This is recognized as a problem, and is an issue that immigration reforms attempt to address.

Every company ends up competing on "H1B lottery" with large body shops. So a startup with 1-2 application has very little chance of making it through compared to others with lot more lottery tickets.

I will also point out a closely related issue. The craziness that full 100% quota of the H1B visas for the year gets disbursed on one day in the year (practically speaking, on April 1. Though full approval process takes a few months). This makes it hard for a startup that wants to hire someone in December, but has to wait 4 months to apply (April 1), and 8 months for the new hire to actually start working (Oct 1).

And therefore, there is a need for a reform here of the current regulations.

By all means, write to your elected representatives to cut down on importation of cut-rate programmers. But know that this doesn't disprove Paul Graham's point. He is against the importation of cut-rate programmers too (see his footnote [2]). He is only for the importation of top-notch programmers.

And how do you identify a 'top-notch' programmer as a government organization dealing with visas? Seriously. I'd argue 95% of hiring managers in SV can't identify a top programmer.

The problem could be solved easily if H1-Bs could only be given to companies registered and headquartered in the USA. That would get rid of the Wipros and Infosyses etc.

That would also get rid of most foreign countries from operating in the states, since they couldn't get visas for management, trainers, or whatever. Maybe you just meant Indian companies?

Fair enough. What you could do is to split the 55,000 visas into 50,000 for US entities hiring foreigners. Then you could have a separate 5000 H1-Bs for foreign companies operating in the US. None of the latter would ACTUALLY be able to hire a single person realistically, because Wipro/Infosys etc would just grab those 5000 completely. But at least the other 50,000 would go towards startups and the Googles/Facebooks/etc of the world hiring foreign talents.

The problem is, if we did that, the rest of the world would retaliate, and the USA sells more abroad than at home (we are a net exporter of technology); we still wind up screwing ourselves and losing jobs in the process.

The H1-B visa IS supposed to be for top-notch programmers. That's what it exists for.

You're refuting an argument the essay not only doesn't make, but explicitly disowns.

This says it all.