Top investment trend: China
We're beating a dead horse here, but we can't refrain from beating it again. China is in. China is it. China is hip. Good grief, we've written about it here, here and here in just the last couple of weeks. We can't resist because China came up yet again last night at the annual Churchill Club event here in Silicon Valley. The dinner features well-known venture capitalists who predict top technology trends over the next year or two.
This was a heavyweight group: John Doerr, partner at Kleiner Perkins, Esther Dyson, Pundit at Large, Roger McNamee, of Silver Lake and Elevation Partners and Joe Schoendorf (pictured above), partner at Accel Partners. Moderator Tony Perkins does a good job of keeping the discussion pretty light each year, and this year took to poking fun of Dyson's rather roomy jacket. But underneath the laughs, the debate was a pretty heady one. Here are the 10 trends talked about (read them here).
If passion were the sole criterion, though, Schoendorf stole the show. He's a zealot, for China.
Japan, he said, may have reinvented manufacturing and emerged dominant in the automobile and electronics industries in the early 1980s. But China will pose the greatest challenge yet to America's standard of living. This is more than just the transfer of Silicon Valley technology to China's own huge internal market. China will emerge as an innovator in its own right. "China is poised to become a global leader in inventing the next big thing."
Thankfully, Perkins stopped Schoendorf from a lengthy soliloquy about the prowess of China's intellectual history. We'll simply note that Schoendorf cites the book Genius of China as a good place to start learning why China is more dynamic than many realize.
Here are Schoendorf's other points:
--First, plain hard work. Take Huawei, the Chinese network communications company. It has two groups of engineers, each working 13-hour shifts, so development continues around the clock. Schoendorf says: "They have a work ethic that may even shame our own."
--Second, pride. Masses of Chinese obtaining electrical engineering degrees here are heading back to China to do their part in the national revival. McNamee interrupted to agree, saying the Patriot Act had accelerated the trend by making it harder for foreigners to stay in the U.S. He called it the "single stupidest thing the country (U.S.) has ever done." He called China "a pure negative sum" equation for the U.S. Schoendorf, however, took issue with McNamee's suggestion that Chinese were getting forced to go back. "They went home voluntarily...because the opportunity was there."
--Third, a tech-hungry population and largest market in the world. China has a market of over 300 million cellphones, more than the number of people living in the U.S., and it's growing. The surge in instant messaging and other services that come with such usage is pushing the Chinese to innovate and to set standards that the world will have to follow. Cellphones are just the beginning.
--Stem-cells. This was a trend cited by John Doerr. But China, again, is looming, according to Schoendorf. This is among the most complex areas of work the world has ever taken on, Schoendorf said. The large $3 billion funding recently approved for stem-cell research in California will help push research forward, but he said proponents have a responsibility to fess up to the public that the first real applicable stem-cell-based cure may not be introduced for up to a decade. Doerr objected, saying there are several cures in development stage -- but he was careful not to give an exact date for actual product arrival. Where does China fit in? Well, Schoendorf warned that we in California will spend all this money over the next ten years and be sitting on all this great knowledge and research -- but won't necessarily have much concrete to show for it. Meanwhile, he said, "You know where the leading work is being done today? China."
We looked through our notebook of last night's hour-and-a-half debate for a mention of India. Didn't find a single reference. Perhaps those in attendance will correct me. Just saying.