John Doerr, whom Fortune magazine once described as America's "only celebrity venture capitalist," has often said that the personal computer industry's growth from zero to $100 billion in 10 years was "the greatest legal accumulation of wealth in history." Now he has something to add about the Internet revolution: It has dwarfed the PC revolution by going from zero to $400 billion in five years. "There are waves," says Doerr, "and then there is a tsunami."
That tsunami -- which has ushered in a new economy symbolized by Silicon Valley, where unemployment is -3% and incomes of every segment of society are rising -- has drawn much of its might from the activities of people such as Doerr. During the past two decades, he and his partners at Kleiner Perkins Caufield & Byers, the best-known venture capital firm in Silicon Valley and arguably the U.S., have financed -- and often helped build -- such firms as Compaq, Netscape, Lotus, Sun Microsystems, and Amazon, among others. If the best way to predict the future is to invent it, "the second-best way is to finance it," says Doerr. He should know: Kleiner Perkins has so far invested $1.3 billion in 250 technology ventures, which have created 192,000 jobs and achieved $73 billion in sales and a market value of nearly half a trillion dollars.
Such staggering wealth creation, however, is not the most important thing about Silicon Valley, says Doerr, who was the keynote speaker on March 31 at a conference organized by Wharton in San Francisco. The most important fact about Silicon Valley -- which Doerr describes as "a state of mind" that also exists in some other areas in the U.S. -- is that it has unleashed the power of the entrepreneur. "Entrepreneurs are America's new heroes," says Doerr. "They have been provocateurs, risk takers, and innovators. They have moved from land to industrial assets to ideas. They are now entering fields of social entrepreneurship, such as education. This is the latest social change in history."
The foundations of the new economy, notes Doerr, rest on four pillars: the silicon chip, the PC, the Internet, and genomics. The new economy, he adds, threatens the old economy in fundamental ways. "The old economy was about people acquiring a single skill for life; the new economy is about lifelong learning," says Doerr. "The old economy was about monopolies; the new economy is about competition. The old economy was about job preservation; the new economy is about job creation. The old economy was about wages; the new economy is about ownership. The old economy got its value from plant equipment; the new economy gets its value from intellectual property. The old economy was like sumo wrestling; the new one is like the 100-meter dash. The old economy emphasized standardization; the new one stresses choice. The old economy sued; the new economy invests."
As the new economy grows, a battle is raging for its soul. The combatants are those whose aim is to build great companies to provide long-term value, versus those who want to create companies that can be sold for a quick profit. Citing a recent cover story in Fast Company magazine, Doerr points out that the fight is between those who want to build companies to last and those who want to build them to flip.
Five factors distinguish truly great ventures, in Doerr's view. They are led by missionaries, not mercenaries; they have top-notch, passionate leadership; they operate in large, rapidly growing, underserved markets; they have reasonable levels of financing; and most important, they work with a sense of urgency. "This is a period of extreme time famine," says Doerr. "Time is the most precious resource for the 10th of the planet that is ready for the new economy."
What distinguishes companies led by mercenaries from those led by missionaries? While the two may seem similar at first glance, they are in fact very different, Doerr points out. "Mercenaries are driven by paranoia; missionaries are driven by passion," he says. "Mercenaries think opportunistically; missionaries think strategically. Mercenaries go for the sprint; missionaries go for the marathon. Mercenaries focus on their competitors and financial statements; missionaries focus on their customers and value statements. Mercenaries are bosses of wolf packs; missionaries are mentors or coaches of teams. Mercenaries worry about entitlements; missionaries are obsessed with making a contribution. Mercenaries are motivated by the lust for making money; missionaries, while recognizing the importance of money, are fundamentally driven by the desire to make meaning."
Doerr believes that as the new economy develops, several trends are emerging. Among his forecasts for the future:
Doerr also predicts that the Internet will evolve into what he calls "the Evernet," which is "always on, high speed, ubiquitous, and available in multiple formats." These formats will include a "voiceweb" for voice communications, a "handweb" for handheld devices, a "PC web" for PCs, a "videoweb" for video, and an "e-web" in which machines will communicate with machines. These changes will consolidate the foundations of the new economy.
If the new economy faces one significant challenge, according to Doerr, it is that today's generation of children is being inadequately prepared to run it in the future. "While higher education is in good shape, primary education is in a crisis," Doerr says. The problem isn't lack of money; California alone spends $35 billion a year on education. The problem isn't even teachers, many of whom are highly dedicated. The problem is the system. "Many kids are promoted even if they can't pass tests," he observes. The result: 42 million Americans cannot read, and 60 million, despite an eighth grade education, have serious problems with reading and algebra. If this situation persists, children will be unable to develop the symbolic reasoning skills they will need to work in the new economy.
How can the crisis in education be tackled? The solution is not to hook up more PCs in classrooms, says Doerr. "Schools need smaller class sizes and a longer school day and year. They also need teachers who are given enough time and incentives to excel." Doerr points out that innovation, accountability, choice, competition, leadership, and parental involvement will be required to overcome the crisis in education. One positive sign, he says, is that social entrepreneurs have begun to get involved in attacking the crisis. Among them: organizations and foundations with Web sites such as www.successforall.net, www.letsfixourschools.com, and www.publicschools.org.
"Figure out a way to get involved," Doerr says. "Make a difference in a way that works for you.
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