The case for old entrepreneurs
By Vivek Wadhwa,
Khosla, who believes that old entrepreneurs can’t innovate because they keep “falling back on old habits,” said this at the NASSCOM Product Enclave in Bangalore, on Nov. 9.
He isn’t alone in his views.
Khosla and those who think like him are wrong.
The young may have good ideas, but there is no substitute for experience. You aren’t born with the management, marketing and finance skills necessary to turn ideas into successful ventures. This obsession with the young may be why the venture capital system is in such steep decline and underperforms key public market indices, such as the Russell 2000. VCs are doing themselves a big disservice by ignoring the real innovators: old, experienced people.
In 2008, I led a research team in exploring the backgrounds of 652 U.S.-born chief executive officers and heads of product development in 502 successful engineering and technology companies established from 1995 to 2005. These were companies with real revenue -- not just the start-ups founded by the college dropouts that some venture capitalists like to fund. We learned that the average and median age of successful founders was 39. Twice as many founders were older than 50 as were younger than 25. And there were twice as many over 60 as under 20.
In a follow-up project, we looked at the backgrounds of 549 successful entrepreneurs in twelve high-growth industries. The average age of male founders in this group was 40, and the average age of female founders was 41. The majority had two or more kids. Kauffman Foundation director of research, Dane Stangler, built on our findings by analyzing Kauffman Firm Survey data and Kauffman Index of Entrepreneurial Activity—which uses data from the U.S. Census. He found that the average age of U.S. entrepreneurs is actually rising, with the highest rate of entrepreneurial activity shifting to the 55–64 age group.
Our research revealed that successful entrepreneurs typically start companies for three reasons:
— They have ideas for solving real-world problems.
— They want to build wealth before they retire.
— They like the idea of being their own bosses.
The experience entrepreneurs have gained, the contacts they have made, networks they have formed, their ability to recruit good management teams and their education give them their greatest advantage. Young adults fresh out of school don’t have these advantages.
Do people stop being creative as they reach middle age? Ben Franklin certainly didn’t. He invented the lightning rod when he was 44. He discovered electricity at 46. He helped draft the Declaration of Independence at 70, and he invented bifocals after that. Henry Ford introduced the Model T when he was 45. Sam Walton built Walmart in his mid-40s. Ray Kroc built McDonald’s in his early 50s. Some of the most creative people of the century were also not young. Ray Kurzweil published The Singularity Is Near in his 50s; Alfred Hitchcock directed Vertigo when he was 59; Frank Lloyd Wright built his architectural masterpiece, Fallingwater, when he was 68. And let’s not forget the greatest innovator of recent times: Steve Jobs. His most significant innovations—iMac, iTunes, iPod, iPhone, and iPad—came after he was 45.
Kellogg School of Management economist Benjamin F. Jones analyzed the backgrounds of Nobel Prize winners and other great achievers of the 20th Century. He collected data on the age at which an inventor made his or her first discovery, the average age at which a scientist made his or her greatest accomplishment and the productivity lifespan of innovators and scientists.
Jones found that the average age at which Nobel laureates performed their prize-winning work, and the average age at which inventors had their great achievement, were both 39. The largest mass of great innovations in knowledge came in an inventor’s 30s (42%), but a substantial amount also came during their 40s (30%), and some (14%) came beyond the age of 50. Curiously, Jones found that the average age of innovators is rising. Over the last century, the average age of greatest achievement for both Nobel Prize winners and great tech inventors rose by about six years. Since 1985, it was 45. In fact, in both physics and chemistry during the past two to three decades, very little Nobel Prize–winning research has been done before age 40.
Jones also looked at another group: “ordinary inventors.” The mean age at which they filed their first patent was 31.
”There’s a longstanding view that innovators are most productive early in their lives,” said Jones during an e-mail exchange, “Empirical evidence suggests that this view is increasingly incorrect.”
One exception in recent times, said Jones, has been a small set of information and computing technologies in which a few young people have made breakthroughs. But Jones argues that it is not as much the case in medicine, pharmaceuticals and biotechnology, chemical engineering, nanotechnology, clean energy or any other field.
It may well be the only people who are really set in their ways and “keep falling back on old habits” are Vinod Khosla and the old-time VCs. The rest of us aren’t too old to take risks or innovate.