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Purpletie.com proved the fallacy of many high tech based businesses

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POSTED May 6, 2009 1:33 a.m.
Remember Purpletie.com?

It was the idea of high-tech Turks from the Silicon Valley to do a web-based dry cleaning service. They were seeking capital to build a massive dry cleaning plant in Manteca next door to where Frito-Lay is on Moffat Boulevard. Routes would go into the Bay Area and Sacramento with pickups and deliveries opposite of the commute.

They thought they were brilliant. After all, busy people don’t have time to go to the dry cleaners. They could just go on-line and order a pick-up of their clothes at work and they’d be done. Too bad it is a modern version of an old idea. Independent pickup and delivery guys used to run dry cleaning routes all over the place from your business or your home. They used a quaint device called the land-line telephone.

Purpletie.com died just as the world realized that web-based delivery services weren’t really revolutionary but they were also expensive. The only ones who used them were paid sky high salaries with mega stock options and worked 20 hours a day at high tech firms that provided them with video games, pizza around the clock and all the soft drinks and non-alcoholic beverages they could consume.

The reason we have supermarkets today is because it was cheaper than calling up the old grocery store, placing an order, and having them box it and deliver it.

Purpletie.com is the perfect example of the narcissistic mentality the Silicon Valley has produced with start-up firms getting untold millions to go into business plans that often don’t have a prayer of succeeding. High tech was a sacred cow. They were the new auto and steel industries that were going to power the American economy.

Politicians from Sacramento to Washington, D.C. got caught up in the euphoria and campaign contributions.

That’s how the high tech folks were able to get special treatment such as overseas tax breaks to create jobs in foreign lands. That’s right. The back of the American taxpayer was helping fuel the widely inflated profits of much of the high tech sector. The old brick and mortar folks had to play and pay by the old rules. But not the high tech zillionaires who import high tech workers from overseas thanks to the complicity of Congress to replace American high tech workers and to take potential jobs away from college high tech graduates. Of course, the laid off American high tech workers have to train their foreign replacements.

President Obama is right on target. The high tech giants that are among the most profitable industries on the planet were merely “shipping jobs overseas” and were rewarded in the bargain by federal tax breaks.

Make no mistake about it. The biggest user/abuser of the overseas tax breaks is the high tech sector.

It is the same sector that was shielded from paying taxes on many Internet transactions across state lines even though they are essentially no different than brick and mortar businesses.

The bright politicians who gave the high tech sector big breaks can’t understand why we have an economic crisis or a tax shortfall. Easy. Old guard business gets taxed much heavier than high tech.

By the same token, high tech threw money around like there was no tomorrow. It has spurred an entire generation of narcissistic entrepreneurs who believe they have no social responsibility to their workers besides saying all the politically correct things. It is your birthright as a high tech entrepreneur to become a millionaire by age 25 – even if only on paper – and to spend money like an entire navy of drunken sailors on their first shore leave in two years.

Business models that display caution and proven conservative practices aren’t part of the mixture at most high tech firms.

Their high flying status was based heavily on dreams of instant riches. And if you disagree with that, it certainly was built on the back of the American worker whether on the assembly line at a silicon chip plant or an engineer who is paid a reasonable salary for what they do although there is someone from a foreign land willing to do it for a lot less.

The high tech gods who talk about how they have changed the business model are right. They have changed it. They have focused everything on short-term gains and wrangled generous tax credits that allow them to expand profit substantially.

It is time for our government to not only stop enabling companies to wipeout domestic jobs and export them oversees but to stop making it highly profitable for them to do so with generous tax breaks.

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