The Legend of Stacey Lawson – and Why Voters Should Be Wary.

(Ed note: This blog post was submitted in response to a Patch story about a "hit piece" on Stacey Lawson sent out by the Norman Solomon campaign. To read the Patch story, click here.)

In the cloak-and-dagger world of high stakes espionage, a spy operating undercover creates a “legend,” a false story about himself or herself.

Stacey Lawson, a millionaire businesswoman, is not a spy. But she has created a legend in an effort to convince voters in California’s second Congressional district that she is qualified to represent them in Washington, DC.

It’s troubling that Lawson didn’t bother to vote in eight of the last 12 elections. It’s even more disconcerting that as a candidate with lots of money, she tries to curry the favor of the electorate with deceptive rhetoric about jobs and the economy.

When Lawson debated he touted her affiliation with UC Berkeley's Center for Entrepreneurship and Technology (CET), describing it as an organization “devoted to building the sort of small businesses that drive 85% of jobs in this country.” Nothing could be farther from the truth.

CET was UC Berkeley's competitive response to Stanford University's tremendous success in producing a number of very successful Silicon Valley entrepreneurs (including Hewlett, Packard, the founders of Yahoo, Google and several hundred other companies), venture capitalists and engineers, who went on to collectively kick millions into Stanford's endowment, and made the school a magnet for the next generation of aspiring entrepreneurs, engineers and venture capitalists.

CET's mission is to do likewise and identify and cultivate the sort of students who will invent “the next big thing.” A revealing arm of this effort is UC Berkeley's Startup Accelerator.

From the website: “The purpose of the UC Berkeley Startup Accelerator (UCBSA) is to accelerate the launch of fundable startup companies with scalable business models out of UC Berkeley.” The important parts of that statement are “fundable” and "scalable.” In tech parlance, “fundable” always means “scalable” and “scalable” always means a business where the profits grow exponentially relative to expenses.

For example, “shrink wrapped software” (meaning software that is not customized on a per user basis) and web services are incredibly high margin.

Here's why: Suppose it takes 100 people to build the product, and they have to sell 1000 copies or sign up 1000 users to break even. Well, guess what happens when they sell copies 1001-10,000? It's pure profit. Very successful software companies can get up to 90% margins. That's the definition of “scalable.” And by their own admission that’s what CET/UCBSA is looking for.

The important point is that those sorts of companies do not generate jobs commensurate with the wealth they produce. In the scenario above, the number of people required to develop the product or service did not increase when they sold copies 1001-10,000. So where does all that wealth go? It goes to shareholders -- the founders, the VCs and the institutions that funded the company.

At the opposite end of the job spectrum are small- and medium-sized, service-based businesses. These generally have lower startup costs (which is fortunate since the money has to be borrowed), and growth is proportional to expenses.

For example, if you're running a grocery store and you open a second store, you can increase your total gross profit but there are limits to what you can do on the margin side because you have to hire more employees as you expand. That's exactly why these sorts of businesses drive jobs and exactly why they're of no interest to VCs and CET. They put food on a lot of people’s table, but they will never be what VCs like to call “a screaming ten-bagger” (a 10x return on investment).

There's nothing inherently wrong with CET trying to identify and support the next Google or Apple. By virtue of their size, the handful of super successful tech companies create well-paying jobs, but the ratio of jobs to revenue/profit is startling low. By definition, these companies are not the big job creators, as Lawson would have us think.

Although her track record as an entrepreneur is mixed (one of her own companies, Chelsey Henry, Inc., failed to pay payroll taxes for 15 quarters and later went bankrupt, leaving creditors in the lurch), Lawson has raised a lot of money from well-heeled corporate donors. Her candidacy underscores the problematic influence of corporate cash on the political process.