History has a way of prizing timeless qualities like vision
and oratory above temporal things like money. So if Barack Obama becomes our
nation's first black president, civics textbooks will probably never note his
fund-raising prowess or the financial challenges he had to overcome simply to
compete with the likes of Hillary Clinton. But Obama would not be where he is
today if he did not possess a preternatural ability to elicit huge sums. Obama
prompts an impulse in people to reach for historical antecedents when
describing him-as a speaker, Martin Luther King Jr.; as an inspiration to young
voters, Robert F. Kennedy. No one I'm aware of has suggested an apt comparison
for Obama, the mighty fund-raiser. But whenever I think about the quarter
billion dollars he has raised so far, the image that leaps to mind is Scrooge
McDuck diving joyously into his piles of gold.
The story of Obama's success is very much a story about
money. It provided his initial credibility. It paid for his impressive campaign
operation. It allowed him first to compete with, and then to overwhelm, the
most powerful Democratic family in a generation-one that understood the power
of money in politics and commanded a network of wealthy donors that has
financed the Democratic Party for years.
What's intriguing to Democrats and worrisome to Republicans
is how someone lacking these deep connections to traditional sources of wealth
could raise so much money so quickly. How did he do it? The answer is that he
built a fund-raising machine quite unlike anything seen before in national
politics. Obama's machine attracts large and small donors alike, those who want
to give money and those who want to raise it, veteran activists and first-time
contributors, and-especially-anyone who is wired to anything: computer, cell
phone, PDA.
Here's another thing: he is doing it almost effortlessly.
That is to say, in an era when the imperative for campaign dollars demands more
and more of a politician's time and lurks behind so many recent scandals
(including the auctioning-off of the Lincoln Bedroom), Obama has raised more
money than anybody else without plumbing ethical gray areas or even spending
much of his own time soliciting donations. During the month of February, for
example, his campaign raised a record-setting $55 million-$45 million of it
over the Internet-without the candidate himself hosting a single fund-raiser.
The money just came rolling in.
Obama's campaign is admired by insiders of both parties for
its functional beauty-not just admired but gawked at, like some futuristic
concept car leaking rocket vapor at an auto show. Obama's campaign has made a
similar leap in how it has applied technology to the practices of raising money
and organizing, and it is already the clear model for everyone else.
To get a better sense of why it has succeeded, I opted to
undergo the full tech immersion while reporting this piece, and soon had Obama
ring tones on my phone, new networks of online "friends,"
text-message updates from the campaign, and regular e-mails from its manager,
all gently encouraging me to give money, volunteer time, bring in new friends,
and generally reorient my life in ways that were made to seem hip and fun-and
inexorably aimed at the greater glory of Barack Obama. How Obama arrived at this
new model for campaigning is a tale of foresight and circumstance, his
campaign's enterprise and his opponent's shortsightedness, and it has as much
to do with Silicon Valley as it does with Washington politics.
Obama is a gifted politician by anyone's measure, but what
distinguishes him from earlier insurgents is his ability to fully harness the
excitement that his candidacy has created, in votes and in dollars. Three
forces had to come together for this to happen: the effect of campaign-finance
laws in broadening the number and types of people who fund the political
process; the emergence of Northern California as one of the biggest sources of
Democratic money; and the recognition by a few Silicon Valley entrepreneurs and
venture capitalists that the technology and business practices they had
developed in their day jobs could have a transformative effect on national
politics.
A few days after Obama announced his $55 million figure, I
went to Silicon Valley to meet some of these people, and to find out how they
saw the future coming and got there first.
Mark Gorenberg decided to start fund-raising in earnest
during the early days of John Kerry's presidential campaign, back when Barack
Obama was considered merely a comer in Illinois politics. Granted, that was all
of five years ago. But it was a different world then, at least in the elite
fund-raising circles Gorenberg was entering. Every election cycle, politicians
looking for money traveled a well-worn circuit of important donors.
Two big changes had just come about when Kerry got going in
2003. The McCain-Feingold campaign-finance law had taken effect for the first
time in a presidential campaign, limiting the large "soft money"
donations to political parties that Democrats in particular relied on; for
years, they had solicited large donations from corporations and the rich to
build the party. Now the only way to raise money was to attract small donors, a
task Democrats had never done well. (The law limited individual donations to a
presidential candidate to $2,000 for the primary and general elections each in
2004; the limit increased to $2,300 for 2008.) The other important change was
the Iraq War, which had energized the Democratic Party.
Gorenberg, a partner in the San Francisco venture-capital
firm of Hummer Winblad, was representative of a certain kind of prosperous
Northern California Democrat whom the war and the general climate of
Bush-administration malfeasance had pushed from casual supporter to committed
activist. And he was representative of Silicon Valley, in that he thought in
terms of networks. Partly, this was his job: a venture capitalist looking to
invest in the next big thing must know everything that is happening and
everyone who is making it happen. But everyone else was thinking about
networks, too. The Valley was still emerging from the crash of 2001, yet it was
already clear that the next boom would be in social-networking entities like
MySpace and Facebook, which created vast, interconnected communities on the
Web.
Political fund-raising, on the other hand, was stuck in an
earlier era. "Take a typical Gore event in 2000," Goren-berg, an
affable and slightly rumpled engineer, told me when I visited his office in a
converted brick warehouse on the Embarcadero. "By the time he was the
nominee, a fund-raiser might be 20 people in a living room who'd given $100,000
to the party, and 50 to 100 in the backyard at $5,000."
The engineer in Gorenberg was bothered by the system's
obvious inefficiency. Relying exclusively on the rich put limits on who got
involved, and by design the new campaign-finance laws weakened their influence.
He had an idea about how networks could help. "If the most that any one
person could write a check for was $2,000," he said, "then the important
people suddenly became those who would put their hand up and say, 'I'll raise
$50,000 or $100,000.'" Ever since Watergate-era campaign-finance laws put
limits on the amount that an individual can give to a presidential candidate,
"bundlers" who are able to gather many individual checks have been
important figures, most recently the "Pioneers" and
"Rangers" in George W. Bush's presidential campaigns. But in the
past, everyone tended to draw from the same moneyed crowd.
Gorenberg tapped into his broad network of entrepreneurs and
venture capitalists and discovered that many of them were eager to get
involved-eager enough not just to give but to tap their own networks to raise
money for Kerry. Collectively, these "raisers" generated a great deal
of money, and much of it came from new sources, particularly what Gorenberg
likes to call the area's new middle class. "There is a tremendous amount
of wealth in Silicon Valley," John Roos, Obama's Northern California
finance chair and the CEO of the Palo Alto law firm Wilson Sonsini Goodrich
& Rosati, told me. "Not just massive individual wealth, but wealth
spread collectively among the engineers, lawyers, and executives who made gains
in the good years and now have the ability to contribute a $2,300 check without
it being a significant hit to them."
By the end of the 2004 campaign, Gorenberg had surpassed all
the old names to become Kerry's biggest fund-raiser. And for the first time,
spurred by these expanding networks, the Bay Area eclipsed Los Angeles as the biggest
source of Democratic donations in California.
In Silicon Valley, as elsewhere, Kerry's loss, while
devastating, seemed only to intensify the activist zeal. Goren-berg teamed up
with a friend, Nadine North, who recruits executives for tech firms, to pursue
a new goal in 2006: helping Democrats win back the House of Representatives.
With guidance from Nancy Pelosi, San Francisco's reigning
power, the pair chose 10 races that looked like good possibilities to help
Democrats pick up the 15 seats they needed to regain control. But they worried
about how to raise money for a slate of House candidates who lacked the glamour
of a presidential nominee. They found their answer in the software industry.
After the Internet bubble burst, software companies had been unable to sell
expensive systems. Marc Benioff, the CEO of Salesforce.com, hit upon a solution
when he dropped the practice of charging full price up front in favor of a
subscription model that charged a little at a time for access to software. The idea
appealed to companies that lacked the budget or the appetite to write another
big check, while the promise of recurring revenue helped reinvigorate the
software industry.
North and Gorenberg borrowed the subscription model for
their "Win Back the House" project. Instead of asking for a big check
up front, as they would for a presidential candidate, they invited each of
their House candidates to the Bay Area over the course of the year, so that
supporters could give recurrent, but smaller, donations. Most of the donors
were from the tech industry, and understood the software-subscription model.
They came to enough gatherings, and kept writing enough checks, that the roster
of House candidates eventually expanded from 10 to 30. As before, the emphasis
was not on writing big checks but on building raiser networks, including people
who couldn't contribute much themselves. By November, North and Gorenberg were
among the top Democratic fund-raisers nationwide.
On election night, everyone gathered to watch the returns
come in, and this time they experienced a resounding victory: Democrats
recaptured the House. "Many of the candidates in the key races were ones
we had supported," North told me. "It really brought the national
political landscape home to Democrats in the Bay Area."
Barack Obama was new to most Americans when he entered the
presidential race, in February 2007. But he was familiar to Silicon Valley in
at least one way: like a hot Internet start-up in the glory years, he had great
buzz, a compelling pitch, and no money to back it up. He wasn't anybody's
obvious bet to succeed, not least because the market for a Democratic nominee
already had its Microsoft.
This being Silicon Valley, however, Obama was quickly
embraced. A few days before Obama declared, John Roos hosted a fund-raiser at
his home, attended by Gorenberg and many other prominent figures. This sent an
important signal to the community and added to Obama's local mystique.
"There is a lot of good feeling for the Clintons in California," says
Peter Leyden, the director of the New Politics Institute in San Francisco, a
tech-focused think tank that is neutral in the presidential race. "But
once the community here experienced Obama, that started to break up really
quickly."
That early fund-raiser and others like it were important to
Obama in several respects. As someone attempting to build a campaign on the
fly, he needed money to operate. As someone who dared challenge Hillary
Clinton, he needed a considerable amount of it. And as a newcomer to national
politics, though he had grassroots appeal, he needed to establish credibility
by making inroads to major donors-most of whom, in California as elsewhere, had
been locked down by the Clinton campaign.
Silicon Valley was a notable exception. The Internet was
still in its infancy when Bill Clinton last ran for president, in 1996, and
most of the immense fortunes had not yet come into being; the emerging tech
class had not yet taken shape. So, unlike the magnates in California real
estate (Walter Shorenstein), apparel (Esprit founder Susie Tompkins
Buell), and entertainment (name your Hollywood celeb), who all had
long-established loyalty to the Clintons, the tech community was up for grabs
in 2007. In a colossal error of judgment, the Clinton campaign never made a
serious approach, assuming that Obama would fade and that lack of money and
cutting-edge technology couldn't possibly factor into what was expected to be
an easy race. Some of her staff tried to arrange "prospect meetings"
in Silicon Valley, but they were overruled. "There was massive frustration
about not being able to go out there and recruit people," a Clinton
consultant told me last year. As a result, the wealthiest region of the
wealthiest state in the nation was left to Barack Obama.
Furthermore, in Silicon Valley's unique reckoning, what
everyone else considered to be Obama's major shortcomings-his youth, his
inexperience-here counted as prime assets.
I asked Roos, the personification of a buttoned-down
corporate attorney, if there had been concerns about Obama's limited CV, and
for a moment he looked as if he might burst out laughing. "No one in
Silicon Valley sits here and thinks, 'You need massive inside-the-Beltway
experience,'" he explained, after a diplomatic pause. "Sergey and
Larry were in their early 20s when they started Google. The YouTube guys were
also in their 20s. So were the guys who started Facebook. And I'll tell you, we
recognize what great companies have been built on, and that's ideas, talent,
and inspirational leadership."
This was the dominant refrain as I traveled around the
Valley. From a policy standpoint, there are many reasons for tech-minded types
to support Obama, including his pledge to establish a chief technology officer
for the federal government and to radically increase its transparency by making
most government data available online. "Barack recognizes that people in
Silicon Valley are not just talking about a set of technical questions,"
Lawrence Lessig, the Stanford law professor and noted Valley demigod, told me.
"It's a broader generational issue of how to architect and orient the
government on important issues, from privacy to security to competition, in
ways that open up the process to everyone."
But more than any policy, the idea of Obama and the world he
speaks for seemed to excite something deep within the limbic system of the
Valley brain that manifested itself through the early and continuing financial
support that was crucial to launching Obama's campaign. Getting behind Obama, especially
for those who did so early, appealed to their self-image as discerning seers.
Though she ultimately went with John Edwards, Nadine North captured this better
than anyone: "Obama was the new, new thing, and that's what we're all
about here."
When Gorenberg joined Obama's national finance committee, he
was pleased to discover an institutional culture eager to embrace new ideas
about building user-generated networks. The effects of this type of thinking
are evident throughout the campaign, but nowhere are they more fully embodied
than in the person of Steve Spinner.
Spinner is a 38-year-old entrepreneur and media executive
who, when we met at a Starbucks in Menlo Park, came across as a prototypical Valley
figure: bright and enthusiastic, a born networker with a dazzling command of
the latest industry lingo, and someone who is a zealous exponent, in roughly
equal measure, of both Northern California's business-venerating culture and
Barack Obama.
Spinner had only recently become active in politics, through
Gorenberg and North's "Win Back the House" effort. Although he hadn't
intended to do more than write a check, he had gotten swept up in the
excitement. "I know most of the VCs and entrepreneurs here," he told
me, "so when companies are thinking about doing their initial
fund-raising, thinking about raising $3 million or $5 million or $10 million,
I'm able to help a number of them by making introductions to the various VC
firms that might find what they're doing attractive."
Raising money for a political cause seemed like a natural
progression, though it was not without its challenges. Unlike other
professionals in Silicon Valley, entrepreneurs are typically cash-starved, and
therefore unlikely contributors. But as he called around to friends and
contacts, Spinner was surprised to find many of them eager to give and thankful
to have found an outlet for political expression. Things quickly took off. He
hosted an event in his home in 2006 that was headlined by Arizona Governor
Janet Napolitano. "I realized, 'Wow, I can do this,'" he told me.
"And so I got totally hooked. On election night, I had an ownership stake
in the effort."
Eager to get involved in a presidential campaign, Spinner
accompanied Gorenberg to the February fund-raiser at John Roos's house and,
somewhat to his own surprise, found himself volunteering to raise $25,000. Like
so many of his Valley colleagues, Spinner was instantly infatuated with Obama
and certain that supporting him was the right play. "I'm a start-up
guy," he told me. "We take measured bets. We will place a lot of
money on something that has a greater likelihood of failure than success, but
there has to be a path-if you've got the right plan and the right leadership,
the game can be won. That's how I looked at Obama."
Spinner began sending out e-mails, tapping into his network.
He browsed friends' profiles on LinkedIn, Facebook, and MyYahoo, trying to
determine who might be a Democrat and donate. One friend also wanted to raise
money for Obama, so Spinner brought him aboard. He soon exceeded his $25,000
goal.
This brought an invitation from Obama's national finance
chair, Penny Pritzker, to join the national finance committee and commit to
raising $250,000. Spinner thought about it, and took the plunge. He'd been
surprised by the excitement he'd encountered for Obama, but also by the lack of
a forum to discuss it. So he established what Web denizens would call an
affinity group, "Entrepreneurs for Obama," to serve this untapped
market. Obama appeared before the group by videoconference in May and was a
smash hit. Almost overnight, a whole new network, which would yield its own
spin-offs, had come into being and gone to work for the candidate. And in a
period of weeks, Spinner, who had never raised a dime for a presidential
campaign, had gone from neophyte to mid-six-figure Obama fund-raiser.
What ultimately transformed the presidential race-what swept
Obama past his rivals to dizzying new levels of campaign wealth-was not the
money that poured in from Silicon Valley but the technology and the ethos.
The campaign's focal point is My.BarackObama.com, which has
made better use of technology than its rivals since the beginning. As a
consequence of this fact and the general enthusiasm over the candidate, Obama's
Chicago-based staff is constantly besieged by suitors offering the latest
applications, services, software, and widgets. Since many are based in Silicon
Valley, Spinner volunteered his services as a talent scout.
To understand how Obama's war chest has grown so rapidly, it
helps to think of his Web site as an extension of the social-networking boom
that has consumed Silicon Valley over the past few years. The purpose of social
networking is to connect friends and share information, its animating idea
being that people will do this more readily and comfortably when the
information comes to them from a friend rather than from a newspaper or expert
or similarly distant authority they don't know and trust. The success of
social-networking sites like Facebook and MySpace and, later, professional
networking sites like LinkedIn all but ensured that someday the concept would
find its way into campaigning. A precursor, Meetup.com, helped supporters of
Howard Dean organize gatherings during the last Democratic primary season, but
compared with today's sites, it was a blunt instrument.
Obama's campaign moved first. Staffers credit the candidate
himself with recognizing the importance of this new tool and claim that his
years as a community organizer in Chicago allowed him to see its usefulness.
Another view is that he benefited greatly from encouraging a culture of
innovation and lucked out in the personnel department, with his own pair of 20-something wizards. Joe Rospars, a veteran of Dean's
campaign who had gone on to found an Internet fund-raising company, signed on
as Obama's new-media director. And Chris Hughes, a co-founder of Facebook, took
a sabbatical from the company and came to Chicago to work on the campaign full-time.
When My.BarackObama.com launched, at the start of the
campaign, its lineage was clear. The site is a social-networking hub centered
on the candidate and designed to give users a practically unlimited array of
ways to participate in the campaign. You can register to vote or start your own
affinity group, with a listserv for your friends. You can download an Obama
news widget to stay current, or another one (which Spinner found) that scrolls
Obama's biography, with pictures, in an endless loop. You can click a
"Make Calls" button, receive a list of phone numbers, and spread the
good news to voters across the country, right there in your home. You can get
text-message updates on your mobile phone and choose from among 12 Obama-themed
ring tones, so that each time Mom calls you will hear Barack Obama cry
"Yes we can!" and be reminded that Mom should register to vote, too.
"We've tried to bring two principles to this
campaign," Rospars told me. "One is lowering the barriers to entry
and making it as easy as possible for folks who come to our Web site. The other
is raising the expectation of what it means to be a supporter. It's not enough
to have a bumper sticker. We want you to give five dollars, make some calls,
host an event. If you look at the messages we send to people over time, there's
a presumption that they will organize."
The true killer app on My.BarackObama.com is the suite of
fund-raising tools. You can, of course, click on a button and make a donation,
or you can sign up for the subscription model, as thousands already have, and
donate a little every month. You can set up your own page, establish your
target number, pound your friends into submission with e-mails to pony up, and
watch your personal fund-raising "thermometer" rise. "The
idea," Rospars says, "is to give them the tools and have them go out
and do all this on their own." The organizing principle behind Obama's Web
site, in other words, is the approach Mark Gorenberg used with such
success-only scaled to such a degree that it has created an army of more than a
million donors and raisers. The Clinton campaign belatedly sought to mimic
Obama's Internet success, and has raised what in any other context would be
considered significant money online-but nothing like Obama's totals, in dollars
or donors. John McCain's online fund-raising has been abysmal.
The social-networking model provided Obama with something
that insurgents before him, from Gary Hart to McCain, always lacked: a means of
capturing excitement and translating it into money. In the 2004 primary, Howard
Dean raised $27 million online. Obama is fast approaching $200 million.
At a critical point in the race, this money had a
dispositive effect. After "Super Tuesday," on February 5, Clinton's campaign
ran out of money-a scenario that would have been unimaginable a year earlier.
Obama, flush with cash, proceeded to win the next 11 contests, all but putting
the nomination out of Clinton's reach.
"What's amazing," says Peter Leyden of the New Politics
Institute, "is that Hillary built the best campaign that has ever been
done in Democratic politics on the old model-she raised more money than anyone
before her, she locked down all the party stalwarts, she assembled an all-star
team of consultants, and she really mastered this top-down, command-and-control
type of outfit. And yet, she's getting beaten by this political start-up that
is essentially a totally different model of the new politics."
Before leaving Silicon Valley, I stopped by the local Obama
headquarters. It was a Friday morning in early March, and the circus had passed
through town more than a month earlier, after Obama lost the California primary
by nine points. Yet his headquarters was not only open but jammed with
volunteers. Soon after I arrived, everyone gathered around a speakerphone, and
Obama himself, between votes on the Senate floor, gave a brief hortatory speech
telling volunteers to call wavering Edwards delegates in Iowa before the county
conventions that Saturday (they took place two months after the presidential
caucuses). Afterward, people headed off to rows of computers, put on telephone
headsets, and began punching up phone numbers on the Web site, ringing a desk
bell after every successful call. The next day, Obama gained nine delegates,
including a Clinton delegate.
The most striking thing about all this was that the
headquarters is entirely self-sufficient-not a dime has come from the Obama
campaign. Instead, everything from the computers to the telephones to the doughnuts
and coffee-even the building's rent and utilities-is user-generated, arranged
and paid for by local volunteers. It is one of several such examples across the
country, and no other campaign has put together anything that can match this
level of self-sufficiency.
The alchemy of social networking and the presidential race
has given Obama claim to some of the most fabulous numbers in politics: 750,000
active volunteers, 8,000 affinity groups, and 30,000 events. But the most
important number, and the clue to how Obama's machine has transformed the
contours of politics, is the number of people who have contributed to his
campaign-particularly the flood of small donors. Much of Clinton's haul, and
McCain's, too, has come from the sort of people accustomed to being wooed in
the living room, and Obama initially relied on them, too. But while his rivals
continued to depend on big givers, Obama gained more and more small donors,
until they finally eclipsed the big ones altogether. In February, the Obama
campaign reported that 94 percent of their donations came in increments of $200
or less, versus 26 percent for Clinton and 13 percent for McCain. Obama's claim
of 1,276,000 donors through March is so large that Clinton doesn't bother to
compete; she stopped regularly providing her own number last year.
"If the typical Gore event was 20 people in a living
room writing six-figure checks," Gorenberg told me, "and the Kerry
event was 2,000 people in a hotel ballroom writing four-figure checks, this
year for Obama we have stadium rallies of 20,000 people who pay absolutely
nothing, and then go home and contribute a few dollars online." Obama
himself shrewdly capitalizes on both the turnout and the connectivity of his
stadium crowds by routinely asking them to hold up their cell phones and punch
in a five-digit number to text their contact information to the campaign-to win
their commitment right there on the spot.
It's possible to track the network effects in the growing
fund-raising numbers that seem to arrive in ever larger denominations: $25
million . $30 million . $35 million . in February, the staggering $55
million-nearly $2 million a day.
In a sense, Obama represents a triumph of campaign-finance
reform. He has not, of course, gotten the money out of politics, as many
proponents of reform may have wished, and he will likely forgo public financing
if he becomes the nominee. But he has realized the reformers' other big goal of
ending the system whereby a handful of rich donors control the political
process. He has done this not by limiting money but by adding much, much more
of it-democratizing the system by flooding it with so many new contributors
that their combined effect dilutes the old guard to the point that it scarcely
poses any threat. Goren-berg says he's still often asked who the biggest
fund-raisers are. He replies that it is no longer possible to tell. "Any
one of them could wind up being huge," he says, "because it no longer
matters how big a check you can write; it matters how motivated you are to reach
out to others."
There is some irony in the fact that the architect of the
most recent campaign-finance law also happens to be the Republican presidential
nominee. John McCain likely views all that has happened with considerable
trepidation. Contrary to the widespread assumption at the time the
McCain-Feingold Act became law (The Atlantic published an article on the
legislation titled "The Democratic Party Suicide Bill"), it has not
hurt the Democratic Party. Neither has it clearly benefited Republicans; McCain
in particular has little to show for it. He raised $15 million in March, only
$4 million of it over the Internet. His small-donor base is virtually
nonexistent. When challenged about his staunch support for the Iraq War, McCain
likes to say that he'd be willing to sacrifice the White House for principle.
Nobody asks about campaign-finance reform. But that, and not Iraq, may wind up
being the principled stand that does him in.
Meanwhile, the Obama machine rolls on, to the delight of its
early stakeholders. "They've gone from zero to 700 employees in a year and
raised $200 million," Steve Spinner says of the campaign. "That's a
super-high-growth, fast-charging operation."
It's also one whose growth curve is coming into sharper
focus. The Obama campaign has not yet assumed a place in Silicon Valley lore
alongside Apple, Google, and Facebook. But a few more months could change that.
The hottest start-up in the Valley right now won't make anybody rich, but it
might put the next president in the White House