U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

40–859 PDF 2008

FULL COMMITTEE HEARING ON

THE ROLE OF SMALL BUSINESSES

IN STIMULATING THE ECONOMY

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

APRIL 24, 2008

Serial Number 110-88

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

VERN BUCHANAN, Florida, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

MARY FALLIN, Oklahoma, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

PANEL I: 

Hodgson, Mr. Michael G., President, ConSol, Stockton, CA, On behalf of 

the National Association of Homebuilders ......................................................... 4

Misener, Mr. Paul, Vice President, Global Public Policy, Amazon.com .............. 6

Fischer, Mr. David, Vice President, Online Sales & Operations, Google Inc. .... 8

Ceru, Dr. Dennis, Adjunct Lecturer, Entrepreneurship, Babson College, Babson Park, MA ........................................................................................................ 10

Steiger, Mr. Marc, CEO, DLP Technologies, Inc., Cincinnati, OH, On behalf 

of CompTIA ........................................................................................................... 12

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 35

Chabot, Hon. Steve .................................................................................................. 39

Altmire, Hon. Jason ................................................................................................. 38

Clarke, Hon. Yvette ................................................................................................. 39

Hodgson, Mr. Michael G., President, ConSol, Stockton, CA, On behalf of 

the National Association of Homebuilders ......................................................... 40

Misener, Mr. Paul, Vice President, Global Public Policy, Amazon.com .............. 50

Fischer, Mr. David, Vice President, Online Sales & Operations, Google Inc. .... 60

Ceru, Dr. Dennis, Adjunct Lecturer, Entrepreneurship, Babson College, Babson Park, MA ........................................................................................................ 66

Steiger, Mr. Marc, CEO, DLP Technologies, Inc., Cincinnati, OH, On behalf 

of CompTIA ........................................................................................................... 74

(V) 

(1)

FULL COMMITTEE HEARING ON THE ROLE 

OF SMALL BUSINESSES IN STIMULATING 

THE ECONOMY 

Thursday, April 24, 2008

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

1539 Longworth House Office Building, Hon. Nydia Vela ́zquez 

[chairman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Gonza ́lez, Cuellar, Altmire, 

Clarke, Ellsworth, Sestak, Hirono, Chabot, King, Davis, Fallin, and 

Buchanan. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

Chairwoman VELA ́ ZQUEZ. Good morning. I now call this hearing 

to order on The Role of Small Businesses in Stimulating the Economy. This forum will take place during the 45th anniversary of National Small Business Week. The occasion reminds us of the important role that entrepreneurs play employing half of the private sector workforce, and creating almost 80 percent of all new jobs. 

Small businesses are also the country’s primary source of innovation and drivers of advances in virtually every industry. It is not 

an exaggeration that small firms are the life blood of the American 

economy. That is important to keep in mind given the challenges 

we are facing today. 

The sub-prime mortgage crisis continues, and oil prices are 

climbing to record highs. Unemployment is rising, and our place as 

leaders of the global marketplace appears in peril, but small businesses can help us get things back on track if they have the right 

tools. 

That is why today’s hearing is so timely. It will explore how to 

best help entrepreneurs continue their role in stimulating the 

American economy. We will do so with an eye towards addressing 

current economic realities, and looking for solutions that lead to 

sustained economic growth. 

Joining us are witnesses from an array of cutting-edge industries. Their insights into the challenges facing the economy will add 

to our discussion of these issues. They will also help explore how 

current challenges can be overcome through responsible policy and 

strategic partnerships that are rooted in the work of American 

small firms. 

2

As a nation, we can find a path from this economic downturn to 

recovery and growth. Small businesses have already proven that 

they are very good at leading the way. In fact, throughout history, 

entrepreneurial activity has been a principal reason our economy 

has regained its strength. 

Many businesses begin during economic slow-downs, creating 

jobs, products, and services. Take the last major recession as an example. During the early 1990s, self-employment, a core piece of the 

country’s small business sector, was at an all time high, 7.7 percent. Moreover, some 25 percent of downsized managers over the 

age of 40 chose to start their own companies during this time. Most 

of the firms endured as successful, modern enterprises, others 

fared even better, and have given birth to companies, such as those 

on today’s panel. 

Finally, it is no secret that during the late 20th century, technology was a key force in jump-starting and expanding economic 

activity. It remains so today. That was evidenced in the SBIR/

STTR Re-authorization we approved in the House yesterday, with 

overwhelming bipartisan support. 

It is also clear in the development and construction of energy-efficient homes, as well as the marketing, tracking, and shipment of 

small business products around the globe. Small businesses are 

leveraging the power of high tech tools. 

These entrepreneurs are harnessing real time communication, 

market mapping software, and on-demand inventory systems. They 

are extending the reach of the Internet, and bridging the path to 

platform independence.With each step, they revitalize our economy, 

and build a market-leading America of tomorrow. 

This Committee has always supported such efforts. At a time 

when small businesses and our nation as a whole face daunting obstacles, we will redouble our work to advance policies that will help 

entrepreneurs thrive in the markets of the 21st century. 

I thank each of the witnesses for joining us today in celebrating 

Small Business Week, and in discussing these important issues. 

I’m looking forward to your testimony. 

With that, I yield to Ranking Member Chabot for his opening 

statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. Madam Chairwoman, thank you for holding this 

hearing examining the role of small businesses in stimulating our 

nation’s economy. I’d also like to thank our impressive panel of witnesses here this morning. I’m looking forward to hearing your testimony, and a special welcome to Marc Steiger, who’s from Cincinnati, Ohio, one of the distinguished members of the panel here. 

And I happen to represent Cincinnati, so we’re particularly pleased 

to have him here. 

It’s fitting that we are holding this hearing during Small Business Week, as we recognize the contributions of America’s small 

business owners and workers. These are the men and women who 

use their entrepreneurial talents to help improve our lives, sustain 

our economy, and expand opportunities for all of us, all Americans. 

There is no doubt that small businesses drive America’s economy, 

creating about 70 percent of the new jobs, and accounting for more 

3

than half of our private sector employees. These jobs are important, 

and in a time of economic uncertainty, they become even more critical to moving our country forward. 

Small businesses are playing an increasingly important role in 

the technological sector. Statistics show that they are on the cutting edge of research, hiring 40 percent of all technology employees, 

and generating 13 times more patents per employee than large 

firms. 

Small firms also lead our nation in trade. NAFTA and free trade 

agreements, such as those with Chile, Singapore, and Peru boost 

prosperity, strengthen our ties with other nations, and create and 

support new jobs for America’s workers. 

Almost one-third of all U.S. exports are generated by small business, and 97 percent of all U.S. exporters are small companies. 

Small businesses also create opportunities for every American. 

The Small Business Administration reports the number of women, 

minority, and veteran-owned businesses is growing rapidly, and 

comprising an increasing percentage of our economy. 

These successes are impressive, but we must do all that we can 

to give small firms the tools to prosper. They need access to capital, 

counseling, and programs to help them build and expand their 

businesses. 

By supporting policies to keep taxes low, promote free trade, 

allow small businesses to pool together to purchase health insurance, and reduce frivolous lawsuits, we can help small companies 

to compete. 

Small businesses exemplify the American values of hard work, 

ingenuity, and achievement. And during Small Business Week, we 

honor small companies for their vital contributions to their communities, and to our nation. 

I also want to mention that I am the Ranking Member of the 

Anti-Trust Task Force, and so will have to leave here shortly, and 

will be ably substituted by either Steve King, or Lynn Westmoreland, or one of the other distinguished members of the panel who 

will fill in until I can get back. We’re discussing an issue of some 

relevance to our community, in particular. It’s the Delta Northwest 

merger, and Delta, we happen to be the second-largest hub. And 

the Chairman of the committee, Mr. Conyers is also very interested 

in that particular topic, as well. I try to be at these meetings from 

beginning to end as often as possible, but this is one I have to actually go over there. 

And one other detail I wanted to do was to introduce a young 

lady here who is just—she’s a great young lady, and she happens 

to be the daughter of my Staff Director, Kevin Fitzpatrick. And her 

name is Elizabeth. She also happens to my goddaughter. Elizabeth, 

you want to stand up there so people can see you. She’s also a 

champion swimmer, by the way, too. 

(Applause.) 

Mr. CHABOT. I know she would love to sit through all the testimony, and all the questioning, but I think she may have some 

other more interesting things to do at some point this morning, so 

she may move; not that this is not terribly interesting, but to a 

fourth grader, there’s probably bigger and better things to see in 

Washington while she’s here. 

4

Chairwoman VELA ́ ZQUEZ. But did you hear what she said to me 

when I said hello to her? 

Mr. CHABOT. No, I didn’t. 

Chairwoman VELA ́ ZQUEZ. That when she grows up, she wants to 

be like me. She wants to be a Democrat. 

(Laughter.) 

Mr. CHABOT. Elizabeth, did you say that? I think not, but in any 

event, thank you, again, Madam Chairwoman for holding this hearing this morning, despite that comment. We look forward to hearing from all the witnesses, and I yield back.

Chairwoman VELA ́ ZQUEZ. Thank you. And I just want to welcome 

all of you, friends, people that are here, and to say please excuse 

this room. This is not our regular Small Business Committee room. 

We have a better room than this one, but it is being renovated. 

With that, it’s my pleasure to welcome Mr. Michael G. Hodgson. 

He is President of ConSol, a green energy consulting firm based in 

Stockton, California. He will be testifying on behalf of the National 

Association of Homebuilders. The Homebuilders is a federation of 

more than 800 state and local associations. About one-third of its 

235,000 members are homebuilders or remodelers. The remainder 

of its membership works in closely-related fields, including mortgage finance, and building products and services. Welcome. You 

have five minutes. The timer is there. You’re going to see the green 

light. It means you start. The yellow one says that it’s about to finish. Welcome. 

STATEMENT OF MR. MICHAEL G. HODGSON, PRESIDENT, 

CONSOL, ON BEHALF OF THE NATIONAL ASSOCIATION OF 

HOME BUILDERS 

Mr. HODGSON. Thank you. Chairwoman Vela ́zquez, Ranking 

Member Chabot, and Members of the Committee, my name is Mike 

Hodgson, and I’m President and Founder of ConSol, a residential 

energy consulting firm in Stockton, California, and Chairman of 

the Energy Efficiency Tax Credit Working Group of the National 

Association of Homebuilders. 

Since 1981, I have worked with homebuilders to improve the production of energy-efficient new homes. ConSol is consistently recognized as the builder’s energy advocate at the local, state, and national level, dedicated to assisting homebuilders achieve the highest level of quality construction, and energy performance. My business is closely linked to the health of the housing industry and its 

technological future in energy-efficiency, and sustainability. 

Thank you for the opportunity to testify today about the urgent 

need to restore the health of the housing industry, and small businesses like mine, as well as to discuss the importance of incentives 

for producing more energy-efficient housing. 

Currently, the housing market is in the midst of a historic downturn, characterized by falling home prices, declining home sales, 

constrained mortgage credit, and a painful contraction in the residential construction sector. 

In California, my company’s largest market, new construction 

permits have fallen 46 percent from their 2005 levels, and researchers predict they’ll fall an additional 24 percent in 2008. 

5

Small businesses like mine that depend on the health of the 

housing industry have reacted quickly to keep solvent. For example, ConSol’s revenue is down 30 percent in the last two years. I’ve 

been forced to lay-off 31 employees, 30 percent of my company’s 

workforce. I know many other small businesses in our industry has 

had to take similar steps. 

NAHB has made several recommendations for stabilizing the 

housing industry in the immediate term, such as creating a temporary home buyer tax credit, among others. My written testimony 

provides specific details on how this, and other proposals can help 

the housing market, and the overall economy recover from the current downturn. 

With respect to energy policy in the housing industry in the longterm, it is important to improve the promotion of residential energy 

efficiency. Section 45L of the Tax Code, for example, contains the 

new energy-efficient home credit, which is a key market incentive 

to shift builders toward significant energy savings in new home 

construction. The program, which expires at the end of this year, 

provides a $2,000 tax credit to a homebuilder who constructs a 

qualified new energy-efficient home certified to achieve a 50 percent reduction in energy use. 

This credit is particularly beneficial to small homebuilders who 

often have the most flexibility to react to the marketplace preferences, such as increased energy efficiency, or green homebuilding. However, homebuilders also report, and I know this firsthand, that the increased construction costs required to meet the requirements of the tax credit dramatically exceed $2,000. 

The Senate recently passed a two-year extension of this credit, 

along with its housing stimulus legislation, but the House has not 

acted on it. It is crucial that leaders in both Houses of Congress 

work together to not only renew the credit as soon as possible, or 

make it permanent, but also to increase the dollar amount. 

Furthermore, many businesses in the construction sector experience losses, and, therefore, are unable to fully utilize this credit. 

Mechanisms need to be developed by which the credit can be transferred from a builder to investors, or other stakeholders, similar to 

the model in the low-income housing tax credit. 

I would like to quickly highlight the work done by NAHB to promote green building. The first National Consensus Standard on 

residential green building in the United States will be soon be approved by the American National Standards Institute, ANSI. As a 

member of the Consensus Committee that helped developed this 

benchmark, I can personally attest to the rigorous process that produced a viable and affordable alternative to other private rating 

tools. 

NAHB also established a National Green Building program that 

embodies a consumer education campaign highlighting the benefits 

of green building, and sustainability in housing design. 

Together, the National Green Building Standard, and the National Green Building program will help homebuilders continue to 

push the envelope in green building construction. This, in turn, will 

create new market opportunities for small businesses like mine 

that provide residential energy-efficiency services. 

6

NAHB appreciates the efforts by Congress to address the housing 

crisis, support small business, and promote energy efficiency and 

green building. Thank you for the opportunity to testify today. 

[The prepared statement of Mr. Hodgson may be found in the 

Appendix on page 40.]

Chairwoman VELA ́ ZQUEZ. Thank you, sir. Our next witness is Mr. 

Paul Misener. He is Amazon.com’s Vice President for Global Public 

Policy. He is responsible for formulating and representing the company’s policy positions worldwide. 

Amazon was one of the first businesses to sell products over the 

Internet. Today, it is one of the world’s largest and most successful 

retailers. The company was founded in 1994 by Jeff Bezos, and is 

headquartered in Seattle, Washington. Welcome. 

STATEMENT OF MR. PAUL MISENER, VICE PRESIDENT, 

GLOBAL PUBLIC POLICY, AMAZON.COM 

Mr. MISENER. Good morning, Chairwoman Vela ́zquez, and Ranking Member Chabot, and Members of the Committee. Thank you 

very much for inviting me to talk about this very important topic. 

And I am delighted to respond to your specific request to know how 

Amazon.com drives the growth of small firms, and about the effect 

that small companies have on the economy. 

Madam Chairwoman, I would like to offer you and your Committee three essential observations this morning. First, the online 

economy has evolved dramatically since its inception in the early 

1990s, bringing unforeseen benefits to small businesses. Second, 

these benefits arise not only from the new markets that can be 

reached online, but also from the myriad retailing services now 

available online to small businesses from Amazon.com, and others. 

And third, the demographics of today’s online economy can be surprising, particularly with respect to the share of the online economy held by small businesses. 

With these observations in view, we may safely conclude that the 

online marketplace is a very important avenue through which 

small businesses may help stimulate the overall economy. 

Madam Chairwoman, the Internet is a great enabler of small 

business. In its early days, the online economy was a haven for innovative, technically savvy small businesses, and today it has 

evolved to become a crucial sales channel for all kinds of small 

businesses, not just those with technical expertise. 

Several different eCommerce business models now co-exist and 

vigorously compete on the web. One model is platform retail, 

whereby large companies, such as Amazon.com, eBay, and others, 

provide eCommerce services to other companies, both large and 

small. Through Amazon.com’s platform, over 1.3 million sellers, 

most of them small businesses and individuals, now have easy access to over 79 million active consumer accounts worldwide. 

You’ve asked me for an indication of how my company drives the 

growth of small firms. Well, simply put, Amazon.com strives to provide our small business seller customers a wide variety of retail 

tools so they can concentrate on the areas of their business they 

know and like best. For example, with product ads by Amazon, 

small businesses can easily and efficiently advertise on AmaVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
7

zon.com the specific products available on their own web sites. For 

small businesses that don’t have their own web sites, we offer several types of services, like selling on Amazon, which allows small 

businesses to post their inventory on our web site without any individual item listing fees. 

Through WebStore by Amazon Service, we even create and run 

complete eCommerce web sites for small businesses. And whether 

or not a small business has a web site, we can provide the global 

reach of our physical distribution network through our fulfillment 

by Amazon Service. 

As for small businesses with media products, we make additional 

services available. One simply way creators and small publishers 

can use our retail platform is through our Amazon Advantage program, in which they need to print or manufacture only a few books 

or disks. Small publishers then can offer these few copies to the entire Amazon customer base of more than 79 million active customers. 

Digital delivery, of course, is another low-investment way to get 

media products to consumers. We have a rapidly growing digital 

music and video business that allow individual creators and small 

publishers to sell their audio and video works on line, without 

every reducing them to physical form. 

Moreover, as you may have heard, we have also introduced the 

Amazon Kindle, which is this little device here. It’s a portable reading device that wirelessly can download books, blogs, newspapers 

and magazines. This way authors and small publishers easily can 

attract an audience and distribute their works without the up-front 

investments in printing and physical distribution that often act as 

significant barriers to entry. On my own Kindle, I have several 

books from individual authors and publishers who don’t need to 

have any physical books in print. 

The demographics of today’s online economy can be surprising. 

Indeed, the share of the online economy held by small business is 

surprisingly large, because it is systematically under-counted in 

surveys, including by the U.S. Census. 

The upshot of this significant under-counting of sales by small 

business is that the proportion of eCommerce by small business is 

greatly underestimated. The sales by sellers with annual revenues 

on the order of $100,000 likely could account for as much as a 

quarter of all consumer eCommerce in the U.S. Obviously, the surprisingly high portion of eCommerce conducted by small businesses 

means that such businesses can have a greater effect on the online 

economy than may be generally assumed. 

In conclusion, Madam Chairwoman, the Internet is a great enabler of small business. The online economy has evolved dramatically since its inception in the early 1990s, bringing unforeseen 

benefits to small businesses. These benefits arise not only from the 

new markets that can be reached online, but also from the myriad 

of services now available to small businesses by Amazon, and other 

providers. 

Lastly, the demographics of today’s online economy can be surprising, particularly with respect to the large share of the online 

economy held by small businesses. With these observations in view, 

we may safely conclude that the online marketplace is a very imVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
8

portant avenue through which small businesses may help stimulate 

the economy. 

Thank you again for inviting me to testify, and I look forward to 

your questions. 

[The prepared statement of Mr. Misener may be found in the Appendix on page 50.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Misener. 

Our next witness is Mr. David Fischer. He’s the President of Online Sales and Operations for Google. He is responsible for the company’s Internet sales channel, and operation of its advertising program in North America. 

Google, Inc. is an American public corporation that earns revenue from online and mobile advertising. The company is 

headquartered in Mountain View, California. Welcome. 

STATEMENT OF MR. DAVID FISCHER, VICE PRESIDENT, 

ONLINE SALES & OPERATIONS, GOOGLE, INC. 

Mr. FISCHER. Thank you. Chairwoman Vela ́zquez, Ranking Member Chabot, and Members of the Committee, it’s a great pleasure 

to be here to testify about American small businesses, which are 

one of the most important and dynamic facets of our economy. 

Google is committed to helping small businesses prosper on the 

Internet. Indeed, much of Google’s success is predicated on the success of our small business customers and partners, and we place 

tremendous value on this relationship with these entrepreneurs. 

For many of them, their success is fundamentally linked to the continuing growth of the Internet. 

Today, hundreds of thousands of businesses are using Google advertising to reach customers, and hundreds of thousands of web 

site owners are generating revenue by placing Google ads on their 

pages. A significant majority of these partners are small businesses, and our tools are helping them compete, and succeed in the 

global marketplace. 

In my testimony this morning, I’ll first explain how online advertising enables small businesses to connect efficiently and cost-effectively with new customers. Second, I’ll explore how advertising 

partnerships provide new sources of revenue for web site owners. 

And last, I’ll offer some comments on future trends in the Internet 

economy, and important implications for policy makers. 

Online advertising enables small businesses to affordably and efficiently find their customers, whether it’s a local plumber reaching 

a new customer down the block, or a niche antique dealer connecting with a collector overseas. 

Small businesses are using Google’s advertising program, known 

as AdWords, as a sort of matchmaking service for new customers. 

Through a simple online tool, businesses create short text ads for 

their products that appear when a Google user conducts a search. 

For example, a Google search for the word flowers will s how you 

both relevant search results, as well as ads from local and national 

florists. 

We found that our advertising system gives small businesses a 

level playing field to compete efficiently with much larger companies. Any business can get started with just $5. Here’s one examVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
9

ple. Bulb America, a Brooklyn, New York-based lighting and fixture company got started in 1998 with just two employees. It’s 

grown to over 25 employees, with $6.5 million in total sales in 

2007. Today, the company attributes about 65 percent of those 

sales, or over $4 million last year, to Google advertising. 

Chairwoman Vela ́zquez, Bulb America is just one of thousands of 

businesses in your district, and across the U.S. that are finding 

new sources of revenue through our advertising program. But 

Google advertising isn’t just helping small businesses find customers more efficiently, it’s also helping to find a whole new breed 

of online entrepreneurs. 

In 2003, Google created a program called AdSense, which pays 

web site owners to place our ads on their pages. Every time someone clicks on one of those ads, the advertiser pays Google, and we 

share a majority of that revenue with the web site owner. 

Our business model enables entrepreneurs, educators, bloggers, 

and others to generate revenue by sharing their expertise and opinions with the world. In many cases, these individuals are able to 

dedicate themselves full-time to their web sites because of the support they receive from our advertising programs. 

In 2007, for example, Google paid out $4.5 billion to our partners, 

thousands of whom are small businesses and entrepreneurs. Chairwoman Vela ́zquez, in the 12th District of New York alone, we paid 

out more than $51 million to more than 6,000 AdSense partners 

last year. 

Askthebuilder.com is just one example of a small business success story. Based in Cincinnati, Ohio, Tim Carter delivers practical 

tips for handymen across the country. In April of 2004, Carter 

added AdSense to his web site, and immediately experienced a 

jump in revenue of 400 percent. Today, Tim Carter receives a 

monthly check from Google that averages about $42,000, and he is 

just one of 2,000 businesses in the First District of Ohio with whom 

we shared a total of $1.6 million last year. 

Thousands of small businesses are using online advertising to 

create new economic opportunities and flexibility. We at Google are 

very pleased to help support this proliferation of economic activity, 

free speech, and entrepreneurial spirit. 

I’d like to conclude with a few thoughts about the future trends 

we see emerging in the Internet marketplace, and how they might 

impact this Committee’s work. 

First, the vast majority of our advertising customers and partners hosting our ads are not Fortune 500 companies, but small 

firms, creating niche products for specific audiences. The web allows users with individual tastes to find these niche products and 

services more efficiently, and the economic potential of this content 

is driving some of the most innovative online businesses today. 

We believe that the continued growth of small businesses is dependent on fostering activity among the millions of individuals 

users and companies who make up the vibrant online community. 

As the Committee continues its important work as a champion of 

small business, I would encourage you to constantly consider how 

any new laws and regulations will affect these online entrepreneurs. 

10

Finally, we just continue to preserve the Internet as an open 

platform. Just a decade ago, Google’s founders were graduate students at Stanford University, when they launched their small business, a new approach to searching the Internet. A free and competitive online network and open standards enabled the success of 

Google’s search engine. Preserving this openness online is critical 

to insuring the success of a new generation of small businesses. 

As policy makers interested in promoting small business, I urge 

you to consider the openness of the Internet as a guiding principle 

in your legislative work, and as a critical component to insuring 

the continued success of American small businesses. 

We look forward to continuing our partnership with these businesses, and to answering any questions you might have about our 

efforts. Thank you. 

[The prepared statement of Mr. Fischer may be found in the Appendix on page 60.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Fischer. 

Our next witness is Dr. Dennis Ceru. He’s an Adjunct Professor 

at Babson College, where he teaches MBA courses in Entrepreneurship and Business Strategy. He has more than 25 years of experience delivering successful business and technology solutions 

through leadership and management positions in the fields of technology, financial services, and healthcare. 

He’s also the President and CEO of Strategic Management Associates, a company dedicated to providing business leaders with the 

tools necessary to expand and manage growth. Welcome. 

STATEMENT OF MR. DENNIS CERU, ADJUNCT LECTURER, 

ENTREPRENEURSHIP, BABSON COLLEGE 

Mr. CERU. Thank you. Chairwoman Vela ́zquez, Members of the 

Committee, thank you for this opportunity to talk with you this 

morning about the role of small business in stimulating the economy. 

Again, my name is Dennis Ceru, and I represent Babson College, 

as well as the Global Entrepreneurship Monitor. GEM is a joint 

venture of Babson College and the London School of Business, and 

it is the largest ongoing study of entrepreneurial dynamics in the 

world. We started with 10 participating countries, the project now 

in its eighth year of operations, has expanded to include 42 countries in 2006, and now 44 countries in 2008. 

Some of the information that I will share with you today is derived from this research, as well as the research of my colleagues 

at Babson College, and peppered with my own experience in owning, managing, and advising small and medium-sized businesses. 

First off, the main characteristics of entrepreneurial activity in 

the United States is significant. The total entrepreneurial activity 

index in 2007 is at 9.6 percent. This counts both nascent entrepreneurs, as well as new business owners. The overall business 

owners index, the count of early-stage plus established businesses 

is 14.1 percent. 

Interestingly enough, there are gender differences in this, with 

about 62 percent of the early-stage entrepreneurs in the U.S. being 

men, and 37-1/2 being women. Early-stage entrepreneurs in the 

11

U.S. are very confident people. They believe their business has 

high potential, with 22 percent of them expecting to create more 

than 10 jobs, and 50 percent growth in the next five years, compared to only 7.1 percent growth projected by current business 

owners. To us, this signifies opportunity, enthusiasm, and a positive outlook. 

Over 49 percent of early-stage companies plan to offer products 

that are new to customers, contrasting with only 31 percent from 

established business owners. More than 37 percent of early-stage 

companies will use the latest or newest one to five-year technology 

in their business, as compared to only 10 percent of established 

businesses. What this says to us is that entrepreneurs are innovative. They are innovative in their use of technology, as well as their 

creation of new business models, new services, and new technologies. 

They’re also young. Most are 34 years of age or younger, 41.6 

percent, and about 62 percent of these early-stage entrepreneurs 

have some degree of a college education. This is a dynamic, young, 

educated workforce. 

In the United States, most of this activity is centered around the 

consumer-oriented services sector, about 42 percent, followed by 

the business services sector, closely followed by transforming and 

very little in extractive services. In other countries, of course, we 

see very different combinations of these sectors. 

Experts in entrepreneurship overwhelmingly believe that there is 

sufficient equity funding, debt funding, and private funding for 

their new and growing firms. Government support for entrepreneurship is believed to be stronger at the local level, than at the 

national level, with 55 percent claiming support from local sources, 

and only 45 percent claiming support at the national level. The 

findings from this indicate that these entrepreneurs are consumer 

focused. They do believe they have the capital to start their businesses, and they still seek most of their support at the local, rather 

than the national level. 

In terms of current issues, the slump in the housing markets is 

causing distress not only in the homebuilding industries, but the 

overall financial markets, as well, and many small businesses and 

nascent entrepreneurs will be affected if this slump continues for 

a prolonged period of time. 

The Federal Reserve has been responding with significant interest rate cuts, which have provided some stimulus. Venture capital 

investment has continued to grow in this country, with about a 14 

percent year-to-year increase in the annual amount invested in 

portfolio companies in 2006, and an 11 percent increase in the first 

six months of 2007. 

Some of the new tax legislation proposed before Congress could 

potentially change the treatment of venture capitalist’s profits from 

capital gains to ordinary income; thus, affecting early-stage companies that represent not only the highest investment risk, but as 

both the Committee and some of my colleagues have stated, also 

create the most jobs and opportunities for the American economy. 

The finding from this is that there has been a negative ripple or 

trickle-down effect from the overall economic crisis. However, as 

has been mentioned by Chairwoman Vela ́zquez and Ranking MemVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
12

ber Chabot, that the times of economic distress are often the times 

when new businesses start, and they are times when entrepreneurs 

are able to seek opportunities that established businesses, perhaps, 

are a little bit less comfortable taking. 

So, in conclusion, thank you very much for inviting me here 

today. I hope that my testimony has underscored some of the important facts and statistics behind entrepreneurship in the United 

States, and I welcome your questions at the conclusion of this testimony. 

[The prepared statement of Dr. Ceru may be found in the Appendix on page 66.]

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Ceru. 

Our next witness is Mr. Marc Steiger, and he is CEO for DLP 

Technologies, Inc. in Cincinnati, Ohio. And I understand you are a 

constituent of Mr. Chabot. 

He will be testifying on behalf of the Computer and Technology 

Industry Association. CompTIA membership extends into more 

than 100 countries, and includes companies at the forefront of innovation. 

The association has expertise in a broad range of issues areas, 

including convergence technology, eCommerce, IT training, software services, certification, public policy, and workforce development. Welcome. 

STATEMENT OF MR. MARC STEIGER, CEO, DLP 

TECHNOLOGIES, INC. ON BEHALF OF CompTIA 

Mr. STEIGER. Thank you. Good morning, Chairwoman Vela ́zquez, 

Ranking Member Chabot, and distinguished members of the Committee. 

My name is Marc Steiger. I’m appearing today as a member of 

Computing Technology Industry Association, CompTIA, which represents over 10,000 member companies. I also am appearing as the 

owner of DLP Technologies, a small business that is working to do 

its part to fuel the American economy. 

I am a member of CompTIA, and I am a VAR. The typical small 

business does not have an IT department, but relies upon the services of an important segment of the computer industry referred to 

as value-added resellers, or VARs. VARs are small system integrators that design, install, and maintain computer systems and networks for other small businesses. Over one-third of the computer 

hardware sold in the United States today is sold by VARs. 

First, Madam Chair, I want you to know that the SBA Loan program has been a great benefit to my company. We just purchased 

a commercial condominium for our office space with SBA guaranteed funds, and some of our emergency working capital is also 

backed by the SBA. I want to thank this Committee for you support of the SBA Loan program. 

DLP Technologies has worked with small and medium-sized 

businesses in the Cincinnati area for over 25 years. We’ve become 

their IT support department, assist their computer users, manage 

their computer equipment, and help their businesses become more 

efficient. We have about 100 small business clients in many diverse 

industries, from law firms, to printers, from small manufacturers, 

13

to nursing homes, from chains of opticians, to chains of chili parlors. 

DLP supports the American economy as the employer of 11 employees with a payroll of $675,000. We support our employees by 

providing a full program of benefits, and we support our community by paying a variety of taxes. However, our major contribution 

to the economy is through the impact we have on our clients, and 

I’d like to give two examples. 

Last year, we did a technology project for The Counseling Source, 

a provider of mental health services for the elderly. Because of this 

project, The Counseling Source is now able to serve 300 clients up 

from 200 before the project. They have increased their clinical staff 

50 percent, while decreasing their administrative staff from 10 to 

4. This is a prime example of how we assist our clients to increase 

productivity. 

Another example is a project we did for Thoma and Sutton Eye 

Care Professionals, a 22-store optical chain based in Cincinnati. By 

upgrading and supporting their technology platform, we were able 

to improve their productivity, and allow an 8 percent increase in 

sales, with no increase in personnel. We also supported their increase in size by two stores by allowing their team to concentrate 

on more important matters, while we took the responsibility for 

technology issues. Their CEO asked me to emphasize to you today 

that his company would not have been able to make this investment without the Section 179 tax benefits. 

Sometimes our small businesses need the assistance of government, sometimes we need government to stay out of the way. So 

today I’d like to mention four issues of concern to me, and other 

small technology businesses that affect our contributions to the 

economy. 

One, the cost of healthcare insurance is becoming more and more 

out of reach for small businesses. I pay $68,000 in annual premiums for 11 employees. So far, I consider myself lucky as our employees have not faced any major health issues, but what if we 

were to have a huge claim tomorrow? My costs could double or triple overnight. Why should I currently have a competitive advantage over another business, who’s only fault is that someone on 

their staff or family happens to get very sick? Business should compete on the basis of value-offered, and not on which business has 

the lowest healthcare claims. Please, help make healthcare more 

fair and affordable for small businesses. 

Two, as a small business owner, I’m very appreciative of the temporary increase to the Section 179 tax benefit enacted under the 

Economic Stimulus Bill. As I said earlier, one of my clients specifically identified this program as allowing him to afford $100,000 

project which increased his productivity 8 percent. While we are 

most appreciative of this one-year bump, we ask for your support 

in making this $250,000 limitation permanent. 

Three, we are concerned with the impending implementation of 

a 3 percent Federal Income Tax Withholding on government contracts. A 3 percent withholding would represent 30-50 percent of 

my gross profits on educational sales, which is a huge disincentive 

for me to continue with this business. I want to thank this ComVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
14

mittee for its work to repeal this withholding. This was bad tax 

policy when it passed, and it is bad tax policy now. 

Four, IT security is important. It is essential for my clients. We 

urge this Committee to implement legislation that would create a 

Small Business Cyber Security Task Force to study how industry 

and government can work together more effectively to promote 

cyber security amongst small businesses. 

I certainly do appreciate your attention, as well as the honor of 

appearing on this panel today. We thank you for your vigilance in 

helping small businesses to remain competitive. I would be pleased 

to answer any questions you might have. 

[The prepared statement of Mr. Steiger may be found in the Appendix on page 74.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Steiger. 

Mr. Hodgson, I would like to address my first question to you, 

if I may. 

We all know that the housing industry is critically important to 

the overall health of our economy. And in your testimony, you indicated support for a first-time home buyer’s tax credit. How could 

this type of tax credit jump-start the housing market, and help 

homebuilders and firms like ConSol? 

Mr. HODGSON. Well, the homebuilding industry actually reaches 

into many business sectors, and so by enacting a first-time tax 

credit for home buyers, that would stimulate the purchase of new 

homes. And that would help the homebuilders, but the homebuilding industry, just looking at the Association, is really about a 

third of their membership. A lot of the members are like me, so it 

would also stimulate the retail industry, the building supply industry, the energy services industry, which I’m a member of, and the 

financial industry. So I think it would have a very large effect on 

companies, small businesses like mine by getting the housing market back on track. 

Chairwoman VELA ́ ZQUEZ. Can you give me some suggestions as 

to how this can be structured so that it just not jump-starting the 

housing market, but also encouraging the development of affordable housing? 

Mr. HODGSON. Well, assuming the home tax credit is a first-time 

tax credit, that’s going to affect the affordable market. I think the 

proposals that have been in the Senate and the Ways and Means 

Committee have been around $7,000, so that really only addresses 

the, I would say affordable housing market, the first-time home 

buyer. So I think that would have an impact. And right now, the 

housing economy needs any sales, but the sales that are critically 

absent right now are the first-time home buyer, the person who is 

trying to afford that home for the first time, both because of the 

availability of product, but also the lack of financial qualifications. 

The credit market is very, very difficult to quality in. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Fischer, with an increasing number of small firms having access to the Internet in various communities, many have opted to 

advertise online. I would like to get your perspective on the trends 

Google is seeing with small business eCommerce. Are more small 

businesses advertising on the Internet? 

15

Mr. FISCHER. The first thing that I would say about small businesses, overall, and that this Committee surely knows well is, some 

of the biggest challenges small businesses face are in time and resources, that it’s often one person, or just a handful of people driving to drive a business. And, so, we see more and more people coming online, but part of what’s allowing that is tools of the sort that 

Google offers, that other companies offer, to make it easier for companies to establish an online presence, which is a critical step, obviously. 

And then as that happens, we’re seeing more and more businesses start to advertise their site. And we see many, many success 

stories through advertisers who come online and are able to take 

a small business, and offer to grow it significantly. 

We have stories. I would point, for example, to one story of a realtor in the Outer Banks of North Carolina, who has been in business since 1978. It’s called Twiddy Real Estate, and they describe 

that the difference between coming-they describe themselves as 

having been in the dark ages before they came online, and now 

they sort of describe themselves as being in a renaissance, because 

they said they’ve been able to target people much more specifically 

through advertising, to find people who are searching for rentals on 

the Outer Banks; whereas, before, they might just have to buy 

newspaper advertising, or do brochure mailings in a much broader 

way, and so it’s that targeting that’s really allowing small businesses to reach out to their niche audience very effectively. 

Chairwoman VELA ́ ZQUEZ. If we see that it has a significant impact on small businesses, can you talk to the Committee about 

what tools Google offers to assist small businesses, and are they affordable? 

Mr. FISCHER. Absolutely. The first thing that Google does is take 

that first critical step of helping businesses come online, who may 

not be online. And, as I said, often time is a big constraint, so 

Google’s local business center allows small businesses to come and 

actually register, create a presence online and be found through 

Google, through Google maps when you search in your neighborhood for the local plumber, or bakery, or electrician, so that they 

have a presence, and they have a basic web site. And that is free. 

And we offer other free tools that allow you to build-out a more dynamic web site, as much as you want to build. 

And then the advertising, that enables you to both move into ad- vertising, online advertising which I mentioned. There’s only a $5 

sign-up fee, and you control your budget. We give you a great deal 

of ability to target exactly the audience that you want to reach, and 

to manage your budget, as appropriate, for your business. And out 

of that, we see many examples of people generating very high return on investments. 

And then, finally, I would point to our ads program called 

AdSense, where we allow you to place our ads on your web site. 

And that was some of the examples that I mentioned earlier, and 

generate revenue that way, as well. And that, again, is not only 

free, it actually generates revenue. But all of these, we aim to set 

up tools that people can access free of charge, as much as possible. 

Chairwoman VELA ́ ZQUEZ. Mr. Misener, with shoppers becoming 

more Internet savvy, the competition to attract new customers is 

16

growing more intense. What advantages do small firms have when 

it comes to attracting new customers? 

Mr. MISENER. That’s a great question, Chairwoman. The advantage the small business has is they can focus today on what they 

do, and like most, what they do best, and like most. They can focus 

on their businesses, as opposed to trying to figure out the Internet, 

and the technology associated with. 

If you look back a decade, or a dozen years ago, the companies 

that were founded at the time, Mr. Fischer’s company, my company, Yahoo!, eBay, all founded by engineers. And that’s because 

at the time, they needed to be technically savvy people to understand the technology to operate on the Internet. 

No longer is that the case, and so today’s small businesses have 

the advantage of being able to concentrate on their niche markets, 

their specialties, their expertise, and then sell it through the Internet in a way that does not require them also to be technologists. 

Chairwoman VELA ́ ZQUEZ. What challenges do entrepreneurs face 

in retaining customers as the number of online businesses continues to grow? 

Mr. MISENER. I think it’s a good news story, Madam Chairwoman. They actually are doing quite well online. And as I indicated, the size of the small business market online, the proportion 

of sales online by small businesses, I think is surprisingly large. 

And it is a good news story. The only sort of foreseeable concern 

that we have is one that we share with Mr. Fischer, which is somehow a closing of the Internet would actually close off the markets 

to small businesses and entrepreneurs, and so we’re anxious to see 

the openness of the Internet preserved. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Dr. Ceru, in the past 15 years, we have noticed an increase in 

small business entrepreneurship that can be attributed to the 

Internet. What is it about the economics of starting a business online that is so attractive to entrepreneurs? 

Mr. CERU. A number of factors, and I think both of my colleagues 

have alluded to that, in part. We describe this as the long tail, or 

the fact that now a small business can effectively reach niche markets, and not have to have a brick and mortars location, and attempt to reach them by traditional means, but through the great 

reach, and the breadth, and the depth of the Internet, be able to 

access customers who might not normally find them. 

This, combined with the fact that the relative investment is insignificant, if any at all, to establish an online presence, spurs 

many business owners to start their businesses in that virtual environment. 

Chairwoman VELA ́ ZQUEZ. And what can you tell us in Congress 

to do to continue to promote such activity? 

Mr. CERU. I think there’s many things that need to happen to 

promote that activity, not just in an online venue, but in the traditional venues, as well. 

Chairwoman VELA ́ ZQUEZ. Especially during this difficult time, 

sir. 

Mr. CERU. Especially in these times, yes. I think the SBIR grants 

are very important. Based on our experience at Babson College and 

my experience advising small companies, I believe we need to focus 

17

significantly on science, and technology, and engineering. That is 

largely supported, in part, by government programs at the national 

level, more so than at the local level. I think innovation should be 

continued to be supported in our country, both from a policy perspective, through tax credits, as well as through educational efforts. And, finally, encouraging women and minority ownership of 

entrepreneurial venues, activities, companies is essential as our 

country’s demographics are shifting dramatically, and there’s more 

of a need to be inclusive of these different demographics in the new 

economy. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Steiger, you spoke to us about the role that small business 

loan played in terms of providing access to capital for you to start 

up your business, or for some of your clients. Given the difficult 

times that we are in in our economy, what do you think the SBA 

can do to spur greater investment in start-up firms? 

Mr. STEIGER. I don’t know what you can do to increase it, but 

I’ll tell you that the programs you have are very effective. The programs you have were able to let me build a building, which certainly helps the local economy. It allowed me to lock in my financing for 20 years, which gives me a nice stable path on which to 

grow the economy, so I found those programs very effective. I hope 

you continue them. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Now I recognize Mr. Buchanan. 

Mr. BUCHANAN. Thank you, Madam Chair. 

Mr. Hodgson, you’re from California? 

Mr. HODGSON. That’s correct. Stockton, California. 

Mr. BUCHANAN. As a homebuilder. I think you hear California, 

I’m from Florida, a member of Congress from Florida, but Vegas 

has been hit the hardest in terms of some of the areas. But looking 

at some of the incentives, you think of a recession, down 3-4 percent, 5-10 percent in business, but homebuilders, at least in our 

area, many of them are down 50, 60, 70 percent. It’s simply a supply and demand issue, or way over-built, and we just don’t have demand right now. 

Some of these incentives that you’re talking on behalf of yourself, 

and the Homebuilders Association, what do you think are the top 

two or three that really can make a difference? I mean, it’s nice to 

have tax credits, as you mentioned, to give to the buyers, but from 

the builder’s standpoint, unless you have a way of selling off those 

credits to generate some cash, many of them have losses, so I’m not 

sure where we go with that. But I want to talk to you a little bit 

about just what more we can do to help, without goofing things up 

here, but actually be a real help to small homebuilders, and builders in general, because it’s a huge issue. 

Mr. HODGSON. Well, I hate to be limited just to few, but let me 

give you top - 

Mr. BUCHANAN. Give me your top two or three. 

Mr. HODGSON. You’re absolutely right. Our market is down 60, 

70 percent from two years ago, and we’re predicting the market to 

go even lower in 2008. Just as an example, if I may, we do the 

front end of construction work, and we do energy design, and mechanical design, et cetera. Two years ago we were doing around 

18

21,000 permits through our office, and it sounds like a large number, but let me kind of give you a perspective on that. And that 

means that we did about 800 master plans, and those are homes 

that are models that other homes we built from. That was in 2005. 

This year, we’ve done eight, so new construction has stopped. 

And builders really are not taking the risk because of the foreclosure market product that’s coming down the road, and the inventory that they will have. But in our market, and I apologize, I’m 

not familiar with the Florida market. Really, most homebuilders 

have limited their own inventory, and it’s now the recurring—the 

inventory that’s coming back that is really causing the supply. So, 

to me, the number one thing to a small business is expanding the 

carry-back period for the net operating loss. That would allow capital immediately into this year, into the builder’s books, and allow 

them to take credit for that. 

The second is allowing - 

Mr. BUCHANAN. Let me, on that, how far are you looking to carry 

it back? 

Mr. HODGSON. I believe currently it’s a two-year carry-back, and 

it’s been proposed for four years. And that is what we’re supporting. 

Mr. BUCHANAN. Okay. 

Mr. HODGSON. The second, which is more dear to my heart, necessarily, as I’m an energy efficiency advocate and try to push builders to go beyond just code, and what’s very difficult in our market 

now is the Federal Tax Credit for energy efficient new housing. It 

was passed for three years, and then extended for a year. The mentality of the homebuilder is, if I want to do something and change 

for market differentiation so I can sell my product, as opposed to 

a different product, is I need to make a long-term risk assessment. 

So when I’m building a product, I have to look at where that product is going to be two, three years down the road. And if the tax 

credit is only good for a year, I’m not going to make that judgment 

call, because I don’t want a product I build in 2008 to look different 

than the product I build in 2009 or 10. So we really support an extension. 

I know the House and the Senate have passed different versions 

of two years. I think, personally, that’s far too short. It should be 

a long-term effort, a five or ten-year credit, or make it permanent. 

And make it above code, so you’re always driving energy efficiency. 

So those would be my top two. 

Mr. BUCHANAN. Okay. I know in our area, the whole concept of 

green housing and more efficiency, not just in our area, but something we need to do as a country, when you’re talking about tax 

incentives for buyers, I assume that’s what you’re referring to, is 

that what you’re talking about there? 

Mr. HODGSON. Well, the tax credit I was talking about specifically is 45L, an extension of that. And that actually goes to the 

homebuilder. So the person who makes the decision in that - 

Mr. BUCHANAN. What about the purchaser? 

Mr. HODGSON. The purchaser, we’re also supporting that that extension be—I believe that also has been proposed for a two-year extension. 

19

Mr. BUCHANAN. Because I think there’s a lot of people that will 

buy homes if there’s some tax credits, as a way of stimulating the 

market, move out of what they’ve got, if they can cut their energy 

cost in half, and that’s a good thing for everybody. 

Mr. HODGSON. Absolutely. That, I believe, is covered in 179 on 

the commercial side. And I’m not a tax person, so I’m not sure 

what the residential. I think it’s 25, with a letter after it. 

Mr. BUCHANAN. Another thing, I’d like to get your general feeling, just real quick, on the sub-prime. How did that affect your 

area? You said 20 percent of homes that were sold in the last couple, three years were sub-prime lending, which, as you know, people don’t qualify for conventional financing, so we created all this 

creative financing. But what’s been your experience in your immediate market, that area? What’s your thoughts on it? 

Mr. HODGSON. Well, Stockton occasionally gets national publicity. One of those was about six weeks ago as being the foreclosure capitol of the nation, so we have very direct experience. 

And it’s approximately 40 percent of our market was sold in ‘05 

and ‘06, about two out of every five homes were sold in the subprime market, with sub-prime market-type loans. So that’s coming 

back to really build inventory, and inventory, it’s a supply and demand, so what we’re finding is that that’s going to depress our 

market through 2008, probably through 2009. We’re not looking for 

any turn in our market through 2010. 

Mr. BUCHANAN. Okay. Thank you. 

Mr. Misener, what’s been the experience, and I know Amazon 

has been a huge success story, but what has been the growth online sales, you said since ‘94. Has it continued to be 20 percent a 

year? What is that number? 

Mr. MISENER. Yes. Thank you, Mr. Buchanan. We just released 

our quarterly report yesterday, and our growth was in excess of 30 

percent, and so the online market does continue to grow. Roughly 

30 percent of the units that ship as a result of the sale through 

Amazon are from other sellers besides Amazon, our retail platform. 

As I mentioned before, there are 1.3 million small businesses and 

individuals who sell through Amazon’s platform. Picture this, if 

someone comes to Amazon and wants to buy a particular product, 

say a frying pan, they’ll come and see a picture of the frying pan. 

There will be a description of the frying pan, and perhaps we’ll 

have it for sale for a certain price. But right next to our sale price 

is the price from other sellers, competing directly with us. And oftentimes it’s lower, and people buy. As I say, 30 percent of the 

units sold through us were not by sales by Amazon.com. And, so, 

we’re seeing a sustained growth there. 

The number of active customer accounts is now 79 million, that’s 

people that have bought something in the past year from us, so 

that, plus the overall demographics, which I mentioned before, 

which I think are so important, that systematically small businesses are being under-counted in their online sales. So, it really 

is a good news story, I think, at present. 

Mr. BUCHANAN. It’s a great story. Let me ask you just practically, just I know a lot of companies have online sites. I mean, 

it’s unbelievable. But my experience is that very few are very effective. Now, a lot of them are sometimes just informational, and 

20

that’s very helpful, helps people make a decision. But how do a lot 

of these sites get more, and really I’m going to ask you, too, how 

do they get more out of their sites, because my sense of it is, is that 

for every hundred sites, there’s maybe two or three, I’m not talking 

about big corporations, but I’m talking about small business, are 

really effective in doing business in a significant way online. I 

mean, I think it’s come a long way. Look at the overall numbers, 

but there’s a lot more sites, but my own experience, if I was to 

think of 100 sites, there’s probably five, ten that really have some 

sense of figuring out where it’s really been a great tool. But I think 

most of them are up there, and they don’t get the hits, and that. 

But how does a small business really take advantage of it? And I 

think, obviously, you’ve got some great opportunities, and obviously, Google does. But I want to have both of you focus a little bit 

on that today. 

Mr. MISENER. Sure. I’d be happy to, Mr. Buchanan. 

Mr. BUCHANAN. And do you agree with my premise, that out of 

100 sites that are up there for commercial use, small business, that 

a lot of them are not nearly as effective as they can be. And I’m 

sure there’s five or ten that really do a good job, but 90 percent are 

not doing what they’d like to do with their sites. That’s just my experience. 

Mr. MISENER. I don’t have statistics on that, but I think that 

you’re probably in the right ball park. I think part of is a legacy 

of the experience of the mid-90s. In the mid-90s, the way to get online was to create your own web site and run it yourself. That was 

the only option. But now there are so many other options, we see 

people starting to switch over so that a lot of the services that are 

technically difficult, payment processing, for example, or advertising, or search functionality, or fulfillment, all these things are 

difficult to manage, but now service providers are stepping in and 

allowing small businesses again to concentrate on what they do 

most. 

We have this worldwide fulfillment network. This involves gigantic distribution centers throughout our country and around the 

world. Why not allow small businesses to come in and allow their 

products to sit in our warehouses until they sell them, and then we 

will take care of the shipping for them, so they don’t have to be 

experts in shipping, or inventory management, and those sorts of 

things. 

So, I think despite the rather gloomy view of the web sites 

around the Internet that you have and I share, I think we’re going 

to see shifts now by small businesses to service firms, like our’s, 

and others. We’re not the only ones, of course. That will allow them 

to concentrate on the things that they do best. 

Mr. BUCHANAN. Let me ask you, and I’ll ask both of you, one of 

the things that’s a little more controversial, and I’m not for raising 

sales tax, but how do we deal with this issue of Amazon, or my 

son’s play football. They buy their shoes in Minnesota. They sell 

into the state, a lot of local merchants, small businesses say that 

you guys have an advantage over them because when they go buy 

a book, they’ve got to pay 6 percent in Florida, or 8 percent in 

Texas. What’s your position, just out of curiosity, about how we 

21

deal with that issue between the state getting their share, and that 

being unfair to local merchants? What’s your thoughts on that? 

Mr. MISENER. There’s a real simple way of getting at it. It’s 

called the Streamline Sales Tax Project. This is where many states 

have come together to simplify their sales tax codes. The reason 

why Amazon currently is not required to collect sales tax in many 

states is because of the Supreme Court decision back in 1992, 

which said that the sales tax codes in our country are so inordinately complex that it would be unconstitutional burden on 

eCommerce, or interstate commerce for us to be required to collect. 

We have taken it upon ourselves to participate with the states 

to simplify their sales tax codes in an effort to get to the point 

where it no longer would be that burden. And, so, my guidance 

would simply be that if states are interested in this, to join in and 

participate in the Streamline Sales Tax Project, which is aimed at 

getting to the point of simplification, where companies like our’s 

can collect. 

Mr. BUCHANAN. We want it to work for everybody, but it’s something that I deal with. I was Chairman of the Florida Chamber, 

and it was a big issue on both sides, people felt about it. 

Mr. Fischer, just supporting small business, and you guys have 

done a lot in this area, how does that small company get more focused? I mean, obviously, if you’re selling a product across the 

country, it’s one thing, but how does a merchant in Sarasota, Florida, Tampa, Florida impact his local market? Maybe you’re selling 

a car, a house, they’re not selling books across the country. How 

does that work, where you can get the local impact, get the biggest 

bang for the buck, working through Google? 

Mr. FISCHER. Sure. Well, Congressman, one of the key features 

of our advertising program is that we allow you to target not just 

the type of audience, the particular searchers by their queries and 

what they might be searching, but actually by location. So, for example, you could choose Sarasota. You could choose the State of 

Florida, you could choose particular areas to target. And some 

small businesses want to sell nationwide, or even target the entire 

world, and some it’s more appropriate for them to target specific 

areas, and we enable them to do that. 

If I might, I would like to just go back to your earlier question 

about web sites, and how useful, and how well designed they are, 

if I could. 

Chairwoman VELA ́ ZQUEZ. You will have 20 seconds. 

Mr. FISCHER. Twenty seconds, sure. The only thing I would say 

is I agree with your general premise, some are good, some need 

work. We provide a series of free tools that actually allow advertisers to both—sorry, web sites to actually track the use of their 

web site, and to actually provide tools to optimize their web site to 

improve it, because you’re right. You can’t just have a web site, it 

needs to be a good web site to be effective. 

Chairwoman VELA ́ ZQUEZ. Thank you. Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Madam Chair. Thanks for holding 

this important hearing, and thank you, gentlemen. I’ve learned 

quite a bit. 

I think I have solved one problem, though, today, for at least two 

of you. Mr. Misener, if you take the Kindle and you download the 

22

Congressional record into that, and then give that to Mr. Hodgson, 

there should be enough hot air contained in there to heat all the 

homes that you build for the future, so it—so you might disagree. 

Thank you very much. 

I think you can hear the common theme through this Committee 

in all of our hearings, is that we’re asking you to help us help you. 

I think we went down the line. Mr. Hodgson, thank you. When I 

meet with homebuilders back in Indiana, they’re very helpful, telling me just the nuts and bolts, the nitty gritty things they need, 

and what really restrict them from—I know a couple of months ago 

we were talking about the regulations on sidewalks in a very hilly 

area, and how that hampers what they do, and what they have to 

go through. 

And one of the questions I have for you is, is your entire—in your 

position on the energy efficiency, is that pervasive through your organization, is that your’s, or is that the homebuilders? It seems to 

me, the folks back home had said that the requirements that we’re 

putting on are a bit restrictive, and adding to the cost, which is 

slowly down their homebuilding. Just if you can quickly touch on 

that, if that’s the position of the national organization? 

Mr. HODGSON. It’s my position, not the national organization’s 

position. I think NAHB has a very clear policy on what’s cost-effective, and how they determine energy efficiency codes. My niche in 

the market is to drive builders to code, make sure they do a good 

job, and design well, and then to push them beyond code. And we 

have about a 20 percent market share in our area, which is California, basically, the southwest. And we’re very strong advocates of 

energy efficiency, so I think my leaning is on the left side of the 

coast, which is also probably on the left side of the position of 

NAHB. 

Mr. ELLSWORTH. Okay. Thank you. 

Dr. Ceru, again staying with that theme of, you’ve studied this 

topic probably as much as anybody. One, two, three recommendations, if you were sitting in the Chairwoman’s seat, don’t try that, 

what would you say? Something in our power that we can do to 

help small businesses, you all do your job better, what would be 

your recommendations? Mr. Steiger said here’s the three things, he 

needs healthcare. What would be your list of three, if you could do 

that? 

Mr. CERU. Well, I think healthcare certainly is a burning issue 

for small businesses. As a small business owner myself for many 

years, it was a significant portion of my payroll expenses, in addition to paying the federal and the state payroll taxes, disability, 

and unemployment taxes. So healthcare is a burning issue. 

Investment tax credits for small businesses is a very important 

issue. As an owner of a technology company, we did benefit from 

Section 179 benefits, as well. I think today they’re even more important. What we see at Babson College, and many of the colleges 

throughout Massachusetts and the country, is a significant interest 

in green technology, in energy-renewable technology, and many of 

these will require significant time to get to market penetration, 

and get to a pricing level that they become affordable on a mass 

scale.Between the beginnings of that idea, and the reaping of profVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
23

its from those products, I think on both the national, as well as the 

state level, investment tax credits can be significant. 

And probably the last one is to take into consideration the 

sources of capital. Many entrepreneurs today are not getting traditional venture capital funding, they’re getting more angel investing, small business loans, and banking loans. And the restriction 

of credit in today’s environment, that source of debt financing is 

going to become more stringent, more difficult. 

I, myself, participate in an angel investors group, and there’s becoming more of a conservative sway in that group. I think to increase the benefits of investing and easing the restrictions, if you 

will, from a tax onerous perspective on that investment is the beginning fuel for that new source of capital, and that new source of 

activity. 

Mr. ELLSWORTH. Thank you very much. 

Madam Chair, I’d yield back. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. King. 

Mr. KING. Thank you, Madam Chair. I appreciate this hearing, 

and I very much appreciate this testimony. I really have something, I hope I’ve got time to ask from each of you. But I turn first 

to Dr. Steiger. 

You made a mention of bad tax policy, and to make a clarification into that, I’d ask you from a withholding perspective, you pay 

wages on a weekly basis, I presume, and you’re doing at least 

monthly deposits, I would think, on payroll taxes, and on income 

tax. Is the federal government’s position, the message that you get, 

that that’s not adequate, and that they have to then take the 3 percent out of the top of any federal contracts you might have, in addition to the withholding? 

Mr. STEIGER. My understanding, if I’m correct, is that there’s a 

program out there that has been pushed off, but that if I sell anything as a government contractor, or I sell anything under just part 

of a government contract, that if I sold you a computer for a dollar, 

and it cost me 96 cents, that the government paying me would 

withhold 3 cents on that dollar. 

Mr. KING. And then you get a big check back when you file your 

income tax on April 15th. 

Mr. STEIGER. A year later when I file my income tax, that turns 

out to be - 

Mr. KING. And then you would have to calculate into your price 

the cost of that capital to carry that over. 

Mr. STEIGER. I don’t think that helps anyone. 

Mr. KING. And I agree. And I just wanted to illuminate that. My 

point, though, is that you are now filing at least monthly 

withholdings for your taxes and your payroll. 

Mr. STEIGER. I think my payroll is within a few days of after I 

pay my employees. 

Mr. KING. Perhaps weekly. 

Mr. STEIGER. Yes. 

Mr. KING. And if that’s the case, then, the federal government 

really doesn’t have a concern about whether you’re paying your 

bills or not, because you’re paying them up front weekly or monthly. And to withhold an additional part, that’s—I just wanted to reiterate that point. I’m glad that you brought it up. That’s someVerDate 0ct 09 2002 17:48 May 22, 2008 Jkt 033615 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40859.TXT LEANN
24

thing that I think intimidates the potential people that might want 

to become the entrepreneurs, which I’d direct the next question 

then to Dr. Ceru on that. 

I’m interested in all of you, especially the entrepreneurial background. Dr. Ceru, as I read through your testimony, and simultaneous to the time you delivered it, I’m quite impressed with the 

science that you put behind the evaluation of entrepreneurship. 

I see in this testimony where you state, ‘‘Entrepreneurship is a 

complex phenomenon.’’ And you’ve identified a lot of it, as much as 

I’ve ever seen, but that complexity I don’t see referenced in your 

testimony, that complexity of how do we measure, let me just say, 

the intimidation effect of government regulation, or the fear of the 

taxes that Mr. Steiger has referenced? What is the psychological 

composition of the entrepreneur, is it genetic, is it nature versus 

nurture? How do we raise more? And then, or if we can’t, how do 

we then prepare a climate by which these entrepreneurs can grow 

and blossom, as opposed to getting locked into the corporate structure for somebody other than their own aspirations? 

Mr. CERU. This is, perhaps, my favorite question of all to answer. 

It’s what most of my classes begin with, the question of nature 

versus nurture with entrepreneurship. And what we found over the 

years by anecdotal experience, and by studies across countries, is 

that there are certain individuals who have talents that lend themselves more readily to entrepreneurship. That simply means they 

are self-chosen. There are individuals who have the expressed interest and desire in entrepreneurial activity, and we firmly believe, 

and have proven that it can be taught. These are skills and tools 

that can be taught. 

Babson College, and I’m fortunate enough to be a part of this, 

is actually working in conjunction with a charitable foundation to 

develop a teaching curriculum for Latin America, for grade school 

teachers to teach their children the foundations of business and entrepreneurship. So not only do we believe this, but we’re putting 

it into practice. And those skills center around the basic understanding of business, a basic understanding of where opportunities 

come from, and how to recognize an opportunity. And then from 

there, the tools that help individuals to shape that opportunity into 

a moldable business revenue model that enables success. 

If I may just finally answer your question with, we’re very fortunate in this country, because we have a national culture that encourages experimentation, and does not penalize failure. Much as 

no one wants to fail, we find that many entrepreneurs often will 

start a business or two before they start a successful business. In 

many parts of the world, this is culturally and nationally not acceptable. In this country, we’re very fortunate to allow individuals 

to make mistakes, and learn from those mistakes, and then proceed. 

Mr. KING. I’m quite taken by this. And I would say that, I suggest another look that might be also helpful with the perspective. 

If one could go back and survey the entrepreneurs as they get closer to the end of their career, the changes they might have observed, 

and the difficulties of doing business in today’s climate versus that 

of a quarter of a century ago, and ask them the specific question; 

do you think you could do it over again, or would you do it over 

25

again knowing what you know today? Were they blissfully ignorant, and youthfully exuberant, and did that overcome the lack of 

knowledge? And back to you, Dr. Ceru. And I recognize the clock 

has ticked out. 

Mr. CERU. Yes, I’ll be very brief with this. It is both. Many of 

the more seasoned entrepreneurs, if you will, will readily admit 

that if they knew everything they knew in their more mature 

years, they never would have taken the leap. But by the same 

token, these tend to be serial entrepreneurs who have taken multiple leaps. And my own experience, I work with a group of CEOs, 

six to twenty million dollar companies, they’re all serial entrepreneurs. As their companies have been purchased by larger firms, 

their tenure is six months or less before they leave the established 

companies, and go back to yet another entrepreneurial activity. 

They have the gray hair that I have, so they’re still not afraid to 

take that jump. 

Mr. KING. I thank all the panel. I thank the Chair, and I yield 

back. 

Chairwoman VELA ́ ZQUEZ. Time has expired. Mr. Gonza ́lez. 

Mr. GONZA ́LEZ. Thank you very much, Madam Chair. 

My question is going to be directed to Mr. Fischer. And I truly 

believe this, that any business, big or small, just is not going to be 

successful unless they really are Internet savvy. That’s where everything is going. 

I appreciate everything Google has added, and it’s very interesting, but there are a couple of issues, because I really would try 

to get in my own mind an understanding, if I was a small business 

person. I finally get to retire. I move to Hawaii, and I’ve got 

Gonzo’s Custom Surf Shop. I’ve got my web site, and it’s an interesting one. But the truth is, it’s all about search and placement in 

order to get the eyes. And there’s two different ways of doing that. 

I’ve got my web site. It’s pretty interesting. Hopefully, you’ll capture it when someone is searching for custom boards somewhere in 

Hawaii. But, better yet, maybe I should also get an ad. I think that 

enhances and increases the chances of certain people seeing my ad. 

And that’s what I—I’m going to reach from the search, which I’m 

sure you’ve read. And it’s old now, but I think he was so far—

JohnBattelle, the pronunciation. 

‘‘Neal Moncrief couldn’t afford to have a bad quarter. In fact, 

even a bad month made things a bit tense at home. Running your 

own business is like that. When things go south at the office, you 

take it home with you. As a small businessman, Moncrief lives on 

the edge of profit and loss. A bad month means avoiding his local 

banker, putting off home and car payments, and having less meat 

on his family table. But Moncrief is proud of what he had achieved. 

He built a small eCommerce company, survived the nuclear winter 

of 2001-2002, and emerged with enough cash flow to take care of 

his family. Moncrief has search engines to thank for that cash flow, 

Google in particular. Thanks to the traffic that Google drove to 

Moncrief’s online storefront, which I think was two big feet or 

something, Moncrief no longer worked for the man. 

Moncrief is one of tens of thousands of merchants who have 

taken to the web since the Internet became a global phenomenon. 

For every household brand built during the bubble’s infamous 

26

glory, eBay, Amazon, Expedia, thousands of Neal Moncriefs toiled 

in relative obscurity building the web’s bike shops and insurance 

agencies, it’s button merchants, and stroller stores. These digital 

cousins of strip mall America are the very beating heart of the 

United States economy. Small business writ large across cyber 

space. 

You think Amazon’s got scale, you think eBay is huge, mere drops in the bucket. Amazon’s 2000 revenues were around $2.76 

billion, but the Neal Moncriefs of the world’‘ - and I think the Professor will love this - ‘‘taken together drove more than $25 billion 

across the net that same year, according to the United States government figures. That’s the power of the Internet. It’s a beast with 

a very, very long tail. The head, eBay, Amazon, Yahoo, may get all 

the attention, but the real story is in the tail. That’s where 

Moncrief lives. 

But while the web may offer access to hundreds of millions of 

customers, you still have to let them know you exist’’ - which is getting to my point. ‘‘When folks went looking for something, they 

usually started at a search engine, and through some combination 

of luck, good karma, and would seem like fair play, when folks 

punch big feet or similar key words into Google, Neal’s site came 

up first. Moncrief had never purchased an advertisement. All those 

search engine referrals were organic. ‘We were the right answer for 

the search, so why buy an ad.’’

Now all that came to a crashing halt because he was no -when 

he went into the search, or people did, he was no longer at the very 

top. And the question was why? And I do want to get to that particular point. 

‘‘Google will have to determine what should come first when 

someone is looking, for instance, hip-hop. Who gets to be first in 

such a system? Who gets the traffic, the business, the profits? How 

do you determine of all the possibilities, who wins, and who loses? 

Because we all know when we go into a search, it’s huge, and hopefully you picked up Gonzo’s Custom Surf Shop. But, truly, I don’t 

know if I’m going to be on page one, or page 100. If I’m page 100, 

no one is ever going to get to me.’’

So the question then goes, ‘‘Have we evolved where it’s just not 

a web site any more. That’s not going to be enough. You are going 

to have to go online with advertising.’’ And then the question is 

how do you determine when Gonzo’s Surf Shop comes up next to 

a particular search? Am I relegated to page 100? Do they have to 

get to page 100 before Gonzo’s comes up, and my ad also pops up 

at the same time. 

Mr. FISCHER. Congressman, at its core, Google, of course, is a 

search company. And above all else, we aspire and aim to have the 

best possible search results available. And that’s a constant work 

in progress. Since day one, and Google now being almost 10 years 

old, we’ve constantly evolved, and we’re constantly improving, 

working to improve our search engine and its capacity. And companies like, perhaps, Gonzo’s Surf Shop, with a good web site still do 

appear, small businesses, plenty of small businesses do appear 

near the top, some may not. And what we always say is that we 

run our search engine, and for us, it’s a church and state issue. 

You can’t buy your way to the top of the organic search results, but 

27

you can purchase ads. So you could have the best web site, and it 

might be really relevant. And if you do, then you can show it for 

free, like the example you mentioned out of the book. But you also 

have the opportunity to buy in. 

I’m happy to go longer, but I recognize we’re out of time, so I’ll 

stop there. And we can follow-up, and provide more details, if 

you’re interested. 

Mr. GONZA ́LEZ. Thank you, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Ms. Hirono. 

Ms. HIRONO. Thank you, Madam Chair. And I thank my colleague for using the Hawaii surf shop as an example of an entrepreneur. 

I’m particularly interested in promoting green buildings and energy-efficient homes, so this is a question directed to Mr. Hodgson. 

I commend your industry for stepping forward, and really pushing 

the whole process of supporting green building. 

You mentioned Code Section 45L. Now that is just a credit for 

new homes, new homebuilding. Does it apply to remodeled homes? 

Mr. HODGSON. 45L is for new homes. There is also a retrofit section for energy-efficiency improvements for rehab, or remodel, or 

renovation. 

Ms. HIRONO. And is that an extensively used section by homebuilders? 

Mr. HODGSON. Well, the homebuilders I deal with are people who 

build new homes, and are not remodelers, so I’m not familiar with 

that. But I presume it’s a code that’s being proposed to be extended 

for two years, so I really couldn’t speak to the popularity of that 

code. 

Ms. HIRONO. Another question. I understand that there are national ANSI standards on green buildings, and there are a number 

of areas that these standards cover. I’m wondering whether you 

think that it would be a good idea for federal legislation, perhaps 

another code section that incorporates the ANSI standards, so that 

although it’s voluntary, any builder who builds to ANSI standards 

with regard to green building should maybe get some other kind 

of credit, tax credit? 

Mr. HODGSON. Well, the ANSI standards that have been developed by the International Code Council, and National Association 

of Homebuilders are a building code, so there’s no credit associated, 

tax credit associated with green building that I know of. 

Ms. HIRONO. Yes, I realize there probably isn’t anything now, 

and my question is, should there be? Should we move things along 

even more than through the 45L tax credit? 

Mr. HODGSON. I’m sure that would be an encouragement. Having 

federal legislation to promote green building standards, in my opinion, is not necessary, because the International Code Council is the 

combination of the three, sub-national or regional codes. And when 

they adopt this process, or adopt the ANSI-700 standard, which 

should happen in their 2010 adoption process, it will then become 

referenceable in the 49 states that use the I-Codes as a building 

code. 

Ms. HIRONO. Does that include Hawaii? You said 49. 

Mr. HODGSON. I think Hawaii is the example that it’s not included, but I’ll have staff get back to you on that. 

28

Ms. HIRONO. So you’re saying that’s adequate to promote green 

building. 

Mr. HODGSON. Correct. And then at that time, Congresswoman, 

what will happen is the local jurisdiction, or the state will make 

the call on what level of requirement they would want to have 

within the green building code. The beauty of having an ANSI 

standard is previous to this, there really was no building definition 

of green. And now there’s a very good scale for the variety of features that you’ve looked at for green building, so that now we could 

have a measurable scale of what the green building is in the residential market, and what it’s not. And that will become an integral 

part of our building code within three years. 

Ms. HIRONO. Thank you very much. I yield back, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Sestak. 

Mr. SESTAK. Thank you, Madam Chair. I’m sorry I was late. 

My questions may not have to do with the overall value attendant to this hearing, but what I was curious about going through 

the read-ahead is the value that small businesses give to the entrepreneurship that’s made America great. 

I guess my question is, do any of you see a depletion in the resources that are necessary to do that, much like oil is going to run 

out? I’m talking about human capital. China has passed us in the 

IT exports throughout the world, and I think more than now, as 

compared to 2001 until today, more than 50 percent of our IT companies that were wholly owned by the United States at that time 

now have foreign ownership. 

More to the point, I guess, is number three guy in China said it 

wasn’t the Harvards and the Yales we most admire about you, it’s 

your community colleges that graduate the artisans that made your 

manufacturing prowess what it is. So my question really has to do, 

in my region, in Philadelphia region, Acker Shipyard, for the homebuilders kind of gets to this point. We’re importing 180 people to 

do welding, because we can’t find the people with the skill any 

longer to do welding. You know, when I had them during Viet Nam 

War, you flipped your helmet, lit the arc, laid the bead. Now you 

have to sit at a computer and lay out welding, the bead and all, 

that old science of technology. 

The question over here, I guess, is for small businesses, as you 

see the value of going on the Internet and doing all this, I went 

to four companies in Montgomery County in my district, and two 

of them out-source over 50 percent of what they do, not because 

they want to. They don’t want to. They have to get a telephone 

book this thick through specs to India in order to make the kinds 

of programs they want, where they would prefer to have Americans 

do it. They just can’t find enough of them. 

This innovation that is so rampant everybody says in small businesses, and attendant to this great spur that got us to where we 

are, do you see that endangered from the artisan that helps your 

business, to this wonderful IT ability to compete, now no longer 

just with someone from Arkansas, but someone from overseas? It 

seems to me that’s the most critical element for small businesses, 

because you all talk about this innovation that comes from somewhere. Where is it going to come from 30, 40 years from now? Or 

do you really don’t think this is an issue much at all? Sir? 

29

Mr. HODGSON. Homebuilding is not high tech, fortunately. I 

guess we’re a little on the low tech side, but one of the critical 

issues as our market was growing previous to the last two years 

was the lack of qualified personnel. And in the California market, 

which I’m most familiar with, we made a very extensive effort, and 

I actually came from the community college system, to set up something called The California Homebuilding Foundation. And it’s a 

partnership between the building industry and 22 community colleges to train framers, plumbers, electricians. And they actually 

give scholarships to these kids to go to community colleges. So I 

think the lack of qualified personnel was a huge issue, as we were 

going through our growth process of 2001-2006. 

I’m not concerned with a lack of innovation in the homebuilding 

market. Homebuilders respond to market forces, and the public 

tells us what we need to build by what they buy. And as the market changes, we’ve heard green building, there are a variety of 

other issues in energy-efficiency and peak load reduction have been 

on the west coast market. We respond well to those things, because 

we survive well. 

Mr. SESTAK. Amazon?. 

Mr. MISENER. Just briefly, Congressman, we have two areas of 

experience here. One is within our company, and the other is with 

our customers. Within our company, it is a challenge to find qualified technologists. It constantly is, we’d love to see better technical 

education in our country to provide that steady stream of technical 

expertise. But outside the company, for our customers, in particular for our small business sellers through our site, we’re doing 

our work to take that technical requirement away from them, so 

they don’t have to worry about being technically savvy, so we’re actually in a circumstance where we think we are able to provide 

services to our seller customers, and then inure to the benefits of 

our buyer customers that remove those kinds of that technical necessity, so you don’t have to be an engineer from MIT to understand how to run a good small business online. 

Mr. SESTAK. Any comment? 

Mr. FISCHER. I would just agree with Mr. Misener is the sense 

that we focus on innovation, and we evaluate success by something 

that creates incredibly easy to use tools. And we usually measure 

that by a success, as something like InSearch where we have hundreds of millions of searches done in a month, and it’s easy to do. 

And you can find what you’re looking for. So when we think about 

innovations, some of the tools that I’ve talked about to make it 

easy for entrepreneurs to run their businesses effectively online, 

and so what we focus on is getting the right talent, and then providing those kinds of innovations. And I don’t dare predict where 

- Mr. SESTAK. Talent is not a problem. 

Mr. FISCHER. Talent is always, I would agree with Misener, talent is always an issue. And we see it as the driving force, if you 

get strong talent, so we have some concerns. But in terms of innovation, we think that we always—we will work hard to get the best 

talent we can. And by creating an innovative environment, getting 

people through some of the things that Dr. Ceru talked about, embracing failure, not liking it, but willing to live with it, knowing 

30

that taking some risk is going to create the spirit of innovation and 

opportunities for success. And that’s always been our approach, 

and to-date has been successful. 

Mr. SESTAK. There may not be time. 

Mr. CERU. Over time, but if I may, Madam Chairwoman. Yes? 

Chairwoman VELA ́ ZQUEZ. Yes, go ahead. 

Mr. CERU. Yes. Thank you. 

I’d like to address that from two perspectives. The first is to take 

a look at it more from a historical trend, or change in models. And 

I think that we’re witnessing a shift in the business models, and 

in the economy in our country that’s happened at breakneck speed, 

compared to the change from the industrial age, to the manufacturing age, to the knowledge economy that we’ve since survived in, 

through the out-sourcing, and new models are being created. 

My own perspective based on what I see working with young people constantly, is that I’m very bullish on our future. I don’t think 

there is a shortage of innovation. I don’t think there is a shortage 

of interest. I think there is a broadening of the skill set in the 

workforce, and some of that is an infusion of talent from other 

countries, as we once again become once a different type of melting 

pot. And I agree with my colleagues that there has been, and I 

have seen a push at the regional and community college level to 

educate young people for what was traditionally considered skilled 

or trade person jobs, which also is going to be an ongoing, very beneficial aspect of our economy. 

Mr. SESTAK. Thank you. 

Chairwoman VELA ́ ZQUEZ. Time is expired. Mr. Steiger. 

Mr. STEIGER. I’ll be very quick. 

I think there’s two issues. One is yes, it’s hard to get good people, 

and that’s a problem when good people are probably needed. But 

don’t give up hope, because the entrepreneurial spirit is going on 

all over the place. We’re constantly getting new competitors. People 

are constantly starting new businesses. We see great new competitors join us every day, and so I don’t think there’s a long-term 

worry. I think things are bright. 

Chairwoman VELA ́ ZQUEZ. Time has expired. 

I would like to ask a question to Mr. Misener. 

In your testimony, you discussed the lack of accurate data regarding the online economy. And without such measures, it is really difficult to measure the impact of the Internet on our nation’s 

economy, as well as the extent to which small firms have an online 

presence. 

Do you have any recommendations for developing a statistical 

benchmark to more accurately measure eCommerce activity? 

Mr. MISENER. Madam Chairwoman, that’s a terrific question, 

and certainly I do. It is the case that the federal government, as 

well as private interests, have been missing the role of small business selling online in a dramatic fashion. The Internet Retailers is 

a prominent trade magazine which annually publishes its list of 

top 500 sellers online, retailers online. Amazon is at the top of this 

list. The most recent version of this had our 2006 sales of a little 

bit under $11 billion in 2006, but it completely missed the sales 

through platforms like eBay, which during the same period had 

$52 billion of sales through its platform. eBay is not even on the 

31

list. Google is not on the list. Yahoo! Is not. Microsoft is not. They 

missed these. They undercount them, and because so many of the 

sales through the platforms like an eBay are by small businesses, 

we’re completely missing a large segment of the online economy. 

And so I would love for the Census Department to drill down deeper with its eStats, instead of just looking at businesses, like they 

tend to, and the business reports, try to delve down further to get 

at the small business seller online. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Dr. Ceru, do you have any insights into how we can get better, 

or more accurate data? 

Mr. CERU. Most of what we track through our research with 

GEM is more international, and more in terms of business starts, 

and business stops. What I can tell you is more anecdotal, and 

more I’ve seen at a local level, is that a lot of what happens 

through the eCommerce arena doesn’t report out immediately, or 

as quickly as some other sources do, so it is, in essence, under the 

radar activity that becomes more difficult to track. 

The question would come up is, are you tracking number of hits 

to a given web site, or actual purchases through that web site, as 

one of the distinguishing factors. And I think my colleagues are 

probably working on that very arena to try to get more closely to 

that. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

And my last question is to both Amazon and Google. We all know 

that the Internet has the ability to level the playing field between 

firms by allowing small businesses in remote areas to compete for 

customers. Can you talk to us about any special efforts to reach out 

to these businesses in rural locations to highlight the benefits of 

eCommerce? 

Mr. FISCHER. Congresswoman, as your question indicated, it’s—

on the Internet, one of the beauties of the platform it creates is in 

some ways there are no rural and urban businesses. There are just 

businesses that have the opportunity to compete equally on a level 

playing field, as you suggested. 

Our primary focus is on trying to provide, as I’ve discussed, the 

tools that enable that as simply as possible. We have a number of 

outreach programs that we do in terms of outreach to different 

types of communities to provide the necessary education. We do 

that to certain communities, we do that to certain minority groups, 

and so on, as appropriate. And our goal is to provide tools that 

work effectively for all groups and all entrepreneurs, as effectively 

as possible. It takes a variety of flavors, but largely, we think 

there’s a lot more in common across these, and by creating a level 

playing field, you can create tools, and you can create education 

materials that will work effectively for a large group of entrepreneurs. 

Chairwoman VELA ́ ZQUEZ. Mr. Misener. 

Mr. MISENER. Yes, ma’am. I’ll be brief. I certainly agree with Mr. 

Fischer. 

Just like the Internet has removed the barriers to consumers 

whereby a rural or isolated community may not have but one or 

two retail outlets, they’re no longer beholding to those one or two 

retail outlets. They have the entire Internet available to them. 

32

Likewise, do small businesses. Small business selling through 

Amazon isn’t beholding to just a local community of buyers, but 

rather to the 79 million and growing active customers of Amazon. 

So it really is a great enabler, and I think a very good news story 

for small business. 

Chairwoman VELA ́ ZQUEZ. Thank you. Mr. Buchanan. 

Mr. BUCHANAN. I know that Madam Chair is going to want me 

to be brief, so just real quick. 

I wanted to get, Mr. Steiger, your experience. You said you had 

good experience with the SBA, but were they with you there day 

one when you were looking at—I assume you had a business plan. 

Did they go through the business plan? I was just curious of the 

experience that you had with the SBA, and then have you gone 

back for additional capital? Because one of the things, I think, Doctor, you said, and I don’t totally agree with, is the idea that I think 

banks are getting tighter and tighter on credit, and I think we’re 

going to have to look for vehicles like the SBA to stimulate the 

economy. I’m not sure you said exactly that, but I just want to get 

your quick analysis of how long it took, and that type of thing, in 

30 seconds. 

Mr. STEIGER. I didn’t use the SBA at start-up, or when we purchased the business. I used the SBA when I knew I was stretching 

myself to grow the business, to build a building to be stable, and 

to—and I just bought my building six months ago, so it’s a recent 

program. But it made the difference of being able to grow, and not 

grow. And, in that case, I think it was important. 

Mr. BUCHANAN. Dr. Ceru, just to wrap up with you. I want to 

thank you for what you’re doing, because I think we need to, and 

this Committee does, we need to really celebrate risk-taking in entrepreneurship because that, in my opinion, is the way we compete 

with China, India. We are in a global economy, and we’ve got to 

do everything we can to embrace risk-taking. I know in Florida, the 

Federation I headed up is 137,000 businesses. Those businesses, 99 

percent were small business. Some day it will become—Google 

started as a small business, becomes big some day, so what you’re 

doing in your area, we have to continue to do that. 

Let me say this. What I heard a statistic, out of 100 - this is a 

while back. The U.S. Chamber, 100 businesses, 92 fail in five 

years, eight succeed. What is the biggest reasons that we—how can 

we help more businesses, assuming only eight out of 100 succeed 

in five years? What more can be done to—you think the biggest 

challenge is for people that start up in business, why they fail? 

Mr. CERU. We’ve seen a number of different issues, and they 

range from not having a good plan, to not having a good operating 

plan. And many times, we teach entrepreneurship, we have no 

shortage of brilliant ideas. I tell students all the time there’s no 

such thing as a not good idea, but is it a good business concept? 

Is it a good business? And the shift from having that idea, turning 

into operations, living with it, managing through it, is a skill set 

that needs to be taught. 

There are many agencies like the Small Business Administration 

that does provide tools, and training for these individuals. I participate through the Small Business Educational Association of New 

England, in providing some of that. So I think we have to provide 

33

them with resources, we have to provide them with go-to centers, 

if you will. And at some point in time, we do have to provide them 

with sources of short-term liquidity to help them manage through 

what might be difficult periods in accounts receivable, or extended 

downturns in the economy. 

Mr. BUCHANAN. And I guess that’s one thing I’ve seen or experienced, is a lot times they run out of capital. They’re always a little 

more optimistic. It usually takes a little bit longer, costs a little bit 

more. That’s probably a big component why some don’t succeed. 

They just kind of quite not get there in the capital. Is that what 

you’ve seen? 

Mr. CERU. Some of that running out of capital is inefficient management of inventory, or inefficient management of receivables that 

ultimately results in a reduction in capital. And the companies that 

I’ve worked with that have had the best success with that have had 

good internal management policies, combined with revolving line of 

credit, as opposed to an extended loan. 

Mr. BUCHANAN. And just the last question you touched on, is 

how much of it is driven of the successful companies, is just personality. What you touched on earlier, you didn’t put a percentage on 

it. Let’s say 100 people go in business, and why some succeed, and 

don’t. But how much of it is just the individual, he or she, that type 

of thing, regardless? Because I’ve seen people, great plan, plenty of 

capital, still not make it. But what’s your thought on that? 

Mr. CERU. That fire in the belly, as we call it, is essential to get 

the idea off and rolling, and started. But one of the things that 

most entrepreneurs need to learn is, they may be the person to 

start the business, but not the person to manage the business on 

an ongoing basis. And one of our entrepreneurs who comes in to 

speak at Babson College said it most eloquently, that entrepreneurship is a team activity. And finding the right team members to fill 

out your great idea is essential to keep the business going. 

Mr. BUCHANAN. Thank you, doctor. And thank you, Madam 

Chair. 

Chairwoman VELA ́ ZQUEZ. I understand, Mr. Gonza ́lez, you want 

to ask - 

Mr. GONZA ́LEZ. Just an observation, I guess, and that is, this 

Committee’s chief concern is small business, as you obviously pick 

up on that. And as business models change, technology moves forward, we just can’t allow maybe what’s maybe going out there, I’m 

not saying that it’s happening, that would ignore the needs of the 

small business person. And I understand, Mr. Fischer, Google 

doesn’t have a subscription service for Gonzo’s Custom Surf Shop 

to be included in a search. And I think that’s the best business 

models you guys could ever come up. And you still have to make 

money at the end of the day, and I understand advertising. 

The concern then is, does the advertising then bump the placement, and such, and the exposure that a small business? And that 

is really where I’m coming from on that, because that’s where you 

make money, and I understand that. 

Mr. Misener, the concern that I have, of course, with eCommerce 

and such, it’s a blessing for many, and you’ve indicated that you 

have many suppliers that are small businesses, and so on, that you 

don’t have all of the inventory, and some of it is provided by small 

34

businesses. By the same token, I know that in San Antonio, historically, we’ve had a little bookshop, the Twig Book Store, or Book 

Shop, and we thought it wasn’t going to survive Barnes & Noble 

and Borders. They did. Now the question, I mean, they’re barely 

hanging in there. The question is, is Borders or Barnes & Noble 

going to survive online? And we understand all of that, and we still 

have to be very mindful of what’s going on out there. And I understand you also have to stay in business and make a profit at the 

end of the day. 

And there are some things that appear to be fair, and some 

things that don’t. eBay and PayPal, and how they restrict the consumer in the way in which they can purchase through their service, all of that we have to be very mindful as to how the consequence to small business men and women in America. But I commend all of you. Thank you so much for you testimony today. 

Chairwoman VELA ́ ZQUEZ. Before we wrap up, I just would like to 

address a question to the two small businesses that are represented here. 

We passed a first stimulus package, and there is discussion 

about a second stimulus package. Mr. Hodgson, and Mr. Steiger, I 

want you to answer this question based on your own business, and 

your own industry. 

What would you suggest is one legislative fix that will help your 

business, your industry continue to create jobs? 

Mr. HODGSON. The one fix for my personal company is the extension of 45L. Our niche is in the energy-efficiency market. I think 

the stimulus to the housing market is the extension of the tax credit, in general. 

Chairwoman VELA ́ ZQUEZ. Mr. Steiger. 

Mr. STEIGER. I don’t know if I’m prepared to answer that. I think 

I came - 

Chairwoman VELA ́ ZQUEZ. You have a long list? 

Mr. STEIGER. I have a long list. 

Chairwoman VELA ́ ZQUEZ. You can submit it to us. 

Well, thank you all so much. This was very insightful, and I really want to take this opportunity to say that it’s been a great hearing. The information has been very valuable to us. And in the 

sense that we continue to see how we can best provide legislative 

fixes, so that we can enable small businesses in this country to continue to do what you do best, and that is creating jobs at a time 

when the economy is in such a downturn and we need to see if we 

can play any role to get this economy back on track. With that, I 

thank you. 

I ask unanimous consent that members will have five days to 

submit a statement and supporting materials for the record without objection. So ordered. This hearing is now adjourned. Thank 

you. 

[Whereupon, at 11:56 a.m., the Committee was adjourned.]

35


40859.001
36


40859.002
37


40859.003
38


40859.047
39


40859.004
40


40859.005
41


40859.006
42


40859.007
43


40859.008
44


40859.009
45


40859.010
46


40859.011
47


40859.012
48


40859.013
49


40859.014
50


40859.015
51


40859.016
52


40859.017
53


40859.018
54


40859.019
55


40859.020
56


40859.021
57


40859.022
58


40859.023
59


40859.024
60


40859.025
61


40859.026
62


40859.027
63


40859.028
64


40859.029
65


40859.030
66


40859.031
67


40859.032
68


40859.033
69


40859.034
70


40859.035
71


40859.036
72


40859.037
73


40859.038
74


40859.039
75


40859.040
76


40859.041
77


40859.042
78


40859.043
79


40859.044
80


40859.045
81

Æ


40859.046