California has cleared the first hurdle to become three states. Elizabeth Keatinge (@elizkeatinge) has more.
SAN FRANCISCO – Even in Silicon Valley, where wildly improbable ideas are the coin of the realm, few people put much stock in Tim Draper’s radical plan to break up California.
But the iconoclastic 60-year-old venture capitalist is savoring victory this week after his initiative to split California into three states collected enough signatures to qualify for the November ballot.
Draper, who made a name for himself funding Hotmail, Skype and Tesla and as an outspoken champion of cryptocurrency, ticks off the ways California is failing its citizens one by one: deteriorating quality of life, crumbling roads and bridges, an underperforming education system, ballooning pension obligations for government workers, political cronyism and unfriendly policies that are driving businesses out of state.
The only answer, he says, is to start over with smaller states that can run more efficiently and with less red tape. Greater competition would force governments to be more responsive to the needs of residents and businesses. And, he claims, California would get six Senate seats and more political clout in Washington.
“I looked at this and thought: We really need to start fresh,” Draper told USA TODAY. “We need a way for governments to be accountable. We need a way to empower the residents of the state.”
If this sounds like an elevator pitch from a starry-eyed entrepreneur angling to disrupt an established industry, that’s because it is — but this one is squarely aimed at California voters.
“There’s a monopoly government in California, and I’m a start-up guy,” Draper said. “When there’s a monopoly industry or an oligopoly industry where the service is bad and the price is high, I look at that as an opportunity for an entrepreneur or somebody to come in and create a better service at a lower cost.”
His arguments have not swayed Californians in the past. In 2014, he spent $5.2 million to slice up the state into six parts, which failed to make the ballot. But his proposal captured media attention and landed him a spot on Stephen Colbert’s show to discuss in Colbert’s words “a great new plan to make California whole again by breaking it apart.”
In September, Draper took another shot at carving up California. His new plan calls for three states, with one state centered around Los Angeles and the other two divvying up the counties to the north and south.
The initiative taps a rich vein of resentment in California, between the more liberal coastal population centers and more conservative mountain areas, between its citizens and the state’s sprawling bureaucracy and between business lobbies and regulators.
“You can just let the state flop around and die or wait until there’s some sort of violent revolution. Or you can try to stem the tide by doing something like this,” Draper says. “I think this avoids the violent revolution or it avoids California becoming a ghost town.”
Draper’s not lacking his trademark enthusiasm, but his proposal is a long shot that faces major hurdles. Chief among them: even if it passes, the initiative would likely require the approval of the California legislature and Congress and the blessing of President Trump.
There’s loads of opposition, including the NoCABreakup group led by former Democratic Assembly Speaker Fabien Núñez, and little popular support. An April poll by Survey USA found that California voters were against the measure by a margin of 4 to 1.
“California government can do a better job addressing the real issues facing the state, but this measure is a massive distraction that will cause political chaos and greater inequality,” said Steve Maviglio, who is running the opposition campaign.
Plus, Draper has competition from an alternative proposal — another group wants California to “Calexit,” as in secede from the U.S. And history is not on his side. Separatists in California have tried to divide up the state more than 200 times. The last time a breakup was approved by the U.S. government was in 1863, when West Virginia wanted to split with Virginia during the Civil War.
“It’s hard for me to see this going anywhere,” says Jack Citrin, professor of political science at UC Berkeley. “But it does tell you one thing about California politics: With enough money you can probably put anything on the ballot.”
Draper dismisses talk that the odds are against him. Now that the initiative is on the ballot, he says it’s catching fire.
“Every start-up has hurdles,” he says. If the ballot initiative succeeds, “this would be tremendous. You’d get a clean slate. You wouldn’t have all the baggage that’s keeping California down. Each state would have its own way of governing and would be held accountable by its citizens who might move from one state to another if they didn’t like what was going on in that state.”
Silicon Valley isn’t just pushing new technologies such as self-driving cars or new services like ride-hailing or social networking. From Bill Gates to Mark Zuckerberg, billion-dollar fortunes are being used to beta-test solutions to problems tech leaders care about, from how schools teach children to curing diseases.
Yet despite dipping their toes in state politics for personal causes such as charter schools, few if any technology leaders have staked their business reputations and millions of dollars on a single initiative in such a high-profile way.
A lanky man with a baritone voice and libertarian views, Draper is a third-generation venture capitalist and fixture in Silicon Valley who grew up riding his bike on the dirt path that is now Sand Hill Road, a leafy stretch of road in Menlo Park lined with wealthy venture capital firms.
For a member of the Silicon Valley establishment, Draper has always thought pretty far outside the box. In a place where venture capitalists wear a uniform (button downs, Patagonia vests and khakis), he sticks to suits. Instead of concentrating his investments, he has a scatter-shot approach that has produced a lot of losers and a few huge payoffs.
He’s widely known for risk-taking in all parts of his life, whether it’s being chased by a Cape buffalo in Africa, hanging from a Cirque du Soleil trapeze at his 50th birthday party or swimming across the frigid San Francisco Bay without a wetsuit.
He co-owns two safari camps and an island resort in Tanzania, has a private school for entrepreneurs in San Mateo, Calif. called Draper University, and played Principal Schmoke on Nickelodeon’s The Naked Brothers Band.
An example of how his business thinking can be as wild and untamed as his bushy eyebrows is Draper’s backing of bitcoin soon after it debuted in 2009 and even after 40,000 of his bitcoins were swiped in 2014 when Mt. Gox, a cryptocurrency exchange in Japan, was hacked.
A few months later, Draper swooped up 30,000 bitcoins that had been seized by the U.S. government as part of its case against Silk Road, which was the Internet’s largest black market. That stake today would be worth more than $188 million.
In April, Draper jumped on stage at his Draper University to perform a rap song, “Bitcoin Hustle,” and make a bold prediction that the price of the cryptocurrency would hit $250,000 by 2022 (It’s now about $6,300). His goal now: to make bitcoin a national currency as Japan has done.
Far more controversial has been his defense of Theranos CEO Elizabeth Holmes, even after she lost investors hundreds of millions and was charged by the Securities and Exchange Commission with “massive fraud.” Draper led the seed round in Theranos with $500,000.
He told CNBC in May that the Theranos technology could have transformed health care but Holmes was “bullied into submission.” Earlier this year Holmes agreed to a $500,000 fine and barred from serving as a director or officer of a public company for 10 years.
“I am thrilled with what she’s done,” Draper said. This was “one of the cases where the entrepreneur was defeated,” he said.
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