Editor’s note: Joe Lonsdale is a General Partner at Formation 8, an early growth technology fund. He is co-founder of Palantir and Addepar, and is also proud to be behind other successful mission-driven technology companies. Follow him on Twitter @JTLonsdale.
When we saw a huge gap in the government’s technology response to 9/11 and founded Palantir in 2004, Silicon Valley venture capitalists refused to invest. They said “no” even after our progress two years in, when we had early proof that a distributed, flexible platform could outperform and replace several multi-billion-dollar IT services projects for a fraction of the cost and time.
Investment firms close to the government sector lacked strong backgrounds in technology. And in Silicon Valley, a couple of prominent groups passed, because “working with government is slow, and too much of a headache.” When we pointed out that the platform had multi-billion-dollar applications in global finance, they explained that they’d rather focus on web 2.0-type companies where there was easier money to be made. Now that Palantir is used in defense and financial systems around the globe, and secondary markets value the company at several billion dollars, dozens of later investors boast that they believed in the vision all along. But still, technology entrepreneurs and investors ignore other enormous challenges our economy faces.
Across major industries, much of the enterprise technology infrastructure was designed two to four decades ago, and it needs to be replaced. This old IT infrastructure is incapable of dealing with the massive new wave of heterogeneous information – big data – that’s now available via sensors, mobile technology, and other Internet-enabled platforms.
Industries as diverse as government, healthcare, energy, finance, logistics, and education are on the verge of an IT-led revolution. In healthcare, for example, over a quarter of doctors’ visits could be handled remotely through smart communication platforms. Applying smarter IT to genomic data may offer the potential to cure many types of cancer and other diseases.
In energy, new sensor and gamification platforms could massively reduce wasteful consumption. And more than 50 percent of original U.S. oil reserves remain downhole, leaving 100 billion barrels ($10 trillion) that are not economically recoverable today. Sensor and IT platforms could change this, substituting actionable information for expensive guessing about the flow of subsurface chemicals within wells and reservoirs; the “digital oil field” will also improve safety and protect the environment.
In the government sector, systems that self-monitor government spending, set targets and improve benchmarking could save huge sums and help prevent businesses or special interests from ripping off government at all levels. Education curricula could be intelligently tailored to individual students, meeting specific and esoteric needs and preferences and powerfully improving learning. In finance, open IT platforms will eliminate many types of fraud and break up the “old boys club” by automating data entry and enabling data-driven matching of services and products and other globally competitive innovation.
These aren’t just exciting problems – they’re critical. Our government and healthcare institutions are in crisis, with pensions and entitlements unaffordable within a couple of decades by any realistic measure. The education crisis is more severe than any we’ve encountered. Energy policy has become critical both to the global economy and to our national security. Global finance sits at the backbone of our economy but operates from within closed IT platforms, and by some measures its regulated cartels inefficiently absorb almost as many resources as our inefficient governments. Our only hope is to innovate our way to prosperity in these core industries.
Unfortunately, much of the technology community celebrates the anti-establishment ethos of outsiders and hackers, with a sort of faux-rebellion culture. Top technologists don’t realize that they have become their own establishment and that, in celebrating this aesthetic, they now act conventionally. Our society has failed to imbue young technologists with a sense of duty. As a result, with few exceptions, they have ignored the great challenges of our time and chosen instead to indulge self-expression and narrow achievements.
The energy my fellow entrepreneurs and investors maintain to inspire engineers, mentor entrepreneurs, and assist in creating mission-driven companies isn’t just driven by financial incentives. We are motivated by the challenge, and we believe we are solving important problems for our society. But value creation and wealth creation are often one and the same. When you solve big, hard problems, problems that fundamentally improve how an industry works, financial returns follow, giving you resources to do more of the same.
Some economists believe secular growth rates are uncontrollable variables and that productivity goes up at random, but I have seen otherwise. As technology entrepreneurs and investors, we can enable productivity increases and drive growth while improving outcomes in healthcare, education, energy, and other large industries. There is a huge wave of impactful, billion-dollar companies waiting to be built in these areas right now.
The IT revolution and its impact on the “old economy” space offer the best hope for a prosperous 21st century.
I challenge this generation of technologists to step forward and work together to tackle the problems that our society needs to solve – to eschew the hip, narrow approach to entrepreneurship. Not everybody has to work on the big problems, but if nobody does, they don’t get solved. Our best and brightest must conceive of themselves as stewards of our society and confront the critical challenges of our time. It’s the best bet for our society, for entrepreneurs, and for the investors who believe in them.