Steve Welch Blog

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Technology driving realignment of political parties

(Originally published in the Philadelphia Inquirer October 19, 2016)

http://www.philly.com/philly/opinion/20161019_Commentary__Technology_driving_realignment_of_political_parties.html

Vespasian ruled Rome from AD 69 to AD 79. The emperor was one of the first heads of state to encourage the development of arts, science, and technology. He was also one of the first to fear technology's impact on workers. When an engineer offered a low-cost machine for moving heavy columns to the capital, Vespasian paid the engineer for his invention, but decided not to use it, saying, "You must allow my poor haulers to earn their bread."

Two thousand years later, Uber launched the first commercial driverless cars in Pittsburgh with the support of the city's Democratic mayor. While Pittsburgh is just a testing ground, the Google driverless car has already driven almost 2 million miles.

At the same time, Austin's Democratic city council essentially banned Uber from doing business there.

The tale of Pittsburgh and Austin offers us an early glimpse into the battle that is coming. The same political party embraced two extraordinarily contradictory polices in response to a similar opportunity and threat.

Since 2000, we have continued to see U.S. production rise, while at the same time employment has remained relatively flat. This has been driven by new and innovative technologies. Not surprisingly, over that same time median wages have declined.

And the factors driving these trends are about to accelerate. Machine learning, big data, and robotics are all separate technologies but they are becoming interwoven and feeding off each other.

The new technologies are designed not to enhance workers' capabilities but replace them. When the car replaced the horse, the vehicle still needed a driver. But when the driverless car replaces the car, there will be no driver and, to top it off, the car will be manufactured by robotics.

More importantly, the skills required to outperform the machines are getting significantly greater. Through our history, technology has continued to make specific jobs obsolete, but overall employment has grown as people have developed new skills. When machines took over the farm, those workers were able to be deployed in manufacturing with minimal training. This is no longer true. Technology will soon replace anything that is remotely repetitive and unskilled.

This does not bode well for low-skilled workers. This is why the bottom half of earners have seen their wages fall since 2000.

At the same time, these technologies provide great opportunities for those that are well-educated and have problem-solving and critical-thinking skills. These technological advancements will drive up earnings and wages while driving down costs. A net result will be a higher standard of living for those that possess the desired skills.

This is particularly true in the United States, which leads the world in these fields. In addition, the United States has a history of quickly and efficiently capitalizing these types of companies. In less than 20 years, Google, Amazon, Apple (reborn), and Facebook have literally created trillions of dollars of value. No other country has one of these, let alone four.

As Google continues down the path to bring us an autonomous car, the 3.4 million workers who earn their living in transportation are about to be unemployed. As McDonald's uses its first robotic hamburger flipper and automated teller in Colorado, all of those workers are about to be replaced.

Depending on where you are on the education and skills ladder, you will see these events very differently.

Enter Bernie Sanders and Donald Trump, who tapped into the populist anger. Bernie captured 43 percent of the Democratic primary vote, with almost every part of the party establishment against him.

Trump's antitrade and antiimmigration stances, and his newly found Christian values, propelled him to the Party's nomination with 45 percent of the Republican primary vote. While Trump held up immigrants as the scapegoats and trade as the devil, he offered little on policy.

While technology has not been at the forefront of the 2016 campaign, the impact of technology is driving the under currents of the political environment. Both parties are currently constructed of unstable coalitions, and technology issues will pit these different coalitions against each other. Democrats will see labor at odds with party elites in academia and the financial industry. The rise of Trump shows how divided Republicans are between the business community and their working-class and evangelical voters. In fact, both parties have split not along ideological lines, but educational ones.

Highly educated voters supported Clinton while less educated voters supported Sanders. There was a generational split but this had more to do with the individual candidates.

In the GOP, less-educated workers supported Trump, while more-educated voters supported anyone but Trump. (There were also well-educated Trump supporters who strongly and understandably wanted an outsider business candidate.)

Take away the individual personalities and the trends are quite striking.

In the general election, Clinton is about to be the first Democrat in a generation to win college-educated voters, while Trump will be the first Republican to lose them. At the same time, Trump has galvanized low-skilled white workers, who have been fleeing the Democratic Party since 2008. If Trump could get through an afternoon without insulting women and minority groups, he would have galvanized low-skilled nonwhite workers as well and would be trouncing Clinton.

The political coalitions of the last 50 years are under great strain as technology is greatly changing who benefits from economic growth. This year's election offers us a glimpse into the future that Vespasian feared. As Pittsburgh and Austin demonstrate, it's unclear how the parties will address these challenges and answer this question: Who will be for the robots and who will be for the workers?

Steve Welch was a Republican candidate for U.S. Senate in 2012. [email protected]

[stevewelch-blog]

I AM SORRY WE HAVE LIED TO YOU

(Originally published in the Philadelphia Inquirer August 16, 2016)

I have known for some time that free trade, while great for the world long term, it would harm you dearly in the short term. I knew it would depress your earnings. My Democratic counterparts fought it. Not that they disagreed with me, but their campaigns were funded by labor.

I have lied to you for 30 years about immigration, but gosh darn it, you stopped having enough children, and if the population is not growing all hell breaks loose. The debt can’t be paid; entitlements can’t be funded. You yell at me now, but you wait and see -- I was right; we need the population to grow. Of course I knew it would reduce your income -- it’s simple supply and demand -- but really what was I supposed to do? After all, if McDonalds sells fewer hamburgers this year then last because the population is declining, then we go into recession, the stock market tanks and everyone is unhappy and the incumbents might not get reelected.

The Democratic establishment and I both knew in our core that innovation and technology were the only paths to long-term security. After all, at some point there will obviously be a geological or astronomical event that will make our current home unlivable. We have known for some time that massive innovation would be the only way to secure a new home centuries, or maybe even millenniums, down the road. I am sorry if you feel like I am rationalizing, but it is true. While I would do it again, I knew all along this would put massive downward pressure on your income and make you feel like less of a person when you were replaced by a robotic arm with a 12” touch screen.

I want you to know I stood up for you when it came to the environment. The Democratic king makers continuously pushed policies that would increase prices and depress your standard of living. I fought them, not because I didn’t agree with them, but I too had a campaign to fund. Truthfully, even though I have never been good at articulating it, I knew the democratic policies would depress the rate of economic growth, which would slow innovation, which was my real concern. So, while we shared similar concerns, we have given you different lies.

We have known all along that education was the only real answer, but it would take a generation or more to have a real impact. For me the election cycle was just too short. For the Democratic establishment they had to fund their campaign with massive amounts of money and support from the education unions that have been scared to death of real change that is required.

There were times when you were almost on to us. My Democratic friends and I tried to distract you with gay marriage and guns and we even surprised ourselves with how well it worked.

But the truth is, now I’m glad you know. I know you are mad. I get it. But Donald Trump and Bernie Sanders are not the answers. Sure, they both speak to you in a way that says “I get you”. But one is an unstable narcissist and the other wants to follow policies that have doomed every society that has tried them.

I promise I am sorry. I mean really sorry. The kind of sorry that can only come from someone that has abused another and is now finally seeing them find the courage to walk out the door.

The democratic establishment says they are sorry -- I don’t think they really mean it -- after all they squeaked Hillary through the process, and I think they have already lost sight of how angry you really are.

I make this promise to you. I hear you and understand your anger, and while 2016 is gone and you are going to vote for Trump or hold your nose and vote for Hillary, starting November 9th our relationship will be different. I cannot control the far right and far left media that gets paid to make you mad, but I will no longer partake in this process. However, I also can no longer allow you the temper tantrums that result in nominating candidates that believe dinosaurs and people roamed the earth at the same time. This indulgence is not good for either of us. Tolerating this lack of reason has been part of how we got here. Nominating a conspiracy theorist and having members of Congress still focused on their belief that the President is not an American. But I also promise to listen, and more importantly, to be honest with you, even when the words I say are going to hurt.

Here is the truth: globalization and innovation are going to wreak havoc on you over the next several decades. They will create more problems and opportunities then any of us can imagine. My Democratic colleagues and I cannot stop them. Any attempt to do so will actually create more harm then good. They are the natural evolution of society.

However, there are many policies that we can work on that will allow us to better deal with these massive changes that has already begun and more importantly, address the education inequality that is truthfully at the core of the problem. But, the only way for this all to work is for us to have a relationship based on honesty and respect. So starting on November 9th no more lies.

Sincerely, The So Called “Republican Establishment”

[stevewelch-blog]

Why Your Child Should Go to Rice instead of Stanford

(Originally published in the Philadelphia Inquirer June 23, 2016)

http://www.philly.com/philly/opinion/20160623_Commentary__Apocalyptic_view_of_the_Trump_presidency.html

With a coworker's son trying to decide between Stanford and Rice, I offered him my perspective on a history to come:

Britain exits the European Union. Voters are frustrated with government because of growing income inequality, which is driven by education inequity, technology, and globalization. But those are complicated, so politicians stick to talking points and blaming each other. The voters blame refugee migration for their problems but also realize that the government, trying to be politically correct, is not being honest with them.

In the United States, the Democrats officially nominate the worst presidential candidate in the history of the republic. She watches what happens in Britain and laughs it off. Four months later, Trump rides the same populist anger into the White House.

Trump removes the United States from NATO and tells the world, "You're on your own unless you are willing to pay us to use our military." He cites the German Hessians as an example of how a country should use its military.

With Brexit and the United States out of NATO, the EU fractures because the Germans will no longer support and protect the debt-laden Greeks, Spaniards, and Italians. It turns out that Germans don't want to work their butts off until 65 so Greek hairdressers can retire with a full pension at 50. Britain and Germany form their own alliance - the Coalition of Reasonable Democratic and Capitalist Societies. Three months later, they allow China into the coalition. (It is later determined that China promised that Foxconn would assemble all BAE products at a reduced price.) Economies roar in Britain and Germany, and, within a year of the Trump presidency, the pound once again returns as the global currency.

Confident that everyone else will sit on the sidelines, Russia invades several Eastern European countries. Trump does nothing. (It is later learned that Putin gave Trump hotel and city naming rights to the expanded Russian territory. Prague is renamed Trumpf.)

Russia devours its own energy supplies due to the growing war and is forced to open up a second front in the Mideast to gain access to more oil. Russia, Syria, and Iran invade Saudi Arabia. Within one week, what is left of Iraq joins the coalition. In a last-ditch effort, the Saudis begins to funnel money and U.S. weaponry to ISIS and are able to slow the onslaught. The war continues but reaches a stalemate.

Oil prices skyrocket to $300 a barrel. The U.S. economy starts to fall apart as trade collapses and energy prices consume household incomes. In an attempt to calm the masses, Trump puts price controls on U.S.-produced oil, mandating a $30-per-barrel cap. Never really a believer in free markets, Trump says, "Believe me, if they will not produce it for $30 per barrel, we will just invade Mexico or Venezuela and take their oil, that I assure you." Trump forms U.S Oil, modeled after the British East India Co., and makes the chairman of the Joint Chiefs of Staff the CEO.

Several prominent Texas businessmen with strong political ties see an opportunity for their state to return to its heritage of being a separate republic. And since they are sitting on massive, undervalued energy reserves, they convince people that Trump's price controls are the reason for their suffering and income inequality.

Texas once again becomes an independent republic. The rest of the states let Texas go unopposed - truthfully, they were all thinking the same thing. With Trump as president and the economy in free fall, there was support across the country for states to leave the union. (Trump sat on the sidelines because he was assured privately by the Texas businessmen that there would be a "huge" new Trump Tower in the new capital of Austin.)

Texas starts to export energy around the world and its economy soars.

With Texas gone from the union, and creditors realizing the U.S. government might not stand behind California, the interest rate on that state's debt skyrockets. In response, California taxes the only things it can to make up for its massive budget imbalance. California creates a "fair tax" of 20 percent on all tech companies, expensive real estate, and public endowments.

Silicon Valley entrepreneurs and companies rush to relocate assets in Texas. Within a couple of years, Stanford's endowment has been consumed by California's fair tax.

Because of the transfer of wealth and talent to Texas, Rice becomes the new Stanford. And that is why your son should go to Rice instead of Stanford.

Steve Welch, formerly of Pennsylvania and now a Texan, is the founder and chairman of Dreamit. [email protected]

[stevewelch-blog]

Facebook is Killing the Republican Party

Originally Published in the Philadelphia Inquirer on December 16, 2012 

The Sunday morning before the election my daughter and I attended a candidate’s breakfast in Chester County, Pennsylvania. The room was packed with passionate Republican volunteers. The energy level bordered on exuberance, as people believed Pennsylvania was in play in the presidential race.  In fact, one ardent political operative for the Pennsylvania Pastors Network told me he believed Romney would likely win Pennsylvania by 10 points.

That night, my three children, my wife, and I trekked out to Bucks County to attend a Romney rally. We arrived over an hour early with tickets in hand and were unable to get into the event. An estimated 30,000+ attended the rally and to say the place was electric would be an understatement. As I stood in a mob in the cold dark night holding on tight to my 3-year-old son for fear that I would lose him in the crowd, I heard nothing but absolute confidence that Romney would win Pennsylvania and the presidency.

Romney lost by five points.  

What happened? The loss is a complicated story, but the cause of the misguided optimism can be found in a single word - Facebook. Facebook is not only responsible for creating unwarranted expectations; it is actually killing the Republican Party. The mechanics of Facebook work such that combative tones, extreme views and single-issue agendas are pushed to the forefront, whereas even-tempered discussions about comprehensive reforms are buried and rarely seen at all.

Firstly, people are more likely to have friends on Facebook and in real life that agree with their political positions then oppose them. This is human nature. If you are politically active, you are likely to have friends that are also politically active, which means when you post something, your friends tend to agree with you. This turns Facebook into a political echo chamber of consenting “likes,” shares, and comments.

Secondly, posts in Facebook that receive a lot of likes and comments rise to the top of people’s feeds. This means more controversial posts appear more frequently in everyone’s feeds, drowning out more mundane opinions and thoughts. The resulting effect is the amplification of extreme views, which focuses people on single issues. Not only has Facebook become an echo chamber; it actually amplifies the echoes of extreme views more.

Thirdly, and what is at its root a larger issue, even if you happen to have friends of different political persuasions, their post are less likely to come up in your feed. Facebook makes money when you click on posts and links, which means Facebook wants you to see things that you agree with. This subtly lulls you into believing the world in general shares your point of view. Not only is Facebook creating an echo chamber that amplifies the extreme views, it does not allow outside voices into the chamber at all.

Lastly, because Facebook feels like a news site and real news is mixed with unqualified opinion, they become indistinguishable. David Brooks’ fact based argument is given the same weight as the political activities and gut feelings of the Pennsylvania Pastor Network. So now the echo chamber is amplified, closed off and validating opinions as facts in people’s minds.

I am sure the same thing is happening to Democrats. Of course, since my Facebook profile indicates I am a Republican and I tend to click on conservative links, I will never see what Democrats are writing about.

Facebook is pushing the Republican Party into no man’s land (or perhaps only white man’s land) and convincing single-issue extremists in the party that it is a good idea in the process. The loud minority on Facebook drown out, and even worse, attack dissenting views. It turns out teenage girls are not the only people who use Facebook to bully individuals. The Republicans should have control of the Senate but the primary process that elected Akin, O’Donnell and Angle produced candidates that could not win general elections. Worse yet, they damaged our party’s brand through their style and tone - a style and tone that has been rewarded and amplified by their followers on Facebook. Currently, 50% of American’s have an unfavorable view of the Republican Party.  

On Election Day, I went door-to-door talking to voters in Phoenixville, a predominately Democratic town in my area. The talk on the street that day was drastically different than what I expected. It was clear I had let my Facebook echo chamber manipulate my perspective and as the day wore on, I began to fear I wasn’t the only one. To my Republican friends that, like me, believe the federal government has over-stepped it bounds in free markets, I beg of you to get off Facebook and engage in conversation with people who disagree with you. This is the only way we can grow as a party and it is the only way the country will ever come together again.

[stevewelch-blog]

2016 Republican Primary Fantasy League

One of my mothers great gifts to the family was making everything in life an educational game.  Nicole and I try to carry on that tradition to this day.  With that in mind - What better way to learn about the primary process then to have a 2016 Presidential Primary Fantasy League. 

The rules - Each team drafted 6 candidates.  The person that picked first in round one picked last in round two and visa versa.  After the draft is over you can pick up any free agent at anytime and cut someone else.  Your team earns point based on delegates won prior to the convention.

We only did this for the Republican side, given that everyone (other then me) thinks the democrats have already selected their nominee.

Below are our teams

Elena and Steve

Jeb Bush

Carly Fiornia

Rand Paul

Susan Martinez

Ben Carson

Rick Perry

Jackson, Sienna, Jack

Scott Walker

Chris Christie

Marco Rubio

Bobby Jindhal

John McCain

Mitt Romney

Saylor, Nicole, Kay

Lindsey Graham

John Kaisik

Mike Huckabee

George Pataki

Nikki Haley

Mike Pence

Actual Draft Order

Jeb Bush

Scott Walker

Lindsey Graham

John Kaisik

Chris Christine

Carly Fiornia

Rand Paul

Marco Rubio

Mike Huckabee

George Pataki

Bobby Jindhal

Ben Carson

Susan Martinez

John McCain

Niki Haley

Mike Pence

Mitt Romney

Rick Perry

[stevewelch-blog]

The Awesomeness of Life

Never have I had or will I probably have a day in the future that demonstrated the full spectrum of life’s emotions as I did on June 7th.  Joy, fear, stress, disappointment and pride all intense and in a matter of hours.

9 Months ago Nicole and I found out we were expecting our 4th child.

3 Months ago Elena began to practice for her kindergarten graduation which entailed learning 7 songs and a short speech she would give on Japan.

3 weeks ago my 20 month old daughter Sienna started having a pretty terrible wheezing sound when she was breathing. Our pediatrician originally diagnosed Sienna as have RSV which is a virus that affects the lungs.  It is something pretty normal and she have even had it in the past.

All paths converge. 

We had been to our pediatrician 3 times in the last three weeks and had not seen any improvement in Sienna’s breathing.  On Wednesday June 5th we took Sienna to an allergy specialist who discovered that she had a very low blood oxygen level.  She was immediately rushed in an ambulance to Paoli hospital.  In the Paoli ER they were able to increase her blood oxygen level when she was given an oxygen mask, but as soon as they took the mask away the level dropped.  After 4 hours at Paoli we decided to take her to Children’s Hospital of Philadelphia (CHOP).  Another ambulance ride and a very exhausted little girl.  

We arrived at 2am on June 6th and the CHOP staff was nothing short of incredible.  Even though it was 2am she saw a half dozen doctors and nursery’s in a couple of hours and it was clear this team was developing a plan to determine what was going on.  Sienna was incredible during this entire process.  With the exception of getting a x-rays hardly a tear was shed and she was even helpful at times.  (it is important to note that Sienna probably considers getting an x-ray as being worse than water boarding)  After 18 hours, a ton of different medications, 3 sets of x-rays and based on other findings they determined there was a high likely that there was something blocking flow into and out of her one lung.  

Around 8pm June 6th we decided to perform a bronchoscopy which is a procedure in which they go in through the mouth to the lungs with a camera to try to see what is going on and if there is an obstruction to remove it.

At 9pm on June 6th Nicole’s water broke, however contractions did not start.  She was not due until June 10th.  The morning of June 7th Nicole and her mother went into to Paoli hospital will I slept on the couch next to Sienna at CHOP.  My parents stayed with Elena and Jackson.

The morning of June 7th my parents took Elena (with Jackson) to her Kindergarten graduation.  Elena has worked very hard preparing for this graduation.  Every day we had been practicing her songs and her speech.  In the last several months she has become a very mature little girl and become alarmingly self-sufficient.   Nicole and I are very proud of how hard she worked in her preparation and were excited to share in her graduation with her.  Unfortunately neither Nicole or I were able to be there for her big moment. She preformed admirable and graduated from kindergarten around noon on June 7th.

At around 10am even though Nicole’s water broke the night before she had not started into labor so they induced her. 

At noon Sienna and I where taken to the anesthesiologist in preparation for her surgery.  After having an IV put in she was given a gas to numb her (sorry don’t know a better term) so that she would not get upset when they wheeled her away from me.  Now if you have never seen this process it is heart wrenching.  I held her little hand as they applied the gas.  Sienna has brilliant green eyes and an incredible happy presence about her. (her nickname is Happy)  As the gas took its affect both were blank.  Motionless, lifeless.  Worst thing I have ever had to experience as a parent.  At around 1pm my little girl was rolled away from me.  

At 1:08pm Saylor Kathleen Welch was born into this world.  At 8lbs 10oz she was a healthy little girl and Nicole was great.  Nicole called me moment later to tell me the good news.  Sitting in the surgery waiting room I was brought to tears.  Happy our newest addition and my wife were doing great. Sad because I missed the birth of our daughter. Disappointed because I missed Elena’s big moment. Still petrified for Sienna.

At around 1:35pm the surgeon came out to let me know that Sienna was doing great. They found what looked like a small piece of peanut fragment lodged in her left bronchiole tube as it entered the lung.  They were able to remove it and she was great.  

After Nicole’s mom arrived at CHOP to be with Sienna, I traveled out to see my new little girl,  Saylor. 

One last night with Sienna at CHOP and our family was all together.  All six of us.

June 7th was an intense day. Never have I ever experienced such a wide range of intense emotions over such a short period of time.  It was a great reminder of the awesomeness of life.

 (Please pardon my poor writing.  I am tried and my normal proof reader has been very business with our newest addition)

My brave little Sienna

Saylor Kathleen Welch, 10 minutes old

So proud of Elena

Together for the first time.  All six of us.

[stevewelch-blog]

Epilogue - We are all Born Entrepreneurs

Epilogue

On the morning of September 11, 2001, I was sharing a 10’x10’ office with Mitos’ first two employees when someone rushed in to tell us that one of the World Trade Centers had been struck by an airplane. The three of us immediately rushed over to a neighboring office to follow the coverage on TV. I regret to say that I watched the second plane strike the second tower on live television. As the tragedy unfolded, I numbly called my good friend, David Suarez, who was working as a consultant on the 99th floor of the North Tower. None of my calls went through so I frantically tried to e-mail him, but again, no response.

At noon, I closed the office at Mitos and drove to my parents’ house. Later in the afternoon of September 11th, my father and I decided to escape the madness by going sailing on the Chesapeake Bay. There was not a boat in the water nor a plane in the sky. It was eerily peaceful, yet that afternoon marked the beginning of a different world for me and for many others of my generation who considered war as a distant image that occurred only in foreign lands.

David did not return my call nor respond to my e-mail. His body was not uncovered until the spring of 2002. You’ll remember that I roomed with David for two years during our college days. He was my cohort in our carpet-selling business. More than any other person I have known, he looked for the positive aspect in the people and the world around him. The New York Times wrote the following story about 24-year-old David:

David Suarez cared. He cared about people who did not have his opportunities, people who did not have his education, people who had to struggle. "He reached out to people in a very warm and genuine way,” said Ted Suarez, his father. “Everyone remembered his smile. From a little boy, he had a smile that was very endearing." Mr. Suarez, 24, was a systems consultant who worked for Deloitte Consulting. He reported each day to the office of his client, Marsh & McLennan, in the World Trade Center. He was in the process of sending out applications to colleges, because next fall he wanted to embark on an M.B.A. before returning to Deloitte. His hope was to go to Harvard. But he always made time for the needy. Social concern was a family tradition. He volunteered for the nonprofit group New York Cares. He worked in soup kitchens and tutored high school students for their college entrance exams. He always gave the disadvantaged the benefit of the doubt. Friends told a story about how they found him once talking to some beggars outside a bar. Mr. Suarez asked one of the beggars, who was in a wheelchair, "What would it take to make you happy?” The man said, "Give me $20." Mr. Suarez gave him $20. The beggar got up, folded up his wheelchair and walked off. Mr. Suarez was not angry. The episode did not make him jaded. He shrugged it off. By his thinking, he would rather lose $20 here and there to an impostor than risk spurning someone who really needed his help. He kept on giving.

I was not with David when he gave away the $20, but it serves as a perfect example of his character. You could turn to him when you needed a positive outlook or a word of encouragement. During my years at Penn State, David was the one with whom I could debate the topics of the day and share my crazy concepts. On occasion, I was actually able to convince him that my ideas were worth pursuing. David was a young man, just starting out his life in New York, yet hundred of mourners flocked to his funeral. As so often is true of great people such as David, I selfishly thought I was the only one that had a unique relationship with him. But in reality his magnetic personality drew people to him and provided each of them with a feeling of special friendship.  

David’s father presented a eulogy that I (and I suspect many others who were there) reflect upon on a daily basis.  

“There is much I could say about David. You probably already know that he was an Eagle Scout, that he graduated from Penn State, and that he was a great employee. But that is not what made him special to us. What made him special is that he valued relationships far more than material achievement and was not willing to gain the world at the expense of his soul. After reading the stories that many of you have written about David, there is very little that I could say that you do not already know. I will therefore, ask you to close your eyes. To listen to my words, and your own thoughts about him. To see his big smile, to remember his zest for life and in particular to recall an event you experienced with him. I will ask you to dream. Yes, to dream of what our lives can be like having known him. I will further ask you to commit to one action, which only you will know. For if we convert his and our dreams into action, he will live on through us to influence others and thus, his life will continue to have meaning.”

  In his writings (for his MBA application) here is how he described the start of a normal workday: ‘The subway pulls into the Fulton Street station. I look up from the New York Times, grab my bag and join the migration toward the World Trade Center. The Marsh project is at an interesting point. I settle into my desk on the 99th floor, to the backdrop of the Brooklyn Bridge and the morning sun hovering over the distant Long Island. I start the day by reviewing the goal list I created last night. I look up, the sun has risen slightly and people have begun to trickle in. Ahhh… I am ready to begin.’ 

And ready he was, for it was on a day such as he described, that he took his first step into eternity.  

  David, we all are running the race to arrive where you are. As a runner, you never were one to wait around. You got there first. We mourn your departure but rejoice at your arrival. With the grace of God we will see you some day. To paraphrase from Ted Kennedy’s address memorializing his bother Robert: Most of us dream dreams and ask why? David, you would ask, why not? and then proceed to make them happen. We must now make his dreams and our dreams come true.” 

I did make a commitment that day. I committed to a dream that David and I shared – leaving the world a better place than we found it. This is my purpose.

I often find myself wishing that David had woken up 15 minutes late that morning or missed the train so that I would still be able to debate the issues of the day with my good friend. But as is so often true in life, it is the small things that make an enormous difference and there is a certain randomness to the world around us. David’s story taught me not only these facts, but how short and precious life can be. 

We all have a role to play in society. I am not a physician or a politician. Like so many other people, I was born an entrepreneur and found purpose in it. With the help of many others, I have been able to keep the entrepreneur in me alive and convert my inherited traits into the skills needed to succeed. I am fortunate to be able to give back to the world by helping it operate more efficiently, thus creating good jobs and increasing the quality of life for employees. 

This is the difference that I can make. 

I hope that this book provides guidance for you to do the same.  

[stevewelch-blog]

How to Win the Hearts of Investors

How to Win the Hearts of Investors

To me investing in early stage entrepreneurs is kind of like dating with the hopes of finding the girl you are going to marry.  Like a marriage, there is no turning back once you put money into a deal and while it can be very rewarding, it also requires a long-term commitment of working with the person you invest in.

Like my dating philosophy (when I was younger of course) my goal is to 1) Take a quick look at as many options as manageable 2) Spend time with the options that catch my eye 3) Marry the investment that win my heart.

So how do you win mine and other angel investors’ hearts?  Friday I closed a seed round, alongside Gabriel Weinberg and a handful of other investors, which clearly demonstrates what I and other angel investors are looking to marry.

The company is a modern Indian dating site called myZamana.  It was founded by Ashish Kundra.  I fell in love with myZamana because of the entrepreneur.  What I saw in Ashish was 1) someone who was adaptable, 2) approached entrepreneurship in a very methodical and calculated manner, 3) had a clear understanding of the core assumptions the business model and 4) of the right time to raise money

Adaptability – Too often entrepreneurs fall in love with an idea and due to human nature cannot let go of that idea.  However, rarely is an idea perfect from the start and sometimes it is just a bad idea. Ashish had originally founded a company called Mobibolt, which was funded by Launchbox Digital in 2008.  After leaving Launchbox Digital he raised a small amount of Angel funding. After several launches and multiple iterations on Mobibolt, however, he saw for himself that there was no path to success. Rather than running down a dead end, he chose to change course entirely and, with the support of the original investors, used the remainder of the money to build and test a new concept entirely. This open-mindedness and willingness to change paths is critical for successful entrepreneurs.

Methodology – More and more I am starting to see a difference in first time entrepreneurs that come out of the accelerators versus other first time entrepreneurs.  These accelerators force entrepreneurs to focus and attack entrepreneurship in a very methodical and unemotional way. In addition because they are surrounded by a dozen or so other companies that are doing the same thing, this process becomes human nature.  Over time it becomes like breathing. They do not even know they are doing it, but it is what is keeping them alive. 1) They test their ideas and look for customers and market feedback that is quantifiable. This allows entrepreneurs to remove themselves from their products and look at them objectively.  This is a key ingredient to good decision-making. 2) They tend to better understand the importance of maximizing their limited resources. Simply put, they learn not to waste money because the accelerators do not give them much money.  Ashish clearly was frugal. On top of his very modest personal standard of living, he prioritized his spending to effectively test his idea. To me this also shows commitment and a willingness to sacrifice in order to increase the likelihood of success.

Core Financial Assumptions – Ashish did not present a 20-page business plan.  He had a small pitch deck and more importantly, had a financial model that clearly defined the core assumptions of the financial model.  He had defined and understood each of these variables.  Just as importantly, he understood where he was and where he needed to be regarding these variables. This provided me confidence that he was focused and knew what he needed to do to be successful.  The alternative to this, which I usually get, is a P&L statement and hockey stick revenue forecast based on one or two customers (if any).  More importantly, the key variables are usually buried in the model and I cannot tell what is important and what is not.  Which means I assume the entrepreneur cannot tell what is important and not.  With Ashish, I asked him, what if you only reach a conversion rate of X. With one keystroke he knew the impact.

Timing – Ashish did not go out and raise money as soon as he developed the idea.  He waited.  He validated his core assumptions--not completely--but with enough certainty that he reduced the risk of the business dramatically, which meant less risk for investors.  Less risk for investors leads to high valuation, which leads to more ownership for the founders.  Good entrepreneurs maximize their own returns by raising money at the right time.  I respect this understanding and am more willing to invest when I see this in entrepreneurs. 

Angel and Venture Capitalist often say they invest in entrepreneurs, not ideas.  This is confusing and little misleading to entrepreneurs.  What is really being said is that good entrepreneurs are adaptable, use a methodology and financial modeling to develop and perfect ideas and because of this process, these same entrepreneurs leave the bad ideas behind. Coupling this process with the right time to raise money maximizes the investors and entrepreneur’s returns. 

That is what makes investors fall in love.

Steve Welch

Entrepreneur & Angel Investor

Check on my new book on Entrepreneurship

[stevewelch-blog]

Washington knows better than Entrepreneurs & Angel Investors

  Washington knows better than Entrepreneurs & Angel Investors

  Angel investors and entrepreneurs are not Wall Street bankers.  This distinction is obvious to you and me, but apparently not to Washington. The new Senate Financial Reform Bill, which is likely to be voted on this week, lumps the two together as one group. If allowed to pass in its current form, this bill will destroy the way in which our society helps entrepreneurs turn their crazy innovative ideas into viable job creating businesses.

  Angel investors are individuals that invest in early stage businesses that often consist of not much more than a folding table, a couple of computers and lofty aspirations. However, it is these early stage investors that often invest in companies five years or younger and help get high growth business off the ground.  Apple, Google, Facebook and a thousand other high growth businesses you have never heard of, all got their start because angel investors took a risk along side entrepreneurs.

  It is these types of business that lead in both innovation and job creation.  In fact a recent Kauffman foundation study found that between 1980 and 2005 every single net new job created in the United States came from a company 5 years old or less.  It  is clear that one of the keys to job creation in our country is to ensure that early stage entrepreneurs have access to capital.  This is why many of our political leaders and candidates are trying to craft policies that support angel investors.  In fact, gubernatorial candidate Tom Corbett is proposing an angel tax credit for Pennsylvania angel investors.

  With such clear understanding that entrepreneurs and angel investing are critical to economic growth and job creation, you would think our leaders in Washington would be doing everything possible to promote this type of bottom up economic development.  Unfortunately, we are seeing another example of top down Washington economic policy. 

  In its current state, Senator Dodd’s Financial Reform Bill would make two sweeping changes to the way in which angel investors and entrepreneurs can operate.  First, the bill would redefine who would be qualified to be an angel investor.  Currently individuals with either $1 million in investable assets or $250,000 in income qualify as accredited investors.  The new bill would change this to individuals with $2.3 million in assets or $450,000 in income.  According to the Kauffman Foundation, this would eliminate 77% of accredited investors.  This single handedly would reduce the amount of capital available to early stage businesses and stunt our much needed job creation.

  In addition, the new bill would require any company attempting to raise angel investment to seek SEC approval, which would take up to 4 months.  As an active angel investor myself, I can say with certain that companies in this stage can rarely wait four months for funding. They will simply be forced to close up shop. Yet again this is another example of government bureaucracies getting in the way of the thriving entrepreneurs that this country needs to unleash, not restrict.

  Angel investors and entrepreneurs had absolutely nothing to do with the financial meltdown of 2008, and no one believes they pose a systemic risk, so why are they being lumped together with Wall Street Bankers?  Proponents of the bill say that Washington is trying to protect people from risky investments.  

  Yes, angel investing is risky, and starting a business from scratch is even more risky.  However, it is this calculated risk taking that has allowed the United States to be the most innovative society in the world and has provided us a standard of living the world has never seen before.  If Washington insists on completely eliminating risk from the marketplace they will also eliminate entrepreneurship and innovation and this, in turn, will eliminate job creation in the process.

  As a society we need to be looking for ways to increase capital to early stage businesses.  We need to be trying to find ways to lower the bureaucratic burdens place on our entrepreneurs.  The Financial Reform Bill goes against both of these principals, and punishes us all by restricting our entrepreneurial spirit as a society.

    Steve Welch 

Entrepreneur & Angel Investor

Author of “We are all Born Entrepreneurs

[stevewelch-blog]

Why SquareSpace Rocks!

Why SquareSpace Rocks!

I am not a techy.  I am mechanical engineer with a background in material science and its applications in the biotech industry.  My first company Mitos had nothing to do with the Internet.  We were a manufacturing company the build disposable systems for biotech companies.  I say this because since co-founding DreamIt Ventures people assume I am a software engineer.

The truth is this, I understand web and mobile applications well, but have not written a line of code since 9th grade when it was C+.  I provide this background so that you can understand why I am so amazed with SquareSpace.

A couple of weeks ago a friend of mine put together a site for my new book, We are all Born Entrepreneurs, which is getting ready to release.  When I asked him to make some changes I could tell he was busy, and since I knew he put the site together in SquareSpace and I heard all the rave, I decided to try to make the changes myself. 

SquareSpace Rocks! I watched a 15 minutes video and I truly understand the base framework.  Over the last two hours I have revamped the site entirely.  SquareSpace has truly opened up the market for ordinary people to make very functional website that go beyond a static page.   Widgets are easy to tie in, form and data capture can be included with ease.  The value proposition is awesome.

I hope my friend will not be offended that I changed around his work.

[stevewelch-blog]

Sorry Zeta - Washington Knows Best

Sorry Zeta - Washington Knows Best

It is hard to find a politician that does not talk about entrepreneurs and their importance to job creation.  However these are empty words when actions do not match.  

Today is a reminder that few in Washington have any idea of how businesses get started in this county.  Buried in the Dodd Financial Reform bill are two provisions that would harm Entrepreneurs by resulting in less funding going into early stage high growth companies, at a time when this is exactly what we need. 

If left in the Financial Reform Bill section 926 would;

1) Require companies taking Angel Investments or certain types of Venture Investments to fill with the SEC.  Anyone who has had to work with the SEC will tell you this will be a time consuming and frustrating process.  Simply put this will be nothing but a burden on early stage companies.

2) The provision will double the net worth required to be an accredited investor from one million to two million.  This will significantly reduce the amount of people that are legally allowed to be Angel Investors.

Now more than ever we need funding for early stage companies.  There is not a single person that has tied the financial collapse to Angel Investing.  Why then does the financial reform bill include these provisions?

Just yesterday myself and three other active Angel investors meet with a company  (we will call Zeta for demonstration purposes) that is in the process of raising $200k.  We are likely moving forward with the deal.  How would this legislation affect Zeta? 

First, Zeta is out of money.  Now they will have to spend money they do not have on legal fillings for the SEC.  At least the lawyers will get rich.

Second, they have done an outstanding job of bootstrapping the business, but just as it is starting to take off they need funding.  We are hoping to close within a month.  Under this legislation that would not happen.  Zeta would be required to receive approval from the SEC which they claim could take up to 120 days, but several individual I know that have gone through an IPO think it will actually be longer.  Sorry Zeta you will have to shut down.

Second, at least two of the Angel in this deal would not qualify as Angel and therefore would not be allowed to invest under the new legislation.  Sorry Zeta even about to cover the cost of filing with the SEC and if you are able to survive for the next 120 days you will only get half the capital you need to grow your business.

This policy is bad for entrepreneurs, investors, and anyone looking for a job!

Write you Senators and tell them section 926 does nothing but harm entrepreneurs.

To learn more about this policy checkout Kauffman Foundation. 

http://www.huffingtonpost.com/robert-e-litan/proposed-protections-for_b_511284.html

[stevewelch-blog]

DreamIt Entrepreneurs Hit Prime Time

  HITTING PRIME TIME: AN ENTREPRENEUR’S DREAM COME TRUE Two young entrepreneurs landed appearance on ABC's Shark Tank after a summer with Philadelphia-based start-up accelerator DreamIt Ventures

PHILADELPHIA, PA – Sean Conway and DJ Stephan, founders of Notehall <www.notehall.com> lived every entrepreneur’s dream when they earned a full 22 minutes of airtime on ABC’s Shark Tank in the Fall of 2009, after spending the summer building their business with support from local start-up accelerator DreamIt Ventures (http://www.dreamitventures.com/).

ABC's Shark Tank is a show that pits entrepreneurs against seasoned investors, or “sharks,” in a no-holds-barred pitch session. Impress the sharks and you get an investment offer on the spot. Fail to impress and you face public embarrassment on national television.

Conway and Stephan had the opportunity to leave the show $90,000 richer, with an investment offer on the table from the real estate mogul Barbara Corcoran, one of the show’s sharks. They've since gone on to close a critical round of investment from other sources.

How an unlikely application turned into a TV appearance

Conway and Stephan never planned to be on TV. They were spending their summer at DreamIt Ventures, an intense three-month summer program that's been running in Philadelphia since 2007, which provides entrepreneurs with startup capital, mentorship, and a tight-knit community of top industry entrepreneurs.

Conway and Stephan credit the DreamIt summer program for refining their business model and the idea of a Notehall.com destination website. 

Originally, they had planned to have a different branded website with a different name for each school.  They also were challenged by the DreamIt partners to validate their assumptions, including their customer acquisition costs and expansion plan.

The DreamIt mentors also inspired them to try to make a big national splash and they were just waiting for the right opportunity. Then they heard about Shark Tank.

One of their peers in the DreamIt program, the founders of the ticket marketplace SeatGeek (www.seatgeek.com), told them that Shark Tank was accepting applications. On a lark, the Notehall team decided to apply.

“At first, all we had to do was send in a picture and a mission statement. It didn’t take long at all. Then we didn’t hear anything for weeks and pretty much forgot about it,” said Conway, Notehall’s CEO.

To their surprise, they received a 15-page application from the show, which made them think they might have a shot at making it.

But they didn’t want to get their hopes up or get distracted from their business. So they put their answers together quickly, including a video of them pitching their company. But the process still wasn’t over - they received a forty-page contract from the show even though they weren’t selected yet.

When came the big news that they were selected they hopped on a flight to L.A. just ten days later to film the show. It would be a full two months before their episode would air.

Two long months of waiting and preparing

Conway and Stephen had been a hit on the show, with three of the sharks fighting over the opportunity to invest in their company. Their segment was so intense and dramatic that ABC would decided to feature it in their ads and trailers for the episode.

But Conway and Stephan couldn’t talk about any of this, even with the people closest to them. “They were pretty adamant about saying, ‘don’t tell friends and family,’” said Stephan, the company’s Chief Marketing Officer.

So the Notehall team focused on preparing for the big day.

“We wanted to push it back as long as possible so that we had all of our operations in order,” said Stephen.

The day the show aired

Once their segment started, Notehall rocketed to the #1 most searched term on Google. Their website buckled under the traffic, which exceeded even their best hopes and their intense preparations. The site went down but they were able to bring it back within 5 minutes.

Conway grimaced at one of the most talked about moments of the show, when he wagered his stake in the company that they would hit $1 million in revenue within 24 months.

“I regretted it a little afterwards. They used it to make me look like the over-confident entrepreneur,” said Conway.

But that segment and the whole episode was a big hit for ABC. In fact, when ABC aired it for a second time in February, the Notehall website received so much traffic that it was brought to its knees for a second time.

The Aftermath

Notehall has grown considerably in the last few months with some help from the show but also according to plans they laid out before they had applied to Shark Tank.

Notehall was popular in just 3 schools in May, before they joined the DreamIt summer program and appeared on Shark Tank. Now they are used in 24 schools and growing fast.

“We ended up launching at 14 schools in the last semester alone. And we saturated many of these schools in terms of the how many students were active users of our system,” said Conway.

Their team has grown to over 10 people and they are renting their first office space, graduating from the makeshift office in Conway and Stephan’s apartment.

The Notehall team credits their summer experience in DreamIt Ventures for their recent success as much as they credit their appearance on the show.

“DreamIt really is the reason we are where we are right now,” said Stephan. We went into the summer thinking we were going to individualize every site for every school, even with a different name at each school. After about a month or so at DreamIt, and talking to all the mentors, and looking at all the metrics, we realized it wasn’t a good thing to do.”

What’s Next for Notehall

The Notehall team says their next big move is to expand to graduate and professional schools. By the end of the year, any student at any type of school should be able to exchange notes and study guides using the Notehall system.

They are also looking to raise their next round of funding and are starting those conversations now.

Otherwise, they are going to keep applying the formula that’s been working. It’s not easy, they say, but say they know it can work.

“Anytime you’re pioneering a new idea or a new concept, it takes a lot, a lot of education," said Stephan.

[stevewelch-blog]

What is the Right Question?

  The following is one of a series of blog post that were written while I was in China in the spring of 2009 as part of my Eisenhower Fellowship. If you have interest in China’s culture I think you will enjoy this series.

    What is the Right Question?

  Who?

A question that leads to a narrative of a person.

  When?

A question that leads to a definitive answers of time.

  Where?

A question that leads to a simple recitation of a location.

  How?

A question that leads to a presentation on how something was accomplished?

  Why?

This question stands out from all others.  It is a question that often leads to more questions than answers.  

  When, Where, Who and How are most often facts which can be memorized and recited back.  Answering these questions allows one to repeat what others have learned or done. 

  Why… requires a broader thinking, a judgment, an interpretation of facts.  A simple yet critical word which opens the minds and leads us down an infinite number of paths.  It often illustrates the root causes of a problem, uncovers the true need and provides a framework for a path forward.

  I have been fortunate to be surrounded by entrepreneurs, and I am convinced that one of the key differences in the way that their minds work is that they seek the answer to this one word sentence. Answering this simple question reveals new market needs which provide entrepreneurs the impetus to start new businesses. These new business are first to market and have staying power as market leaders.  

  There is no question that China is in the process of attempting to mimic the entrepreneurial success of the United States.  There have been successes in China’s entrepreneurial community, but most have been entrepreneurs that answered the question how.  How did Google capture the market in the United State, the answer a company called Badu.  How did Facebook so quickly rise to prominence, the answer 17 different companies with the exact features, look and feel of Facebook.

  China is throwing enormous sums of money at aspiring entrepreneurs to help them build business from the ground up.  Yet I believe they are attacking the issue at the wrong location.  Money alone can not create great entrepreneurs or startup companies.  

  During my time in China, I must have asked the question why over 100 times.  Often the question was asked about the most basic of political or economic issues.  More often than not the answers was “I have never thought about it.”

    American culture is rooted in heroes that not only asked the question why, but challenged the status quo once they discovered the answers. Individuals like Henry Ford who asked why the workers had to move to the parts.  Or patriots like Thomas Jefferson who asked why taxation without representation.  We have been blessed with a culture and created an education system that assistants in developing entrepreneurs from birth.  

  Until either China’s educational system or culture encourage the question, why, to be asked their entrepreneurial community will be restricted to success stories rooted in the question how.

[stevewelch-blog]

What is the Right Question?

  The following is one of a series of blog post that were written while I was in China in the spring of 2009 as part of my Eisenhower Fellowship. If you have interest in China’s culture I think you will enjoy this series.

    What is the Right Question?

  Who?

A question that leads to a narrative of a person.

  When?

A question that leads to a definitive answers of time.

  Where?

A question that leads to a simple recitation of a location.

  How?

A question that leads to a presentation on how something was accomplished?

  Why?

This question stands out from all others.  It is a question that often leads to more questions than answers.  

  When, Where, Who and How are most often facts which can be memorized and recited back.  Answering these questions allows one to repeat what others have learned or done. 

  Why… requires a broader thinking, a judgment, an interpretation of facts.  A simple yet critical word which opens the minds and leads us down an infinite number of paths.  It often illustrates the root causes of a problem, uncovers the true need and provides a framework for a path forward.

  I have been fortunate to be surrounded by entrepreneurs, and I am convinced that one of the key differences in the way that their minds work is that they seek the answer to this one word sentence. Answering this simple question reveals new market needs which provide entrepreneurs the impetus to start new businesses. These new business are first to market and have staying power as market leaders.  

  There is no question that China is in the process of attempting to mimic the entrepreneurial success of the United States.  There have been successes in China’s entrepreneurial community, but most have been entrepreneurs that answered the question how.  How did Google capture the market in the United State, the answer a company called Badu.  How did Facebook so quickly rise to prominence, the answer 17 different companies with the exact features, look and feel of Facebook.

  China is throwing enormous sums of money at aspiring entrepreneurs to help them build business from the ground up.  Yet I believe they are attacking the issue at the wrong location.  Money alone can not create great entrepreneurs or startup companies.  

  During my time in China, I must have asked the question why over 100 times.  Often the question was asked about the most basic of political or economic issues.  More often than not the answers was “I have never thought about it.”

      American culture is rooted in heroes that not only asked the question why, but challenged the status quo once they discovered the answers. Individuals like Henry Ford who asked why the workers had to move to the parts.  Or patriots like Thomas Jefferson who asked why taxation without representation.  We have been blessed with a culture and created an education system that assistants in developing entrepreneurs from birth.  

  Until either China’s educational system or culture encourage the question, why, to be asked their entrepreneurial community will be restricted to success stories rooted in the question how.

[stevewelch-blog]

A Subtle Priority

  The following is one of a series of blog post that were written while I was in China in the spring of 2009 as part of my Eisenhower Fellowship. If you have interest in China’s culture I think you will enjoy this series.

    A Subtle Priority

    At almost every meeting when the topic of technology entrepreneurship has come up there has been a mention of Tsinghua University.  Whether the impact of the alumni network or research and development it is clear that Tsinghua is the center of the country’s technology development effort. 

  After leaving a meeting at the University’s startup incubator which had over 400 companies under 7 million square feet, we decided to walk around the university.  I had heard over and over that the university is the most difficult in the country to get into with only a very small percentage of those that apply receiving admission.  As I walked I noted how that it was a nice yet typical college campus with relatively small three story granite buildings.  The walk ways were lined with trees and there were several grass area to lounge.   

  As we strolled through the campus I noticed that large industrial buses were continually coming into the campus.   As I watched the parade of buses and hundreds of people unload from the buses I asked the escort what was going on.  She replied that they were tour buses.  Tsinghua University is one of the largest tourist attractions in the country. 

  I was surprised at first.  There were certainly more attractive and historic places within Beijing.  But as I was thinking about the explanation I started to realize that the buses were full of families with young children, many of which were as young as five years old. They had come from all over the country. Often traveled for days in pack buses to see and pay respect to the institution that was educating the country’s best and the brightest. 

  The power and implications of this cultural norm is compelling.  It embeds a priority in the nation’s youth while at the same time providing a visual tangible path to success and a better lifestyle.

[stevewelch-blog]

A Relative Perspective

The following is one of a series of blog post that were written while I was in China in the spring of 2009 as part of my Eisenhower Fellowship. If you have interest in China’s culture I think you will enjoy this series.

    A Relative Perspective

  One of my many hopes for this trip is to spend at least an hour each day speaking with random local people.  Yesterday provided an excellent opportunity to spend some time with an ordinary Chinese couple.

  I had convinced my interrupter that we could walk to our next meeting which was about 5km away.  In an interesting process, we navigated our way to the meeting by stopping about every two blocks and asking for directions.  (No need for a map according to my escort).  One of the individuals that we asked for directions was an older lady who turned out to be extremely helpful and at the same time was as curious about me as I was about her and her husband.  Neither she nor her husband spoke English, so we walked for several miles with the interrupter translating back an fourth, a process that the older couple obviously enjoyed.

  It turned out that the husband and wife were in their 70’s, although I would have guessed that they were in their 50’s.  They were both retired from the local steel mill which they worked at for over 30 years. The couple was taking their daily mid-morning walk to the local park just outside of the Forbidden City.  

  As we slowly walked through the busy streets of Beijing there was, a striking difference in what each party was interested in.  They were interested in my thoughts on American politics and movie stars. I on the other hand was interested in the details of how they lived day-to-day in China’s largest city.  

  They had two children, a boy and a girl, each who had a single child. They were clearly proud of their son who was working at a private company in Beijing. They were excited about the recent announcement that the government was going to increase spending on healthcare, though few details were provided as to how this would be a good thing.  They survived off a monthly pension and a small amount of savings.  

  Since they were over 65, almost all government services were free, including transportation, healthcare, etc.  They lived in a two room apartment with running water, electricity, heat, but no air condition. They had a radio, but no television.  They certainly had heard of the Internet, but neither had ever used it, and most interestingly, never understood why anyone would want to! 

  The couple seemed genuinely happy.  

  They were a very nice couple, and I hope that they enjoyed our discussion as much as I did.  I’m sure I learned a lot more today about Chinese culture during my walk than I would have during a taxi ride. 

[stevewelch-blog]

The New Resource

The following is one of a series of blog post that were written while I was in China in the spring of 2009 as part of my Eisenhower Fellowship. If you have interest in China’s culture I think you will enjoy this series.

The New Resource

In the pre-industrial era, the act of boarding a small boat that was packed with hundreds of people and setting off across the sea in hopes of arriving in America was a tremendously dangerous task that required great risk, tolerance and sacrifice. These daring journeys required men, woman and children to live in small cots and hammocks packed together to maximize space during the long voyage. Food turned moldy and sour and water became foul and undrinkable. The discomforts were nothing compared to the risks of survival. Childbirth, disease and death in these tiny quarters were commonplace. Storms and pirates also claimed many ships during this journey that would typically take over six weeks.

On arrival, it was understood that America was not the place to go if you wanted an easy life. America was a difficult environment that often required hard manual labor to survive. The newly arrived were not asked who they were, but what they could do.  For those willing to work, the opportunities were endless.  The federal and local governments of the day provided access to what is now called the American Dream, by providing incentives to invest in cheap, fertile land in the west.

Between 1820 and 1920, 33 million immigrants arrived on the shores of America.  They viewed this journey as a calculated risk in search of a better life for themselves and their families.

Likewise, those who were happy with their lives or simply unwilling to take a great risk remained in their respective countries. As a result, compared to other nations in the world, America emerged as a country filled with a disproportionate number of calculated risk-takers. This culture has been reinforced as those who are not comfortable with calculated risk-taking typically fail to flourish in the American culture. What has emerged is a society that admires hard work and calculated risk-taking by those with a passion and purpose to excel.  This is a key ingredient to our success as a society.

Standing in the Matrix Ventures board room on the 27 floor in downtown Beijing, one can see massive buildings and new construction as far as the eye can see through the hazy Beijing air.

As we sit down to speak with our host for the day, Mark, it is clear that no interpreter is needed.  A brief introduction revels that Mark was born in California.  His parents had emigrated from China to the United States well before his birth.  Growing up in San Francisco Mark never learned a single word of Chinese.  After attending Stanford he held a couple of jobs in early stage businesses and one with a small boutique venture capital firm.  About 3 years ago he took a step back and tried to look at the world objectively. At the age of 26 his goal was to determine the best path forward which would provide him the greatest opportunity.

After an honest reflection of his situation he decided to leave the bay area where he was born, raise and worked his entire life (in fact, he had always lived in a 5 mile radius). His journey would land him at a University in Beijing were he quickly learned the basics of the Chinese language.  His American education provided him unlimited opportunities in this developing land with an endless need for well educated individuals with strong experience.

The need for knowledgeable talent is so well recognized by the Chinese government that several plans are in place to attract the world’s top talent.  The most compelling program is the one designed to attracted entrepreneurs.  In short, the plan provides aspiring entrepreneurs who have degrees from western universities the following incentives to start a business in one of the country's 54 high tech parks:

1) A subsidy of 1 million RMB ($150,000 USD) to start a business.  They take no equity; it does not need to be paid back.

2) Several other financing options by local governments which could provide loans for up to an additional 1 million RMB. Loans are typically guaranteed by the company not the individual.

3) Tax abatement – zero taxes in years 0-3, 17.5% taxes in years 4-7

4) Basically free rent at the industrial parks which have every imaginable resource an entrepreneur would need.

5) Assistance in finding local talent.

6) Guaranteed employment for one’s spouse.

The program also offers many other small benefits.

Mark's migration in itself would not be significant, if I had not met over 10 ex-patriots in the past week, all educated in the United States, who told me similar stories.  Like electricity that follows the path of least resistance, talent tends to follow the path of opportunity.

The governments of the past have competed over real estate and natural resource. Today, there is a quiet unknown battle brewing to attract and maintain the most valuable resource in the world: Knowledge.