Tuesday, August 28, 2012

"Something Ventured": the business innovation that enabled modern telecommunications

The development of modern telecommunications and personal computing was, from a business viewpoint, largely the result of the development of venture capital as a way to finance innovation, according to the film “Something Ventured” (2011), directed by Daniel Geller and David Goldfine, distributed by Zeitgeist.

The story begins with the inventions of William Shockley in the 1950s, leading to the development of modern semiconductors that make all modern telecommunications possible.  After approaching many companies unsuccessfully, Shockley was able to get off the ground with Fairchild in the late 1950s.

By the early 1970s, semiconductors were used in video games, such as those coin-operated in bars, and then miniaturized somewhat as home toys.

The next big jump would come with the personal computer, particularly from Steve Jobs and Steve Wozniak.  Early investors were not that impressed with them at first, finding them having “b.o.” and “shooting for the moon” with the idea that individuals would actually need and want personal computers.

By the mid and late 1970s, banks and lenders where changing their business models, away from demanding collateral to looking at business plans and trying to predict future earnings as a justification for investment. 
Arguably, the more business-friendly atmosphere of the Reagan administration in the early 1980s was a big help to Silicon Valley. 

Venture capital helped develop the Tandem computer, which is a backbone device that financial institutions and other entities (like power companies and the military) use in environments where extreme robustness and reliability are required. 

In fact, the development of venture capital also probably drove the changes in computing culture, away from mainframes and inhouse applications, as in the 70s and early 80s (the atmosphere that my own IT career grew in) to minicomputers, use of packages, and then the idea of end-user control even of requirements, which went along with the development of the Internet but also caused a huge shift in career paths in the information technology world, as the old paths of “programmer” and “analyst” became too artificial.

We can ask ourselves, why did the "financial innovations" of venture capital morph into bundling of financial products (like credit default swaps)?  

Certainly, modern telecommunications is a testament to individualism.  "Working together" put us on the Moon but didn't create Facebook. 

The recent controversies over use of patents (the Apple-Samsung case) could certainly affect the future of venture capital, as could the basic questions about social networking company (Facebook) business models.

The official site for the film is here

The film is available for instant replay on Netflix but is not yet on DVD.

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