A member of my Board of Advisors suggested that I post the article by Michael Malone from the December 21 Wall Street Journal, Washington is Killing Silicon Valley. The article is interesting on a number of fronts. First, it points out the role entrepreneurs have played in the job creation process. Second, it mentions that the exit strategy for too many business plans end with the magical words… “And then we’ll sell to Google.”
But what really interested me was the observation that because of the accounting nightmares in the last decade, Sarbanes-Oxley was created and this legislation “has essentially killed the creation of new public companies in America, hamstrung the NYSE and NASDAQ (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.”
This brings me to something I heard from my uncles many years ago…that when the government gets involved, you never know what exactly will happen. Now I have to believe that the writers of the Sarbanes-Oxley had all the good intentions in the world. Preserving and defending the investor is pretty noble, but unfortunately the old Law of Unintended Consequences has a way of rearing its ugly head and that’s what happened with Sarbanes-Oxley. And as we reflect on that, you have to wonder how the Law of Unintended Consequences will play out with the role the Fed and the U.S. Treasury has taken on in the current economy. That post won’t be written for some time to come.