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Whitman’s edge may be a desire to see CEO run state

I may be projecting a bit here, but I wonder if a certain desperation among the electorate won’t be Meg Whitman’s biggest advantage in the forthcoming race for governor of California.

We’ve tried professional politicians (Pete Wilson, Gray Davis). We’ve tried a Hollywood action star and a melodrama second banana (Arnold Schwarzenegger, Ronald Reagan). We’ve tried a colorless nobody (George Deukmejian) and a publicity magnet (Jerry Brown). And after all that, here we are, bankrupt and uncertain, saddled with another state budget that everyone knows is really a fraud, next year’s problem masquerading as this year’s solution.

Is it time to hand the statehouse over to a corporate CEO?

Whitman, who retired last March after 10 years running EBay, believes her experience makes her “uniquely qualified to be the chief executive officer of California in these economic times,” as she told me last week, shortly after announcing her candidacy for the GOP nomination for governor.

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“I managed and led very large and complex organizations,” she said. (Before EBay, she held executive positions at Hasbro, FTD and the investment consultancy Bain & Co.) “I balanced the budget throughout my entire career. I have prioritized projects and made trade-offs. This is something that the state is going to have to learn how to do.”

Whitman certainly has an impressive record. She pulled off perhaps the hardest feat of entrepreneurship -- building a new business model almost from scratch. When she joined EBay in early 1998, it was an online service for hobbyists, with fewer than 50 employees, 300,000 users and $4 million in revenue. When she retired it employed 15,000, brought in $8 billion a year, and with 246 million regular users reigned as the dominant auction marketplace on the Web.

Whitman imposed MBA-style order on EBay’s nerdly culture, led it to a spectacular initial public offering only a few months after joining, and managed it through growing pains involving such issues as how to beat online fraud, whether to allow the sale of guns and ammo (answer: no), and how to meet competition from Yahoo and Amazon.

Yet there’s reason to wonder whether she can overcome the lesson of history, which tells us that it’s very hard for a successful CEO to morph into a successful politician.

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The list of would-bes is long. It includes H. Ross Perot, whose “my way or the highway” creed attracted lots of attention in the 1990s, until voters concluded that the people you meet on the highway are a little less, well, insane. Investment executive Mitt Romney -- a Whitman mentor at Bain, as it happens -- served one uneven term as governor of Massachusetts, during which the Legislature overrode his every attempt to veto a budget item. Then he ran for president/CEO of the United States and flamed out.

The list of contemporary success stories pretty much begins and ends with Michael Bloomberg, the notoriously tough-minded founder of a financial data company, who has become popular enough as mayor of New York to push through a rule change allowing him to run for a third term.

Recently I asked Fred Smith, the founder of FedEx, why he never considered running for office. He said he didn’t think the skill sets for successful politicians and executives were identical. “It’s not enough to be a great executive and have great managerial skills,” he said. “You have to have those political skills.” (He was not talking about Whitman, whom he knows and admires.)

When I suggested to Whitman that a corporate executive suite might not be the best place to acquire the common touch essential in modern politics, she replied that EBay’s executive suite was out of the ordinary. The EBay user community she dealt with was “incredibly diverse,” requiring her to learn that “you could not please all of the people all of the time. . . . The analogy isn’t perfect, but people used to say, ‘Meg, you’re the governor of the EBay community.’ ”

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She also said it was wrong to think that all CEOs operate by ordering people around, which doesn’t work in politics. “When you’re running a large organization, the best way to not have people do what you hope they do is dictate. You’ve got to negotiate; you have to bring your executives along.”

The unanswered question is what Whitman would do differently from any of her predecessors. Every governor of a revenue-strapped state talks about prioritizing and making trade-offs. For 5 1/2 years the Schwarzenegger administration has been lecturing us about balancing the budget, living within our means and cutting wasteful programs. Schwarzenegger hasn’t achieved any of that because slogans don’t help you actually trade things off. In real life, all programs on the chopping block have constituencies that are perfectly capable of fighting one another to a draw.

Whitman hasn’t been very clear on how she would prioritize. In interviews, she has expressed dismay at the idea of raising state taxes on the wealthy; in our conversation, she expressed dismay at the excise taxes embedded in the latest budget deal between the Legislature and Schwarzenegger. “They just went hard after working-class families and the middle class,” she said. “The sales tax, the gas tax. . . . Can we layer one more thing on the families and hardworking people of California? I think the answer to that is no.”

Of course, if you’re looking for revenue and you rule out getting it from the upper class, the middle class and the working class, you haven’t left yourself too many places to go. (Corporate taxes? She wants to cut them.) And if you talk, as Whitman does, about doubling the number of state workers on furlough, that means cutting back services mostly for . . . well, for working-class families and the middle class.

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It’s proper to note that Whitman’s EBay experience raises questions about how she will manage in a financial storm. She joined during the dot-com boom, when many online services, EBay included, were enjoying explosive growth. (Of course, EBay survived while others failed.) But during Whitman’s last few years in charge, annual growth in the value of merchandise sold in EBay’s auctions slid to less than 30% from as much as 200%. Not everyone agrees that Whitman managed the transition well.

She tried to make up the slack through acquisitions. Some deals were successful. But not the Internet phone service Skype, which Whitman bought in 2005 for $2.6 billion. Two years later, EBay had to write off $1.4 billion of Skype’s value. From their peak in December 2004 to Whitman’s departure in March 2008, EBay shares fell 43%, reflecting concerns that when the tech sector’s go-go years ended, they took her magic with them.

That’s not to minimize her accomplishments. The jury is still out on whether California is truly ungovernable or has merely been governed for too long by the ineffectual. The next race for governor may hinge on whether Whitman can prove that it’s time to give a new category of leader a crack at things.

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Michael Hiltzik’s column appears Mondays and Thursdays. You can read his previous columns at www.latimes.com/hiltzik and reach him at michael.hiltzik@latimes.com.


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