__ Ten years ago the power matchmaker foresaw that Silicon Valley and Washington would need each other. Now they need him. __
Less than five minutes out the door of Washington, DC's Old Executive Office Building, where he'd been meeting privately with Al Gore's chief domestic policy adviser, high tech lobbyist Tony Podesta broke into a sweat, dashed across Pennsylvania Avenue, and got busted.
Siren wailing, a police cruiser pulled to the curb, and a tightly wound cop wearing mirrored shades jumped out. "ID!" he barked. Podesta handed over his license. "You live here," the cop said in disgust, examining it. Podesta nodded. Dapper, as usual, in a pinstriped suit and a deliberately loud tie, he had already started to punch a number into his cell phone. "That's 'crossing as to create endangerment,'" the cop interrupted. He wrote out a $5 ticket as slowly as possible while Podesta waited, steaming with impatience. "So tell me," the policeman asked, finally putting away his pad. "Do you always go that fast?"
In a word, yes. You might even say that Anthony T. Podesta, already among Washington's canniest and best-connected dealmakers (number 16 this year on The Washingtonian magazine's list of the city's 50 most powerful lobbyists), is accelerating. At 55, he's a lifelong liberal Democrat with a small lobbying firm that brings in around $7 million a year representing some of the most prominent corporations on Earth. His specialty: the difficult and often mutually mistrustful interface between information-age businesses and the world of Washington. His strength: a surprising ability to close the deal leaving everyone happy. It's an approach that resonates equally with businessmen steeped in the win-win jargon of negotiations and politicians deep in the pragmatic you-scratch-my-back-I'll-scratch-yours conversations that make Washington run. Podesta appears to be the ideal matchmaker for any high tech company needing to do business on Capitol Hill, in the White House, or wherever regulation, trade, and government contracts are on the table. And these days that's just about everywhere.
Podesta Associates was launched in 1988 by Tony and his younger brother John, an expert on law and technology who had worked for the Senate Judiciary Committee. Over the years, Podesta Associates has forged close relationships with big firms like IBM and Genentech, while becoming increasingly sought after by new Silicon Valley players like WebTV. Podesta represents MCI, Textron, Universal, CBS, the Recording Industry Association of America, the National Association of Broadcasters, and The Washington Post. Meanwhile, over at the White House, where John Podesta now toils as Clinton's chief of staff, Tony Podesta is a familiar face and informal policy adviser, and has shepherded several tricky nominations through Congress. "We've got a hundred, maybe 200 people at the most in Washington who really get science and technology," says Jeff Smith, executive director of the White House Office of Science and Technology Policy. "Tony's right up there. He exercises a very influential role in tech policy now."
"I'm not so much of a tech guy," Podesta demurs. "What I really am is a translator."
Politicians and information-age gurus alike love overblown rhetoric, and it has become commonplace to pose the current battles over tech policy as nothing less than a war between paradigms: Will Silicon Valley and its speeded-up New Economy change the way business is done inside the Beltway, or will Washington tame the geeks? For the record, Podesta is betting that Washington, built on an enduring and nuanced obsession with power of every kind, will ultimately prevail. "The Valley guys generally start out with the view that politics doesn't have any meaning, and that politicians are bumper stickers traveling as human beings," he says with a shrug, as if to indicate the suicidal futility of such a stance. "They don't understand it's in their interest to pay attention."
"It's a Mars-and-Venus kind of thing," agrees Michael Maibach, who's spent most of the last 15 years as Intel's government affairs point man in Washington. Unlike Podesta, though, Maibach largely blames the "machine age" federal bureaucracy for the culture clash. "The Commerce Department takes 20 months for a patent review," he grouses. "That's two months longer than our product cycle."
But when the Clinton administration launched antitrust actions against Microsoft and then Intel - a spectacle that alternately cheered competitors and aroused fears of more wide-ranging government oversight - Silicon Valley's bluster began to sound hollow. "In some ways," says Maibach ruefully, "it was a blessing to be ignored." Then came the pivotal moment: the billionaire geek who couldn't believe that guys who failed high school physics were judging his software getting slapped down hard by politicians who couldn't believe that a guy who didn't grasp high school civics was giving them back talk. "All of a sudden, people began to get interested in what the government could do," Podesta observes. "It happens when you get a sock in the teeth."
The high tech industry is, of course, far too heterogeneous and volatile to have anything like a single agenda in Washington, or even to agree on what its interests are. But that same industry is realizing that its isolationist days are over. This year, Microsoft alone had 56 lobbyists working inside the Beltway. (Podesta, favoring the long view of human events, is staying out of the Microsoft wars, at least for now. "We have friends on both sides," he says, delicately.) During 1996, computer industries spent $19.9 million on DC representation, a number that jumped nearly 30 percent, to $25.4 million, last year.
Political contributions increased, too: In the 1996 elections, federal candidates and their parties got $7.3 million in PAC, soft money, and individual contributions from traditionally tightfisted tech companies. While that hardly matched the amount forked over by more seasoned industries - Hollywood, for example, gave more than twice as much - the potential was obvious to politicians. The political allegiance of high tech, the fastest-growing sector of the economy, was up for grabs.
In this climate, Podesta has become not just a lobbyist but a power broker, with both parties bidding for his clients. Veteran high tech lobbyist Kenneth Kay is frank: "Our guys," he says of the companies he represents, "are probably basically Republicans, but they had a president who only cared about oil and gas. Now they've got a Democrat who understands them, and the GOP has to catch up." Democrats are leaving behind the machines and philosophies that grew out of the industrial economy, while Republicans are seeking to broaden their reach beyond the established business community. Ambitious politicians are rushing to brand themselves with the Silicon Valley seal of approval, flying out to Sunnyvale meet-and-greets in search of techies who'll help them cash in on the industry's image of wealth and youth. Even pending impeachment hearings didn't keep Bill Clinton from a late-September fund-raising dinner with the Silicon Valley élite hosted by Kleiner Perkins partner John Doerr.
But there's much more to the DC operating system than the basic GOP-versus-Dems diagram. The translation skills of go-betweens are essential if geeks are to master the political nuances of Beltway squabbles surrounding issues like ecommerce and Internet telephony. In just one example, while White House ecommerce guru Ira Magaziner recently pledged the administration's commitment to keeping the Internet tax-free and basically unregulated, the nation's governors of both parties (as well as members of Congress who speak for the interests of highly regulated broadcast and telecommunications industries) are loath to favor the newcomers with a free ride.
"It all comes down to a bandwidth issue," says Podesta, pointing to looming regulatory decisions on encryption, immigration, WIPO legislation, and obscure but vital tax and securities legislation. "How much time can your company afford to not spend on politics?"
Podesta is a gregarious man, quick to show his old-fashioned manners, his raspy laugh, and his temper. Tan and barrel-chested, with finely carved Italian features, he stands out amid the herds of lawyers trotting dutifully through the city's corridors. "Tony's big," explains Elizabeth Inadomi, a lawyer and encryption expert at Podesta Associates. "He's large in terms of size and - well, just large. Flamboyant. This is a town where everyone wears navy, navy, navy, and maybe charcoal gray. Tony has been known to wear aubergine. And that's just the suit."
An inveterate host and passionate art collector, Podesta likes to keep his friends up late, cooking for a constant stream of DC insiders who savor political gossip and homemade pesto in equal measure at his spacious Woodley Park home. His social circle spans party affiliations and the public/private sector divide, bringing together ambassadors and corporate execs, speechwriters and senators, pollsters and newly subpoenaed White House wonks. He's wired into the enormous and expanding network of telecommunications heavies who revolve through positions at the FCC, telecom corporations, and lobbying firms. He doesn't hang out much with the Valley's big boys on their own turf, preferring to host the occasional dinner "with real food" when a TechNet delegation comes to town. And though Podesta still sees people like John Perry Barlow, Jerry Berman, and Esther Dyson - he midwifed the birth of the Electronic Frontier Foundation in his living room, and characteristically remained friendly with all the founders after a bitter split - their conversation is more likely to center on politics than technology. "I studied at MIT," Podesta explains, "but, uh, I didn't bother to take computer science."
He did, however, pick up enough by the late 1980s to realize that seemingly unbridgeable cultural differences were blocking a potential alliance between Washington and Silicon Valley. "For a lot of politicians, high tech is basically just a photo-op," he says. "You talk to some senator about portals, he thinks that's what's in front of the Navy building. But then you tell some Valley guy, 'We're gonna meet with the head of the Office of Information and Regulation Affairs at the Office of Management and Budget,' and he thinks, 'Oh, nobody important.'"
Knowing who's important and what everyone needs is the working motif of Tony Podesta's life. He grew up in Chicago, the eldest child of a first-generation Italian immigrant and a small, smart, stubborn woman from Greece who is still traveling the world at 80 and dispensing advice to her powerful sons. He cut his teeth in student government at the University of Illinois in Chicago with his friend (now US Senator) Carol Moseley-Braun; organized presidential races for an impressive string of Democratic losers, including Eugene McCarthy, George McGovern, and Michael Dukakis; and did time on the Hill as a consultant and staffer. As counsel to Ted Kennedy, Podesta was a driving force behind the Massachusetts senator's bitterly fought campaign to derail the Supreme Court nomination of Robert Bork in 1987, an episode that is widely remembered as having launched the era of relentlessly personal attacks in Washington. Podesta went on to become the founding president of Norman Lear's fight-the-Right group People for the American Way. But with an apparent eye toward life after partisan politics, he managed to retain Republican as well as Democratic friends in Congress - a painstaking campaign he refers to simply as "expanding my circle of allies." Hilary Rosen, director of the powerful Recording Industry Association of America, has watched Podesta at work for a decade. "Tony manages his conflicts of interest well," she comments. "He understands there's going to be a tomorrow for everyone. The long run matters."
Podesta also understands the symbolic importance of well-timed and even-handed giving. Not only does he cook for all, Podesta ranked 19th out of the 100 top-spending lobbyists in individual political donations in 1996, and says he "maxed out" his permissible federal contributions for 1998 by August. And he urges his clients to join in. "I tell people it's better to be in the game than not to be," he says. "Nobody ever got hurt in Washington from knowing too many people."
"Oh, sure, I'll hold, no problem," Karen Lewis is saying, as she hyperventilates into her headset. Tony Podesta's frizzy-haired, superstressed assistant searches through a pile of papers and takes another sip of her Mountain Dew. "Tony's on his way," she says sweetly to the next caller, standing up and looking under the pile beside her chair. "Can Dick tell us if we need to reschedule the conference call? OK, I'll hold." Lewis pulls off the headset and sighs theatrically. "I am going to have a nervous breakdown." Another call. "Yes, Tony got NAB to contribute to the event, and he's working on other people. We'll get back to you."
The downtown DC offices of Podesta Associates, with a dozen principals and 10 associates, are about as mellow as those of the typical start-up - albeit with wilder art. In Podesta's own office, phallic black and white swirls by a young Israeli artist erupt next to an ecstatic mural-sized piece by Brazilian painter Beatriz Milhazes; Artforum and dealers' catalogues are piled next to Roll Call and Rolling Stone on a twisted aluminum sculpture that serves as his coffee table. The phone rings again. "He's walking in now," says Lewis. "Can you hold?"
Podesta has just returned from a business trip to Romania on behalf of Textron to see about a helicopter deal, and a quick jaunt to Paris to watch the French Open. The night before, a packet of ripe and reeking Livarot stashed in his briefcase, Podesta had crossed five time zones, cooked dinner for eight - featuring the French cheese, along with a fine Ligurian pesto - made a few dozen phone calls, yelled at some staff, and answered his email before waking at six to start the day's round of meetings. Wrestling off his jacket, Podesta goes to work without ceremony, skimming through his long and detailed phone list. He stops somewhere in the "C" pages, between CBS, CIA, Commerce Department, and Corcoran Museum of Art. He picks up the phone, turns on his heartiest voice, and starts to pace the room. "Hi, Tony Podesta from Chicago, 39th Ward, regular Democratic organization, what can I do for you?" he booms. There's a pause, then he cackles. "Let's get together and gossip, I'll cook you dinner. Call me."
Like so many of his clients, Podesta is working an information economy. "Tony's a router," says the White House's Jeff Smith. "He knows how to get people from A to B." Or, as Podesta puts it, "I'm software. I'm a server, I'm a switch, I'm all of the above."
But whatever the metaphor, it's all about the strength of your network. For lobbyists, "Do you know him?" is the ubiquitous question that determines the outcome of every deal, and with Podesta, the answer is likely to be yes. "If you're looking for someone who can call Trent Lott at home," he tells a potential client at one point, "there's people better at that than we are." But then he drops into the conversation the fact that a Podesta Associates principal named Kimberley Fritts happens to be the daughter of the head of the National Association of Broadcasters (a Podesta client) and a former staffer for Republican senator Connie Mack of Florida. Podesta is apt to downplay his impressive connections through his brother John, saying, "At this point, we have more Republicans than Democrats in the firm." But as he told a reporter when his brother was appointed to the White House as Clinton's staff secretary, "I would be disingenuous to say it hurts me."
"Politics is a business," he says later on, "and you want to understand who's in charge. But there are potential allies everywhere, if you understand that you're in it for the long haul. I have my own political views, but that doesn't mean I can't work with everyone."
Such pragmatism poses problems for true believers like Grover Norquist, the conservative who founded Americans for Tax Reform and is perhaps the most important secular power broker of the grassroots Right. Norquist, a lobbyist for Microsoft, tries to deploy his considerable business savvy in the service of an anti-Clinton, antigovernment strategy, and finds it difficult to simply sidestep ideology. "Tony Podesta's a serious lobbyist," he says grudgingly. "But he labors under the problem of being a Democrat. At the end of the day he won't be able to solve your problem."
"Decency," Tony Podesta was saying, "dictates that we talk about politics tonight." It was a breezy September evening, and he had just kissed Carol Moseley-Braun goodbye at the door of an upscale Italian restaurant in downtown Washington, crossed the room shaking hands and greeting power diners, and sat down with a sigh. A few blocks away, in the Capitol, independent counsel Kenneth Starr's 36 boxes of documents were stacked under guard, emitting vibrations strong enough to disturb the atmosphere at every table in Washington. Podesta ordered a bottle of Amarone and leaned toward his guest, John Williams, the CEO of Biztravel.com. "I'm afraid your testimony at the Aviation Subcommittee just might not get a lot of press tomorrow," he said dryly.
The Podesta brothers, who ran Podesta Associates together for 7 years, had pulled even closer than usual as the Clinton sex scandal built. Both were Clinton loyalists: Tony had run the Clinton-Gore campaign in Pennsylvania in 1996, and John, dubbed "the Secretary of Shit" by colleagues during Whitewater for his damage-control role, had fiercely defended the president as each new allegation surfaced. When John was summoned to testify before the grand jury investigating the Monica Lewinsky affair, "Uncle Tony" had spirited John's children off to Italy with their grandmother. Now Tony was calmly going about his business with clients, congressional representatives, and Democratic Party bigwigs, while his brother coordinated staff response to the scandal, and the mood inside the White House lurched from anxiety to hysteria. "I don't know much, of course," Tony said, sounding unworried, when people asked him how John was doing, or what Clinton's inner circle thought. "I haven't wanted to ask." But Tony was showing up at the White House on Saturdays and evenings to help his brother with strategy, and he clearly relished being back in the thick of urgent, real-time politics. Now he smiled gamely and raised his glass. "Cheers," he said. "To the republic. God help us."
Knowing how Podesta could spin for the Clinton White House at the height of its crisis makes it fairly easy to imagine him successfully executing corporate PR on the Hill. Indeed, Anne Schelle of Telos Technologies, who consults for a new coalition of PCS companies, says Podesta "has a gift, almost like successful selling," when he represents his clients.
Making the circuit with Podesta, you can see how the game operates - and occasionally doesn't - on behalf of technology companies. Case in point: Genentech. The biotech giant was Podesta Associates' first client a decade ago, when Podesta's lobbying style tended toward the splashy, media-directed side of the game. (When the California Poultry Industry Federation asked him to fight legislation that allowed its competitors' frozen chickens to be labeled "fresh," Podesta carried a crate of the icy birds to Congress and set up a bowling tournament with them in the halls.) His work for Genentech began conventionally enough, as he guided the company through hearings on human growth hormone or numbingly dull negotiations about R&D tax credits. But it was Podesta's more out-of-the-box tactics that paid off for Genentech in 1997, after nearly three years of dogged lobbying for a pharmaceutical coalition, when he won sweeping changes in the operations of the Food and Drug Administration. "The opportunity to do this kind of stuff comes along once in a generation," says Walter Moore, Genentech's vice president for government affairs. "And Tony provided the bipartisan glue that made FDA reform happen."
"Reform" of the FDA had been on Genentech's agenda from the beginning of the first Clinton administration. The company felt crippled by the agency's arduous drug testing and approval process, its labeling and advertising regulations, and its restrictions on the experimental uses of approved medicines. Podesta knew that Genentech could not get new legislation written through traditional insider negotiating alone, so he launched a brash public-relations campaign that took the fight into the open. "The FDA was well thought of," he says. "We didn't need to bash [then FDA head David] Kessler. We just needed to be more energetic and compelling with our message than the agency was."
And biotech's message was loud and clear: deregulate. By the mid-'90s, a rift had opened between older pharmaceutical companies - large, diversified, heavily invested in infrastructure - and the newer, more audacious start-ups churning out not just new drugs but new processes for making drugs. The older companies, fed by a steady stream of profits from existing "classic" drugs and thus able to devote years and years to research, wanted a strong FDA to help them keep tight control of their patent. The younger companies, surviving on venture capital, needed to slash through regulations and get their innovative products to market as quickly as possible. Meanwhile, the AIDS epidemic had brought a new force into the equation: educated, articulate, desperate patients who had learned how to work the regulatory system, taught themselves advanced pharmacology, chained themselves to the railings outside FDA meetings, and harassed the pharmaceutical companies over pricing and access to medicines.
Podesta saw an opportunity for Genentech "to convert what could have been seen as a deregulation scheme into a matter of patients' rights." And, in an early meeting with Senate staffers, he says, he decided to add the issue of wealth to the issue of health: "I argued that either we were going to streamline the US government, or the most advanced health technology companies in the world were going to move all their jobs to Europe."
He seized on the 1996 congressional campaigns to launch Genentech's push for legislation to overhaul the FDA.
"The fact that people are running and want to visit with constituents usually makes their attention span go up," Podesta notes. "Instead of simply testifying in hearings and meeting with staff in Washington, we took it to key players in their own backyards. We got patient groups organized, we got employees of medical-devices companies to meet with candidates on their home turf, we basically ran a grassroots political campaign."
The battle took shape: On Genentech's side were desperate patients, doctors looking for new treatment options, and other biotech start-ups with products to sell. They gathered support from White House economists friendly to high tech, and from Vice President Gore, who saw political opportunity in getting drugs to sick people under the rubric of his "reinventing government" platform. On the other side were consumer activists worried about inadequate drug testing, doctors appalled by corporate carelessness, old-guard pharmaceutical companies, and FDA bureaucrats invested in the status quo.
Back in Washington, Podesta identified "three zones of power and authority" in addition to the Congress members writing the legislation: the FDA, the Department of Health and Human Services, and the White House. Genentech's Moore recalls watching as the pieces were assembled. "Tony was able to keep the consensus together all the way through," he says, "when every word in the bill was contentious. He knew Barbara Boxer and got her on the same page as the head of the labor committee. He knew Greg Simon [then the vice president's chief domestic policy adviser] and Sally Katzen [then at the Office of Management and Budget], who were working on it from the White House. His contacts were everywhere."
Greg Simon recalls "hundreds" of private conversations and "endless" meetings on the subject. "Tony was one of maybe two people I ever looked forward to hearing from," he says. "I could actually trust him to tell me not only his client's point of view, but what was going on politically." What was going on politically, of course, had been largely stirred up by Podesta Associates' "grassroots" PR blitz, as well as by Podesta's own behind-the-scenes network of friends. "I was the point person for the administration on this," says Podesta. "They'd sit down with the pharmaceutical association, the biotech association, the medical-devices association, and David [Beier, then Genentech's vice president for government affairs]. Genentech was always at the meetings, because I was the one who organized the meetings for the White House."
The deal was finally closed, says Podesta, at an after-hours White House meeting, after he negotiated a final round of compromises concerning the off-label uses of approved drugs. "We gave up on some restrictions, Senator Mack agreed to narrow his original statute, and the FDA gave up trying to restrict information to doctors. Overall, in terms of the scope of what could be made available and how, we won, but everyone got something they wanted."
Despite the months of highly complex negotiations, Podesta describes his strategy in simple terms. "First, you have to make the technical issues into issues people care about, and have voters bring them home to politicians. And then you have to be in the conversation enough so that you know who everyone is and what everyone wants." He pauses, and then repeats his essential mantra: "You know why I'm good at what I do? I know what everyone needs."
In early 1998, the White House chose Genentech as the site for its announcement of an extension of R&D tax credits. "We held that event at Genentech to thank Gore for supporting us," says Podesta. Gore enthused to the press about healthy families and a better future just weeks before news of breakthrough breast cancer drugs pushed up both Genentech's and the vice president's stock. Not long after, a new chief domestic policy adviser to the vice president was appointed: David Beier of Genentech.
Podesta says he never made an overt decision to forgo running for office himself. "I was just always more comfortable in the background," he admits. But he still feels the need to defend the choices that have led him from hardcore liberal crusader to big-business mouthpiece. "I haven't really changed," he insists. "I still believe in social issues like abortion rights and the First Amendment, stopping censorship. I guess I'm maybe a little more economically conservative now, more fiscally responsible. I'm a little more libertarian in terms of what I think government can do."
Like many Democrats of his generation, most notably Bill Clinton, Podesta's pragmatism seems to have supplanted an earlier, passionate ideology. And like a lot of Democrats who worked for Clinton, Podesta may lately be experiencing Beltway burnout. "You know, when they announced the MacArthurs I saw it in the paper," Podesta muses, with an odd, abstracted melancholy. "There was a time when I would have read the list to see who won it for politics, and now I just don't care. I only care about the artists."
The telephone seems to revive him. A constant stream of calls is rolling in, and he needs to make one quick call to clear up some details from his trip to Romania before his final meeting. "It's a $33 billion economy and a $2 billion deal," Podesta says in a reasonable tone. He starts to pace, gesturing with a free hand. "What I was told is that he's running around trying to undo it. But if we don't end up with the 90 attack helicopters nothing else is possible." He listens for a moment, still walking. "Who do they need encouragement from?"
"The ambassador wants to bring some Romanian software guys to Silicon Valley," Podesta says after hanging up. "It's just a favor, but I'm going to see if anyone's interested. I'll call Jerry Yang." He gazes at a painting on his wall. "Yeah," he says, "they're visionaries out there in Silicon Valley. But nobody's gonna invent three branches of government and bicameralism.
"Business has the idea that the public sector should be driven by speed and profit," he says. "But democracy is messy, democracy is slow." Podesta shrugs, as if he's recited the same lesson hundreds of times to visitors from Silicon Valley. "High tech guys just have to learn to live with it," he says. "There are smart people here, and there's a way smart people can do business." He reaches for his briefcase.
"We have no permanent allies," Podesta adds. "We have no permanent enemies. We just have interests."
And he's out the door, fast.
