Venture capitalists in Silicon Valley prefer to fund the young, the next Mark Zuckerberg. Why? The common mantra is that if you are over 35, you are too old to innovate. In fact, there is an evolving profile of the “perfect” entrepreneur—smart enough to get into Harvard or Stanford and savvy enough to drop out. Some prominent figures are even urging talented young people to skip college, presumably so they do not waste their “youngness” on studying.
To a degree, the cult Silicon Valley has built around young people makes sense—particularly in the Internet and mobile technology. The young have a huge advantage because they aren’t encumbered by the past. Older technology workers are experts in building and maintaining systems in old computer languages and architectures. They make much bigger salaries. Why should employers pay $150,000 for a worker with 20 years of irrelevant experience when they can hire a fresh college graduate for $60,000? After all, the graduate will bring in new ideas and doesn’t have to go home early to a family.
These graduates grew up in an era when the whole world was becoming connected. To them, the world is one giant social network in which they can play games or work with anyone, anywhere. This is not a U.S.-only phenomenon. Children in Egypt and China are as Web-savvy as Americans. With better, more timely information at their fingertips than any generation has had in history, the world’s children can rise above the fears and biases of their parents. That is why youth in the Middle East are fomenting revolutions and the Chinese are getting restless. A key ingredient in innovation is the ability to challenge authority and break rules, a passion the Internet is unlocking among a new generation of youth worldwide.
The young understand the limits of the Web world, but they don’t know their own limits. It’s proving to be a powerful combination. Since they don’t know what isn’t possible, the Zuckerbergs can come up with new solutions to old problems. That is why they lead the charge in starting innovative mobile and Web companies.
But great ideas by themselves don’t lead to breakthrough technologies or successful companies. Ideas are dime a dozen. The value comes from translating ideas into inventions and inventions into successful ventures. To do this, you have to collaborate with others, obtain financing, understand markets, price products, develop distribution channels, and deal with rejection and failure. In other words, you need business and management skills and maturity. These come with education, experience, and age.
Indeed, research by my team revealed that the average and median age of the founders of successful U.S. technology businesses (with real revenues) is 39. We found twice as many successful founders over 50 as under 25, and twice as many over 60 as under 20. So everyone has a shot at success, but age provides a distinct advantage.
Are venture capitalists misguided, then, in funding companies with baby-faced CEOs? Perhaps one answer lies in the results of a study conducted by the Kauffman Foundation. It found that during the period when funding young technology entrepreneurs became the norm, from 1997 to 2007, the venture industry grew dramatically. But returns actually stagnated and then declined—precipitously. The returns of venture industry lagged those of the small-cap Russell 2000 Index by 10 percent over the 10-year time frame.
When you meet entrepreneurs in India, Ireland, Brazil, and other parts of the world, you find many of the same dynamics at play. The young have the outrageous ideas, but its older people who achieve business success. In all these countries, youth entrepreneurship is on the rise. And as in the United States, most of these businesses fail. That’s okay when you can learn from your failures and start over—again and again. This has been Silicon Valley’s advantage: it accepts failure and encourages entrepreneurs to keep trying. It hasn’t been like this in other parts of the country and the world. In most places, if you fail, you don’t get a second chance. But cultures are changing. They are beginning to accept failure. So entrepreneurs all over the world are trying again and again. In the process, they are getting older and smarter, and eventually achieving success.
Even China is becoming more open to entrepreneurship, though in that country a chasm divides old and young. Despite the billions of dollars that China’s government is investing in research, there is practically no innovation in its labs: they are staffed by a generation that came of age in the days of the Cultural Revolution, when defying authority was a capital offense. But if you meet the young at the universities or the Internet cafés, you find the same innovative ability you see in Silicon Valley.
Most of what I discussed above was in the computing world. But we live in an era of exponentially expanding technologies. Moore’s law describes the advances in computing power. Today there are other fields of science and engineering advancing just as rapidly, such as robotics, synthetic biology, medicine, and nanomaterials. The human genome, for example, was first sequenced about a decade ago at cost of more than a billion dollars; now the same feat costs $1,000. Together, all these advances are making it possible to address many of the grand challenges of humanity: making sure we all have adequate education, water, food, shelter, health, and security. Entrepreneurs can now do what only governments and large corporations were once capable of.
But understanding these diverse technologies isn’t the domain of the young. Though college dropouts may know all about social media, it is very unlikely that they understand the intricacies of nanotechnology and artificial intelligence as well as their elders do. These are complex technologies that require not only a strong education but also the ability to work across domains and collaborate with intellectual peers in different disciplines of science and engineering.
Given all the new complexities in the sciences, it is no surprise that innovators are actually getting older.
Kellogg School of Management economist Benjamin F. Jones looked at the backgrounds of Nobel Prize winners and other great inventors of the 20th century. He found that the average age at which they made their greatest innovations was 39. The largest mass of great advances – 72 percent – came in an inventor’s 30s and 40s, and only 7 percent came before the age of 26. What’s more, Jones found that the age at greatest achievement is actually rising, by about six years over the last century. Indeed, that effect was due todecreasing rates of invention at younger ages. The explanation is probably simple. People are spending more time in training as a prerequisite to contribute to complex fields.
The reality is that there is no age requirement for innovation. The young and old can both innovate. The young dominate new-era software development, and software will be a key driving force in the convergence of other technologies that are expanding exponentially. So we badly need our young. And we need our older entrepreneurs to develop cross-disciplinary solutions that solve the grand challenges of humanity.