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Where Silicon Valley Is Wrong on Innovation

Silicon Valley exemplifies the saying, “The more things change, the more they stay the same.” Very little has changed over the past decade, with the Valley still mired in myth and stale stereotype. Ask any older entrepreneurs or women who have tried to get financing; they will tell you of the walls they keep hitting. Speak to VCs, and you will realize they still consider themselves kings and kingmakers.

With China’s innovation centers nipping at the Valley’s heels, and with the innovation centers that Steve Case calls “the rest” on the rise, it is time to dispel some of Silicon Valley’s myths.

Myth 1: Only the young can innovate

The words of one Silicon Valley VC will stay with me always. He said: “People under 35 are the people who make change happen, and those over 45 basically die in terms of new ideas.” VCs are still looking for the next Mark Zuckerberg.

The bias persists despite clear evidence that the stereotype is wrong. My research in 2008 documented that the average and median age of successful technology company founders in the U.S. is 40. And several subsequent studies have made the same findings. Twice as many of these founders are older than 50 as are younger than 25; twice as many are over 60 as are under 20. The older, experienced entrepreneurs have the greatest chances of success.

Don’t forget that Marc Benioff was 35 when he founded Salesforce.com; Reid Hoffman 36 when he founded LinkedIn. Steve Jobs’s most significant innovations at Apple — the iMac, iTunes, iPod, iPhone and iPad — came after he was 45. Qualcomm was founded by Irwin Jacobs when he was 52 and by Andrew Viterbi when he was 50. The greatest entrepreneur today, transforming industries including transportation, energy and space, is Elon Musk; he is 47.

See also: Innovation: ‘Where Do We Start?’  

Myth 2: Entrepreneurs are born, not made

There is a perennial debate about who can be an entrepreneur. Jason Calacanis proudly proclaimed that successful entrepreneurs come from entrepreneurial families and start off running lemonade stands as kids. Fred Wilson blogged about being shocked when a professor told him you could teach people to be entrepreneurs. “I’ve been working with entrepreneurs for almost 25 years now,” he wrote, “and it is ingrained in my mind that someone is either born an entrepreneur or is not.”

Yet my teams at Duke and Harvard had documented that the majority, 52%, of Silicon Valley entrepreneurs were the first in their immediate families to start a business. Only a quarter of the sample we surveyed had caught the entrepreneurial bug when in college. Half hadn’t even thought about entrepreneurship even then.

Mark Zuckerberg, Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Sergey Brin and Jan Koum didn’t come from entrepreneurial families. Their parents were dentists, academics, lawyers, factory workers or priests.

Anyone can be an entrepreneur, especially in this era of exponentially advancing technologies, in which a knowledge of diverse technologies is the greatest asset.

Myth 3: Higher education provides no advantage

Thiel made headlines in 2011 with his announcement that he would pay teenagers $100,000 to quit college and start businesses. He made big claims about how these dropouts would solve the problems of the world. Yet his foundation failed in that mission and quietly refocused its efforts and objectives to providing education and networking. As Wired reported, “Most (Thiel fellows) are now older than 20, and some have even graduated college. Instead of supplying bright young minds with the space and tools to think for themselves, as Thiel had originally envisioned, the fellowship ended up providing something potentially more valuable. It has given its recipients the one thing they most lacked at their tender ages: a network.”

This came as no surprise. Education and connections are essential to success. As our research at Duke and Harvard had shown, companies founded by college graduates have twice the sales and twice the employment of companies founded by others. What matters is that the entrepreneur complete a baseline of education; the field of education and ranking of the college don’t play a significant role in entrepreneurial success. Founder education reduces business-failure rates and increases profits, sales and employment.

Myth 4: Women can’t succeed in tech

Women-founded firms receive hardly any venture-capital investments, and women still face blatant discrimination in the technology field. Tech companies have promised to narrow the gap, but there has been insignificant progress.

This is despite the fact that, according to 2017 Census Bureau data, women earn more than two-thirds of all master’s degrees, three-quarters of professional degrees and 80% of doctoral degrees. Not only do girls surpass boys on reading and writing in almost every U.S. school district, they often outdo boys in math — particularly in racially diverse districts.

Earlier research by my team revealed there are also no real differences in success factors between men and women company founders: both sexes have exactly the same motivations, are of the same age when founding their startups, have similar levels of experience and equally enjoy the startup culture.

Other research has shown that women actually have the advantage: that women-led companies are more capital-efficient, and venture-backed companies run by a woman have 12% higher revenues, than others. First Round Capital found that companies in its portfolio with a woman founder performed 63% better than did companies with entirely male founding teams.

See also: Innovation — or Just Innovative Thinking?  

Myth 5: Venture capital is a prerequisite for innovation

Many would-be entrepreneurs believe they can’t start a company without VC funding. That reflected reality a few years ago, when capital costs for technology were in the millions of dollars. But it is no longer the case.

A $500 laptop has more computing power today than a Cray 2 supercomputer, costing $17.5 million, did in 1985. For storage, back then, you needed server farms and racks of hard disks, which cost hundreds of thousands of dollars and required air-conditioned data centers. Today, one can use cloud computing and cloud storage, costing practically nothing.

With the advances in robotics, artificial intelligence and 3D printing, the technologies are becoming cheaper, no longer requiring major capital outlays for their development. And if entrepreneurs develop new technologies that customers need or love, money will come to them, because venture capital always follows innovation.

Venture capital has become less relevant than ever to startup founders.

Copy and Steal: the Silicon Valley Way

In a videoconference hosted by Indian start-up website Inc42, I gave Indian entrepreneurs some advice that startled them. I said that instead of trying to invent things, they should copy and steal all the ideas they can from China, Silicon Valley and the rest of the world. A billion Indians coming online through inexpensive smartphones offer Indian entrepreneurs an opportunity to build a digital infrastructure that will transform the country. The best way of getting started on that is not to reinvent the wheel but to learn from the successes and failures of others.

Before Japan, Korea and China began to innovate, they were called copycat nations; their electronics and consumer products were knockoffs from the West. Silicon Valley succeeds because it excels in sharing ideas and building on the work of others. As Steve Jobs said in 1994, “Picasso had a saying, ‘Good artists copy, great artists steal,’ and we have you know always been shameless about stealing great ideas.” Almost every Apple product has features that were first developed by others; rarely do its technologies wholly originate within the company.

Mark Zuckerberg also built Facebook by taking pages from MySpace and Friendster, and he continues to copy products. Facebook Places is a replica of Foursquare; Messenger video imitates Skype; Facebook Stories is a clone of Snapchat; and Facebook Live combines the best features of Meerkat and Periscope. This is another one of Silicon Valley’s other secrets: If stealing doesn’t work, then buy the company.

See also: Time to Rethink Silicon Valley?

By the way, they don’t call this copying or stealing; it is “knowledge sharing.” Silicon Valley has very high rates of job-hopping, and top engineers rarely work at any one company for more than three years; they routinely join their competitors or start their own companies. As long as engineers don’t steal computer code or designs, they can build on the work they did before. Valley firms understand that collaborating and competing at the same time leads to success. This is even reflected in California’s unusual laws, which bar noncompetition agreements.

In most places, entrepreneurs hesitate to tell others what they are doing. Yet in Silicon Valley, entrepreneurs know that when they share an idea, they get important feedback. Both sides learn by exchanging ideas and developing new ones. So when you walk into a coffee shop in Palo Alto, those you ask will not hesitate to tell you their product-development plans.

Neither companies nor countries can succeed, however, merely by copying. They must move very fast and keep improving themselves and adapting to changing markets and technologies.

See also: 3 Technology Trends Worth Watching  

Apple became the most valuable company in the world because it didn’t hesitate to cannibalize its own technologies. Steve Jobs didn’t worry that the iPad would hurt the sales of its laptops or that the music player in the iPhone would eliminate the need to buy an iPod. The company moved forward quickly as competitors copied its designs.

Technology is now moving faster than ever and becoming affordable to all. Advances in artificial intelligence, computing, networks and sensors are making it possible to build new trillion-dollar industries and destroy old ones. The new technologies that once only the West had access to are now available everywhere. As the world’s entrepreneurs learn from one another, they will find opportunities to solve the problems of not only their own countries but the world. And we will all benefit in a big way from this.

The World Doesn’t Need Silicon Valley

Ever since the Chinese government banned Facebook in 2009, Mark Zuckerberg has been making annual trips there attempting to persuade its leaders to let his company back in. He learned Mandarin and jogged through the smog-filled streets of Beijing to show how much he loved the country. Facebook even created new tools to allow China to do something that goes against the social media giant’s founding principles: censor and suppress content.

But the Chinese haven’t obliged. They saw no advantages in letting a foreign company dominate their technology industry. China also blocked Google, Twitter, and Netflix and raised enough obstacles to force Uber out.

Chinese technology companies are now among the most valuable—and innovative—in the world. Facebook’s Chinese competitor Tencent eclipsed it in market capitalization in November, crossing the $500 billion mark. Tencent’s social media platform WeChat enables bill payment, taxi ordering, and hotel booking while chatting with friends; it is so far ahead in innovation that Facebook may be copying its features. Other Chinese companies, such as Alibaba, Baidu, and DJI, are racing ahead in ecommerce and logistics; artificial intelligence and self-driving cars; and drone technologies. These companies are gearing up to challenge Silicon Valley itself.

See also: What India Can Teach Silicon Valley  

The protectionism that economists have long decried—which favors domestic supplies of physical goods and services—supposedly limits competition, creates monopolies, raises costs, and stifles competitiveness and productivity. But this is not a problem in the Internet world.

Over the Internet, knowledge and ideas spread instantaneously. Entrepreneurs in one country can easily learn about the innovations and business models of another country and duplicate them. Technologies are advancing on exponential curves and becoming faster and cheaper—so every country can afford them. Technology companies that don’t innovate risk going out of business because local startups are constantly emerging to challenge them.

Chinese technology protectionism created a fertile ground for local startups by eliminating the fear of foreign predators. Yes, the technology industry is a predator. Silicon Valley’s moguls openly tout the need to build monopolies and gain unfair competitive advantage by dumping capital. They take pride in their position in a global economy in which money is the ultimate weapon and winners take all. If tech companies cannot copy a technology, they buy the competitor.

Amazon, for example, has been losing money or earning razor-thin margins for more than two decades. But because it has gained market share and killed off a lot of its brick-and-mortar competition, investors have rewarded it with a high stock price. With this inflated capitalization, Amazon has raised money at below-market interest rates and used that to increase its market share. Uber has used the same strategy to raise billions of dollars to put potential global competitors out of business. It has also been unscrupulous and unethical in its business practices.

With these predators out of the way, Chinese technology companies started adapting Silicon Valley’s technologies and improving on them. In doing so, they weren’t only copying the technologies, but also copying Silicon Valley’s style—which is also to copy.

Steve Jobs built the Macintosh by copying the windowing interface from the Palo Alto Research Center. As he admitted in 1994, “Picasso had a saying, ‘Good artists copy; great artists steal’; and we have always been shameless about stealing great ideas.”

Apple usually lags in innovations so that it can learn from the successes of others. Indeed, almost every Apple product has elements that are copied. The iPod, for example, was invented by British inventor Kane Kramer; iTunes was built on a technology purchased from Soundjam; and the iPhone frequently copies Samsung’s mobile technologies (Samsung also does the reverse).

Facebook’s origins also hark back to the ideas that Zuckerberg copied from MySpace and Friendster. And nothing has changed since: Facebook Places is a replica of Foursquare; Facebook Messenger video duplicates Skype; Facebook Stories is a clone of Snapchat; and Facebook Live combines the best features of Meerkat and Periscope. Facebook tried mimicking WhatsApp but couldn’t gain market share, so it spent a fortune to buy the company (again acting on the Silicon Valley mantra that if stealing doesn’t work, then buy).

See also: Time to Rethink Silicon Valley?  

America doesn’t realize how much things have changed and how rapidly it is losing its competitive edge. With the Trump administration’s constant anti-immigrant rants, foreign-born people are getting a clear message: Go home; we don’t want you.

This is a gift to the rest of the world, because the immigrant exodus is boosting their innovation capabilities. Let’s hope they don’t try raising their walls, too.

Time to Rethink Silicon Valley?

The downfall of Travis Kalanick should show the world of would-be tech entrepreneurs that they need better role models, that they need to stop looking up to the spoiled brats who lead some of Silicon Valley’s most hyped companies and the investors who fund their misbehavior.

Travis Kalanick’s ouster from Uber is literally a watershed for the Valley, something that is capable of shaking up its entrepreneurs and venture capitalists alike. For too long, the elite have gotten away with sexism, ageism and, to coin a word, unethicalism. The cult of the entrepreneur idolized arrogant male founders who plundered money and even sank companies; the more money they raised (and often lost), the higher the valuations their companies received and the more respect they gained. Corporate governance and social responsibility were treated as foreign concepts.

Uber was not the worst offender in the tech industry; it was just the most visible and the one that got caught. Its investors have been rightly humiliated for having their heads in the sand. This is because it has for so long been clear that Uber needs management that is more responsible — to its employees, its drivers and its customers.

The trouble first surfaced in 2013, when complaints about male drivers’ assaulting female passengers met with denials of responsibility by the company. Then followed sexist “boober” comments by Kalanick; ads in France that pitched attractive female drivers; suggestions by an Uber executive that he would dig up dirt on a journalist; and the rape of a woman passenger in New Delhi partly caused by a lax screening of drivers.

See also: What to Learn From Uber’s Recent Troubles  

But through all of this, Uber investors supported the company and accepted the ethical lapses as if they hadn’t happened. All that seemed to matter was that valuations were rising; the business, expanding. Who cared that a top Uber executive had secured a copy of the medical report of the Delhi rape victim and shared it with other company executives, including Travis Kalanick, in an attempt to discredit her? The company was growing; investors were valuing it in the billions!

Things finally reached a boiling point with a series of allegations by a woman employee about rampant sexism and sexual assault at Uber headquarters. And, fortuitously, a board member illustrated the root of the problem by making a sexist remark at a meeting about eliminating sexism. The board was finally compelled to do something it should have done years ago: force Kalanick out and clean up its act.

To be fair, there are many technology companies that are, in this regard, exemplary, including Salesforce, Microsoft and Facebook. They are going to extremes to correct problems that they had found in their ranks. I know from discussions with executives such as Microsoft CEO Satya Nadella that they have been working hard and sincerely. But too many Silicon Valley stars are like Uber.

With the help of Arianna Huffington and Eric Holder, the company is at last working on reforming itself. And maybe the downfall of Kalanick will provide not only valuable but lasting lessons for the hotshots of Silicon Valley, and of tech cultures worldwide. If Uber can do it, so can the rest of the Boys Club. They have to realize that press releases won’t suffice, that real change is necessary.

Who are “they”? To begin with, the people who fund the offenders, the venture capitalists. They have not been held accountable, and they need to be.

The Diana Project at Babson College documented that, as of 2014, 85% of all venture capital-funded businesses had no women on the executive team, and only 2.7% had a woman CEO. The proportion of women partners in venture capital firms had also declined to 6% from 10% in 1999. And this is part of the problem for an obvious reason: Women don’t tolerate boys-will-be-boys behavior, because they aren’t boys. Moreover, as any number of studies have documented, diversity in companies yields a broader range of perspectives on the business itself and, often, better bottom-line results. And, as I have pointed out, high-tech women who are measurably better than men have been consistently discriminated against.

Venture capitalists are susceptible to business pressure. The money that they invest is not their own. It is raised from pension funds, universities and state governments. They must require venture capital firms to provide public disclosures about the diversity of the companies they invest in — including the gender and age of the executives. They must have a diverse set of investment partners, without sugarcoating the numbers using inflated titles for junior associates.

Next are the boards. Venture capitalists demand seats on boards as a condition for their investment but don’t usually fulfill their fiduciary duty to all shareholders and employees — they always put the interests of their own funds ahead of those of the company. They must take responsibility for the employees as well as for the success of the company, as board members are supposed to do. And startups must have diverse boards that provide balance and broad perspective, not chummy boys clubs dominated by venture capitalists.

Finally, all tech companies must take heed of the report that was put together by former Attorney General Eric Holder for Uber. There are obvious procedures to employ in making diversity a priority: such things as blind resume reviews; interviewing at least one woman and one minority candidate for each open position; limiting alcohol at work events and in the office and banning employee-manager relationships.

In most industries, discriminating on the basis of gender, race or age would be considered illegal. Yet, in the tech industry, venture capitalists brag about their “pattern recognition” capabilities. They say they can recognize a successful entrepreneur when they see one. The pattern always resembles Mark Zuckerberg, Bill Gates, Jeff Bezos a nerdy male. Women, blacks and Latinos need not apply. Venture capitalists openly admit that they only fund young entrepreneurs because, they claim, older people can’t innovate.

See also: A Trip Through Silicon Valley  

Silicon Valley got a free pass when computers were just for nerds and hobbyists. Few cared about its arrogance and insularity, because its companies were building products for people who looked just like their founders. And these child geniuses inspired so much awe that their frat-boy behavior was a topic of amusement. But now technology is everywhere; it is the underpinning of our economic growth. What is more, the public is investing billions of dollars in tech companies and expects professionalism, maturity and corporate social responsibility.

There is no free pass for the tech industry anymore. It must grow up and clean house.

The Unsettling Issue for Self-Driving Cars

It is a warm autumn morning, and I am walking through downtown Mountain View, Calif., when I see it. A small vehicle that looks like a cross between a golf cart and a Jetson-esque, bubble-topped spaceship glides to a stop at an intersection. Someone is sitting in the passenger seat, but no one seems to be sitting in the driver seat. How odd, I think. And then I realize I am looking at a Google car. The technology giant is headquartered in Mountain View, and the company is road-testing its diminutive autonomous cars there.

This is my first encounter with a fully autonomous vehicle on a public road in an unstructured setting.

The Google car waits patiently as a pedestrian passes in front of it.  Another car across the intersection signals a left-hand turn, but the Google car has the right of way. The automated vehicle takes the initiative and smoothly accelerates through the intersection. The passenger, I notice, appears preternaturally calm.
I am both amazed and unsettled. I have heard from friends and colleagues that my reaction is not uncommon. A driverless car can challenge many assumptions about human superiority to machines.

Though I live in Silicon Valley, the reality of a driverless car is one of the most startling manifestations of the future unknowns we all face in this age of rapid technology development. Learning to drive is a rite of passage for people in materially rich nations (and becoming so in the rest of the world): a symbol of freedom, of power, and of the agency of adulthood, a parable of how brains can overcome physical limitations to expand the boundaries of what is physically possible. The act of driving a car is one that, until very recently, seemed a problem only the human brain could solve.

Driving is a combination of continuous mental risk assessment, sensory awareness, and judgment, all adapting to extremely variable surrounding conditions. Not long ago, the task seemed too complicated for robots to handle. Now, robots can drive with greater skill than humans — at least on the highways. Soon the public conversation will be about whether humans should be allowed to take control of the wheel at all.

This paradigm shift will not be without costs or controversies. For sure, widespread adoption of autonomous vehicles will eliminate the jobs of the millions of Americans whose living comes of driving cars, trucks, and buses (and eventually all those who pilot planes and ships). We will begin sharing our cars, in a logical extension of Uber and Lyft. But how will we handle the inevitable software faults that result in human casualties? And how will we program the machines to make the right decisions when faced with impossible choices — such as whether an autonomous car should drive off a cliff to spare a busload of children at the cost of killing the car’s human passenger?

See also: Of Robots, Self-Driving Cars and Insurance  

I was surprised, upon my first sight of a Google car on the street, at how mixed my emotions were. I’ve come to realize that this emotional admixture reflects the countercurrents that the bow waves of these technologies are rocking all of us with: trends toward efficiency, instantaneity, networking, accessibility, and multiple simultaneous media streams, with consequences that include unemployment, cognitive and social inadequacy, isolation, distraction, and cognitive and emotional overload.

Once, technology was a discrete business dominated by business systems and some cool gadgets. Slowly but surely, though, it crept into more corners of our lives. Today, that creep has become a headlong rush. Technology is taking over everything: every part of our lives, every part of society, every waking moment of every day. Increasingly pervasive data networks and connected devices are enabling rapid communication and processing of information, ushering in unprecedented shifts — in everything from biology, energy and media to politics, food and transportation — that are redefining our future. Naturally we’re uneasy; we should be. The majority of us, and our environment, may receive only the backlash of technologies chiefly designed to benefit a few. We need to feel a sense of control over our own lives; and that necessitates actually having some.

The perfect metaphor for this uneasy feeling is the Google car. We welcome a better future, but we worry about the loss of control, of pieces of our identity, and most importantly of freedom. What are we yielding to technology? How can we decide whether technological innovation that alters our lives is worth the sacrifice?

The noted science-fiction writer William Gibson, a favorite of hackers and techies, said in a 1999 radio interview (though apparently not for the first time): “The future is already here; it’s just not very evenly distributed.” Nearly two decades later — though the potential now exists for most of us, including the very poor, to participate in informed decision-making as to its distribution and even as to bans on use of certain technologies — Gibson’s observation remains valid.

I make my living thinking about the future and discussing it with others, and am privileged to live in what to most is the future. I drive an amazing Tesla Model S electric vehicle. My house, in Menlo Park, close to Stanford University, is a “passive” home that extracts virtually no electricity from the grid and expends minimal energy on heating or cooling. My iPhone is cradled with electronic sensors that I can place against my chest to generate a detailed electrocardiogram to send to my doctors, from anywhere on Earth.

Many of the entrepreneurs and researchers I talk with about breakthrough technologies such as artificial intelligence and synthetic biology are building a better future at a breakneck pace. One team built a fully functional surgical-glove prototype to deliver tactile guidance for doctors during examinations — in three weeks. Another team’s visualization software, which can tell farmers the health of their crops using images from off-the-shelf drone-flying video cameras, took four weeks to build.

The distant future, then, is no longer distant. Rather, the institutions we expect to gauge and perhaps forestall new technologies’ hazards, to distribute their benefits, and to help us understand and incorporate them are drowning in a sea of change as the pace of technological change outstrips them.

The shifts and the resulting massive ripple effects will, if we choose to let them, change the way in which we live, how long we live for, and the very nature of being human. Even if my futuristic life sounds unreal, its current state is something we may laugh at within a decade as a primitive existence — because our technologists now have the tools to enable the greatest alteration of our experience of life since the dawn of humankind. As in all other manifest shifts — from the use of fire to the rise of agriculture and the development of sailing vessels, internal-combustion engines, and computing — this one will arise from breathtaking advances in technology. It is far larger, though, is happening far faster, and may be far more stressful to those living through this new epoch. Inability to understand it will make our lives and the world seem even more out of control.

A broad range of technologies are now advancing at an exponential pace, everything from artificial intelligence to genomics to robotics and synthetic biology. They are making amazing and scary things possible — at the same time. Broadly speaking, we will, jointly, choose one of two possible futures.  The first is a utopian “Star Trek” future in which our wants and needs are met, in which we focus our lives on the attainment of knowledge and betterment of mankind. The other is a “Mad Max” dystopia: a frightening and alienating future, in which civilization destroys itself.

These are both worlds of science fiction created by Hollywood, but either could come true. We are already capable of creating a world of tricorders, replicators, remarkable transportation technologies, general wellness and an abundance of food, water and energy. On the other hand, we are capable too now ofushering in a jobless economy; the end of all privacy; invasive medical-record keeping; eugenics; and an ever worsening spiral of economic inequality: conditions that could create an unstable, Orwellian or violent future that might undermine the very technology-driven progress that we so eagerly anticipate. And we know that it is possible to inadvertently unwind civilization’s progress. It is precisely what Europe did when, after the Roman Empire, humanity slid into the Dark Ages, a period during which significant chunks of knowledge and technology that the Romans had hard won through trial and error disappeared from the face of the Earth. To unwind our own civilization’s amazing progress will require merely cataclysmic instability.

See also: Lack of Enthusiasm for Driverless Cars?

It is the choices we all make which will determine the outcome. Technology will surely create upheaval and destroy industries and jobs. It will change our lives for better and for worse simultaneously. But we can reach “Star Trek” if we can share the prosperity we are creating and soften its negative impacts; ensure that the benefits outweigh the risks; and gain greater autonomy rather than becoming dependent on technology.

The oldest technology of all is probably fire, even older than the stone tools that our ancestors invented. It could cook meat and provide warmth; and it could burn down forests. Every technology since this has had the same bright and dark sides. Technology is a tool; it is how we use it that makes it good or bad. There is a continuum limited only by the choices we make jointly. And all of us have a role in deciding where the lines should be drawn.

This is an excerpt from Vivek Wadhwa’s new book, “The Driver in the Driverless Car: How Our Technology Choices Will Create the Future.”