Every Industry is Becoming an IT Business

From the latest Wolfe Research report with Future Ventures’ Steve Jurvetson (excerpts from the conference call transcript posted with permission from interviewer Steven Milunovich):

“I think the companies we like to invest in that are creating disruptive change have a bold star on their horizon, a vision, a dream, that is potentially unique to them. It is certainly not mainstream, and in some cases most people would disagree that it’s even possible. It’s just too big of a dream. Yet it can motivate employees, customers, and partners like nothing else. Like Apple felt in the early days, with a messianic sense of mission. We love that. This is the purpose-driven company, the mission-driven business writ large.

As companies scale, the mission also has an interesting effect of unifying folks over a timescale. What do I mean by this? If you take the other end of the spectrum, imagine a big business that has absolutely no mission, no purpose, no vision of where it’s going. It’s saying: “We just want to maximize shareholder value.” Imagine that was its mission statement. People will then debate endlessly over what timeframe — because the things that would maximize shareholder value in the current month or the current quarter are probably not the same things that would maximize shareholder value over ten years. Both may be legitimate goals, but it’s not obvious to all which to prioritize.

When you are purpose-driven or mission-driven, you have this incredible ability to operate as if you were a small team. I think team size is fundamentally correlated with success in any creative endeavor, whether it’s venture capital investing, entrepreneurial success, programming teams at Google or in academic settings. Whenever you get more than seven people, productivity goes through the floor. Three to five people is the ideal, there are a number of studies that have shown this. We somehow lose sight of that. I think it could be one of the simple reasons why small companies succeed and why small venture funds outperform large ones.

I rely on entrepreneurs to open my eyes to future inevitabilities. For example, autonomous cars. When I first rode in a Google X autonomous car in 2011, it was this incredible eye-opening experience. I just didn’t see it coming, it was like peeking into the future. It also happened to me when I first got in a pure electric car, which was one of the prototype builds for the Tesla Roadster. Like my experience with the autonomous car, it hits you like a bolt of obviousness that 500 years from now there is no way we would not be driving autonomous electric vehicles everywhere. It is much easier in my opinion to forecast meaningful change the farther out you look.

MEAT

“I can’t imagine that 50 years from now we’ll slaughter animals for food in the United States. We’ve gone a thousand years without any fundamental change in how we manufacture meats. Imagine if there was a much better way, I mean making steak, chicken, and salmon fillets without any of the inefficiency problems. Raising animals uses 33% of global arable land and water, 41% in the United States. It is one of the major sources of greenhouse gases, especially methane, which in the short term is the worst of the greenhouse gases.

What’s an alternative? Companies like Memphis Meats are growing meat—not substitute meat, not plant meat, but meat from cells. They take some stem cells from the organism, grow, proliferate, and immortalize them. That’s done routinely in the pharma industry. It scales up very well in three dimensions, much like fermentation itself. Then you differentiate those cells into skeletal muscle by growing them on a scaffold — some edible collagen or aerogel — and you get meat, real meat. You can improve on that by blending or texturing. You could make something 10x better than Wagyu beef for much less cost. But initially they are just making the traditional meat products.

I believe we are in an era of accelerating technological change. We always have been, we just haven’t noticed the pattern. The change cycle is shrinking from generations to successive graduating classes, and I think that’s leading to a renaissance of opportunities in enormous markets. Think about agriculture and how little progress and disruptive change there’s been. Imagine large disruptors coming into every industry. Our job as investors is to try to figure out when and where that’s happening.”