People Who Need to Talk About People

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.

Q: This is a non-PC question directed mostly to Joseph about China and other countries in a similar situation. You were talking about one child per couple, and perhaps Europe is already there. That is to the extent that the younger population supports the older population. Looking at the future of China just using it as an example, what is the, I'll call it optimal ratio, of the younger populations supporting the old population?

Joseph Chamie: Mr. Chamie is the director of the population division of the UN's Department for Economic and Social Affairs. All the countries of the world are going through a demographic transition over time, some faster than others. We start with very high birth and death rates, and then death rates come down and birth rates get high, and you have the rapid exposure and then the two come in harmony. What China was able to do by edict, by the government telling people to have one child, was to speed up that process. The benefit was called demographic bonus, where you reduce the number of dependents at the young age group and you don't have many at the older age group. That's going to be it for about 35, 40 years, and then it's going to catch up to them, and they're going to have a high dependency ratio.

Much is happening in most developed countries. You go from about say five, six workers per person above 65, and then it will go down to two. Countries like Italy and Spain are going down to 1.4 or 1.3 workers, that's everyone from, say, 15 to 64 for every person above 65. That is the major challenge. There are several ways to deal with that, and the Chinese will probably do it. You won't retire at 65; you'll have to retire at 70 or 72.

Second, the entry point will be later. No one starts working at 15 in the United States. You've got to get an education. But it's a fact that the number of people in the working age per person above, say, 65 is coming down rapidly, and that is a burden that most developed countries are having. China doesn't have it now, but it'll have it in the future.

Q: Joseph: The year is 2100 AD, and I have three issues I'd like you to comment on: population, energy distribution, and wealth. Population, is it going to continue to grow? Energy, is it going to continue to dominate in a sector? And wealth: do the rich get richer, and what do you feel will happen in the coming 100 years?

Chamie: We are now working on projections. Our medium term is 50 years; 2050 is no problem. We're now trying to make projections for 300 years to 2300. For the very first time, we're doing it by country, and results are scheduled for release soon.

Population. Will it be much larger than today? Today, we're 6.3 billion. By mid-century, we'll probably be around 9 billion, and by the end of the century, we see the world's population beginning to stabilize at slightly under 10 billion. That's the first question. However, there will be changes in the distribution. Europe will decline; Africa will grow very rapidly despite AIDS. India, Pakistan, and Asia will grow rapidly. A stabilization will occur in Latin America.

Energy, very big question. You have to get the energy out to the developing world. Solar or other types of energy will be required in order to sustain their well-being.

Wealth. If you don't take care of the developing countries, they'll come after you. If you cannot grant political stability and social equity and economic stability for the world, what good is having money? You need a stable world for trade. It's to your interest and my interest to help the developing world develop. That means taking some wealth from Europe, the United States, and Japan to help the other countries. We've got to solve AIDS, and we've got to take care of disease like SARS.

Helping development is good for your own interest, or else they'll come here with diseases, ill intentions, or other things that will destabilize you. So in terms of the wealth, you may have money now, but it's very easy to change the equation as we saw with 9/11.

Q: This is a quick question for Joseph. I'd like to educate myself more on demographics. Do you have reading material to recommend?

Chamie: There's a great deal of information. We have demographers that advise General Motors, the stock market. We have a Web site: unpopulation.org. We produce over 5 million statistics. We cover a 100-year period for 242 countries by male and female and every 5-year age group and every 5-year period. Our publication indicates the major trends.

I recommend you study demographyótake a crash course at Berkeley or some placeóand check out a book. It will help you understand not only what's happening in the world, but also what you're going through with your parents and your children and your spouse and so on.

Kawasaki: This question cannot be for Joseph.

Q: All right. To the rest of you, what do you think Joseph would say if you viewed the world and all the countries in itóeach country like a product? What was said was the United States has 50% or more of market share for those who can buy or invest in whatever country they want to invest in. What's the number two product or country in terms of influx of immigration, and what are the characteristics that [define it]?

Kawasaki: We'll just sit here and listen.

Chamie: We're having a number of phenomena going on. We have been basically a rural society for thousands of years. In a few years, we'll be breaking a historic point where half of the world's people will be living in cities. People are also moving from poorer areas to wealthier areas. The United States will continue attracting these minds. However, other places will continue attracting them as well.

Ireland, Scotland, and many countries are now advertising they want people to come back. Italy is trying to bring all of the Italian immigrants. Why? Human resources. If Canada does not get any immigration starting now, by 2050 it will be the same size as today but much older. Canada is dependent on immigrants to continue growing. Europe is in the same situation, yet they haven't recognized it. Why? Because of social integration and all the political problems. The world will become much more complex.

The advantage that this country has is the readiness to accept anyone wearing a sari, a turban, or any other thing. When other countries come into that competitive mode, they'll start really competing with us for the minds that are going out. Right now, Europe is in transition to decide what to do with the migration that's coming to its doorstep.

One final remark: I started with Einstein; I'll end with Einstein. After World War II, he was at the White House and the president asked him, ìIf you were starting your career over again what would you go into?î And he said not physics. He said biology, and they asked him why. He said because no one knows anything about it. Right now, there are certain areasóand we talked jokingly about diapers, longevity, health care, diseaseóall sorts of other industries that I think seriously you people here could make a great contribution to.

Q: I'm from a software company out of Israel, Amerigroup. Thank you very much to the panel for all of your suggestions and ideas. Taking Mr. Chamie seriously, I'd be very interested to ask Mr. Federman and the other VCs here to think what we can do about shoes and hair coloring for everybody as we go forward. These are some things that we should think about investing in, and he may have said it lightly, but I think it's true.

Kawasaki: So in other words, would VCs do non-tech deals?

Q: Exactly.

Irwin Federman: Mr. Federman is a general partner at US Venture Partners. They have. It's not clear to me the successful Internet companies are particularly technology-centric. Pampers for adults have been done by VCs. Adult incontinence is, unfortunately, a serious problem. If you go to a pharmacy and go to the paper product shelves, you will see unobtrusively a very large selection of those products, and VCs have done those. Will VCs do flat shoes for women? Maybe. Maybe Capezio had a VC; I don't know.

I think that non-technology consumer products are generally far from the expertise of the VC community here in Silicon Valley, but venture capital is a global thing that's been around for many, many years. The Rothschilds were venture capitalists. The English Rothschilds funded Reuters during the English-French war in the 19th century. Reuters figured that early news on the war would be useful in the U.K., and he had carrier pigeons that went across the channel. Rothschild funded that. Ain't no high tech there.

I think that the VC community in Silicon Valley is a technology community. It is not the venture capital business globally, and there is capital available perhaps for such mundane things as more comfortable shoes. You're just not going to find it here.

Kawasaki: Craig, would Heller Ehrman Venture Law Group take a client that is making these kinds of products?

Craig Johnson: Mr. Johnson is chair and cofounder of Venture Law Group.I think it really comes down to more fundamentals in technology. Is there something protractible? Is there some way to make money? Is there a niche; is there a need? When I hear an unusual business ideaóregardless of what it isóand if it is not clear to me that someone like Irwin would be interested in it right away, my test is usually to find a customer. Get that first stage of financing from a customer who believes in what you're doing, because that shows that there is a strong enough need in the marketplace.

Somebody being willing to pay for it is the way I test out these kind of ideas that are a little outside the mainstream. But sometimes you find not only does the customer fund it, but it becomes a very big company. So I don't try to be smart with the companies that I work with, but I do try to validate them in the marketplace as quickly as possible, and sometimes I've been quite surprised.

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.