An interesting paradox in the technology world is that there is both a shortage and a surplus of engineers in the United States. Talk to those working at any Silicon Valley company, and they will tell you how hard it is to find qualified talent. But listen to the heart-wrenching stories of unemployed engineers, and you will realize that there are tens of thousands who can’t get jobs. What gives?
The harsh reality is that in the tech world, companies prefer to hire young, inexperienced, engineers. And engineering is an “up or out” profession: you either move up the ladder or face unemployment. This is not something that tech executives publicly admit, because they fear being sued for age discrimination, but everyone knows that this is the way things are. Why would any company hire a computer programmer with the wrong skills for a salary of $150,000, when it can hire a fresh graduate—with no skills—for around $60,000? Even if it spends a month training the younger worker, the company is still far ahead. The young understand new technologies better than the old do, and are like a clean slate: they will rapidly learn the latest coding methods and techniques, and they don’t carry any “technology baggage”. As well, the older worker likely has a family and needs to leave by 6 pm, whereas the young can pull all-nighters. → Read More
Silicon Valley’s vitality depends on a constant influx of bright people who challenge its inhabitants to work harder and think smarter. And, as I noted in my last post, America’s economy depends on startups to create jobs and innovation. Skilled immigrants have provided both. So, given the miserable state of the economy, we should be laying out the welcome mat for the world’s best and brightest. Yet they’re doing the exact opposite. Meanwhile other countries have figured out the secret of the Valley’s success and are laying out their red carpets and welcome mats, not only for the foreign skilled workers we’re turning away but also for our techies.
Fifty-two percent of Silicon Valley’s startups from 1995 to 2005 were founded by foreign-born workers. And in 2006, 26% of America’s global patents—including 40% of those filed by the U.S. government, 72% of Qualcomm’s, 65% of Merck & Co.’s, and 64% of General Electric’s—were invented wholly or partly by foreign nationals residing in the U.S. You would think that we would develop policies to bring in more of these people. Yet, sadly, the only immigration legislation our political leaders have been able to agree on, unanimously, is to hire 1000 more border-patrol agents and to fly drones on the Mexico border—like the ones we use to kill terrorists in Pakistan—to keep the nannies, gardeners, and farm workers out. Ironically, to pay for all this, the new border-security law levies taxes on companies that the bill’s sponsor, Senator Schumer (D-NY), calls “chop shops”—because they bring in tech workers who compete with Americans and supposedly “take their jobs away”. These “chop shops” are Indian companies such as Infosys, Tata Consulting Services, and Wipro—which have the best employee-training and -development programs, and are amongst the best-managed companies, in the world. They compete head to head with American “chop shops” such as IBM Global Services and Accenture, and increasingly with management consultants such as McKinsey & Co and The Boston Consulting Group. (In the U.S., the term “chop shop” is typically used to describe an illegal business which disassembles stolen cars for selling off the parts.) → Read More
I knew I would be touching a raw nerve with my last two posts, on patents. But I was really surprised at the divergence of opinion. Entrepreneurs overwhelmingly supported my stance that software patents hamper innovation and need to be abolished, but friends in Microsoft, IBM, and Google were outraged at my recommendation. The big companies’ executives argued that abolishing patents would hurt their ability to innovate and thus hamper the nation’s economic growth. (They believe that companies like theirs create the majority of jobs and innovations, and they claim that without patents they cannot defend their innovations.) I am not convinced that software patents give Google any advantage over Microsoft and Yahoo, or make IBM’s databases any better than Oracle’s. But I do know one thing for sure: it isn’t the big companies that create the jobs or the revolutionary technology innovations: it is startups. So if we need to pick sides, I vote for the startups.
Let’s start with the question of who creates the jobs. This is one of the issues that I recently took Intel co-founder Andy Grove to task for, in BusinessWeek. Grove wrote a profound essay lamenting the loss of American manufacturing jobs. I share his concerns about jobs. But Andy’s protectionist recommendations for restoring America’s competitiveness were largely based on his flawed premise that companies like Intel create all the jobs—not the startups. I also discussed the tradeoff between bailing out companies like General Motors, AIG, and Citibank and nurturing startups in this BusinessWeek piece. This question is more important than it may seem. → Read More
I doubt that Steve Jobs has ever asked Apple customers what type of products they want, or that he cares about what they need. Jobs believed that if he developed a mobile phone that plays music and surfs the web, he could create both the want and need. He was right: his iPhone changed the industry and started a mini technology revolution.
Most of the entrepreneurs I know fancy themselves to be like Jobs. They think they know—better than their customers—what the customers want, and what they need. Or they believe, as in the movie Field of Dreams, that if you “build it, they will come”. But it just doesn’t work this way in real life. The vast majority of technology startups fail because no one buys or uses their products. → Read More
In a speech at the American University last Thursday, President Obama highlighted the incredible economic rewards that America has gained from its immigrants. He spoke of new waves of immigrants—from places like Ireland, Italy, Poland, and China—challenging the generations before them, and consequently being subjected to “rank discrimination and ugly stereotypes”. Yet they kept coming to America. That’s because it was the only land of opportunity. The President wants lawmakers to fix the immigration system so that America can remain globally competitive. But I don’t think it’s that simple: America is no longer the only magnet for the world’s best and brightest. Fixing immigration policy is an important start, but it won’t be enough to stop the brain drain of highly educated and skilled workers that the U.S. is presently experiencing.
Just last week, there were two notable visitors to Silicon Valley—Russian President, Dimitry Medvedev, and Chile’s minister of Economy, Juan Andres Fontaine. President Medvedev wanted the brilliant Russian-born and -educated programmers who write some of the Valley’s most sophisticated software to know that they are welcome back home and that he is setting up a science park for them. Minister Fontaine wants to turn Chile into a tech hub and is following my advice on how to make this happen: by attracting immigrants; building a diverse culture that encourages risk-taking and openness; and creating networks of mentors. Over drinks (some excellent Chilean wine), the minister told me of a new program that Chile is piloting to lure bootstrappers. Chile will grant $40,000 and provide some really cheap office space and accommodation to budding entrepreneurs from anywhere in the world. All they have to do is to build their products in one of the most beautiful locations on the planet. Chile is betting that once these entrepreneurs get there, they will never want to leave. → Read More
Meena wants to become a computer engineer. She believes that if she works hard enough, she can build her own “big business”—maybe a Google. So she is determined to complete her schooling and earn an engineering degree. Young girls like Meena, just 16 years old but with the ambition and confidence to enter the tech world, are a rare commodity even in Silicon Valley; but Meena lives in a slum in New Delhi. Her father works as a day laborer. He used to spend half his income on alcohol, and would come home drunk every night and make so much noise that Meena could not do her homework. He considered Meena a liability, saw no value in her education, and had nothing to be optimistic about.
Sana Azmi too lives in a Delhi slum. She is determined to become a lawyer. Sana has long had this ambition, but her unemployed father had made the decision to withdraw her from school this year, when she turned 16. His plan was to get her married as soon as possible, and he believed that if Sana received too much education, it would be difficult to find a suitable groom in their socioeconomic community. Moreover, they simply couldn’t afford to educate her. Sana begged her Dad to find a way; she told him that without higher education she would be like an “empty room”. → Read More
David Park and Eric Bahn are earning more at their startup, called Beat The GMAT, than they ever did in the corporate world. Every penny of profit from the business goes directly into their bank accounts. They enjoy being their own bosses; have become experts in sales, marketing, customer support, computer programming and graphic design; feel good about helping students gain admission to business school; and are grateful that they can spend their time doing things rather than discussing things—because they don’t answer to anyone. Why should they sell their business and be back to working for companies like Intuit or McKinsey & Co., they ask?
Ryan Sit, who runs a website called Picclick.com, feels the same way. His visual sales site attracts 300,000 unique visitors per month and generates millions in product sales for eBay and Etsy sellers—netting him a healthy six-figure income. He works from home and spends as much time as he wants to with his two small children and wife. Ryan cherishes the freedom to do anything he wants—like experimenting with new website ideas. The last thing he wants to do is to raise capital or merge with a bigger company. “You become a slave when you are funded, and having lots of employees is just a pain”, Ryan says. → Read More
Raising millions of dollars from VCs is still the tech entrepreneurs’ dream. Entrepreneurs believe that a hoard of cash in the bank will give them the luxury of developing better products, marketing the heck out of them, and reaping the rewards with big sales and an eventual IPO. But more often than not, the money is a curse. When a company is running on a tight budget, it will usually perform far better than a company that is well capitalized. In my experience, having too much money always leads to bad habits.
First, the CEO will feel pressure from investors to upgrade the management team and bring in “grown up” supervision. This doesn’t always work out as planned. Seasoned managers want bigger salaries and larger chunks of equity. VCs usually expect a portfolio company to use a preferred headhunter to find the rockstar VP of sales. Naturally, the headhunter also wants an equity stake, on top of a finder’s fee in the neighborhood of six figures. → Read More
I am quite used to controversy—unsurprisingly, given the topics that I have been exploring with my academic research. But what has really been a surprise is the hornet’s nest that I seem to have stirred up with my two TechCrunch posts and BusinessWeek column on the dearth of women entrepreneurs. At every event I’ve been to recently, women have come up to me to say thanks for raising awareness of this issue and for providing them with encouragement; the New York Times ran a big feature story echoing my words; and several VC friends sent me emails congratulating me for “having the courage to speak up”. On the flip side, I’ve also taken fire from some VCs. One woman VC wrote a TechCrunch post chiding me for being “patronizing”; others declared on Twitter that all my posts are “garbage”; and I received some really nasty e-mails questioning “my agenda”. So I know that I’ve touched a nerve, and that this is a really important topic. → Read More
A long time ago, I had to make a really tough choice: invest in an MBA from New York University, or make do with my bachelors. I was newly married, had a child on the way, and didn’t have much in savings. The degree would set me back tens of thousands of dollars and take years to complete—especially if I did it part time. And I couldn’t imagine doing anything but programming computers for a living. So why learn finance, marketing, and operations management, I wondered? Well, I decided to enroll because my understanding of the business world lacked depth, and I harbored a deep-rooted desire to get the best education possible. My wife and I moved into a small one-bedroom apartment in North Bergen, NJ, and we made do with what we had.
For a couple of years after getting my degree, I wondered whether I had made the right choice. Even though I scored a great job at CS First Boston in its IT department, I was just writing code and designing systems. Yes, I started to enjoy reading BusinessWeek and the Wall Street Journal; but had the financial sacrifice and time away from my family been worth it? It didn’t seem to have been. → Read More
When I came to the U.S. in 1980, I was young and naïve. I used to think that corruption and ethical lapses were just a third-world ill. Eventually, I became a tech CEO and learned the harsh realities of American business. Yes, standards are much higher, and breaches are punished, but the temptations are just the same here as they are in any other country. Ethical lapses (which are a form of corruption) are quite common. You watch stories about these on TV every other day and read about them on TechCrunch. It was the ethical lapses of our financial institutions that threw our economy into a tailspin, and for which we are paying the price, after all.
It is best to be aware of the temptations and to prevent the lapses from occurring. As Enron, Bernie Madoff, and Lehman Brothers have shown, it’s a slippery slope. Once you start compromising your values for short-term gains, there is no turning back. Business ethics are not something you need to start worrying about when your company reaches a certain size; they need to be sewn into the fabric of your startup from the get-go. The lessons are the same for tech businesses as they are for investment banks and for third-world economies. → Read More
My last post triggered some interesting debates in the blogosphere about whether entrepreneurs were a product of nature or could be nurtured. It’s not black or white. People are a product of their upbringing and education. Average humans can achieve extraordinary feats when they really try. I’ll concede that, like some great athletes, some great entrepreneurs may have something different about them that gives them a special advantage (this is a topic that I am presently researching). But not every entrepreneur needs to reap the same fortune as Bill Gates or Mark Zuckerberg to qualify as a success. You can build a good lifestyle business that pays the bills, or that does good for the world, and be considered a successful entrepreneur. (And you’ll probably be happier and gain more respect than most billionaires do.) Entrepreneurship isn’t all about the IPO. → Read More
Silicon Valley investors often have a picture in their heads of the type of person who is worthy of funding: young, brash, stubborn, and arrogant. They believe that successful entrepreneurs come from entrepreneurial families and that they start their entrepreneurial journey by selling lemonade while in grade school. Angel investor and entrepreneur, Jason Calacanis said as much in his recent talk to Penn State students. And after meeting Wharton students, VC Fred Wilson expressed shock when a professor told him that you could teach people to be entrepreneurs. Wilson wrote, “I’ve been working with entrepreneurs for almost 25 years now and it is ingrained in my mind that someone is either born an entrepreneur or is not.”
Jason, Fred, and Silicon Valley VCs, I’ve got news for you: you’ve got it all wrong. Entrepreneurs aren’t born, they’re made. And they aren’t anything like you think they are. → Read More
“People in technology businesses are drawn to places known for diversity of thought and open-mindedness”, is what Professor Richard Florida concluded after studying the growth and success of 50 metropolitan areas in the U.S. The most successful regions were those with the most gays, bohemians, and immigrants. These groups flourish in Silicon Valley, and its diversity has undoubtedly provided it with great advantage. But after attending the recent Crunchies Awards, I realized that something important is still missing — women entrepreneurs. I was shocked that the only woman CEO on stage during the entire event was TechCrunch’s own Heather Harde. Nearly all the companies that competed in the event (other than the PR firms) had males at the helm. This dearth may be one of the reasons for which the Venture Capital community is in such sharp decline, and why the Valley isn’t achieving even more success.
An analysis of Dunn and Bradstreet data shows that of the 237,843 firms founded in 2004, only 19% had women as primary owners. And only 3% of tech firms and 1% of high-tech firms (as in Silicon Valley) were founded by women. Look at the executive teams of any of the Valley’s tech firms – minus a couple of exceptions like Padmasree Warrior of Cisco, you won’t find any women CTOs. Look at the management teams of companies like Apple – not even one woman. It’s the same with the VC firms – male dominated. You’ll find some CFOs and HR heads, but women VCs are a rare commodity in venture capital. And with the recent venture bloodbath, the proportion of women in the VC numbers is declining further. It’s no coincidence that only one of the 84 VCs on the 2009 TheFunded list of top VCs was a woman. → Read More
In the State of the Union Address last Wednesday, President Obama said “the nation that leads the clean energy economy will be the nation that leads the global economy and America must be that nation.” At the same time, on the other coast, 75 clean energy investors, entrepreneurs, and researchers were debating whether the U.S. can gain this leadership position. They agreed that even though Silicon Valley leads the world in technology, it is not clear if it will ever lead in Cleantech. The Valley may develop some breakthrough technologies, but without government help these are unlikely to translate into global leadership. The technology world is rightfully allergic to government assistance and intervention. Cleantech is different, however, and we aren’t dealing with a level global playing field. → Read More
In my last post, I discussed how the gap between the web and enterprise-computing worlds has narrowed. Some of the Valley’s developers are now building web-based systems that make old-world transaction processing seem like child’s play. After all, Twitter processes more transactions per day (in the form of messages) than the systems of many large corporations process in a month. Applications that would take years to design and develop can now be built in weeks.
I called on Silicon Valley entrepreneurs to rescue the California government—to help rebuild its legacy systems. I also went out on a limb and “bet” that an unemployment check-processing system that California State had budgeted $50 million to upgrade could be rebuilt from scratch for a tenth of the cost, in a fraction of the time. → Read More
Most people don’t realize this, but Northern California actually has two giant technology centers: Silicon Valley and Sacramento. Silicon Valley is the world’s entrepreneurship capital and Sacramento is California’s State capital. They are less than 100 miles away from each other. But technologically, they’re light years apart. While Silicon Valley’s workers conceive the next revolution in technology, Sacramento’s workers toil away at maintaining computer systems which were built in the tech equivalent of the Mesozoic era. Both depend on each other: Sacramento workers maintain the State’s infrastructure and public services, and the Valley’s workers generate the revenue to pay Sacramento salaries. The irony is that while the Valley entrepreneurs desperately look for problems to solve, Sacramento has problems aplenty and no saviors in sight.
Witness the problems which the state experienced last November when it couldn’t issue checks to unemployed workers whose benefits had run out before Congress authorized a payment extension. Workers had to wait up to two months to receive their checks because the Employment Development Department couldn’t make timely changes to its computer systems. Like most of the State’s systems, these were built in the 70’s and 80’s in antiquated computer languages like COBOL, Adabas Natural, Assembler and PL/1. They run under operating systems like CICS and IMS. → Read More
In my recent post on how stealth mode is a bad idea, I advised entrepreneurs to come out of their shells. To build marketable products, you need feedback from customers, potential investors/partners and business advisers. And the veil of secrecy which comes with being in stealth mode blocks this feedback. But there is a flip-side that I want to make entrepreneurs more aware of: It is a tough world out there and some big and small competitors will deliberately or accidentally steal your ideas. A few of these players are predators much like the beasts of Pandora. So there needs to be a balance. You need to air your ideas, but use every available mechanism to protect yourself. When you do come under attack, run as fast as you can or fight like hell.
I’m going to explain all this through three examples. But first, I’ll cover the basics about patents. → Read More
When Preetam Mukherjee started Marcellus.tv in March 2007, his company was one of the very few players in the professional online video hosting space. He believed he was building a killer product that would become a blockbuster and would compete handily with the one established player in the space, Brightcove. To ensure that he wouldn’t tip off any potential competitors, he went into “stealth mode”. Secrecy was the key to success. He would not even tell his close friends what he was building until his product was complete (after all, who can you trust these days?). Then he would send Mike Arrington an email, get a TechCrunch feature and watch fame and fortune beat a path to his door.
But as happens to nearly all secretive startups like Marcellus, the blockbuster never materialized, and the attention never came. When Marcellus did come out of stealth in September 2008, there were many online video platforms available, most of which had better features than Marcellus. Preetam got his TechCrunch mention and experienced a huge spike in traffic for a few days. But when the dust settled, he found himself back in obscurity. Moreover, it was like having a really bad hangover—his product didn’t entirely meet customer needs and no one seemed to care.
As I’ll tell you later, Preetam’s story does have a happier ending, but that’s not how it is for most startups. That’s the problem with stealth. Startup guru, Eric Ries says one or two of every 10 companies he meets have what he calls a “stealth-disease”. They are too afraid to show something imperfect to the world or are afraid that a competitor will steal their idea. And they think that when they launch their product will make front-page news and grant them blockbuster success. Wasn’t it Ralph Waldo Emerson who wrote, “Build a better mousetrap and the world will beat a path to your door”?
Well, Emerson was wrong. → Read More
The one skill which entrepreneurs need is something they don’t teach in business school—selling. Yes, I know that “selling” conjures up negative images of used-car salesmen peddling clunkers. But the ability to persuade people to believe in you is a necessity. That’s because sales is not just about selling things for money. Selling is about life. Convincing the perfect soulmate to go out on a date is a sales job. Enticing your children to eat their vegetables is a sales job. Negotiating a raise with your boss is a sales job. And, yes, selling your company to Google is definitely a sales job. A sales job in that you are listening to others, finding out what they want or need, and giving it to them in a form that they appreciate. And guess who the best salespeople in tech companies are? Your developers.
Let me explain why I believe this. → Read More
San Francisco, CA
