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As Long as We Remember...

February 3, 2005

The Party of Entrepreneurship

Chris Charuhas

During the 2000 presidential election, entrepreneurs - people who start and run their own companies - were pretty much split between the parties. In Silicon Valley, socially liberal entrepreneurs pushing for education reform supported Democratic Candidate Sen. Al Gore, while those who leaned Libertarian supported Texas Gov. George W. Bush because they liked his "lower taxes, less government" stance.

This is no longer the case. During the past few years, entrepreneurs have rushed to join the Democratic Party.

Here in Frederick County, people who just recently became active in the Democratic Party include a local contractor who tripled his business last year; a man who built a chain of health care clinics; the president of a successful dot-com; the CEO of a nationally-known marketing agency; and the founder of an international software firm.

This Democratic involvement by local entrepreneurs isn't confined to Frederick County. An Internet startup founder in Arizona is developing Democratic county organizations in its rural counties. A serial high-tech entrepreneur in California is financing several fledgling liberal political groups.

On a national level, the trend is the same: entrepreneurs are aligning themselves with the Democratic Party. George Soros, who started his own arbitrage company and made billions in hedge funds, has become a major Democratic financier. So has Peter Lewis, who built a $6 million insurance company into a $5 billion juggernaut. The founders of the liberal political action committee made their fortunes in software startups. The founder of Real Networks, Rob Glaser, is chairman of Democratic-friendly Air America Radio.

So, why are entrepreneurs flocking to the Democratic Party? Because entrepreneurs like growth and innovation.

Entrepreneurs know that economic growth is fueled by human capital. But the Republican Party is preoccupied with financial capital. It should be: the top 10 employers of Bush donors are finance and investment banking firms.

But entrepreneurs tend to regard these folks as a necessary evil - money-shufflers who don't really understand how to create value, but nonetheless must be dealt with from time to time.

The Democratic Party, by contrast, concentrates on human capital. Sen. John Kerry's education plan focused on attracting and developing good teachers. Under Democratic leadership, the Department of Housing and Urban Development started over 1000 inner-city computer training centers. Advantage: Democrats.

Entrepreneurs want lots of public investment in research and technology. They know that private corporations can't develop economic dynamos like the Internet on their own. But Republicans are cutting the budget of the National Science Foundation. What's more, Republicans now obstruct biomedical research on stem cells, a prerequisite to enter what promises to be a trillion-dollar industry. Advantage: Democrats.

Also, entrepreneurs don't like aristocrats. Entrepreneurs are typically annoyed by their opposites: aristocrats who get a free ride through life without doing much. Annoyance turns to loathing when these people wield power. The Republican Party encourages aristocracy with its drive to abolish estate taxes. Letting people use fortunes they didn't make is anathema to entrepreneurs.

Entrepreneurs know that aristocracy hurts productivity. During the dot-com heyday, I saw several trust-fund kids try to start companies. All of them failed miserably, because they lacked business savvy and drive. It's not like they needed any savvy and drive to make a living - Mummy and Daddy had taken care of that. By the way, they were all Republicans. Advantage: Democrats.

Entrepreneurs know that aristocracy leads to inefficient investment. Aristocrats not only make poor businessmen - one need only look at the president's business career to see that - they tend to invest their money in unsound companies. Tim Draper, a scion of wealth and third-generation investment banker, lost over $200 million of other people's money investing in silly dot-coms. In the 2004 presidential campaign, Mr. Draper endorsed Governor Bush. Advantage: Democrats.

In my next article, I'll explain how entrepreneurs' aversion to unsound schemes has led them into the Democratic Party.

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