TCS Daily

T.J. Rodgers, CEO of Cypress Semiconductor, on Tech Issues in Campaign 2000

By James K. Glassman - October 2, 2000 12:00 AM

What does Silicon Valley want from Washington, DC? T.J. Rodgers, CEO of Cypress Semiconductor, says that he and most of his peers just want to be left alone. TCS Host Jim Glassman recently spoke to Rodgers about tech issues in campaign 2000.

Jim Glassman: Al Gore has spent a good portion of his tenure as vice president courting Silicon Valley. How successful has he been in winning over tech executives, based on the people that you know and work with?

T.J. Rodgers: Based on the reality of the situation, if the CEOs of Silicon Valley were the electorate, Al Gore would be in Tennessee right now and never would have been Vice President.

On the other hand, you have to give the Clinton campaign effort credit for generating an appearance that Gore and Clinton were supported big time by Silicon Valley CEOs. They have done that by taking a few high-profile executives, basically advertising the hell out of it and creating the image which brought support, which they do not have.

Glassman: So you're saying that the Democratic candidate does not have a lot of support in Silicon Valley among executives.

Rodgers: Absolutely not. Even if you remember when Clinton was elected, there was that famous meeting in San Francisco. I was invited to that meeting and I ignored it. I had no interest at all in talking to Clinton. And then I was invited aggressively several times, finally by Sandy Robertson, the head of the investment bank Robertson-Stephens at that time, with a personal invitation to come and to talk with Kennedy and Clinton. And, I finally, as a personal favor to Sandy said okay.

And then the next day I received by Federal Express a card to fill out, thank you very much for your $1000 donation to Bill Clinton for President. And I knew that if showed up at the fundraiser, they would reasonably be able to claim that I contributed and therefore was a supporter. And I just sent it back and said, no way I was going to do it. And most of the support they gained was by that mechanism. And many of the people were not Clinton supporters and the majority of Silicon Valley CEOs today have never been Clinton supporters.

Glassman: What about George W. Bush?

Rodgers: I think most CEOs would prefer to see Bush elected over Gore. On the other hand, Bush has not generated or even tried to generate, as far as I can tell, the kind of local support and press coverage of the local support that Clinton and Gore have done. So you know, give points to Gore and Clinton for having developed a constituency here and having advertised it. And W has not done that.

Glassman: What are the most important issues to executives in Silicon Valley?

Rodgers: Real simple. We want a free market. Beyond that, we will compete, we will invent technology, we will create wealth the way we've done it. We simply want to exist in an environment where we can be capitalists and run our businesses.

Glassman: So, is it something specific that the government is doing at the federal level that is preventing you from doing that?

Rodgers: Well, you name it. I mean, if you look at the Federal government, the one that was intended when we were created versus the tumor that we've got now, they are intervening in every single way. They take a huge amount of money out of the economy. They take some of the money they take out of the economy and come back and use it to try to force or at least induce Silicon Valley to go into a certain direction on certain technology issues. They interfere with their ability to compete. The anti-trust law is a great example. Today, if you make a $15 million still have to get Hart-Scott-Rodino permission from the Federal government to go through with it, and it is arduous and it is expensive. It is not a trivial bureaucracy.

Glassman: What about immigration?

Rodgers: Well, with regard to immigration, the Federal government is not helping Silicon Valley get the talent we need to be more successful. We currently have a huge shortage of workers. It's been that way for several years. And what we would want would be to get the best and the brightest of other companies, of other countries, to come and help us as opposed to helping our competitors in those foreign countries. At a minimum, what we would like to see is that the college graduates who are foreign-born, who come here to Berkeley or Stanford aren't forced by our government to go back home so that they can use their American college education to compete against American companies.

And there has been some effort in Congress. It's been bipartisan but in general, they haven't gotten the job done and we're still sending people back - from our best universities because of immigration troubles. We get half-way through the year and the quota for high-tech immigrants shuts down every single year. Currently, my company has people hovering in foreign countries waiting for the window to open up again so that they can come over. And I would just like to stress that these are not people who are competing with or who would replace American workers. We currently have several hundred open jobs. We need all the American workers we can get, all of the American college graduates we can get, and all of the H-1b visa people we can get, and then some. And we're typical. We're not different from other countries.

Glassman: You mentioned Hart-Scott-Rodino, I also wanted to ask you about the Senate hearing exploring the alleged dangers of foreign ownership of American telecom companies. And we also see the FTC who is seen as ready to either kill or put some kind of restrictions on the AOL-Time Warner merger. Now, as someone who is a CEO of a company that makes the products that are used in these various networks, do you see dangers, either in foreign ownership of U.S. companies or in a company like AOL getting too big?

Rodgers: Well, I think, first of all, if you talk about the dangers of foreign ownership, if you take countries -- Mexico is one example -- that have severe restrictions on foreign ownership of property in their countries, they are invariably poor countries that don't do very well in international competition. So, to me, restrictions on foreign ownership translates into preventing foreign capital from building American infrastructure -- deciding that we don't want free money here. And somehow...foreign investment to the point of ownership in a company means that somehow there would be some interest contrary to the interest of the United States. To me that's absurd. With regard to the size of the company, this is yet another aspect that relates on the anti-trust law, where basically there is this theory, which I think is absolutely incorrect, fundamentally flawed, that somehow companies get big by turning into monopolies. And once they are monopolies, they can have their will with the American consumer. And I just don't believe that.

In most cases, government does its greatest damage when it protects us from some alleged evil. I can't name the monopoly that has done harm to the United States. A great example would be Microsoft, where Microsoft is a company that has produced superb software. They have produced huge amounts of wealth to the point that Seattle is one of the richest cities in the United States. They have brought the cost of software down astronomically. Today for a couple of hundred dollars you can buy software for personal computers that literally would have cost millions of dollars and only would have run on a mid-sized computer when this company was started in 1983. And yet somehow they are harming us. How, I don't know.

Some of their competitors don't like the way they compete or that they are successful in competition, but how the consumer has been harmed by this is really beyond me. The consumers have been huge benefactors of Microsoft's competence. So, in general, when we talk about big companies harming the consumer, typically that is an excuse for another agenda.

Glassman: You know, speaking of Microsoft, is it your impression that some of the Silicon Valley executives who urged the government to prosecute Microsoft have had second thoughts?

Rodgers: I haven't had any specific discussions with anybody on it because the people here understand how I feel, which is that, I think the anti-trust laws are wrong. I think that they harm free markets and I really don't like companies that try to use government force as opposed to competition in the marketplace to win.

I do know that it's a real shame that in this area, which is rich because we have a free and more open market than the rest of the U.S. and a lot freer and more open markets than the rest of the world, [some companies] would resort to tactics that are self-destructive, using the force of government and coercion to compete. It's disappointing. It's like Sematech when the semiconductor industry went on welfare and took the dole from the government. This is the lapse in Silicon Valley where we kind of have forgotten the basic principles of what made us who we are.

Glassman: Speaking of basic principles, you said in a recent monograph that Silicon Valley executives should not involve themselves in Washington politics. So, what is the danger that you see in normalizing relations with Washington?

Rodgers: Well, we have always been criticized as standing off to the side here in Silicon Valley, as too geeky and techie and concerned with our businesses and technologies to get involved in the so-called mainstream of the country, criticized that we didn't act more like Ford or IBM and have lobbying groups in Washington and participate. But the fact is that we concentrated on our businesses and technology -- that's why we are successful. And if we had taken away our obviously immensely successful effort and wasted it by lobbying through this bill or that bill for the last twenty years, we'd be far behind.

So, the way I look at it, the government takes half of my personal money and takes about half of Cypress' money and I could spend the rest of my life fighting them so the government takes only forty percent of my money or thirty-five percent. On the other hand, the half of the money that the government leaves my shareholders and myself, I can double that money every two years or so. So, instead of making a nickel or a dime by wasting my time fighting with government, I am better off taking what is left behind and simply productively investing it and managing it here. I will be way ahead at the end of the day. So, to me it is a waste of time, unproductive time to deal with Washington. Also and I think more importantly, the fundamental premise behind the process in Washington is that we're going to have a central authority that is going to create rules, a lot of them, hundreds and thousands of rules, millions of rules about how to put pickles in a jar, what kind of food coloring you can use, how your business should run, etc., and after having created those millions of rules enforce them with fines or jailing. And the free market is antithetical to that. The free market is just that - people should make trades openly and voluntarily and coercion should not be part of it.

So the entire premise of the way they work is antithetical to the premise that has made us successful and the sooner we start dealing with them on their terms - "We'll see if I can force my competitor into this thing, it's bad for my competitor. Let's see if I can force my foreign competitor not to be able to import products into the United States. Let's see if I can force my Congressmen with the appropriate donations and lobbying to give money to my company to do research and development." -- as soon as you have done that, you're playing their game and under their rules and you stop being an entrepreneur and a capitalist in the free market and you start being in a state of socialism, which is a known failure in the economic system.

Glassman: Are you finding support for this point of view?

Rodgers: A lot of support. One of the precursors to the Cato essay that I wrote, "Why Silicon Valley Should Not Normalize Its Relations with Washington, DC," was another Congressional testimony that I wrote called the "Declaration of Independence from Corporate Welfare." I was invited by a Democrat to attend a Congressional Committee hearing on corporate welfare. And after I accepted and was on my way, I found out that the set up was, there was going to be five or six lobbyists who are going to tell us why the so-called government-industry partnerships, which is the euphemism for corporate welfare -- it sounds better, were valuable and give examples of why government money was well invested in the industry, which is pure bunk.

But I was invited to be the token other side and then I was to be dismissed as that sort of radical, free-marketeer from Silicon Valley. And look at all these state citizens saying it's good for the government to confiscate money from our citizens and give it to some of the richest high-tech companies in the world. And I was going to state the opposite and the conclusion was going to be that they're more in the majority, that corporate welfare is good.

And I only found that out from a staffer who talked to me the day before I testified, two days before I testified. So I had to try to show that my testimony wasn't that of a maverick, but that of general opinion in Silicon Valley. So I called my list of CEO friends and obviously a CEO is very difficult to get hold of right now. Many are traveling and some are abroad. But I managed to get hold of about 80 CEOs and I wrote a statement that was simple so that they could agree to sign it. And the statement, the Declaration of Independence from Corporate Welfare, said that governments consume about 40 percent of the total output of Americans, that that's way too high, that the government expenditures are by and large much less efficient than those made by the private markets or individuals who would not be taxed, and that if we could cut government expenditures at the expense of corporate welfare, we would agree to eliminate corporate welfare even if that meant cutting government subsidies in some way to our own companies. In other words, we are prepared to go away from corporate welfare and I got 80 people to sign it, 84. And they are big names. So I presented that document at the Congressional hearing to show that I was not speaking as a maverick, that this was really a pervasive feeling in Silicon Valley.

Glassman: And when was this?

Rodgers: I first showed that in 1995, but that particular document has been rediscovered. This is about the tenth time since 1995. And in general, Silicon Valley CEOs are for small, non-intrusive government, that allows the free market to function.

Glassman: Let me ask you a last question. This week, vice president Gore promised to create 10 million new high-tech jobs if he is elected or re-elected, two terms. Were you relieved that Silicon Valley would grow like this?

Rodgers: Well, if he wants to create - how many 10 million?

Glassman: Yeah.

Rodgers: All he has to do is give me a call and I will create 10 million jobs. I will just take the current thousand jobs we have that aren't filled and I'll raise it to 10 million, one thousand jobs that we currently have that aren't filled. You know, it's a meaningless statement, unmeasurable, classic campaign hype. There are already millions of jobs that are open that aren't filled. So the issue isn't creating more artificial jobs. The issue is creating more people to fill those jobs.

Glassman: All right. Well, thank you, T.J. Rodgers.

Rodgers: Thank you for the opportunity.

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