Some typically savvy comments from my friend Tom Baruch of CMEA. As much as politicians and promoters shout about innovation, and as much as we go on and on endlessly about the wonders of entrepreneurs, the reality is that in many important areas — like energy — real change takes a long time, making our investing orthodoxies non-viable. [-]
In venture capital, it’s really a simple equation—it’s about the mathematics of compound interest. We talk about Moore’s Law, and we apply it to genomics, we apply it to transistor density on semiconductor chips, we apply it to speed and power and memory and calculations per second, but that’s really only one part of it. I believe Moore’s Law has really accounted for the creation of the whole venture capital business due to the fact that it can create exponential change. If you look at every major innovation in energy since the mid-1800s, historically these have been preceded by a major innovation in materials science. The problem is that it generally takes 20 to 50 years before they’re successfully commercialized. Compound interest is also exponential, and there is no market big enough to create an acceptable return when you’re taking 20 to 50 years to make a difference. That’s the bottom line. I don’t hear many people talking about that—maybe it’s the elephant in the room.
From Forbes/Wolfe Emerging Tech Report.
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