It's Not the Money; It's the Demography

Guy Kawasaki, managing director of Garage Technology Ventures, interviewed some insiders on Silicon Valley's relationship to the global economy at the Silicon Valley 4.0 conference a few months ago. This session was called From Valley View to World View.

Kawasaki: What do you think is the optimal-sized fund these daysói.e., can you invest a billion dollars?

Irwin Federman: Mr. Federman is a general partner at US Venture Partners. Sure, just tell me how much time it's going to take!

I think we're going to find that the very large funds won't be replicated. I think that we're going to see funds in the $400 to $700 million range. I don't know what optimal is. It really depends upon how many investing partners you have, how many companies in the portfolio. It's a bandwidth issue. It's not an opportunity issue; there's plenty of opportunity.

Kawasaki: Joseph, now you can just take us out of the microcosm we live in, and give us the macrocosm if you would.

Joseph Chamie: Mr. Chamie is the director of the population division of the UN's Department for Economic and Social Affairs. What I really want to do at this point is I want to try to do a Vulcan mind melt with all of you. I want to get in your heads some basic ideas. What is my message? There was a great scientist, Einstein, some years ago working at Princeton. One day he got on a train headed somewhere, and the conductor came inóand those of you familiar with trains know a conductor comes in and asks for tickets. So he asked for the tickets.

Einstein started looking for that ticket in his pockets. He couldn't find it. He looked in his wallet; he couldn't find the ticket. The conductor came down the aisle, continuing to ask for all tickets. This time Einstein had taken his suitcase and put it on the aisle and opened it up and had all his ties, his underwear, socks, all over the floor looking for that damned ticket. Finally, the conductor recognized Albert Einstein and walked over to try to comfort him. He said, "Please, Professor Einstein; I'm sure Princeton University has enough money to buy you another ticket." What he said was, "My dear, Mr. Conductor; I'm not worried about the money. I'm trying to figure out where I'm supposed to be going.

Okay, people: It's not the money. Where are we going? Okay? Here's where we're going, a new international population order. Let me give you some examples. The 20th century was the most remarkable demographic century in the world's history. It had more gold medals than any of the centuries combined. I'm very lucky to be a demographer because if I were born in the 17th or 16th century, there would be no work. The 20th century was a period of rapid population growth. The unprecedented growth of the human species has altered everything on the planet: environments, economics, culture, defense. Name the topic: [growth] has changed it.

We started at 1.6 billion at the beginning of the 20th century. We nearly quadrupled to 6.1 billion at the end. If you didn't remember, just reverse the numbers, 1.6, 6.1. Malthus, the guy who Charles Darwin studied underóyou've read his book. Malthus was wrong: we're not going to run out of food for the world. Some areas will have food problems. But what's going on now in this new orderónumber oneómost of the globe is going in the developing world. It's going on in countries such as India.

Let me give you an example. The European Union, 15 countries. Add all the newcomers, their growth, their population growth, births minus deaths in the year 2000: it was achieved by India in the first six days of this year. India adds more people per year than China, Pakistan, and Nigeria combinedóthe next three. Now, you're going to see India by mid-century at 1.5 billion people. If you educate them, good luck. The ultimate computer is up here. We're talking about human minds.

Other changes: Because of decreasing fertility, the world's population is aging rapidly. We're going to have more longevity millionaires, people living a million hoursó114 years. Also, women are joining the labor force. They always worked, but they weren't in the formal labor force.

If you step outside, you'll see 24 fellows lined up. Of the 24 fellows, only 3 are women. Of this room of about 400 people, I'd say 10% are women. That's going to change. Why? Women are leaving the kitchen, and they're not going back. They're going to join the labor force. You're increasing the mental capacity of the earth's population almost by double by bringing women in.

Other things that are going on: Migration, urbanization, the growth of megacitiesÖmany, many other factors going on. All these things are affecting you, and you'd be wise to study them and understand what's going on. Silicon Valley is basically a cork in a large tub, and the waves in those tubs are driven to rapid forces.

This material was excerpted from the Silicon Valley 4.0 conference, hosted by the Churchill Club and Garage Technology Ventures. Guy Kawasaki led the discussion with Joseph Chamie, director of the population division of the UN's Department for Economic and Social Affairs; Aaron Gershenberg, managing director for Silicon Valley Bank; Craig Johnson, chair and cofounder of Venture Law Group; and Irwin Federman, general partner of US Venture Partners. Part five of five; see part one, part two, part three, and part four.