Editor’s Note: Vivek Wadhwa is a longtime friend of Making Sen$e and appears here today extolling the economic virtues of coding and entrepreneurship — for the older, even much older set. He’s written before about his personal experience as a CEO, where he’s seen how older entrepreneurs are crucial to Silicon Valley. Wadhwa last appeared on this page writing about how to fix Google’s gender gap. A similar version of this column appeared in the Washington Post last week.
— Simone Pathe, Making Sen$e Editor
Economists are raising the alarm bells about declining entrepreneurship in the U.S. They also worry that businesses — like people — are getting “old and fat.”
Ian Hathaway and Robert Litan of The Brookings Institution published a report that documented that the share of firms aged 16 years or older has increased from 23 percent in 1992 to 34 percent in 2011, while start-ups have become a smaller proportion of the economy, going from 15 percent to 8 percent. They say this is a trend that is happening “in every state and metropolitan area, in every firm size category, and in each broad industrial sector” and that this could lead to a future of slow economic growth.
Old companies can be a problem for the economy because they become set in their ways and stop innovating. These companies don’t add as many workers or grow at the pace that smaller companies do. Old people, however, are an asset — even if they are fat. They have the knowledge, experience and motivation to build innovative new businesses and boost economic growth — if we empower and enable them.
MORE FROM VIVEK WADHWA
A common belief, at least in Silicon Valley, is that it is only the young who can innovate, and that therefore, we need to encourage more students to start companies. Yes, we do want the young to start companies, but do we really need more social media apps for sexting or finding dates, as kids in Silicon Valley are developing?
A better strategy may be to motivate and empower the old — the parents of these students, and maybe even grandma and grandpa.
In yesterday’s era of social media and mobile apps, it was kids in dorm rooms who built the disruptive technologies. They understood these technologies better than anyone else and were not encumbered by the ways of the past. With today’s exponential technologies, it is possible to solve bigger problems than sharing a photo. We can address the challenges of health, hunger, energy and clean water by taking advantage of advances in sensors, artificial intelligence, robotics, synthetic biology and computing.
To solve the big and complex problems of humanity, entrepreneurs need to have a world view and to be able to see the big picture. They need industry experience, knowledge of diverse social and scientific disciplines, and people-management skills. They need the abilities to go beyond wishful thinking, to step into others’ shoes, and to weigh likely outcomes of the options before them. Older, experienced workers usually have many of these skills. Yes, they may lack an understanding of mobile technologies and app development, but these can be learnt in the same way that the kids learned them.
We must first get over the myth that older workers can’t innovate. This leads to bias in press coverage and to investors favoring college dropouts in funding decisions.
MORE FROM VIVEK WADHWA
Research that my teams at Duke and Harvard did in 2008 revealed that the average and median age of the founders of successful technology companies was 39. Twice as many founders were older than 50 as were younger than 25. And there were twice as many over 60 as under 20. In a follow-up project in 2009, we looked at the backgrounds of successful entrepreneurs in 12 high-growth industries. We found the average age of male founders to be 40, and of female founders to be 41.
We learned that these entrepreneurs typically started companies for one of three reasons: they had ideas for solving real-world problems; they wanted to build wealth before they retired; or they had tired of working for others. There is an abundance of American workers who share these sentiments. To boost our economy, we need to unleash and enable them. Here are some ways to do that.
- Teach entrepreneurship to the old as we do to the young. Most colleges have programs to teach students the basics of building a business — everything from validating and testing an idea and financing and managing a company to creating exit strategies. There are also innovative new institutes that focus on training the young, such as Draper University, which Silicon Valley mogul Tim Draper established. This teaches entrepreneurs new ways of thinking and provides them with access to tech luminaries such as Elon Musk, Tony Hsieh and Steve Jurvetson. If older entrepreneurs were provided with this type of training, their odds of success would be significantly higher. They wouldn’t need to be taught the basics of financial management and interacting with people. They would bring a depth and breadth of experience.
- Fund the startups of the old. Investors in Silicon Valley openly discuss their preference for the young. Older, first-time entrepreneurs are not even likely to have their emails returned by venture capital firms. Available data show that venture-capital firms, on average, produce returns that are less than the stock market’s. This may mean that the venture capital system is putting its eggs in the wrong basket. It may be better off investing in more experienced managers.
- Don’t just incubate the young. Silicon Valley’s most successful — and best connected — startup incubator is Y-Combinator. Founded when youth entrepreneurship was uncommon, its mission was to inspire the young. It still has the same focus, as do the many incubators that try to mimic it. These incubators provide valuable advantages to startups, with funding, coaching and connections. Why not create incubators for older entrepreneurs now?
- Hold hackathons for grandma. Day-long or weekend-long coding camps are held in high schools and universities nationwide. They teach the young how to write code, get them to come up with ideas for apps, and form teams to build them. I can just imagine the great possibilities that would come from holding such camps for older workers, maybe even in retirement homes. I’m not kidding. Writing computer code isn’t very hard. Anyone can learn, and many can excel. Plus, the types of apps that older workers would develop would likely be more useful and appeal to a larger customer base than those that children do.
- Drop-out-of-work scholarships. Silicon Valley billionaire Peter Theil pays children $100,000 to drop out of college. His premise, when he announced this program four years ago, was that children could spend time building world-changing companies rather than wasting their time at school and being burdened by “incredible amounts of debt.” The experiment failed to produce any world changers. The program’s purpose quietly became to provide an alternative education to children. The lesson here is that there is no substitute for education and experience. If we offered promising adults the same funding, mentoring and opportunity as we do these children, we would likely get the world-changing successes.
An analysis of U.S. Census data by the Kauffman Foundation’s Dane Stangler revealed that the average age of U.S. entrepreneurs is now rising, with the highest rate of entrepreneurial activity shifting to the 55–64 age group. So assisting this older group in founding businesses is likely to produce far greater dividends than assisting the young in the same way.
Regardless, it’s not necessary, and not especially useful, to choose between helping older and helping younger entrepreneurs. What is best for the economy is to have the old and the young working together to solve big problems. The young can come up with the audacious ideas; the old can find sensible ways of implementing them. And it won’t hurt if the old lose some fat.
Vivek Wadhwa appears in Paul Solman’s Making Sen$e segment, “Man vs. Machine,” below: