Explaining Southern California's economy

What can states do to lure startups? Be better states

Zappos' CEO Tony Hsieh Speaks At Clothing Industry Trade Show

Ethan Miller/Getty Images

Zappos.com CEO Tony Hsieh delivers a keynote presentation at the MAGIC clothing industry convention in the Las Vegas. Don't worry about the tax breaks, he suggests to the states, because companies may have already made up their minds about where they want to be.

Zappos CEO Tony Hsieh was on a panel today at the Milken Institute Global Conference that I'm covering this week. The title was "Why Wait for Washington? How Can States Create Jobs and Economic Growth." Former California Governor Gray Davis was also on the panel, as was current Indiana Governor Mitch Daniels, so you had some good statehouse-level perspective. Paul Kedrosky, something of a Renaissance man, moderated. 

I found one comment from Hsieh to be particularly interesting, in light of how we might reflexively think about how states can attract businesses. He said that, basically, tax breaks have not very much to do with it. Or more accurately, they're a nice bit of icing on the cake — as well as a negotiating tactic that entrepreneurs can use in their favor.

When Zappos wanted to locate their fulfillment center, they chose Louisville, Kentucky, primarily because it was close to Federal Express's hub. The company's recent decision to move its headquarters to Las Vegas — to downtown Las Vegas, no less — was because Hsieh and his team liked the weather and have some ambitious ideas about the role of cities in fostering a creating class, to use Richard Florida's term for a clustering of young, energetic people who are invested in making cities succeed.


Do venture capitalists care about more than money?

Getty Images

I don't really want to do this $10 billion IPO. Really, I don't.

I'm officially arguing with Felix Salmon about venture capitalists. You can read the previous installments here and here. We've got even more fodder for debate now, based on Felix's excellent piece in the latest issue of Wired.

First off, I think he's talking about two things at the same time: 

1. Why IPOs suck for tech companies (Duh, it's the title of the piece!) — and why the IPO model, once so useful, is now broken

2. Why venture capitalists are doing all kinds of things that are borderline despicable when it comes to funding companies and maximizing their greed

I don't entirely disagree with point number one. It's taking companies longer to get to the IPO stage, and it's debatable whether companies that are already quite successful really need to go public. Also, as William Cohan has argued, investment banking has become a Wall Street cartel, with the same big firms — Goldman Sachs, Morgan Stanley, JPMorgan et al. — getting to run all the IPOs. The model that Bill Hambrecht developed — the so-called "OpenIPO" model — and used to take Google public in 2004 has fallen by the wayside.