As President Biden takes office, tech policy is high on his agenda. That makes sense: The tech industry is a key driver of prosperity and growth, and all of us should wish the president success in this area.
But tech policy is tricky. The tech industry and the government are two very different worlds. Tech companies thrive on independence and competition, and even more than most U.S. businesses, they’re skeptical when they hear the phrase, “I’m from the government and I’m here to help.”
I founded the Internet Caucus when I was in Congress, ran a tech policy organization for several years, and have spent many years advising and running startup companies. Based on this experience, I believe there are four simple principles that could make President Biden’s tech policy a major success.
First and most important, the president should make a clear distinction between Big Tech companies—like Facebook, Google, and a dozen or so others—and everyone else.
Big Tech companies have invented wonderful products, created millions of high-wage jobs, and made America the world leader in innovation. But they’ve also made mistakes and, as the companies have grown in wealth and influence, both Democrats and Republicans now agree that some restrictions are required.
But restrictions on Big Tech companies don’t have to restrict American innovation. The vast majority of new products, disruptive technology, and future competitors to Big Tech companies are found among small and medium-sized tech companies. These companies do not have excessive market power and shouldn’t be subject to the same restrictions as Big Tech. If President Biden and Congress can focus restrictions on Big Tech companies but leave smaller companies free to innovate, the ingenuity that has served our country for so long will help us continue to prosper.
Avoiding new restrictions on small- and medium-sized tech companies is the most important thing President Biden can do. If he can accomplish that, there are three more things he could do that would also help the software and tech industry.
First, he should be careful to maintain a positive business environment. Tech companies need the same thing that every private sector company needs from the government on ordinary business issues like antitrust, taxes and regulations: fair rules that are predictable. This means that, once rules have been adopted, the government should resist the temptation to tinker with them every year unless they are seriously out of whack.
Second, President Biden should invest in pure science.
Private companies, and even universities, don’t have the resources to follow the science wherever it goes, just for the sake of knowledge. But the government can and does fund scientific research, and this research often leads to spectacular results. It was research at the Defense Department, for example, that created the first iteration of the Internet.
It’s not enough to invest in science, it has to be “pure” science. Government research funding, like most things in government, is subject to active lobbying by many groups for research on their favorite subjects. The Biden administration should ignore the lobbying when it can, focus on pure science, and let the tech industry perform its magic.
Third, if President Biden wants to incentivize the tech and software industry, he should make sure to focus on the right kind of incentives. Government incentives are often counterproductive, especially if an administration becomes enamored with a particular technology and tries to make the marketplace move faster in a particular direction. This approach usually fails—the market is infinitely better than the government at predicting which products and companies will succeed.
A much better approach is to use general incentives that are available to everyone, not just to particular technologies or companies. The Research and Development Tax Credit under Section 41 of the tax code is a prime example. This credit is available to any company that innovates in any way, regardless of technology or politics. As a result, companies can experiment with any ideas they have, make changes when they have to, and succeed or fail on their own merits. President Biden should retain and expand this credit and should follow this model if he decides to adopt other incentives, such as increasing the number of STEM graduates in the U.S.
The keys to a successful Biden tech policy are the four principles above. But there is one more thing President Biden has to do for his policy to succeed—aside from the four things above, he has to leave the tech industry alone.
Leaving the industry alone doesn’t require any direct action, but it’s critical to success. The process of innovation often forces companies to move fast, take risks, and fail often. None of these characteristics is compatible with micromanagement by the government.
If the Biden administration can do these four and half things, it will be rewarded with a healthy tech sector that provides enormous economic benefits, and we will owe the President our congratulations and thanks.
Rick White is a former U.S. Congressman. He represented Washington State’s First Congressional District, including Microsoft, Amazon, and other tech companies. He was a founder of the Congressional Internet Caucus and CEO of TechNet, a leading trade association for the technology industry. He now serves as an investor and advisor for startup companies, primarily in the Seattle area, and as a member of the Strategic Advisory Board for alliantgroup, a tax consultant firm in Houston.