Congratulations to portfolio companies DocVerse (http://techcrunch.

com/2010/03/05/google-acquires-docverse-to-further-office-arms-race/) (now at
Google) and Mixer Labs (http://blog.twitter.com/2009/12/mixing-it-up-at-795-folsom-st.html) (now at Twitter). The best part was getting to know and
work with people that I genuinely liked and now consider friends.

I have a new post on picking a co-founder, up here:

http://venturehacks.com/articles/pick-cofounder (http://venturehacks.com/articles/pick-cofounder)

Check out the full article, and watch the video. (http://gigaom.com/2010/05/13/video-want-to-be-an-entrepreneur-listen-to-naval-ravikant/)

Can older people be great entrepreneurs?

Marc Andreesen has a great post (http://blog.pmarca.com/2007/08/age-and-the-ent.html) on this age-old question. In part I, he’s digging through the
data. Some of his observations are powerful and worth summarizing:

"Generally, productivity — output — rises rapidly from the start of a career to a peak and then declines gradually until retirement.

This peak in productivity varies by field, from the late 20s to the early 50s, for reasons that are field-specific.

Precocity, longevity, and output rate are linked. "Those who are precocious also tend to display longevity, and both precocity and longevity are
positively associated with high output rates per age unit." High producers produce highly, systematically, over time.

The odds of a hit versus a miss do not increase over time. The periods of one’s career with the most hits will also have the most misses. So
maximizing quantity — taking more swings at the bat — is much higher payoff than trying to improve one’s batting average.

Intelligence, at least as measured by metrics such as IQ, is largely irrelevant."

I went through an evolution of sorts on this topic.

I started with a variation of the Beard Hypothesis (enthusiasm decreases with age but experience increases, and there’s an optimum cross-over
point). This is the easiest viewpoint as you get older and look back at some of your earlier crazier ideas, but notice that that older crowd is very risk-
averse. Douglas Adams had a great take on it:

1. "everything that’s already in the world when you’re born is just normal;
2. anything that gets invented between then and before you turn thirty is incredibly exciting and creative and with any luck you can make a career
out of it;
3. anything that gets invented after you’re thirty is against the natural order of things and the beginning of the end of civilisation as we know it
until it’s been around for about ten years when it gradually turns out to be alright really.
4. Apply this list to movies, rock music, word processors and mobile phones to work out how old you are."

I then moved on to Dean Simonton’s observations, beautifully covered in Marc’s article. My thinking was driven by books like "The Black Swan,"
"Fooled by Randomness," DeVany’s analysis of Hollywood Economics and Home-Run Hitting, and a casual observation of how Evolution creates
things (massive trial and error). Basically, the number of swings at bat, poems attempted, paintings painted, etc. determine the success rate. The
more you try, the more you learn, the faster you iterate, the better you get, and the more chances that you have of being productive. Your outcome
scales more with the number of bets than the size of the bets. As the violinist Pablo De Sarasate put it, "For 37 years I’ve practiced 14 hours a day,
and now they call me a genius. "

Now I prefer a slightly different hypothesis. More of the creative instinct is driven by the sublimated sex drive and the desire to attract a mate than we
give it credit for. And more of it is squelched by the demands of family than anything else. An extreme take on it is presented by Kanazawa
(http://sciencecareers.sciencemag.org/career_development/previous_issues/articles/2006_05_26/scientific_success_what_s_love_got_to_do_with_it):

"Scientists tend to ‘desist’ from scientific research upon marriage, just like criminals desist from crime upon marriage."

Marc asks:
 "So here’s my first challenge: to anyone who has an opinion on the role of age and entrepreneurship — see if you can fit your opinion into this
model!"

When you are young, hungry, and single, you have

huge amounts of free time (more swings at the ball)

less to lose (more swings)
enthusiasm (more likely to swing)
sublimated sex drive (more likely to swing to stand out from your peers).

As you age, you have

less free time, more family demands, larger social networks (less swings)
more to lose (public embarrassment in front of an established social circle means you don’t want to start anything fresh) (less swings)
experience (if you’re probably going to miss, why bother swinging) (less swings)
fulfilled sex drive (have sex rather than swing)

"And here’s my second challenge: is entrepreneurship more like poetry, pure mathematics, and theoretical physics — which exhibit a peak age
in one’s late 20s or early 30s — or novel writing, history, philosophy, medicine, and general scholarship — which exhibit a peak age in one’s
late 40s or early 50s? And how, and why?"

Unfortunately for an aging me, anecdotal evidence aside, entrepreneurship favors the young.

The difference between poetry, pure math, theoretical physics, and novel writing, history, philosophy, medicine, scholarship, is that the former set
requires huge (multi-year) intense, focused, almost isolated blocks of free time, whereas the latter set can be picked up and put down and resumed
later without too much cost. The first set comprises problems that are solved by an emotional state (poetry, painting), by loading a very difficult single
framework into your head (math, physics, coding), and / or competition (driven by sex drive and time-sensitive). The latter set are more rational, are
systems problems rather than point problems, and don’t have time-sensitive competition.

Modern entrepreneurship, especially web entrepreneurship, is extremely competitive / time sensitive, requires enormous amounts of iteration even
within a single product life-cycle, and often requires solving many challenging technical and business problems one after the other in a public view
(with the opposite sex watching). So, it favors the young and single.

Which is not to say that one can’t do it if one is older and settled down. Mathematician Paul Erdos was famous for his prioritizing his work above all
else (he remained single, by the way). There are many older successful entrepreneurs who spend tremendous amounts of time away from their
families.

…and the rest give up and just become VCs…

I was at dinner the other night with a group of entrepreneurs. One told the story of a 27-year-old whiz kid whose company will likely exit for $500M –
$1B – the business now being less than two years old. You can imagine the effect that this had on the brilliant, hardworking 35+ entrepreneurs in the
group, who have had their share of hits, but not at that magnitude and not that quickly.

These stories are getting more commonplace. It seems that the entrepreneurs who “hit” these days are doing it more quickly, making more money,
and doing it at a younger age. Back in the 70s, it took a decade plus to build a company and $10M, even in today’s dollars, was a big victory for an
individual. Up until the late 90s dot-com boom, even though these stories existed, they were less common and took longer.

The storyteller explained that this 27-year-old is more brilliant and more hard-working than the previous entrepreneurs he’s seen.

That can’t be it. There are only so many hours in the day, and the entrepreneurs of yesteryear worked just as hard as the entrepreneurs of today. And
the ones who came before were just as brilliant. Human intelligence has not evolved that dramatically in 10-20 years.
 Rather, I posit that the amount of leverage available to a modern Internet entrepreneur is far, far greater than was available to entrepreneurs of
previous generations. The number of entrants has dramatically increased as well. The overall hit rate might be lower, but the ones who win, win bigger
and faster thanks to the leverage.

Gone are server farms, telesales and support, marcom material, tradeshow booths, direct sales forces, licensed software, mountains of code, reseller
agreements, plane tickets, hotel rooms, printing CDs, voicemail systems, and so on and so forth.

Modern Internet entrepreneurship starts with a few engineers working for nothing and carrying latops and cellphones. They coordinate with Skype and
GTalk and wikis and bug tracking sytems. The company itself is snapped together with outsourced HR, cookie-cutter incorporation, and outsourced
finance / payroll. Marketing is done virally, or through SEO, or SEM. Customer service is handled via the community and forums. PR and outreach
through tweets and blogging. Payments come via Paypal. Ads are served up by third-party ad networks. Storage goes on Amazon. Computation
scales via Amazon, Softlayer or Rackspace. Code is built upon stacks of open source, SaaS, and $10/month services.

What used to cost $1M-$2M to set up, now costs $10K. What used to cost $5M to build, now costs $250K. What used to cost $20M to go to market
now costs $1M.

But the upside hasn’t gone down. It has gone up. The 3 billionth person will be online shortly. They can all use the product. Network effects are
stronger than ever, and some businesses become natural monopolies very quickly. Most web products have no marginal cost of replication, so adding
a new customer is pure profit.

Less labor required. Less capital required. Less cost to scale. Larger markets. Cheaper marketing. No cost to ship more product.

No, people aren’t getting any smarter or harder-working. But the amount of leverage is obscene. The hits – Yahoo!, EBay, Google, Skype, MySpace,
YouTube, Facebook, Twitter, Zynga, are each arriving faster than the previous one did. And the leverage is increasing, not decreasing.

The returns to scale for being smart, young, skilled, and high-energy have gone up tremendously, and that has profound implications for society. The
smart are getting richer.

Update: An insightful comment on Hacker News (http://news.ycombinator.com/item?id=930612): Basically, the Internet is a wide and deep place. The
depth creates a few huge winners and the breadth creates a large number of small winners (who would have been losers in the old system, but due to
the above-mentioned low costs, can still win). What’s missing is the traditionally fat middle. We’ve gone from a normally distributed set of outcomes, to
a power-law distribution. The median is a small fraction of the mean. This is bad news for anyone who has built their business predicated on their
achieving mean outcomes. That includes mid-stage VC funds, moderately-capitalized companies (traditionally speaking), and societies that care
about “equal” outcomes.