Sitting atop San Francisco's Nob Hill last week, in a banquet room of the opulent Fairmont Hotel, I began thinking maybe I ought to invest in marijuana. "You really should," said a woman at my table, who reminded me, in her wholesome, middle-aged earnestness, of my mom. About a year ago she poured money into Poseidon Asset Management, a marijuana hedge fund that requires a minimum investment of $100,000. The fund earned a 67 percent return in 2014, besting the S&P 500 by a factor of six. Now she's trying to figure out what to do with all of her extra cash.
As we talk, dozens of professional investors are listening to a handful of suit-wearing pot entrepreneurs compete onstage for start-up funding. There's SweetLeaf, an organic edibles company that will target the Whole Foods demographic; Intelligent Light Source, a maker of hydroponics lamps that has ties to MIT; and VapeXHale, a high-end vaporizer controlled by an iPhone app. I'm feeling pretty good about all of them, not least because they've already been vetted and incubated by the ArcView Group, the gathering's organizer and a sort of Y-Combinator for pot startups.
In this week's New Yorker, Alec MacGillis discusses Jeb Bush's approach to education reform, the realm in which Bush, as Florida's governor, had sought to make his biggest mark. In 1995, his efforts to improve the state's public schools catalyzed his political career and, later, fueled competition with his brother George, who as president rolled out the No Child Left Behind Act:
Jeb Bush made it known that he thought his own approach superior, because it sought to grade schools on improvements in individual students' scores, rather than just on schools' performance in a given year. "There were lots of conversations about the work in Texas and how Florida had improved on that," [school superintendent Jim] Warford said. According to education officials, Jeb's team had little respect for Rod Paige, the former Houston schools superintendent whom George W. Bush had named Secretary of Education. "It was a little prickly in Florida," Sandy Kress, who worked on the implementation of No Child Left Behind, said. "It was 'We're going to do it our way and can do it better.'"
Their sibling rivalry notwithstanding, the Bush bros have common ties to one particularly controversial educational entrepreneur. Starting in the late 1990s, Randy Best, whom I profiled at the end of George W. Bush's second term, used his connections to the president to transform a virtually unknown for-profit education company, Voyager, into a "selling juggernaut" (in his words) that he unloaded in 2005 for $360 million.
Randy Best Steve Brodner
The key to Voyager's success was the way it it used revolving doors in Bush's Education Department to game the procurement process. Its dealings prompted a scathing DOE inspector general's report in 2006 and a harshly worded Senate report the following year. "Many programs, including Voyager, were probably adopted on the basis of relationships, rather than effectiveness data," G. Reid Lyon, who co-wrote the No Child Left Behind Act and later consulted for Best, told me in 2008. "I thought all this money would be great; it would get into schools. But money makes barracudas out of people. It's an amazing thing."
The controversy surrounding Voyager didn't dissuade Best from starting another education company. Founded in 2005, Academic Partnerships persuades colleges to outsource to the firm their degree programs in subjects such as business and education, which it puts online in exchange for a hefty chunk of the profits. Nor did Voyager dissuade Jeb Bush from partnering with Best. Here's MacGillis:
Best needed someone to lend credibility to the company. Florida had spent heavily on Voyager during Jeb Bush's governorship, and, in 2005, when Bush was still in office, Best spoke with him about going into the education business. By 2011, Bush had joined Academic Partnerships as an investor and an adviser, and he became the company's highest-profile champion. Best told the Washington Post that Bush's annual salary was sixty thousand dollars, but he did not disclose the terms of Bush's investment stake. For the first time, Bush was making money in an educational enterprise.
Last month, after announcing his intent to run for president, Bush resigned from Academic Partnerships and several other business affiliations. Yet if Bush's family history is any guide, Randy Best 2.0 is just getting started.
It's Friday afternoon in San Francisco and, to be honest, I'm sick of being in the office. So I've slipped out and headed over to Union Square Park, where I'm sitting on a bench watching Japanese tourists taking selfies on the ice rink. But before you call me a slacker, you should know I'm also online and working, courtesy of the free wireless internet service the city provides.
Since October, visitors to most San Francisco parks as well as a stretch of Market Street, the city's main business corridor, have been able to access the city's fast-growing municipal broadband network. City-owned networks have been gaining popularity nationwide as a way to bridge the digital divide between rich and poor, foster competition with cable companies, and provide high-speed internet in underserved areas. Last week, President Barack Obama talked them up as a way to promote "better products and cheaper prices." In Tuesday's state of the union speech, he pledged to bring the internet to "every community and help folks build the fastest networks, so that the next generation of digital innovators and entrepreneurs have the platform to keep reshaping our world."
But there's one big obstacle to all of this: the telecom industry and its friends in Congress.
For $70 a month, Chattanooga offers its residents internet service at 10 to 100 times the speed of what most ISPs provide their customers.
At least 19 states have passed laws limiting municipal and community broadband projects, typically at thebehest of big internet service providers and their trade groups. The legislation ranges from outright bans to laws that limit public broadband to small towns or places where there's no other high-speed service available. The Federal Communications Commission may soon invalidate these laws, but not if Republicans in Congress can stop it. In July, GOP Rep. Marsha Blackburn of Tennessee inserted into an appropriations bill an amendment that would strip the FCC of its authority over state municipal broadband regulations.
Some Republicans have branded municipal broadband as a form of socialism, because it uses public funds to compete with the private sector. They also say that local governments aren't tech-savvy enough to build and maintain their own networks. As an example, they often cite Utah's unfortunately named Utopia, a fiber-optic network funded by a consortium of 11 municipalities that loses millions annually. "When a state determines that municipalities should be limited in experimenting in the private broadband market, it is usually because the state had a good reason," Blackburn recently wrote in the Tennessean.
Although Blackburn doesn't talk much about it, the Tennessee town of Chattanooga just so happens to host the nation's largest and most successful municipal broadband network. Chattanooga's power utility (and now internet provider) offers internet service to 160,000 households at speeds up to 1 gigabit per second—10 to 100 times faster than what's available in most of the country—at a mere $70 a month.
A Missouri GOP state legislator would make cities hold an election before creating a broadband network.
As the Guardiannotes, it takes just 33 seconds to download a two-hour, high-definition movie in Chattanooga, compared with 25 minutes for the average US high-speed broadband household. The service has earned rave reviews and has even spawned a local tech boom. Neighboring communities now want to join the network but a state law prohibits it from growing beyond city utility line boundaries. (For more about community networks, read Clive Thompson's "How to Keep the NSA Out of Your Computer.")
Chattanooga's project got rolling after city leaders learned that the telecoms wouldn't be offering local service for a decade or more. Indeed, city networks are often built in places too small to attract the interest of the big telecom players—cities such as Lafayette, Louisiana; Wilson, North Carolina; and Longmont, Colorado, all of which have decided that high-speed internet is as essential to the economy as electricity, water, and sewer service.
For more on how municipal broadband helps fill gaps in America's shoddy internet service, check out the first minute of this explainer from Vox:
Most state laws restricting municipal broadband were passed between 1996 and 2004, a fast and furious time for broadband development. The tide began to turn the following year, when advocates fended off restrictions in about a dozen states. But the assault picked up again in 2011, when North Carolina passed a law making it harder for cities to create their own networks. South Carolina followed suit in 2012. This year, Missouri state representative Rocky Miller, a Republican, has proposed a bill that would make large towns and cities get voter approval before building municipal broadband—and bar them from using revenues from other town services to cover the costs. (Miller has received $4,700 from donors in the telecom services and equipment industries.)
Today, Senator Cory Booker (D-N.J.) introduced the Community Broadband Act, a bill that would make it illegal for states to limit municipal broadband through regulations or state legislation.
"We are not going to stop, probably, until all of San Francisco is connected to the internet."
In California, where cities face no such restrictions, San Francisco is aggressively expanding its network. An ordinance passed last year requires the city to attempt to install its own fiber cables or conduits anytime a street is torn up. In the short term, leaders are talking about wiring the city's waterfront, all of Treasure Island, and other commercial corridors. "We are not going to stop, probably, until all of San Francisco is connected to the internet," says Ron Vinson, the city's chief marketing officer.
Like many cities, San Francisco already has a robust fiber network in place to serve government offices. Vinson believes that the $1.7 million that the city has spent to outfit its network with public wifi (not including a $600,000 grant from Google) is totally worth it. "There's absolutely no downside being able to provide access to the internet, whether you are parking your car or waiting for a MUNI bus," he says. "It's one of those fundamental things. We fill potholes, we clean the streets, and yes, now we provide wifi. And our citizens expect that."
On the surface, legalizing marijuana in California next year seems like a slam dunk. No other part of the country is more economically and culturally accepting of cannabis than the Golden State, where three northern counties produce the vast majority of the nation's domestically grown weed. But the size and power of California's $1.1 billion pot industry poses a unique challenge to legalization advocates. Existing pot farmers and vendors want any new California law to protect them from the high taxes and strict regulations that have been enacted by other legal-pot states. "The first way we can lose is to go too far, to demand too much in the text of our initiative," veteran marijuana campaigner Bill Zimmerman said last week in a speech at an industry conference in Oakland.
"California history is replete with examples of initiatives that started with far greater support, yet still lost."
Any recreational pot measure must also appeal to the moderate voters who make up a third of the electorate, a group that's "unhappy about marijuana but reluctantly willing to legalize it," said Zimmerman, who shepherded through Prop. 215, the state's pioneering medical marijuana initiative, nearly 20 years ago. "Our 2016 effort has to be guided by an understanding of just how far these voters will go. Our beliefs about what is right have to be put aside in the interest of what is possible."
A 2016 measure could just as easily lose, he added, if it splits the pro-marijuana community, as the state's first failed recreational pot initiative, Proposition 19, did four years ago. (Fearing a drop in prices, all three counties in the state's pot-growing Emerald Triangle voted against it.) "Our opponents will jump at the chance to advertise our disagreements," he said, which could be "devastating."
Crafting a successful initiative will be an unusually delicate balancing act, admits Lynne Lyman, California director of the Drug Policy Alliance (DPA), the group expected to take the lead in drafting the measure. "There are so many issues that need to be researched and debated and vetted just to come to a consensus within the marijuana community," she says, "and then we have to make sure that the outcomes of these deliberations are things that the public wants."
Some 58 percent of Californians now support legalization, according to a poll DPA conducted last February. "California history is replete with examples of initiatives that started with far greater support, yet still lost on election day," Zimmerman cautions. But there's also some buyers remorse among legalization advocates in states where they compromised to win support from groups such as law enforcement. Critics cite problems with Washington's strict stoned driving law, for example, and say taxes and permit fees in all four recreational pot states are too high to support small producers or put an end to the black market, which can offer lower prices.
"I say we draw the line to make sure illegal growers are part of the solution, or else they will continue to be part of the problem."
Dale Sky Jones is executive chancellor of Oaksterdam University, the cannabis college founded in Oakland by Richard Lee, who was the driving force behind California's Prop. 19. Jones says the mainstreaming of cannabis now gives the state the chance to pass an initiative that's much more sensitive to the needs of the industry—in particular to the yeoman pot farmers who prop up Northern California's rural economy. "I say we draw the line to make sure they are part of the solution," she says, "or else they will continue to be part of the problem."
Bringing the Emerald Triangle growers out of the shadows would probably involve granting small farmers tax and regulatory exemptions not available to industrial growers. It could also reward outdoor growers for their smaller carbon footprints. (Indoor grows have been estimated to use a staggering 9 percent of California's electricity). The incentives would need to convince growers it's worthwhile to open their doors to environmental and health inspectors—no small task in a state where illegal growers export pot nationwide and the cultivation of medical marijuana has gone virtually unregulated.
But there are signs the pot industry is ready for a change. Bill Panzer, an attorney for Emerald Triangle growers, says his clients are now much more in favor of legalization than they were four years ago. "They want to come out of the cold. They want not to worry about the helicopters," he says. "But they want it in a way that's economically feasible."
Of course, pot growers don't account for a large part of the electorate, and the pro-legalization folks ultimately could decide to stick to what's worked in other states. Jones, for one, thinks that would be a mistake. "I don't know if you can pass an initiative without the base," she says. "I know the base is willing and able to be extremely disruptive. They have it in them. And then you are looking at 2020."
Following a string of high-profile corporate hacks at companies such as Target, Home Depot, and Sony, President Obama is now urging Congress to improve how companies respond to data breaches. He wants to require them to disclose consumer data breaches within 30 days of discovering them, make it easier for companies to share information about hacking threats with one another and the federal government, and criminalize the sale of botnets, programs used to coordinate attacks.
But while those may sound like good ideas, they're not winning universal support from top digital rights groups. "President Obama's cybersecurity legislative proposal recycles some old ideas that should remain where they've been since May 2011: on the shelf," writes the Electronic Frontier Foundation (EFF).
Here are the top five concerns with Obama's proposals:
1. They may allow companies to share your personal data with the NSA: Companies would receive legal immunity in connection with sharing information about threats with a cybersecurity center headed by the Department of Homeland Security, which could immediately pass it along to the National Security Agency and other federal agencies. The proposed disclosure law, which would trump other state or federal data-privacy laws, would require companies to take unspecified "reasonable" steps to strip information that could identify a specific person before sharing it, but only for individuals "reasonably believed to be unrelated to the cyber threat."
2. Private companies and the government already share information about security threats: The sharing happens through the nonprofit Information Sharing and Analysis Centers and Homeland's Enhanced Cybersecurity Services. "The question is what gap this bill is trying to fill when we already have a robust information sharing machine," says EFF legislative analyst Mark Jaycox.
3.The reforms would increase penalties under the draconian Computer Fraud and Abuse Act: The notoriously broad and stringent CFAA is best known as the tool used by the feds to prosecute digital rights activist Aaron Swartz, who killed himself in 2013 while facing 35 years in jail and $1 million in fines in connection with downloading copyrighted scientific articles. "We've repeatedly seen government prosecutions that use the CFAA's tough penalties to bully people," says Jaycox. In a press release, the White House says it wants to ensure the act isn't used to target "insignificant conduct." But a close reading of its proposed reforms appears to tell a different story: One provision increases the penalty for stealing data from any "protected computer" from one year to three, even if it wasn't done for commercial gain.
4. They supersede state laws: The White House's consumer data breach law would supersede at least 38 state data-breach laws, some of which are more stringent than the proposed federal standard. The law proposed by the White House would apply only to businesses that store information on more than 10,000 individuals, but California, Florida and some other states have disclosure laws that apply to any company that experiences a data breach affecting more than 500 people. "Any such proposal should not become a back door for weakening transparency or state power," the EFF said in a statement, "including the power of state attorneys general and other nonfederal authorities to enforce breach notification laws."
5. They could limit online civil disobedience: There are plenty of legitimate reasons to curtail the sale of botnets, but they've also been used by activists to carry out distributed denial of service (DDOS) attacks against repressive governments and corporate ne'er-do-wells. Last year, the hactivist collective Anonymous posted a petition on Whitehouse.gov asking that DDOS attacks be recognized as a legal form of protest similar to the Occupy protests. Under the CFAA, carrying out a DDOS attack can already land you in jail for many years, but now the White House wants to further clamp down on the practice by specifically allowing the Attorney General to go after botnets that help enable them.