his job in America—a position whose perks and prestige would have been unmatchable just five years earlier— coincided with Russia’s privatization bonanza. He calls that period his “lost years.” By the time Milner got back home, the choicest spoils had been divided. Instead of becoming an oligarch, he went to work for one: Mikhail Khodorkovsky.
But the experience taught Milner the value of capitalizing on paradigm shifts, and he began to look for the next one. He found it not in a political revolution but in a technological one. Milner was one of the first Russians to understand the impact of social networks. His first step was the classic developing market technique of copying what was working elsewhere: he bought and invested in Mail.ru, the Russian equivalent of Hotmail, and Odnoklassniki, Russia’s Facebook. The Cyrillic alphabet, which had sometimes been a barrier to Russia’s success in the global economy, turned out to be a boon for Milner, making it harder for Silicon Valley to conquer his domestic market.
But winning in the Russian technology market wasn’t enough for Milner. He decided that his failure in Russia had taught him to be faster and hungrier than the Americans he had met at Wharton. Now that he understood how to respond to revolution, he would take that talent to the place where the biggest transformation in the world was happening: Silicon Valley. Milner was the first major outside investor in Facebook, a coup he pulled off in May 2009 by agreeing to terms that seemed ridiculous to the Valley: $200 million for a 1.96 percent stake, valuing the five- year-old company at more than $1 billion, and with no board seats. When Facebook made an initial public offering in 2012, Milner’s stake was valued at more than $6 billion. The day the Facebook investment was announced, one of Milner’s colleagues approached the founder of Zynga, the online gaming company, at a conference; a few months later Digital Sky Technologies led a $180 million investment round. Groupon was easier—by the time the online coupon company was looking for investors, Milner’s prescience with Facebook and Zynga had made him a prestige investor.
In the United States, the technology revolution is the radical paradigm shift that is yielding windfalls for those with the skill, the luck, and the chutzpah to take advantage of it. The scale of the change is tremendous. Randall Stephenson, the CEO of AT&T, told me the shift was the biggest economic change since the discovery of electricity and the internal combustion engine.
And like Russia’s transition from communism to capitalism, the technology revolution is driving a paradigm shift that creates the opportunity to reap a windfall. Dan Abrams, founder of the Mediaite group of Web sites, describes it as a frontier moment. Whoever has the courage and the vision to claim that frontier, he believes, will lay the foundation for the business empires of the future. Actually, the opportunity is even richer and more complicated: the technology revolution isn’t a single moment of revolutionary change, the way Russian privatization was. Instead, like the industrial revolution, it is a series of paradigm shifts, each of which offers a financial windfall for those who are in the right place at the right time—and who have the ability to respond to revolution.
One example is the generation of app inventors who made a fortune by riding on Facebook’s coattails. In 2007, as that social network was taking off, it threw its platform open to developers as a way to multiply its own reach. That approach worked so well that by 2009 Facebook decided to close the floodgates a little bit, by controlling how apps spread virally. But for the developers who got their timing right, it was a windfall.
“There was a period of time when you could walk in and collect gold,” B. J. Fogg, a specialist in technology and innovation who taught a class at Stanford in the fall of 2007 that challenged students to build a business on Facebook, told the
Another wavelet is the shift from broadcast and cable television to Web-based video. Now that we have seen what the Web has done to the print and music businesses, that revolution seems inevitable. But to capitalize on it, the big question is timing. In 2011, when YouTube announced a big push to open up its platform to producers of Web-based videos, Michael Hirschorn, a writer and former head of programming at VH1, decided the digital television revolution was about to begin—and he was determined not to miss out. “I felt, having been late to several revolutions previously, that we needed to go all out for this,” Hirschorn told a journalist. He called his future partner and insisted, “We need to start a company now!”
If you have a PhD in math or statistics, the revolution you are probably trying to capitalize on today is big data—a term for the vast amounts of digital data we now create and have an increasing ability to store and manipulate.
If wonks were fashionistas, big data would be this season’s hot new color. When I interviewed him before a university audience in late 2011, Larry Summers named big data as one of the three big ideas he is most excited about (the others were biology and the rise of the emerging markets). The McKinsey Global Institute, the management consultancy’s research arm and the closest the corporate world comes to having an ivory tower, published a 143-page report in 2011 on big data, touting it as “the next frontier for innovation, competition, and productivity.”
To understand how much data is now at our fingertips, consider a few striking facts from the McKinsey tome. One is that it costs less than six hundred dollars to buy a disk drive with the capacity to store all of the world’s recorded music. Another is that in 2010 people around the world stored more than six exabytes of new data on devices like PCs and notebook computers; each exabyte contains more than four thousand times the information stored in the U.S. Library of Congress.
McKinsey believes that the transformative power of all this data will amount to a fifth wave in the technology revolution, building on the first four: the mainframe era; the PC era; the Internet and Web 1.0 era; and, most recently, the mobile and Web 2.0 era.
Big data will create a new tribe of highly paid superstars. McKinsey estimates that by 2018 in the United States alone there will be shortfall of between 140,000 and 190,000 people with the “deep analytical talent” required to use big data. And it will probably create a handful of billionaires who understand and capitalize on the revolutionary potential of big data before the rest of us do—indeed, one way to understand Facebook’s $100 billion market capitalization is as a bet on big data.
The technology revolution isn’t just about the nerds of the West Coast. We think of the computer revolution as a Silicon Valley phenomenon. But while most of the technology is invented there, many of its biggest beneficiaries are on Wall Street. Here is how Larry Fink, the billionaire founder of BlackRock, the world’s largest asset manager, with nearly four trillion dollars under management in the spring of 2012, described the impact of computers on finance.
“People have always asked me, ‘What happened in ’83? Why in ’83 did all of this intellectualism create mortgage securitization?’” Fink explained to me in his office just off Park Avenue in a 2010 conversation. “It was the technology revolution, which put computers on our desks…. It was really the advent of the PC and the availability of having individuals to use a computer, the capabilities of computers to analyze securities, risks, a lot of data… And that had never happened before…. And in my mind that was the beginning of the trading desk becoming more profitable. If you start looking at the profitability of Wall Street, Wall Street was never that profitable before ’83.”
And when computers arrived on traders’ desktops, Wall Street understood the rise of the knowledge worker had begun in earnest and went out to get the best ones. “Most of what Wall Street did is they understood,” Fink told me. “So where did they go? They went to the top schools, they went to engineering. They got these really smart quants…. They got some really smart people who could intellectualize a lot of data and come up with trends and formulas. To me a lot has to do with that.”
The Citigroup analysts writing about “plutonomy” describe it as the triumph of the “managerial aristocracy,” and that is certainly true. But, at its apex, the plutonomy is even more about the triumph of the entrepreneurs—a 2011 Capgemini/Merrill Lynch report estimated that 46 percent of the world’s high-net-worth individuals had founded their own businesses.
And while these individualists are fewer in number than the company men, their gains are much more spectacular—and their windfalls are one reason the super-elite are pulling away so sharply from the merely affluent. Richard Attias, a Moroccan-born French businessman who got his start in computer hardware and is now working to
