Life 2.0 for Web 2.0 – Rich Karlgaard, Transcription Sample

The original podcast can be found here

0:00:00.0 John Furrier: Welcome to the Podtech.net info talk with Rich Karlgaard from Forbes who’s also a distinguished author of a book, Life 2.0. Welcome to the podcast.

Rich Karlgaard: Well, thank you so much John Furrier.

0:00:12.5 John Furrier: So the book’s coming. It’s been out. It’s coming out in paperback, you mentioned. Life 2.0. Me, I do a lot of talking about Web 2.0. Your book’s kinda like that. I mean the world is changing. We’re being distributed around. Costs are changing. Talk about your book and how you, how you saw that.

0:00:27.3 Rich Karlgaard: Well, Life 2.0 is all about reinvention and all of this connecting technology really allows people to match what they can do well with where they want to live. And that’s particularly important for people who live in New York, and Boston, and Silicon Valley, places that are very expensive. You can now do the kinds of sophisticated work that formerly you could do only in Silicon Valley, in Boston, now in so many places across America. And, given the wide disparity in real estate prices, it now costs 6 or 8 times as much to live in New York or Silicon Valley as it does to live in Montana or Arizona, I thought it was a perfect time to write a book about people who were enjoying cheaper real estate but not giving up any of the sophisticated work that they were doing. And that’s what I set out to chronicle in Life 2.0.

0:01:23.4 John Furrier: And so this is also, really, about an impact of technology. I mean a digital impact that’s kinda revitalizing areas that were traditionally a divide or a digital divide. I mean areas like Arizona and Scottsdale. These areas are growing. I mean faster than other places now. Arizona, I mean Scottsdale, and Phoenix is bigger than Philadelphia.

0:01:42.1 Rich Karlgaard: Yeah, it really are [sic]. Because Scottsdale and Phoenix are a much more pleasant place to live [sic]. And previously, these communities were hampered by a lack of an infrastructure. But with broadband, wireless and all of the technologies that have come online, that is no longer the case. So in 2002, I married my new hobby, which was learning to fly a single engine airplane with this interesting chronicling the lives of people who were reinventing themselves in cheaper but better areas. And I flew around the country and visited people who were doing incredible technological things in unlikely places. An example would be, a guy who started an Internet company called Printingforless.com in Livingston, Montana. Livingston, Montana: population 6,000. Printingforless.com is where you go if you want to get a great four-color printing job for not a lot of money. And basically, printingforless.com will take your PDF files, your Quark files and then bid them out to printers around the country. So it’s an auction. And, you get great color work for a low price. But it wasn’t Silicon Valley that came up with this model. It was a little guy named Andrew Field and in Livingston, Montana.

So those were the examples of stories I ran into as I flew my plane around the country.

0:03:05.2 John Furrier: Ray Kurzweil and I had a chat last night about how the future’s gonna be really revolving around distinct interest groups. And the Internet enables a guy to start a company in Montana and compete with companies in Silicon Valley, Boston, etc. So, you have this enablement model on the… What you’ve found in your book, did you find people actually were moving more towards starting companies, self-employed? Were they actually remote workers? What was your findings on that?

0:03:31.3 Rich Karlgaard: I found a mix of people who were self-employed. For instance, if you think about a middle-aged person who’s downsized out of their white-collar job. They were making well into the six figures and now all of the sudden they are faced with the prospect of meeting their mortgage in California and paying for their kids’ college tuition. And, they don’t have a job. They go into the freelance market. They find out they are able to get income but not as much income as they were able to get before.

0:04:02.5 Well, the perfect solution for that is to find a place in the interior where the costs are a lot less. Or, maybe you could take the equity in your California home and buy a home for cash in Montana, or Idaho or many other pleasant places around the country. And now, you have the monkey off your back. Now, you can consult and make your 50 or 75 or 100,000 [dollars].

John Furrier: And sell their home too.

Rich Karlgaard: Yeah, and still have a home.

John Furrier: And make money on that.

0:04:26.0 Rich Karlgaard: Yeah, you’ve sold you’re home. You’ve traded your equity. You’ve bought a new home for cash. No mortgage payments. So, a lot of people doing that. But a lot of people, and I kinda of expected that but what I didn’t expect was to see companies starting from scratch and becoming, going from 0 to 100 million in revenue, in small places and companies going public. A company called Right Now Technologies in Bowsman, Montana is now at a 100 million dollar sales run rate. It went public last year, the first publicly traded company in Montana. And, you think the CEO and founder, Greg Gianforte, is able to offer people jobs that pay well. The money goes a lot farther in Montana than it does in California. The people have great lifestyles. He discourages his employees from working on the weekend. Can you imagine that? I’ve never heard of anybody in Silicon Valley doing that. So people have great jobs, stimulating company, went public last year and they can still fly fish or ski on the weekends.

0:05:28.4 John Furrier: What kind of pressure does this put on Silicon Valley and these epicenters? I mean I talk a lot about, “Is Silicon Valley changing? Is it back? Is it evolving?” I mean, I do a lot of things with RSS and it’s all about syndication but, you know philosophically, is Silicon Valley being syndicated now? So, the benefits of Silicon Valley are actually being pushed out to these areas? And how you see Silicon Valley evolving?

0:05:49.7 Rich Karlgaard: Well, that’s a great question with a lot of answers. I think this Silicon Valley model is being syndicated now. First, let me defend Silicon Valley. It’s still the entire package. There’s still a density of engineers, venture capital, professional service firms who can work with startups. The whole idea of going out of, leaving your company and doing a start-up is not alien to Silicon Valley. So it has the complete picture, as no other place does. But it’s become terribly expensive. Caldwell Banker says the average home in America is three bedrooms, two baths, 22,000 square feet, quarter acre. That home, the medium price for that home just went over $200,000 in America and if it has new kitchens and baths, it’s about $300,000. Well, that home in Palo Alto we know is over 2 million dollars.

0:06:41.7 So, Silicon Valley has all the talent but it can support only certain kinds of companies, now. Isn’t it interesting that in 40 years, we’ve gone from silicon, the semiconductor industry, to personal computers, to software, to Internet companies? And now the kinds of companies that work and thrive in Silicon Valley are companies like Google, that have, that is all IP, all IQ. And those companies can still work in Silicon Valley. But Google has a revenue per employee of about 1.7 million dollars. So, if you’re a 1.7 million dollar per employee company, you can afford to live in Silicon Valley. If you’re a 300,000 dollar per employee company, you can’t afford to live in Silicon Valley.

0:07:27.7 So, Silicon Valley has priced itself with its Manhattan kinds of prices. It’s priced itself into pure IP companies now, in my opinion. So, other kinds of companies that are a little bit further down the value chain, I think will find themselves going out into the country to university towns, gathered far and wide. The Silicon Valley alternative is to do a start-up with a very few number of people and then outsource right away to India and China. So, we’ll see which model works over the long term.

0:08:03.3 John Furrier: That brings a lot of challenges. I mean, someone in North Dakota, Nebraska, Iowa, North Carolina, could be intellectually unable to compete for a job. So it’s managing that if you’re in Silicon Valley, you’ve got the brain trust, IP, whatever. But you have to bring in multiple outside components. That’s a challenge.

0:08:21.1 Rich Karlgaard: Well, let me tell you about a town that most people wouldn’t choose to live in and yet is one of the fastest growing cities in America, Fargo, North Dakota. Now, Fargo, North Dakota is in a part of North Dakota that is flat as a pancake. The winds howl nearly year-round. It gets to be 40 below (zero) during the winter. Not too many people would choose to go there, except people have. In 2001, the city’s best entrepreneur Douglas Burgum sold Great Plains Software to Microsoft for 1.1 billion and Microsoft has left the Microsoft Business Solutions arm, which is the old Great Plains, in Fargo. 8% of Microsoft’s North American workforce now is in Fargo, North Dakota. But, now Fargo, because of the success of Great Plains, has a self-confidence that it didn’t have before and it’s attracting all kinds of technologies. One of the hottest technologies, as we all know, is RFID chips and one of the best companies is a California company, called Alien Technologies out of Morgan Hill. Alien has located its R&D, not it’s low-cost manufacturing but it’s R&D, in Fargo, North Dakota. So, you know, one person can change the whole character of a town and sophisticated R&D work can be done in Fargo, North Dakota now.

0:09:47.4 John Furrier: And that’s a major shift. I mean, North Dakota has traditionally had problems with young people leaving cause there was nothing there. So they had a lot of out migration but now this is more in-migration. They go to college, go to USC, go to Stanford and they come back.

Rich Karlgaard: Well, I think that, you know again, you’re absolutely right. And you circle back to this amazing disparity of costs. The CEO of Caldwell Banker told me that in, over the last seventy years, the ratio of the price of houses on America’s urban coasts versus the heartland is the widest it’s ever been. The price gap is the widest it’s ever been. And yet the information and opportunity gap has shrunk to practically nothing. Because over that same 25 period, 25-year period, as the prices of, price gap has gone wide, the information gap has shrunk because of overnight delivery services, cable TV, cell phone coverage, broadband internet coverage.

00:10:46.2 So, you don’t pay the penalty being in North Dakota that you paid 10 or 20 years ago. Now, it’s true you don’t have the density of entrepreneurs and this is especially true. Access to capital is a little tougher but your costs are a lot lower. And, the models that work in the heartland aren’t so much the venture capital backed models. They are the go out and get a customer early and grow a business. The old fashioned organic growth

0:11:13.0 John Furrier: So, you guys at Forbes obviously have a great reputation. I mean, from a public cases’ standpoint, you know. Unprecedented great magazine, and you track a lot of stuff but aren’t we talking about the impact of the Internet and the fact that this is an unregulated distribution of wealth that is the side-effect of technology? I mean there’s no government involvement here. I mean in fact if the government provided more Internet access, it probably would be a more faster increase of distribution of wealth. I mean, isn’t that what’s happening, with distributing wealth now?

0:11:39.3 Rich Karlgaard: Well, you know, one of my favorite sayings was said by Walter Wriston, who was a lovely gentleman, died earlier this year. He’s on the board of Forbes.com but he was mainly known for his leadership in America’s banking industry through a period of deregulation. He headed Citibank and Citicorp during the 70’s and 80’s and he had a saying that I think that goes right to your point. He said when you have electronic networks and these networks touch individuals and their pocketbooks, their brains and their pocketbooks, he said, once you have that, and we now have that thanks to the Internet, he said brains and money will always go where they’re welcome and stay where they’re well treated. They’re very portable now.

0:12:24.0 So, we’re seeing the distribution of brains and capital. Bill Gates now says he would rather be a poor, bright kid growing up in China than an average IQ kid growing up in the United States. And he said twenty years ago, I would have said the opposite. Twenty years ago, the kid with average IQ, growing up in the United States would have had better prospects in the world than the poor, bright kid in China. But now, the poor, bright kid in China has better prospects because capital reaches out and finds that person now.

0:12:56.1 There aren’t enough entrepreneurs in China. But, the entrepreneurs are coming. It’s a very entrepreneurial culture. And success begets success.

John Furrier: I mean, to me the Internet, what you just mentioned, is so profound. I mean, it’s about changing peoples’ lives I mean with podcasts and then social media, you know. This is all about impacting people and it’s phenomenal.

0:13:16.8 Rich Karlgaard: We are in the era, the great era of personalization, aren’t we? I mean from podcasting to social networks to people walking, choosing their own music with iPods to blogging. And if we talk about today in Telecosm, and Ray Kurzweil talked about within a generation, we’re gonna have desktop manufacturing that will level the playing field between big companies with large capital budgets and entrepreneurs who don’t have a lot of money but just have creative ideas. I think we’re entering a renaissance of small business and entrepreneurship. We’ve seen golden ages of entrepreneurship before and in recent history but I think we’re entering, truly a period of profound entrepreneurial creativity. And I think big companies in expensive areas are the ones that are going to be most impacted to the negative.

0:14:12.1 John Furrier: Yeah, well we’re here with Rich Karlgaard at the Telecosm conference put on by George Gilder and Steve Forbes, the Gilder-Forbes team. And, it’s just a great conference. We’re kind of coming up to our segment limit here, 15 minutes, but always ask my guests a final question. A prediction, five years from now, what’s gonna be different in our world?

0:14:31.0 Rich Karlgaard: Well, I think that the evolutionary thing you can predict is that we’re going to have more bandwidth. And, particularly wireless bandwidth and that is just gonna increase the mobility. And with increased mobility, we’re going to have the kinds of career and lifestyle choices, finding the ideal combination of career choice and lifestyle choice that I chronicle in my book Life 2.0. And, I think that’s good for us. But it does mean that we are responsible for, we have to take responsibility as individuals for these choices. We can’t look out for paternalists, the government or companies to make those choices for us.

0:15:09.6 John Furrier: That’s a great prediction. More connectedness, more personal accountability, more social interactions. We’re gonna be in a Web 2.0 environment and a Life 2.0, soon to be Web 3.0 and Life 3.0. Rich, thanks for the podcast.

Rich Karlgaard: Thank you very much, John.