Venture capitalists are entertaining, but please don’t take them too seriously

I often enjoy the Entrepreneurial Thought Leaders podcasts, which deliver talks from the Stanford Technology Ventures Program.  In particular, it is often useful to glean an idea or moral from the war stories told by some of the weathered entrepreneurs that the STVP invites to talk about their past or current companies.

Every now and then, though, a podcast lands in my iPod that involves a roundtable of venture capitalists.  VCs are often very dynamic, engaging people that are entertaining to listen to, but just as often, they say the most amazingly absurd things.  A recent roundtable podcast (entitled What is the Next Big Thing) really pegged the absurdity meter, though.

Addressing a gathering of Stanford students, alumni, and associates, three venture capitalists, Tony Perkins, Tim Draper, and Michael Moediscussed the recent economic conditions, with the bottom-line message that it is in “times like these”, when markets and economies look their bleakest, that the most successful and impactful businesses are often forged.  That’s an oldie but goodie — so far, so good.

Things go off the rails around the 13:20 mark, though.  One of the three speakers — I believe it was Tony Perkins, but these things are hard to be sure of in an ensemble podcast — relayed how Marc Andreessen (former founder of Netscape and now also a part-time investor) was talking with Charlie Rose about how the New York Times should just kill their paper version.  That’s no huge new idea, but that got Tony off on a slight tangent that led him straight into the weeds (bold emphasis mine):

A lot of the whole [dot-com] bubble period was based upon a vision of the Internet steamrolling the way people do business and creating what was then called the “New Economy”.  My theory right now is that all of those things we talked about that were going to happen, like the end of television, the end of newspapers, all that stuff that we poured a bunch of money in because we thought it was going to happen ten years ago is actually happening now. So a lot of the destruction in the market, a lot of the jobs that are being destroyed, are jobs that are being steamrolled — a lot by the Internet — but increasingly by the “green tech” movement because entrepreneurs are looking at how we do everything, and they’re saying “how can I do that same thing in a way that is better for the environment?”.  That’s bringing the Silicon Valley mentality into the whole green space, which is super-exciting. The reason I share your optimism is because we are the future.  Silicon Valley is the future; a lot of the jobs we’re seeing being destroyed are never going to come back, but it is our world that is causing the destruction, and therefore is going to be the one that creates the jobs.

Hey, I’m essentially a nobody, so maybe Tony’s really got the inside track, and I’m not seeing the forest for the trees.  But wow, the U.S. economy lost 598,000 jobs in January, including:

Etc., etc.  Sorry Tony, these job losses aren’t due to Silicon Valley and VC-backed internet and green-tech companies owning the world and replacing Caterpillar’s earth movers and minimizing the need for Alcoa’s aluminum.  There are a lot of theories about why the economy is what it is of late (lending practices, creative derivative strategies, poor Federal Reserve policy, etc.), but honestly it never occurred to me that I’d come across anyone with the chutzpah to say that recent shrinkage (and reversal) of economic growth and the attendant job losses are due to internet and green-tech companies “steamrolling” the Old Economy1.

Even more crazy to me is the notion that Silicon Valley is going to be singularly responsible for reinvigorating the economy.  It certainly has a role to play, and has had tremendous impact in the past, but from where I sit, Silicon Valley has been far too busy over the past couple of years building Web 2.0 trinkets to be ready with any kind of game-saver anytime in the near future.  Thinking (and saying) otherwise is good marketing within that particular echo-chamber, but it likely sounds like simple self-aggrandizement anywhere else.  (Hopefully there’s a stealth-mode clean energy startup that will prove me wrong on this point.)

I don’t mean to pick on Tony here.  Lots of other VCs have said similar things — it’s just that in this case, the usual VC rhetoric happens to bump up pretty hard into real-world facts and real-world struggle.  Big-picture notions about how entrepreneurship and innovation are the keys to building a stronger economy and a better world are good, but watch out for the odd notions that are borne out of the VC bubble (which seems to have its effect upon almost everyone that steps inside for a time).

My general point is simply that VCs say the darnedest things, and especially as it’s become clear that venture capital isn’t at all required (or even desirable) in many situations, one needs to be careful about how much of the VC worldview one takes to heart.

1 Wow, typing “Old Economy” right there reminded me of back-in-the-day when Wired was raving on and on about the new economy and introduced The Wired Index consisting of 40 New Economy companies.  That’s classic entertainment.