Posts Tagged ‘L. Gordon Crovitz’

Preventing Another Christmas Bomber, Part Deux

January 6, 2010

Wall Street Journal columnist Gordon Crovitz wrote a great column on Monday with the biting title “Intelligence Is a Terrible Thing to Waste” criticizing the Obama Administration’s policy of treating terrorism as a law enforcement issue. I’ve mostly been a supporter of this approach but Crovitz got me thinking hard about the limitations of such a strategy.

One problem he highlights is that our legalistic approach is harming our ability to thwart terrorist plots because we are giving foreign nationals Fourth Amendment protection against unreasonable searches. U.S. intelligence agencies are using this standard when deciding if and when to put suspected terrorists on a watch list or a no-fly list.

“The result of prohibiting hunches was that [Umar Farouk] Abdulmutallab was waved through. Information about suspected terrorists flows into a central Terrorist Screening Database, which is then analyzed by the Terrorist Screening Center, where FBI agents apply the “reasonable suspicion” standard to assign people to various watch lists including “selectee” lists and the “no-fly” list,” writes Crovitz. “It’s at this point where an approach based on domestic law enforcement trump prevention, undermining the use of information.”

While I agree that U.S. citizens should be afforded these rights, it seems foolish to give suspected terrorists these same privileges. Clearly, we need to have a more flexible standard for determining whether or not suspected terrorists, who often live outside the U.S., deserve to be placed on any of these government security lists.

Crovitz concludes that we face a stark choice. “We can limit how information is used or we can allow smart use of information to prevent attacks,”” he writes. “If we continue to choose to limit how information can be used in our defense, we shouldn’t be surprised when our defenses fail.”

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Regulating Venture Capital: Off the Hook Now But “Very Far From the Finish Line”

October 21, 2009

Earlier this year, Silicon Valley freaked out when U.S. Treasury Secretary Timothy Geithner told Congress that large venture capital firms should be declared as systemic risks and put under tight restrictions as part of the broader re-regulation of financial firms.

Such regulations would force VCs to register with the Securities and Exchange Commission, and submit regular reports on their investors and portfolios, costing firms up to $1 million. Data collected by the SEC would then be shared with a new risk regulator to ensure that VCs aren’t “a threat to financial stability.”

But techies breathed a sigh of relief earlier this month when Financial Services Chairman Barney Frank proposed draft legislation rejecting the Treasury plan, carving out an exemption for VCs from the “Private Fund Investment Advisers Registration Act of 2009.” (see draft below)

That was good news for innovation. VCs do not pose a systemic risk to the economy, as Gordon Crovitz pointed out in this astute column in the Wall Street Journal. The venture capital industry is small compared to other capital markets. VCs do not use debt, so that sharply limits their risk. And they are not tightly interconnected with other financial firms, like AIG or Lehman Brothers.

But they do represent an incredibly important part of the economy that helps generate significant wealth and job creation–a unique economic pillar the Treasury Dept. should be strengthening, not weakening.

But National Venture Capital Association President Mark Heesen says the VC industry is not out of the woods yet. “We are very far from the finish line, but in a better place than many expected at this point,” Heesen wrote me in an email. “There is still no House or Senate bill, but House Chairman Frank’s comments certainly are encouraging.”

Financial reform hinges on, you guessed it, the passage of health care reform. “Many Senators sit on both Committees of jurisdiction so can’t focus of financial reform until they see how health care proceeds,” added Heesen.

To make sure VC regulation does not reappear in future versions of financial reform legislation, Heesen says the NVCA is continuing to work with the Administration and members of the House and Senate “to make certain Venture capitalists do not have to register under the 40 Act while giving the government the assurances they need to understand we do not pose a systemic risk to the economy.”

Discussion Draft of the Private Fund Investment Advisors Registration Act

Non-Manic Monday: Creative Capital Featured in WSJ Column

August 10, 2009

L. Gordon Crovitz, former publisher of the Wall Street Journal, featured my book Creative Capital in his “Information Age” column in today’s Wall Street Journal (p. A9)-calling it a “fascinating biography.”

It’s gratifying when your work gets recognized in such a respected publication. And it’s even more rewarding when readers and reviewers understand some of the big ideas that you were trying to get across in the book.

On that measure, Crovitz, totally got it. Crovitz focused his column on the government’s effort to more tightly regulate venture capital. The U.S. Treasury wants VC firms declared as systemic risks and put under tight restrictions as part of the broader re-regulation of financial firms, notes Crovitz.

In his column, Crovitz wrote that the history of American Research & Development, the venture capital firm that I profiled in the book, “is a reminder that our regulatory system, by its nature focused on avoiding risk, has a hard time dealing with investment firms whose mission is to take risks.”

To bolster his argument, he summarizes ARD’s history of run-ins with federal regulators, and quotes some of my favorite parts of the witty and wise personal memos of Georges Doriot, the visionary Harvard Business School professor who pioneered the venture capital industry as president of ARD in the 25 years after World War II.

The dangers of over-regulation is one of the primary discoveries and lessons of my research. Thanks to Crovitz for bringing that point to the attention of a much wider public.