It began in high-tech. Twenty- and thirtysomethings starting their own companies and making millions. Bill Gates, Steve Jobs, Peter Norton, to name just a few. Silicon Valley of the 1980s was like the California gold rush of the late 1840s. Anyone who could write a few lines of code or put together a computer in the garage tried his luck.
But like the gold rush, while a few struck it rich, the vast majority went bust. "For all the great success stories to come out of Silicon Valley, it has spawned many, many more failures," says David Needle, a columnist for Techweek magazine who has covered the high-tech industry since 1981.
Even in failure, however, all that entrepreneurial effort didn't go to waste. It engendered an attitude that has spread throughout the rest of the country: If you're going to take the entrepreneurial plunge, do it while you're young. Success is more glorious, and failure, if it happens, holds less sting.
Not that the accent on youth in high-tech is due merely to energy and attitude. In scientific fields, breakthrough insights are commonly accomplished by the young. Newton invented calculus at age 23. Einstein developed the theory of relativity at 26. Marie Curie discovered radium at 31. What is new is the ability of youthful, high-tech entrepreneurs to take their insights and raise enough money to base their businesses on them.
In large measure, this phenomenon is due to the birth of the personal computer industry. The large capital investment previously needed to manufacture high-tech products simply isn't required to write software or put together computers from parts available at any local electronics store. And once the first wave of microaged millionaires hit, investors quickly lost their shyness about lending money to 25-year-olds with nothing to show for themselves but brains and, perhaps, a profitable idea.
As for the many businesses that didn't pan out? Like a miner whose hands have grown calluses from constant use, Silicon Valley developed a gritty indifference toward failure. It had to, because high-tech companies almost by definition run on the edge of the known. New technologies must be invented, tested and manufactured. At any step along the way, a minor glitch can send an entire project back to the drawing board. Even if the technology does fly, it still has to be marketed to a fickle public known to greet "revolutionary advances" with a bored yawn.
"There's a higher degree of risk with what we're doing because you not only have business risks, you also have technology risks," says Jim Kean, 36-year-old founder of Sapient Health Network, an Internet health-care information provider. "With a leading-edge technology company, what you're really doing is fundamentally changing business practices."
In Silicon Valley, investors and entrepreneurs know these truths from 20 years of seeking the mother lode, and that has helped build a tolerance for failure. In the world of techies, however, it's a tolerance with a decided prejudice for the brilliant flop such as GO Corp.'s portable pen computers, not one of which ever sold, or the supercomputers by Thinking Machines, which sold but never made a profit.
"I think you have to distinguish between failure in trying to come up with new ideas for products and services, and the failure of a business that was poorly managed," notes Kathleen Allen, professor of entrepreneurship at the University of Southern California and author of Tips and Traps for Entrepreneurs (McGraw Hill, $14.95, 800-262-4729). "An innovative high-tech company that ultimately fails or somebody else steps in when there's a shakeout, I don't think those people are looked upon badly."
Jeffrey Shuman is the director of entrepreneurial studies at Bentley College in Bentley, Massachusetts. David Rottenberg is a business writer. Together, they co-wrote The Rhythm of Business: The Key to Building and Running Successful Companies (Butterworth-Heinemann, $18.95, 800-366-2665).