal is Jefferson’s yeoman farmer with an Internet connection.
To the Cyber-Libertarians, the new economy’s premium on diffused authority and rapid decision making renders a death sentence on the federal government as we know it. Their response is straightforward: miniaturize government. For the Cyber-Libertarians, the Republican Congress isn’t filled with extremists (as Democrats like to say) but collaborationists who have already conceded too much to the Leviathan. Ask McNealy what impact Newt Gingrich’s army has had, and he snorts: “It’s kind of like a 747 ripping along and you drop a kid’s paper parachute out the back, and it gets ripped up in a nanosecond.”
The Techno-Communitarians, like the Cyber-Libertarians, bask in a confident optimism about the possibilities inherent in the new economy. But they worry that, left unchecked, the explosive impact of an economy ruled by creative destruction will produce an America that resembles Mexico or Brazil: a country polarized by widening income disparities, where the info-savvy rich barricade themselves against an increasingly desperate poor and a frustrated middle class.
The Techno-Communitarians see government as part of a team dedicated to building healthy communities. The densest hive of Techno-Communitarian thinking is found in Automation Alley, the nickname for the web of high-tech auto suppliers crisscrossing southeastern Michigan. After nearly collapsing with the Big Three automakers in the early 1980s, the region has revived as an outpost of precision manufacturing, and, along the way, developed a new business and public philosophy.
“I cannot accept a premise that government is going to be large and ineffective,” says Dwight Carlson, founder of Perceptron Inc., which makes advanced laser-based systems for monitoring quality control in manufacturing, headquartered in suburban Detroit. “And I can’t accept the other side that says we’re going to cut it down and it’s going to be small and ineffective. The only premise I can accept is that government’s going to be lean and effective, just like the rest of us.”
This argument between Cyber-Libertarians and Techno-Communitarians sounds the opening notes of the politics of the Information Age — a dispute ultimately about the ability of American society to hold together in a world in which the gulf between rich and poor, skilled and unskilled, wired and unwired, seems to be growing as relentlessly as our capacity to squeeze more transistors onto a silicon chip.
Just about everything you need to know about T.J. Rodgers, president and CEO of Cypress Semiconductor, is contained in this fact: on the morning I arrived to see him in his sun-splashed San Jose office, he was reviewing a letter he had just sent off advising a nun to “get down from your moral high horse.” the nun, Doris Gormley, the director of Corporate Social Responsibility for the Sisters of St. Francis of Philadelphia, had written Rodgers a few days earlier, explaining that the Sisters, which hold 7,000 shares of Cypress stock, planned to cast its proxy against the company’s board of directors because it didn’t include any women or minorities. Rodgers responded with a six-page, single-spaced sermon in which he denounced as “immoral” not only the Sisters of St. Francis’s demands for diversity but also the entire notion of corporate responsibility as measured by “self-appointed industry watchdogs,” ranging from environmental groups to Democrats in Congress.
Rodgers’s impassioned response to Gormley captures both his combative personality and his unswerving worldview — one that rejects government-based social and economic control as “coercive utopianism” and that allows little room for self-doubt. “My favorite phrase,” he says, “is free minds and free markets.”
Over the last few years, Rodgers has become something of a cult figure in Libertarian circles. Since the late 1980s, he has regularly testified before Congress in opposition to government subsidies for technology research, which he calls “corporate techno-pork.” He has crusaded against SEMATECH, the Pentagon-backed consortium of chip manufacturers, and lashed out against Patrick Buchanan’s anti-immigration posturing.
In Silicon Valley, Rodgers is unusual only in the intensity of his political beliefs. Unlike Hollywood, California’s other glamour spot, Silicon Valley has never been transfixed by politics. One reason is that the computer entrepreneurs have rarely felt they had much at stake in Washington deliberations. Mostly, though, Silicon Valley has stayed away from politics because it thinks so little of politicians. Hollywood celebrities view politics as a means of proving that they are serious. But as Paul Lippe, a Democratic activist and vice president of business development at Synopsys Inc., accurately observes, most people in Silicon Valley are convinced that they are engaged in more serious and important work than the politicians are.
But if Rodgers is atypical in the amount of time he spends thinking about politics, he’s characteristic in his views. In Silicon Valley — and much of the high-tech world in general — libertarianism is the default ideology. “Libertarianism is probably the closest thing you can come to a state religion in the computer industry,” says Tom Isenberg, a 33-year-old program manager for Microsoft, who ran as the Libertarian candidate for lieutenant governor in Washington four years ago. (His succinct platform was to abolish his own office. “I got a mandate from the people to continue working at Microsoft,” he says, after finishing fourth, with less than 76,000 votes.)
Libertarian thought grows naturally from high-tech culture. It offers a purity, a straight-line way of looking at the world, that appeals to the orderly engineering mind. It fits the computer world’s image of itself and its products as inherently antiauthority. And it taps into the widespread sense in this fluid, entrepreneurial culture that government is simply too slow, bureaucratic, and dumb. Tom Proulx, a cofounder of Intuit who was the principal engineer of its flagship product, Quicken, neatly sums up the prevailing consensus. “There is this feeling,” he says, “that government is the ultimate big company.”
Not surprisingly, the Cyber-Libertarians lack a secure political home. The Libertarian Party is too marginal, the Democrats too fond of government. But even the Republicans are fundamentally flawed — too slow to repeal government control over the economy, too quick to reach into personal life. The Cyber-Libertarian’s social agenda might give Pat Robertson a coronary: they oppose banning abortion, mandating school prayer, or dismissing soldiers with HIV from the armed forces. Rodgers gets almost as worked up about the “Neanderthals” in the Republican Party as he does about the “Socialists” infecting the Democrats.
What captures the Cyber-Libertarian imagination is the conviction that the information revolution is tipping the political struggle in their direction. Just as big companies have been forced to flatten their hierarchies, the Cyber-Libertarians believe that Washington will inevitably cede power to local communities and individuals. More fundamentally, they believe that as commerce is increasingly conducted online, government will find it difficult to regulate, tax, or even measure economic activity.
Slim and silver-haired, Dan Lynch has spent more time than most thinking about the implications of the online economy. After selling his first company, an Internet consulting firm called Interop, he’s invested in some 10 new startups, including UUNet Technologies Inc. and CyberCash, where he serves as chairman.
Based in Reston, Virginia, CyberCash is building a system for people to buy and sell products on the Internet without fear of credit-card fraud. Lynch projects that the Net will not only displace the mall as the principal meeting place of buyers and sellers, but will also become the transmission channel of an economy centered on information trading. With encryption technology, half the economy could be invisible to the eyes of the tax man in 20 years, he predicts. “The guys who are in power now don’t understand this system, so there’s a chance for new power centers to arise,” he says. “The populace will be able to form its own interest groups and find new leaders.”
To the Cyber-Libertarians, it’s an article of faith that whenever government tries to second-guess or reverse the results of the market, it produces perverse results. What about tax incentives to discourage layoffs, as Labor Secretary Robert Reich has proposed? “It is our moral obligation to let people quit or be laid off by corporate losers so they can join corporate winners,” Rodgers argues. Minimum wage laws? They destroy jobs and distort the market, Lynch says. Antitrust? A ruse to protect companies that have lost in the marketplace. “There is no such thing as a free-market monopoly,” says Microsoft’s Isenberg. “The only monopolies on the planet are those that have been enforced by government. Think of two guys in a garage kicking IBM‘s ass or two guys starting Microsoft and then becoming terrified of the other little guys in a garage who become Netscape. The market does not tolerate bullshit.”
“The Information Age is inherently interdependent,” asserts Morley Winograd, an AT&T director based in Monterey Park, California, and the coauthor of Taking Control, a new book on Information Age politics, which stands as a Techno-Communitarian manifesto. “That’s the piece that the Libertarians miss. You’re not going back to an autonomous, independent existence; you’re going forward to an interdependent existence. The knowledge and skills required to be successful are so specialized that you can’t accomplish a complex task without working with others. The interdependence comes from that environment; and that interdependence is where the libertarian impulse fails.”
Techno-Communitarians part company with the Cyber-Libertarians over the central metaphor that will organize business and society in the next century. Rather than elevate the heroic individual, Techno-Communitarians celebrate the team. In an interdependent world, government is not an enemy to be overcome but a partner to be mobilized. “International competition is a team sport,” says Perceptron’s Carlson. “And whether you like it or not, government is part of your team.”
Among Techno-Communitarians, Ralph Miller is the closest thing to a court philosopher. At 54, he looks the part with salt-and-pepper, scrub-brush hair and a professorial habit of winding his fingers when he talks, as though constructing a web. His office, in a low-slung building at the end of a gray industrial park in the Detroit suburb of Madison Heights, is oddly serene and faintly Eastern with a glass desk, muted green and redwood colors, and abstract art on the walls. Miller himself is a calming presence in beige linen pants and an open-necked Hawaiian shirt of yellow, blue, and black.
After earning an undergraduate degree in philosophy and a PhD in mathematics, Miller spent 15 years as an executive with General Motors. After a stint with Rockwell, he led another engineering firm before taking his current position as CEO of APX.
Miller’s worldview revolves around concentric circles of teams. In the inner circle is the company itself. The GM where he began his career three decades ago, he says, was “a bureaucracy, not very much different from the federal government, with incredible amounts of study and restudy and re-restudy and nobody with authority.” Today, he says, the imperative of quick response demands that companies move from vertical to horizontal organizations that diffuse authority and instill in their workers a greater personal commitment to success.
In the next circle is the community of other companies working as suppliers to the auto industry. Here the traditional model was also vertical: lanes of competitors racing against each other. But Miller insists that the horizontal connections – the common stake of all the companies in improving quality — are just as important. For the past decade, he has preached that even competitors have a common interest in increasing the overall efficiency of the domestic auto industry. “We are all codependent here,” Miller says.
That perspective leads Miller to the final circle: teams built between business and community institutions to tackle problems that the free market alone can’t resolve. “Philosophically, I think government should be smaller,” Miller says. “I believe that diffusing power to lower and lower levels in any organization is consistently the better philosophy. But government cannot abdicate. There are things that only government can do. We have to make distinctions between what the market is capable of doing and what requires government action.”
During the 1980s, Michigan’s governor, Democrat James Blanchard, recruited Miller, Carlson, and other like-minded entrepreneurs into efforts to build new public-private partnerships to restore the state’s competitiveness. After Republican John Engler defeated Blanchard in 1990, Doug Ross, who had been a principal architect of Blanchard’s economic agenda as Michigan commerce secretary, transplanted the network into Michigan Future Inc., a bustling volunteer organization directed by Miller, Carlson, and Rick Inatome.
Michigan Future now organizes some 2,000 business executives, educators, and local government officials behind an array of projects, from promoting exports to opening their own charter schools for technical education. Their signature project, which has gone on to become an independent organization, is an alliance known as the Auto Body Consortium.
The consortium originally brought eight small and midsize auto supply companies (including Carlson’s and Miller’s) together with GM, Chrysler, and the University of Michigan in a joint research project to reduce the variation in auto body construction, lowering costs and raising quality. The project, which pooled $7 million from the companies with a $5 million federal grant, ended last September. The results were so encouraging that a larger group of suppliers joined with two universities and all of the Big Three manufacturers to win a follow-up federal grant to reduce variations in the stamping of auto body parts.
These experiences have converted Carlson — a 52-year-old GM alumnus — into an evangelist for federal investment in research. The consortium’s experiences, he says, refute the Cyber-Libertarian claim that government dollars subsidize only projects that can’t make the corporate cut. No single company could have assembled a project that crossed so many organizational boundaries, both public and private. Without federal dollars — and perhaps more important, federal encouragement — the cooperative research “absolutely would not” have happened, Carlson says. “I know because I tried to make it happen for 20 years in Michigan — and never could do it.”
As the Techno-Communitarians are quick to point out, the best example of the value of public investments may be the computer industry itself. The Internet sits atop the ARPANET that the Defense Department began building in the late 1960s to study how the military could communicate after a nuclear war. “To me the Internet is still the ARPANET,” says Debi Coleman, chairman and CEO of Merix Corp., an Oregon-based electronic interconnect company. “Show me the Henry Ford who went out and built the Internet.”
The Techno-Communitarian platform is a turbocharged version of the New Democrat agenda that surfaced in Clinton’s 1992 campaign, only to sink in his presidency: downsizing and deregulation combined with targeted federal initiatives in education, training, research, infrastructure, and the reclaiming of the inner cities. Techno-Communitarians want ineffective federal job-training programs replaced by vouchers, not eliminated; they would rather reform public education through the creation of charter schools than issue vouchers to parents who could opt out to private schools.
It is, the Techno-Communitarians argue, simply naive (one of their favorite words) to expect an unregulated free market to ensure a skilled workforce, adequate infrastructure, or sufficient support for basic research. “The proper role for government,” says Carlson, “is to make long-term investments for the good of the American people. I can tell you that as the CEO of a public company, I have never had one shareholder come to me yet and ask if I am making the right long-term investments for the good of the American people.”
The End of Monopoly Politics
At century’s end, American politics is in a state of decomposition; neither party now commands a stable majority of public support. Pollsters and analysts offer many explanations for this political insecurity. But the most important may be a collective sense in America that we have crossed into a period of lasting change. If there is a single root of the two parties’ declining hold on the public’s imagination, it may be the unspoken and unsettling conviction that, as America goes through this transition, both parties are trapped on the wrong side of history.
This has happened before. In the last quarter of the 19th century, as the nation moved from farm to city, small shop to giant factory, both political parties appeared unable to adapt their vision of minimalist government to the changed circumstances. Inadequate to the challenge, neither side could win the country’s allegiance. From 1876 through 1896, the nation ricocheted through five consecutive one-term presidents, repeatedly shifted control of Congress, and witnessed a proliferation of third-party movements capped by the emergence of the anti-big business Populist Party.
It was not until the turn of the century and the dawn of the Progressive Era that the nation reached a new consensus: rather than vainly struggle to reverse the turbulent economic change that had created huge corporations and controlling trusts, the country would fortify the government in Washington to counterbalance the new private economic power. That bargain lasted almost a century. But the political machinery that ran it has now plainly collapsed, along with the Industrial Age economy that spawned it.
Today we are again at a moment of transition, searching for a new political order to match the challenges of a new economic order. Like the Progressives a century ago, the Cyber-Libertarians and Techno-Communitarians agree on the futility of trying to hold back the tide of change. Yet they fundamentally diverge on how to manage it or whether it should be managed at all. There is no easy point of connection between these contrasting visions of the future; they are moving at diverging angles and accelerating speeds. The widening space between the Techno-Communitarians and Cyber-Libertarians offers a preview of what American politics will look like as we grope toward a new social bargain to manage the Information Age.
With that consensus still far beyond our reach, the electronic message flashing on the screen is short and bracing. It reads: From the new economy to the old politics — Game Over.
Ronald Brownstein (email@example.com) is national political correspondent for the Los Angeles “Times” and the coauthor of “Storming the Gates: Protest Politics and the Republican Revival” (Little Brown, 1996) . He appears regularly on CBS’s “Face the Nation.”
Sidebar: The Politics of Business
Is the new economy dangerously polarizing America? This is the question at the heart of the divide between Cyber-Libertarians and Techno-Communitarians. Cyber-Libertarians either reject the idea that anything is wrong at all or suggest that, if there is a problem, government efforts to address it will only make it worse. Techno-Communitarians see the Information Age ominously separating the United States into a two-tier society, with high wages for workers with advanced skills and education and relentless downward pressure on the living standards of the less-skilled.
Let’s put the issue in the crossfire. For the Cyber-Libertarians, meet Scott McNealy, the boyish, hockey-loving, 41-year-old chairman and CEO of the ferociously successful and innovative Sun Microsystems. The son of a Detroit automobile mogul, McNealy drifted through Harvard and Stanford Business School without apparent motivation before helping to found Sun in 1982; finally focused, he became CEO at 30. Today he’s one of the industry’s leaders. McNealy rejects out-of-hand the notion that the economy is undergoing a transformation that is breeding insecurity in the middle class. “What transformation?” he cries incredulously. “We’ve been going through a transformation ever since I learned to read. All the politicians are trying to do is generate votes through insecurity. That’s all that’s going on. This is as old as our society.
“Either your job is secure and you have a planned economy, or your job is insecure and you’re in a free-enterprise economy,” McNealy argues. “Or you’re a tenured professor or a government official with no term limits.”
Besides, McNealy asks, who says government’s goal should be to diminish insecurity? “We’ve become a society of victims,” he says. “If you don’t have losers, you can’t have winners. If you don’t have winners, you can’t move the standard of living forward. Insecurity is the source of all motivation. Why do I do my job? I don’t need any more money. I’m insecure. I need to prove to myself and everybody around me that I can do it again tomorrow. We ought to take advantage of that basic element of human nature.”
Here’s where Mitchell Kertzman jumps into the debate from the Techno-Communitarian side. A Brandeis dropout who dabbled as a disk jockey, a folk singer, a booking agent, and a peddler of biorhythm charts, Kertzman finally found himself as a programmer. In 1974, he launched Powersoft Corp., which became a leader in client-server software; 20 years later, he sold the company to Sybase Inc., a leading database company, and became a multimillionaire.
Today he’s the executive vice president of worldwide sales and marketing at Sybase and is among the most politically engaged executives in the computer industry. In 1994, Kertzman was the principal business supporter of a Massachusetts ballot initiative to impose a progressive state income tax; he has since founded the Massachusetts Institute for a New Commonwealth (or MassInc.), a think tank to explore issues relating to what he calls “the wealth gap between the wealthy and the rest of the middle class.”
“I buy Scott’s argument, which is the entrepreneurial argument,” Kertzman says. “Scott, motivated by insecurity, can drive Sun even further. But it’s self-fulfilling, self-circulating. Yes, if you have the college education and the background and you come from an intact family that motivated you to achieve, you can do that. But that doesn’t seem to be a majority of the public. And public policy has to serve a majority of the public.”
Kertzman isn’t sure anyone knows “how we get at” the widening polarization of income documented most recently by a major Census Bureau study released in June. A strategy to upgrade skills through education and training, subsidize basic research, and open foreign markets for increased U.S. exports and high-wage jobs “is probably as good a set of answers as we have in all that we know,” Kertzman says. “But is it enough? Probably not.”
Kertzman has less doubt about the implications of allowing the centrifugal trends in earnings and wealth simply to continue into the next century. “I believe the extrapolation of where we’re going is Mexico, some Caribbean island, or Brazil, where the very wealthy live behind guarded walls to protect themselves from the people who work for them,” he says. “The public schools lose the support of that [affluent] class because those schools are for the poor kids, and all of the public institutions are basically there to keep order among the poor. I think it is terribly dangerous.”