What the new Congress could mean for Business

Trade

One area where President Barack Obama and congressional Republicans could find common ground is trade. Mr. Obama wants to submit a revised South Korea free-trade agreement for congressional approval in January, and hopes to unveil new terms addressing U.S. auto and beef exports during the Group of 20 meeting of global leaders in Seoul next week. Mr. Obama has said he wants to boost U.S. exports by 50% during the next five years. Trade-skeptics in the Democratic caucus have blocked movement on trade-opening deals such as the South Korea treaty.

Senate Minority Leader Mitch McConnell (R., Ky.,) said trade is one area where his caucus and the White House could work together. But it is unclear whether the new class of populist, tea-party Republicans share the traditional GOP view that free-trade deals are good for the U.S. economy overall. Big business groups see passage of the South Korea pact as a critical test of whether the White House and Congress can break the stalemate on trade issues.

Defense

Within national-security circles and the defense industry, there is some nervousness about whether the new Congress could push broader cuts in defense spending as part of an attack on the swelling federal deficit. In the past, a Republican House and a more conservative Senate would have been a guarantee of continued defense budget growth. But the influx of tea-party candidates, elected on promises to oppose pork-barrel deals and earmarks and reverse the growth of federal spending, could chart a different course. Debate over how much more to spend on the war in Afghanistan could become a test of the new Congress's direction ahead of the administration's deadline to begin phased withdrawals in July 2011.

Adding to the uncertainty is the expected departure of Defense Secretary Robert Gates in 2011. Mr. Gates, who served as a secretary of defense under George W. Bush before joining the Obama administration, commands the respect of congressional Republicans.

Transportation

This is supposed to be the year that Congress acts on a big, multiyear bill to finance road building, airport construction and other transportation projects. The Obama administration last year successfully pushed for a delay of action on a proposed $500 billion transportation bill, despite strong protests from House Transportation and Infrastructure Committee Chairman James Oberstar, (D., Minn.) Now, Mr. Oberstar is gone—defeated in his bid for re-election. Ready to take his place is U.S. Rep. John Mica (R., Fla.) Mr. Mica said in a statement Wednesday that passing a long-term highway and transit plan and measures to fund the Federal Aviation Administration and water projects are his top priorities. Mr. Mica also called for a "better directed high-speed rail program." Mr. Mica is more likely than Mr. Oberstar to encourage a bigger role for private investors in building new infrastructure projects, and has called for streamlining the process of getting projects approved.

Infrastructure spending is one area where business groups welcome federal spending. The U.S. Chamber of Commerce, which invested heavily to defeat congressional Democrats in the 2010 elections, has supported raising taxes to fund transportation improvements.

Health Care

Health-care companies see the Republican win as a chance to chip away at aspects of Mr. Obama's health overhaul least favorable to the industry. Insurance companies, drug manufacturers and hospitals say they will press to peel away the law's new taxes on health-care companies, pass tougher medical malpractice curbs and knock down a new board that recommends Medicare spending cuts. Opponents of the law may have the most success removing the law's new tax-reporting requirement that requires businesses to file a 1099 tax form when they pay a vendor more than $600 in a year. Where the health industry is most concerned about the Republicans' plans is the party's strong opposition to the law's requirement that most Americans carry insurance or pay a fine, something that could cost health-care providers millions of new customers. House Republicans say they plan to pass a bill repealing the law. That will almost certainly die in the Senate or on Mr. Obama's desk.

Pharmaceuticals

The pharmaceutical industry wants to hold on to concessions it won from Democrats during their reign in Congress, while benefiting from antiregulatory sentiment among Republicans who captured the House, industry lobbyists said.

In negotiations over the health bill that passed in March, the industry offered $80 billion in savings and won a promise from the White House not to pursue certain cost-cutting steps such as importing cheaper drugs from Canada. About half of the savings was intended to close a gap or "doughnut hole" in Medicare drug coverage that some seniors face. Despite Republican calls for a repeal of the health law, drug-industry lobbyists say they don't expect a GOP bid to reopen the doughnut hole because it would anger seniors and risk giving wounded Democrats a rallying cry. The incoming Republicans also may be more sympathetic to industry views on regulation, such as the industry's push to continue a system under which companies pay user fees to get faster decisions on drug applications.

Wall Street

House Republicans didn't wait for the final results of Tuesday's vote to launch their assault on the Obama administration's effort to tighten regulation of Wall Street.

Rep. Spencer Bachus, an Alabama Republican who will be one of the contenders to take over the House Financial Services Committee next year, said Wednesday he wants to rewrite "job-killing provisions" of the Dodd-Frank financial-overhaul law, starting with new rules on derivatives trading. Also high on Mr. Bachus's agenda: overhauling mortgage-finance giants Fannie Mae and Freddie Mac. Republicans want to wind down the two companies, currently under government control.

But any effort to change Dodd-Frank would need Democratic support in the Senate, and then Mr. Obama's signature. In the event those aren't forthcoming, House Republicans could try to cut off funding for agencies implementing Dodd-Frank or grill administration officials in Capitol Hill hearings.

Telecommunications

House Republicans will likely put the brakes on efforts by the Federal Communications Commission to re-regulate Internet lines. Phone and cable companies are fighting the plan, and Republicans have already warned the FCC to drop the plan.

Telecom and tech policy issues are likely to take a back seat next year. But Republicans and Democrats could find common ground in efforts to write stronger rules on Internet privacy. On Wednesday, two leaders of the House Energy and Commerce Committee, Rep. Joe Barton (R., Texas) and Rep. Ed Markey (D., Mass.), jointly warned that they plan to put "Internet privacy policies in the crosshairs" with hearings and legislation.

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Why New Ventures Crash & Burn

There are lots of ways for a newborn business to crash and burn spectacularly. In fact, Steve Blank — serial entrepreneur and author of The Four Steps to the Epiphany — says there are probably 387 million ways to fail. But most screw-ups stem from five different sources; Blank told the audience in San Francisco on Wednesday, October 27, 2010 at “FailCon 2010”, a conference designed to embrace startup mistakes.

Here they are:

1. You’re letting your business plan dictate the trajectory of the business.

2. You assume your business model is correct.

3. You decide all the information you need to run your business is in your building.

4. You believe your mistaken hypotheses are crises.

5. You think you have all the time in the world.

If you’re guilty of one (or more) of the above five ways of thinking, you’re not thinking like a startup founder; you’re thinking like a corporate exec whose job it is to execute a business model. The problem is, your fledgling business doesn’t have a business model yet — no matter what your shiny business plan says.

Blank defines startups like so: “A temporary organization used to search for a scalable and repeatable business model.” The keyword there is search. When you’re just starting out and you don’t know much about your customers, you haven’t yet found your business model, so you have no business acting like your job is to simply execute a plan. Your job at this stage is to test and learn as much as you can (see #3) — and this means getting out of your building and going to your customers. And once you’ve learned that many of your assumptions are wrong, your job is to leverage that insight into building the product or service that your customers really want. It’s not a crisis when you find out you’re wrong (see #4). You could say, at this stage it’s your job is to fail. And fail again. And the faster you do it, the better.

When you finally do go to investors (and you shouldn’t even think about it until you’ve gone through at least 3 cycles of testing, failing, and learning), Blank suggests throwing out the traditional idea pitch in which you spend as much time as possible trying to convince them of the brilliance of your idea. Instead, give investors the this-is-what-I’ve-learned pitch. This accomplishes two things: It proves that you did a boatload of research on someone else’s dime (probably yours) and that you’re well on your way to searching for a business model that’s scalable.

Has anyone ever tried this kind of pitch with investors? Hit the comments area of my blog to tell us about your successes and failures.

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