August, 2010

The Wall Street Journal recently produced an article titled “The Power Trip.“  The gist of the article can be found in two points.  First, contrary to what many may think, studies show that power tends to flow towards nice people.  “People give authority to people they genuinely like.”  Second, once individuals are in a position of power, they often stop exhibiting the qualities of empathy that helped them obtain power in the first place. “It’s an incredibly consistent effect,” says Berkeley psychologist Dacher Keltner.  “When you give people power, they basically start acting like fools.”

The article is a good one, full of thought-provoking content.

I have been thinking about this article in large part because it seems to apply to investors.  I have been investing in public and private companies for more than 15 years, and I continue to be struck by the arrogance and lack of empathy exhibited among investors.  Some of the reasons may be somewhat forgivable:  reacting to being burned by previous slick stories, managing information overload, etc.  But I think a dominant contributor to investors’ self-absorption traces back to some of the factors mentioned in this Wall Street Journal article.  Investors feel a certain sense of power and simply forget to have empathy for individuals who are sweating it out “in the arena,” as Teddy Roosevelt once said.  And that is one of the most unfortunate aspects of the investment world.

A couple of days ago I noted that Chris Anderson has written a fantastic article.  Let me clarify and explain my thinking.

I believe the title of the article is distracting.  The Web is certainly not dead.  But I think Chris has identified an important new trend.  For years investors have embraced the belief that the long-term trend for the Internet is towards openness and “free” content.  We are now seeing, however, semiclosed platforms like Apple and Facebook that are thriving.  Furthermore, consumers seem to be showing more willingness to opt for a paid, high-quality experience delivered via an app or other platform over a free, lower-quality experience delivered via a browser.  For example, my 11-year-old step son said to me last week while I was using my iPad,”Why are you getting your email through a browser?  You should use the Google app.”  Regardless of whether the Google app provides a significantly better experience in this particular case, I was struck by the fact that his instinct was to automatically elect for an app over a browser experience.

The Web is not dead, but I think Chris Anderson’s article should make us wonder if we are seeing an important turning point in the Internet.  This trend, by the way, would shift the power a bit more towards publishers, creators and intermediaries that are trying to be paid for what they produce.

On Fred Wilson’s blog, Tereza Nemessanyi has an op ed piece on the difficulty that women entrepreneurs face when trying to get funded by venture firms.  She writes:

“Recent studies by the Kauffman Foundation and venture capitalist Cindy Padnos of Illuminate Ventures show high-tech businesses with women in leadership outperform the rest. They are more capital efficient, launching with 30%-50% less capital, generate 12% higher revenues, and have lower failure rates.

If women are so good at starting businesses, then why does it take them longer to start one? Well, according to a Tampa University study, women are bitten by the entrepreneurial bug later than men. Our startup sweet spot is between the ages of 35 and 45 — after we’ve finished school, gained professional experience, had children, and transitioned out of the early “interruption parenting” years. We are eager to apply what we know, to create new businesses on our own terms.”

I looked into applying to [incubator] Y Combinator. They require a three-month relocation to the Valley. Trouble is, I’m a 40-year old suburban wife and mother of two young kids from the New York. So no can do.”

I agree that mothers represent an untapped business resource and that many of our institutions are not set up to address the inherent needs that mothers have for flexibility.  This applies to both entrepreneurs and members of larger organizations.   I like the creativity being shown by FlexPaths and others to help change our institutional processes to include a broader set of entrepreneurs and workers.

I think Chris Anderson’s piece titled “The Web is Dead” is the best article that I have read about the Internet in years.  He captures the move away from yesterday’s belief that the openness of the Web trumps almost all closed systems to today’s recognition that consumers value well-designed, high-performing semiclosed platforms that are connected by the Internet.  This is a big shift.  Here is a link to the article.