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Aaron Bush is a student at the University of Texas at Austin and is a member of the Motley Fool Supernova team. Below is his on-the-ground account of his experience at the South By Southwest conference this week in Austin, Texas. It was originally published on the Supernova discussion boards and is being reprinted here.
Over the past five days, I had the privilege of attending South By Southwest (SXSW) – an annual world-class and cutting-edge technology conference that takes place in Austin, Texas (home of my school, The University of Texas at Austin). Serving as a volunteer in Startup Village, it was my responsibility to escort presenters/panelists to the correct rooms while ensuring that each session ran smoothly for attendees and speakers alike. Not only did I meet some impressive individuals (Guy Kawasaki and Kathy Savitt (CMO of Yahoo!) to name a couple), but I was able to observe some trends that I believe are changing the world as we know it.
Fellow Fools Lyons George and Rex Moore (whom it was a pleasure to briefly chat with) will likely be uploading some content covering specific SXSW events soon, so I'll take a different approach. Instead of detailing the specifics of what I encountered, I want to share with you seven undeniable, enormous trends that deeply resonated with me. Having spent the past six months weaving my way into the Austin start-up community as well, I've come to notice some patterns that have influenced both who I am as a thinker and how I perceive where the world is headed. Let's start with these seven:
1. Innovation is Accelerating
Did you know that today is the Internet's 25th birthday? As a 19-year-old, it is crazy to think that the way people do business, find information, seek entertainment, and more has radically transformed since the day I was born. In some ways that idea is downright mind blowing, but in another way it completely makes sense. As society has continuously found ways to pair new technologies to old routines, it has given all touched industries the ability to change at unprecedented rates. Sustaining innovations improve at arithmetic rates, but as soon as technology (especially microprocessors) finds its way into the equation, Moore's Law (the observation that technology becomes twice as capable (both smaller and powerful) at half the cost over the course of ~18 months) takes action and drives change at exponential rates. Very few industries remain untouched today, which means that for the first decade in forever all industries will likely witness radical improvements over the next few years. And to top it all off, there are more scientists working in the world today than there have been scientists in the rest of history combined. That number is only going to grow bigger too. Just think about the implications.
Of course, as the rate of innovation accelerates so does the rate of obsolescence. This little tidbit seems to be forgotten far too often – by businesspeople, consumers, and investors alike. It is no surprise that even the most successful giants fear what is known as the "garage factor" – the idea that kids out in a garage somewhere are creating the product/service that will render the present industry leaders irrelevant. Change can be swift and deadly. There is a plethora of examples of companies that have been blindsided by the garage factor. In fact, the average lifespan of S&P 500 companies has decreased by roughly 50 years in the past century. Some companies have proven to have better everlasting capabilities than others, but as a whole our country is churning through companies faster than ever before. As investors dealing specifically with technology companies (and more and more companies are turning technology based), the idea that disruption is happening at the fastest pace in history (and likely will get even faster) needs to be seared into everyone's minds. Having spent time within the start-up community, not only do you see what changes are coming before the rest of the world does, but you start to understand that there are thousands of unknown people out there fighting every single day to make a positive dent in the world – oftentimes at the expense of existing companies.
2. Entrepreneurism is Broadening its Reach
When I ask people what places they identify to be entrepreneurial hubs, the answer is typically, "Hmm let's see... Silicon Valley, Austin (note the bias), and sort of Seattle, New York, and Boston." Boy are things changing! Yes, those are all entrepreneurial hubs and are all growing at rapid rates, but that is only scratching the surface. In the US, entrepreneurial communities are sprouting up all over the place, from Kansas City to Detroit to Atlanta and more. The base is still small, so the trend has flown under the radar to most people, but the base is growing rapidly. Having identified the trend, I strongly expect to see a new golden age of entrepreneurial spirit. In fact, I think we are witnessing the beginnings of it right now. As Silicon Valley has displayed, success spawns additional success. Communities build and soon enough the successes start to pile up. From there, the process is little more than a positive feedback loop. When I look across the US, I see little, unique Silicon Valleys popping up. By the end of the decade, I think it'll be time to say, "Welcome to the new normal."
Even this perspective, however, is too shallow. The US is not alone in this endeavor. China's R&D spending is higher than ever before and we've seen certain Chinese companies snatch US executives to help scale their ventures. Dublin is booming. So is the Netherlands. Tel Aviv, London, Berlin, Toronto, Paris, Sydney, Sao Paulo, Santiago, Bangalore – the list goes on. Having witnessed several country based meet-ups over the past few days, I can confidently say that there are cutting edge companies in the works all over the world. Globalization becomes a more significant reality each day, which helps the barriers to innovation to fall, leading to more entrepreneurial participation. The new normal isn't going to be domestic; it is going to be international.
3. Women are Being Empowered
I'm sort of tired of hearing all of the statistics about how women are still nowhere close to being treated as equals to men in the workforce. Yes, I'll be the first one to admit it is an issue, but instead of focusing on and raging about the snapshot stats, I prefer to look at the trends. And when I look at the trends, things are changing and the momentum is building in favor of women. Sheryl Sandberg's book, Lean In, and campaign to "Ban Bossy" are the newest efforts to drive change, which is great, but part of the reason it is being so well accepted is because the change has already begun and there are women out there just like Sandberg succeeding in their own ways.
At SXSW, the trend was subtle but became increasingly obvious once I took notice. The conference is pretty guy heavy, although there were still plenty of women (if I had to guess, it was a 60-40 split – not sure). What was most interesting, however, was when I started breaking my observations down into age groups. There were men of all ages and the distribution seemed fairly even. When it came to women, though, there was definitely a younger bent toward the age range of 20s to 30s. This just showed to me that going forward women will be more equally dispersed as a percentage of the total attendee population (which represents leaders in participating companies too). This isn't only great for women, but it is great for all of us. Empowering women empowers the abilities of our overall workforce and allows us to tap into human capital never unleashed before. It's an exciting and powerful cultural shift.
4. Students are Evolving
Generation Y is very different from prior generations. Generation Y is the most educated, least religious, least political, most tech savvy, most daring (as in willing to take career-based risks), most environmental, most geared toward instant gratification (thanks Google), and least discriminatory generation to date – all backed by empirical evidence. These individuals grew up during the Internet boom, and the most nationally significant moments of their lives include 9/11 and the financial crisis of 2008-2009. They are the individuals weighed down by significant college debt among other issues.
These factors bundled together have brought about some interesting trends, many of which are still emerging. First of all, it is obvious to me that higher education is going to break at some point. After the health care debate is over, I predict that the next large debate will be in regards to education. We are seeing the rise of Khan Academy, Coursera, and other MOOCs, but this is just the beginning. Within the next decade it is very reasonable to expect significant disruption in higher education – from both a content and costs perspective. People have called me crazy, but I'll bet $1,000 that I'm right. The current model is unsustainable.
Going back to the entrepreneurial trend briefly, I have to note that students are a huge facet of the movement. Academic institutions are the perfect locations to work, find co-founders, access the community, and take risks that are hard to do in any other time period in life. At SXSW, some of the most impressive talks I heard were actually from college kids like myself. Being able to network with fellow student entrepreneurs from around the country was fantastic, and we all have taken note of the fact that we are just the forefront of the movement. Schools are starting to better serve student entrepreneurs by providing courses, local mentors, and even accelerators that help bring their companies to the next level. I'm living it myself here at UT. It's awesome – and only the inception of something greater. Entrepreneurs are being empowered and supported at younger ages than ever before. The word "start-up" has turned into a buzzword of sorts, but the implications behind this trend are powerful.
5. Companies are Becoming More "Conscious"
I never heard the words "Conscious Capitalism" mentioned during my SXSW tenure, but certain elements were pointing in that direction. In almost all of the sessions I attended, the speakers were talking, in one way or another, about how improving the quality, authenticity, and purpose behind their products/services leads to better outcomes. From branding to social media to how to treat employees, panelists were passionate about becoming better companies – companies that truly do add value to customers' lives. I loved hearing this. Conscious Capitalism is gaining traction even if the name isn't catching on in every instance. At some point, I find it likely that the majority of companies will follow this path, and the ones that don't will likely fall into deep trouble down the road.
6. Everything is Getting Faster
"Real Time" is a phrase I heard being thrown around over and over again. Real time data. Real time marketing. Real time servicing. Real time *insert any word*. It has gotten to the point where if you aren't saving time, you aren't considered progress. I don't necessarily agree 100% with that statement, but that is the vibe I was getting over the past few days. All sessions involving "real time data" related to anything (marketing, attaining feedback, health care, bootstrapping, etc.) were sold out in a flash. The idea of "improving speed" is something that has seriously caught on. If you aren't fast enough you lose a competitive edge. Speed has always been a battleground for companies, but now that technology has infiltrated all parts of the value chain, it is a more critical factor than ever before (and now, in certain cases, a battle of milliseconds). As entrepreneurs and investors, I'd be thinking about what companies out there are improving our lives by saving us time, and what other opportunities are out there that can be grabbed to improve our lives by saving even more time. (PS – I hate lines of all types. If anyone can create a way for all lines to cease to exist, you will be my hero for life!)
7. The World is Changing. So Must We.
The market moves both forwards and backwards. The world, however, only moves forwards. And when you start to think from a birds-eye global perspective, you come to realize that at the end of the day/month/year the convoluted Wall Street perspective doesn't actually matter. It matters zero. By focusing on Point A (now) and Point B (later) and stop fretting about the roller coaster stuck in between, a new, transcendent thought process begins to emerge. The world gains a new clarity in your eyes, and the new perspective allows you to emotionlessly identify the trends and ideas others have yet to separate from the day-to-day noise.
The world is changing. Innovation is accelerating, but so is obsolescence. Women and students are being empowered like never before. Entrepreneurs are riding the wave of a new golden age and will be the leaders who define the future as we will learn to know it. Not only are companies starting to become consciously aware of their actions, but they are becoming more demanding in providing convenience and comfort to us as consumers. It's slowly turning into a world of win-wins.
As we stand here at Point A and try to identify and pinpoint Point B, we must realize that to do so it takes a new perspective. David Gardner has always touted the idea of thinking like a venture capitalist, and I personally believe that this perspective will be the champion perspective, so to speak, for investors over the next decades. It is crucial to stay up to speed on the world around us, and by pinpointing areas of growth before it hits the spotlight and others see it will provide the explosive returns that lead to megaoutperformance. It's far less about DCFs, multiples, and the traditionally dominating principles we are told to adore (Oops! Sorry business school!) as it is identifying the groundbreaking innovations and smart leaders who have big plans to seriously change the world for the better. The next Buffett is likely going to be the individual who can consistently pinpoint innovative explosiveness and ride the trends while allocating intelligently to account for accelerating obsolescence.
As I come to understand this more clearly, I also come to realize how fortunate I have been to have learned from David all of these years. The more I read and open my eyes, the easier it is to see just how brilliant David and his investment principles are. So 1) thank you for bringing me in years ago and helping me up my game, and 2) I'm pumped for what the future holds. Being a businessman/investor over the years to come is going to be a complete blast.
SXSW was awesome and incredibly valuable. It's doubtful that I'll be missing it over the next several years. I look forward to giving another update next year (although it may be a little less philosophical :)).