Friday, January 9, 2009

Twilight or Dawn?

Bill Stensrud blogged an interesting piece using a speech given by Steven Chu, a Nobel prize winner, as its foundation. It's about innovation and venture capital in the technology area.

In essence, he explains that the doldrums in the VC world are tied to the lack of fundamental innovation we have seen in the last decade; he sees the age of the transistor as having run its course. Drawing an analogy with Stephen Jay Gould's evolutionary theory of 'punctuated equilibrium', where change does not happen in a linear manner, but in fits and starts (looking more like a staircase), he sees us past the apex of innovation and entering a stagnant trough.

He then goes on to make an argument towards the efficacy of smaller venture funds, with better GP/LP alignment, being best positioned to prosper in such an era.

Interesting reading, but I am not in full agreement. Looking at the technology industry, we have really seen its success rest on innovations in not one, but three distinct, yet related arenas; hardware (transistors), communications (optics), and software (compilers). These have never moved in lock-step. Advances in at lease one of these areas have always opened new frontiers for the others. The laggard today, represents the best investment opportunity for those focused on tomorrow.

Today, the typical user has way extra computing power and is on the way to having their bandwidth requirements more than satisfied. When this happens, we should have enough kindling to ignite another wave of software/internet innovations (perhaps around a new UI metaphor?)

Thanks again to my smart friend Larry for sending it over. If other readers see interesting things, please don't hesitate to send them over too.

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