Monday, December 18, 2006

Column: Andy Grove's Re-entrance

Forbes.com


Letter From Silicon Valley

12.18.06, 6:00 AM ET
Burlingame, Calif. --Andy Grove understands how to make a re-entrance like no one else.

Not the pop-star flounce onto a stage, heralded with flashing lights and throbbing background music. But the kind of entrance that matters--the ability to look at a growing problem that surrounds him, step away--then come back in with a fresh solution.

I was reminded of this skill recently when the retired Intel chairman joined Harvard Business School professor Richard S. Tedlow onstage recently here in Silicon Valley to discuss Tedlow’s newly published biography, Andy Grove: The Life and Times of an American.

At 70, Grove is still wiry and hip enough to sport a black leather bomber jacket, even though his hands tremble slightly due to Parkinson’s disease. He smirked as Tedlow described how Grove originally told him that the idea of someone writing his biography was the “stupidest idea” he had ever heard. But Grove quickly relented and gave Tedlow his full cooperation.

What comes through in the biography and in the discussion onstage with Tedlow is how Grove made his biggest decisions: by stepping outside himself and viewing the situation coolly, at a distance.

Case in point: a fateful decision in 1985. At the time, Intel was reeling from losses in its memory chip business due to sharp competition from Japanese manufacturers. Grove had spent months wrestling with the problem, including petitioning the U.S. government to take action. Frustrated, he asked Intel co-founder Gordon Moore, "If we got kicked out and the board brought in a new CEO, what do you think he would do?" Moore’s answer: quit making memory chips. "Why shouldn’t you and I walk out the door, come back and do it ourselves?" Grove responded. So they did.

Intel faced an similarly crucial juncture in the early 1990s when Grove had to bet the company on a single chip design direction: Should Intel continue making its x86 class chips or should it follow a more technologically elegant approach called “reduce instruction set computing” or RISC? Intel’s engineers split into warring camps; RISC was the hipper choice, the one that seemed to prove that Intel’s engineers were the best. Grove even took part in a jocular in-house Intel video in which he wore dark sunglasses and rapped about the virtues of RISC chips.

Still, Grove listened when colleagues approached him with a nonengineering-based argument: Abandoning the x86 architecture, they said, would leave Intel’s huge base of existing customers stranded. None of the software written for x86 chips would work smoothly on the newer design. “They saw through all the technical mumbo jumbo,” Grove recalls, “and focused on the most important, basic factors.” Grove stepped away from his own inclination to pick a more technologically sweet solution and stuck with the x86 design. Intel’s value soared.

Grove was slower to step outside his own beliefs when customers discovered a subtle flaw in the ability of Intel’s Pentium processor to carry out certain types of arithmetic functions. Grove dragged his feet on apologizing to customers until the howling both inside and outside of the company was deafening. In his book, Tedlow describes the Pentium gaffe as Grove’s biggest mistake.

Onstage with Tedlow, Grove was impatient with that choice. Yes, a mistake. But his biggest? Grove says he agonizes every day that he didn’t leave Intel with a clearer road map for the future. Intel’s most recent track record has been mixed. Its high-end chip, Itanium, which took root during the end of Grove’s tenure, proved too ambitious and left the company vulnerable to competitor Advanced Micro Devices. Intel is also still seeking a clear path in a world where countless little handheld electronic devices are emerging as the next new thing.

Tedlow countered that Grove was asking too much of himself. “Every generation has to solve the problems it faces,” he told Grove and the audience. “It’s hard to solve the problems that will happen 10 or twenty years out.”

“That attitude brings an anti-investment, pro-short-term perspective,” Grove snapped back. “Some problems take longer than the tenure of a CEO,” he added.

These days, Grove has taken on a couple of other big problems, ones that will certainly take more than a few years to right: improving the U.S. health care system and preserving America’s separation of church and state.

Once again, Grove is trying to step outside his personal concerns to see the problems in a clear light. Almost a third of all Americans lack adequate health care and increasingly turn to hospital emergency rooms for simple medical care--a disaster in the making, worries Grove.

Existing technology can help, he believes. Grove is a fan, for instance, of walk-in medical clinics at drugstores instead of emergency rooms for many procedures. He advocates keeping people’s medical records in PDF files on the Internet to cut costly mistakes and unnecessary procedures. Wireless sensors that kept elderly or infirmed patients in close contact with medical providers could help them stay in their own homes instead of heading to nursing facilities. “We’re using technology to achieve extraordinary care for a few people. What intrigues and motivates me is the idea of using mass technology to help many more,” he says.

Just as important, Grove believes, is protecting the U.S. from the kind of sectarian strife that has ravaged so many other countries, including his native Hungary, where he saw relatives suffer first at the hands of the Nazis and later under the Communists. A clear separation of church and state--as set forth in the U.S. Bill of Rights--is essential for creating an environment in which people can believe what they choose and tolerate differences among their neighbors. Grove is supporting an online petition drive calling for the renewed separation of church and state.

Stepping outside your own concerns and pride, finding a new solution and then reentering is tough for any of us. It’s far easier to pontificate on other people’s problems than to see our own clearly. But as Grove has shown, true self-awareness can be our most valuable asset.

http://www.forbes.com/2006/12/16/intel-andy-grove-tech-cz_ec_1218valleyletter_print.html

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Friday, December 08, 2006

Column: 'I Will Not Cheat!'

Forbes.com


Letter From Silicon Valley

12.08.06, 6:00 AM ET

A chunk of the Hewlett-Packard spy scandal ended yesterday not with a bang but a snivel.

A snivel, because the $14.5 million penalty the government has levied on HP amounts to a “tsk, tsk,” for a company with a $109 billion market capitalization.

A snivel because the money will go into a kitty that the California attorney general’s office can use to investigate other companies. During the heat of the revelations, HP executives asserted that other companies have employed the same pretexting techniques--in some cases, even the same investigators. The California attorney general’s office apparently spent $350,000 investigating the charges against HP.

With the $13.5 million that HP is now contributing to the “Privacy and Piracy Fund” for investigating other allegations about lapses in consumer privacy or intellectual property piracy, the government could, in theory, chase down another half dozen or more companies that have been spying on people they don’t trust--whether those people happen to be board members, employees or journalists. Then it can scold them too--and move on.

Like a grumpy parent, the government frequently slaps down extra regulations when companies have gotten out of line. Yet it’s not clear that those regulations benefit anyone but the lawyers who get paid to enforce them. The U.S. government spent more than a decade pursuing antitrust actions against Microsoft, to the delight of its competitors. During the height of that action, Microsoft chairman Bill Gates repeatedly said that he was more worried about some unknown upstart snatching Microsoft’s business than he was about government action. Like it or not, Gates was essentially right--and Google is proving his point.

Threatening to chase after companies that abuse privacy rights--particularly when the penalties are tiny--won’t change behavior. Adding more regulation to HP’s internal operations will not change those practices, either.

I’m more of a fan of public service as a penalty for transgressions. HP should be required to show the world the value of ethical behavior. How exactly should it do this? Perhaps it should be required to give printer cartridges to California schools with wrappers that say “Don’t cheat!” Maybe its executives should be required to write “I promise not to spy on people!” a hundred times and then post the papers on billboards on Highway 101.

I asked some school kids how they would punish someone who snuck a look in a private notebook: they said that they should have the right to look in the other guy’s notebook. That’s not a bad idea--maybe HP should award major news organizations an all-day pass allowing journalists to poke into filing cabinets and e-mail queues.

If you’ve got a great suggestion, let me know--maybe we’ll post a list and HP will voluntarily do the right thing.

Public opinion can be the strongest medicine of all. We need to demand that companies do the right thing--and praise the ones who do it and shun those who don’t.

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Monday, December 04, 2006

Column: A Walk on the Virtual Side

Forbes.com

Letter From Silicon Valley

12.04.06, 6:00 AM ET

BURLINGAME, CALIF.--As a reporter, I try to follow the story wherever it leads, editors and expense accounts permitting. In February, I hopped on a plane and headed to Bangalore, India. Last week I thrilled my editors with a more parsimonious proposal to visit Second Life, a booming virtual world.

Second Life, created by San Francisco-based Linden Lab, is both easy and difficult to explain: Science fiction fans will recognize it as an attempt to create the visions of cyberspace described in novels by authors like William Gibson and Neal Stephenson. Another explanation: It’s a video game, like World of Warcraft or Grand Theft Auto, that lets players wander around doing whatever they’d like. Except it’s not a game--there’s no goal to accomplish and no one to beat.

It is easier to describe Second Life’s growth: Very fast. Second Life went live in June 2003. Last December, it had 92,000 users, and about 4,200 typically played at one time. Now the site has topped a million unique customers and on Sunday crossed the threshold of 18,000 users at a single time. Half are from outside the U.S.; almost 44% are women.

Those numbers are still tiny compared to Google's YouTube or News Corp.’s MySpace, to name the two most prominent growth stories of the second tech boom. But the buzz about Second Life is growing even faster than its user base.

Part of that growth stems from Second Life’s virtual economy, which theoretically lets users make money by buying and selling items and land in cyberspace; last week, a user claimed to have become a real-life millionaire based on her Second Life exploits.

Although in practice it might be hard for a single person to walk away with that big a check, users are steadily turning their Linden dollars into real ones. In October, for instance, Linden Lab paid a total of 917,000 real dollars to users in exchange for their virtual ones. Since October 2005, the company has paid out 6.8 million real dollars.

Marketers love Second Life, or at least the idea of Second Life, as well. About 40 real-world companies have established beachheads, more for pumping up the “cool” factor of their brands than for moving real products. Sony BMG, the music label jointly owned by Sony Corp. and Bertelsmann AG, has a spot where musicians perform. In November, IBM and Dell opened big sites; the president of Nintendo of America has been making the rounds as well. Time for me to go, too.

Or at least try to go. My aging home computer could help me buy a round-trip ticket to India, but it balked at taking me to Second Life. On my first attempt, my PC lacked the graphics horsepower to render clothing for Second Life’s “avatars," the animated characters that represent the users in cyberspace. It made the virtual world look like a mall filled with naked mannequins--not exactly a cozy experience. So I borrowed a machine with a fresher graphics card and plunged in again.

Landing in Second Life is a bit like getting plunked down in an unfamiliar city where most of the people speak your language and it doesn’t hurt when you accidentally walk into a wall. That’s important because if you’re over the age of 32--the average age of Second Life denizens--it may take a while to get comfortable with the combination of keystokes and mouse clicks that lets you move through the world.

I wandered through a piazza environment, eying other avatars. It felt a bit like being backstage at a fashion show: Everyone has the same youthful appearance and drop-dead physique. You can make a fat avatar--and they probably exist--but I didn’t happen to spot any. As one denizen confided, “You can always look fabulous in Second Life!”

Indeed, many did. Nymph-like women and butch men strolled around wearing form-fitting jeans, blouses with flowing sleeves and chest-exposing vests. Someone floated by with some marvelous white wings. I tried chatting him--I think it was a him--up. “Nice wings,” I typed. “Where did you get them?” “Don’t remember,” he answered and drifted away. “Anybody from Spain here?” typed another character. “Donde?”

If you sign up for a free account, Second Life gives your character L$250 in virtual pocket money--each Linden dollar is worth about four-tenths of a real-world penny. You can get by here on that--but it would be nice to have a bigger spending account to snap up, say, a hovercraft or some Christmas decorations. To plump my account, I could buy more Linden dollars using my real ones. If I had some software skills, I could render up some cool representations of stuff and sell it for Linden dollars. I could sell a service--and anything from virtual sex to journalistic stories about life in Second Life is fair game.

I contacted a fellow journalist, Marvel Ousley, an editor for SL News Network, for a few pointers. Ousley “transported” me to her office. (To get around Second Life you put in the name or coordinates of the location you want to go, click the “transport” button and whoosh, you’ve arrived.) It looked like any of the thousands of fine offices I’ve visited from San Francisco to Bangalore: Large chairs and a sofa, potted office plants, a big screen TV. Ousley’s avatar sports a fedora and a sweater with her magazine’s name. And, like the denizen of any other Silicon Valley office, she promptly offered me a logo shirt.

When my avatar asked her questions, my virtual fingers moved as if typing on a keyboard. But I wasn’t ready for a fully virtual conversation, so I cheated by tracking down her real-world phone number and chatting with her on a real phone as our avatars sat on her office sofa.

When Ousley first joined in April, she got caught up in the world and started working on a couple of publications. Now she tries to keep the habit under control--an hour or two a day--so that it doesn’t cut into her real-world work. In the real world, Ousley is Susie Davis, a freelance journalist who is working on documentaries.

“I wasn’t a gamer,” she says. “But here you meet people--maybe you join a book club or some other activity. You discover you share a lot with people that you might not get to know in the real world.” Ousley promised to take me sky diving on my next visit.

There is sex in Second Life as well, though Linden Labs doesn’t play that up much in its marketing materials. It’s there if you want it--but most of it happens away from the most commonly trafficked areas, says Catherine Smith, director of marketing for Second Life (aka “Catherine Linden” in SL).

Catherine shows off her virtual apartment, a graciously appointed flat with a view of the water and a few glittering Christmas trees. “What I love is there is so much beneath the layers in Second Life,” she says..

Overall, visiting Second Life is a kinder, gentler experience than, say, playing the even more popular World of Warcraft online multiplayer game, which boasts 7.5 million users. There’s no question it’s great fun to custom-design myself. (Shall I be a redhead? How about a guy?) But it’s a place that demands commitment, much like moving to another country means learning a new language and customs, I’d have to spend a lot more time in Second Life before I becoming fluent in how to move, live and act in this world. It might be fun to spend that time. But now real life is calling.


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Thursday, November 30, 2006

News: Microsoft's Courtroom Flashback

Forbes.com

11.30.06, 6:00 PM ET

Burlingame, Calif. -Even as Microsoft executives tout Vista as the operating system of the future, operating systems of the past continue to plague it.

Today in Iowa, attorneys have once again taken Microsoft to court over anti-trust charges associated with its Windows operating system. In addition to the age-old complaints about squeezing out competitors and price-fixing, there is a twist: This case alleges that by bolting together Windows and Internet Explorer, Microsoft produced software that gummed up people’s computers.

The case promises to be a textbook contrast between the ponderous nature of the legal world and the mercurial nature of technology.

Thanks to long hours of arguments by lawyers on both sides, the entire first day of the case was filled by Polk County District Judge Scott Rosenberg, who read through 110 of the 120 pages of instructions given to the jury.

That’s just the beginning. The opening statement by Iowa attorney Roxanne Barton Conlin is expected to last three to four days. She plans to show the entire 10-hour deposition given by Gates in 1998 to attorneys for the U.S. Department of Justice and will introduce some of the 25 million pages of documents gathered from other actions against the company.

Unless the parties settle, Chairman Bill Gates and Chief Executive Steve Ballmer will be called to take the witness stand, possibly as early as January. One minor victory for Microsoft: Gates and Ballmer need only make one trip to Iowa and so will answer questions from both the prosecution and defense on the same day--potentially disrupting the “flow” of the plaintiff’s case.

Complaints about lack of choice and high prices have been the theme song of most of the legal complaints against Microsoft. The Iowa case also alleges that Microsoft’s software caused “drained memory, decreased speed and an increased incidence of security breaches and bugs” in its customers’ computers.

The plaintiff lawyers contend that Iowan customers of Microsoft are entitled to as much as $329 million in damages as compensation for Microsoft overcharges between May 1994 and June 2006. The lawyers are also seeking compensation for the time people have had to spend repairing security breaches--a figure that they put at a minimum of $50 million. “The illegal bolting of Internet Explore to the Windows operating system created a larger ‘attack surface’” and made the operating system more vulnerable, asserts Richard Hagstrom, co-lead counsel for the plaintiffs. “The damages are based on what people need to do to protect themselves from security breaches.”

Although few consumers would disagree with the charge, it may be tough to prove that buggy software is an anti-trust violation. “They’re trying to hold us responsible or make us pay damages because someone out there is violating the law and writing viruses,” says Richard Wallis associate general counsel for Microsoft. “We’re not writing any viruses, I can assure you.”

Since the U.S. government won a 2000 anti-trust decision against Microsoft, the company has fought a rash of more than 200 anti-trust class-action lawsuits throughout the U.S., starting with a California suit. All but two--this case in Iowa and another in Mississippi--have reached settlements or preliminary settlements.

Although the government--and Microsoft--spent millions of dollars to wage the anti-trust court battles, the direct benefit to consumers has been minuscule. All told, Microsoft has had to earmark $2.4 billion for settling these suits. In most states, consumers who purchased Microsoft software in the past are eligible for vouchers for modest refunds when they buy new computer hardware or software. The settlements range in value between $5 to $29 per purchase. Consumers in California (which reached the first settlement in January 2003) wrung the best deal out of Microsoft. An appeal by an independent California attorney held up the settlement, California residents only began receiving their vouchers this past August--three and a half years after Microsoft reached a deal with the plantiffs.

Only a portion of vouchers are likely to be redeemed. In California, eligible businesses and consumers have applied for approximately 30-40% of the alloted vouchers, according to Microsoft. The experience of other mail-in rebate programs suggests that only a portion of those vouchers will ultimately be cashed in. Low-income schools will eventually receive a portion of the money that is not redeemed, although the precise amount varies across settlements. Microsoft repockets the rest. By contrast, the Bill and Melinda Gates Foundation has donated more than $230 million to U.S. libraries since it began its program in the late 1990s--which happened to be the same time anti-trust concerns were cresting.

Most of plaintiff’s petition reads like a history lesson in Microsoft’s anti-trust woes. The case aims to follow well-trod legal ground, revisiting the damage Microsoft inflicted on long-extinct competitors, including Netscape Communications, Be and Go, along with Novell's DR-DOS and IBM's OS/2. Among the witnesses who will testify are former Novell software developers and a former product manager for computer maker, Acer.

“I think Microsoft is as strong as ever,” contends Hagstrom. He helped lead a class action case against Microsoft in Minnesota that spent six weeks at trial before the parties settled.

“All this fanfare about Vista--it seems like it’s just going to be ‘Windows XP.1,’” he contends. “They’ve had to pull back on a lot of the features they said they’d have. Where’s the innovation?”

Silicon Valley entrepreneurs point to the resurgence of Apple Computer and Google's $150 billion market cap as signs that consumers value new approaches to software.

“This case is about whether Iowans paid fair prices for Microsoft software,” insists Microsoft’s Wallis. “We think we charge fair prices.”

http://www.forbes.com/technology/2006/11/30/vista-lawsuit-microsoft-tech-cz_ec_1130microsoft.html

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Sunday, November 26, 2006

Book Review: Andy Grove, The Life & Times of an American

San Francisco Chronicle

The driven life of Intel titan Grove

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Reviewed by Elizabeth Corcoran
Sunday, November 26, 2006

"Andy Grove: The Life and Times of an American" by Richar...

Andy Grove: Life and Times of an American

By Richard S. Tedlow

PORTFOLIO/PENGUIN; 568 Pages; $29.95

Over the past few decades, we've seen a parade of business archetypes: There's been the chief executive as stubborn rebel, as domineering whirlwind, as greedy crook. Now in "Andy Grove: The Life and Times of an American," Harvard Business School Professor Richard S. Tedlow takes us backstage to see the human jitters, foibles and strengths of a legendary boss.

Grove deserves a big biography. As much as any other single person, he built Silicon Valley, bringing the computer revolution into all our lives. He led Intel Corp. to supremacy in the microchip business, enabling powerful computers that are cheap enough to be birthday presents for many people.

Tedlow, who had unfettered access to Grove, goes well beyond the career highlights to present a warm and discursive portrait of a complex man. Grove is unfailingly blunt, quick to engage in sharp confrontation, wickedly funny, brilliant, a thoughtful listener, plagued by fear, achingly critical of himself and others and, at times, simply wrong. What come through most steadily: Grove's insatiable hunger to learn -- and his burning desire to be noticed.

Grove's story has the lyrical qualities of a Broadway show. Born Jewish in Hungary in 1936, Grove fled to the United States when the Soviets invaded Budapest in 1956, earned a doctorate in chemical engineering and became a captain of industry. Along the way, he has confronted some formidable health challenges: scarlet fever as a child, prostate cancer in his late 50s and now Parkinson's disease.

On the job, Grove was beset with doubt from Intel's first day. When he joined in 1968, "I was scared to death," Grove later said. "I literally had nightmares. I was supposed to be director of engineering, but there were so few of us that they made me director of operations. My first assignment was to get a post office box so we could get literature describing the equipment we couldn't afford to buy."

Even so, Grove had the ability to step outside his daily tussle and see himself -- often wryly -- at a distance. In 1969, Grove pasted into his notebook a magazine clipping that described the responsibilities of a motion picture director: "a soother of egos, a cajoler of artistic talent ... [with] the vision and force to make all these elements fuse into an inspired whole." Above the clipping, Grove printed: "MY JOB DESCRIPTION?"

His devotion to Gordon Moore, Intel's co-founder, bordered on filial. When Moore was away from Intel during his time as chief executive, Grove wrote memos to fill in what Moore had missed. In June 1975, Grove wrote: "Welcome home! You absolutely, literally, positively could not have chosen a better/(worse) week (depending on point of view) to be gone."

Grove was much more terse with Intel's co-founder, Robert Noyce, a charismatic leader and gifted scientist who was uninterested in daily management, according to several accounts. "I view the ... situation as Intel's biggest management blunder, with you being the principal," Grove wrote to Noyce in 1971. "I think you should also have to face [your mistakes] like the rest of us have to otherwise you will keep going on making them!"

Such raw comments -- what Grove liked to call "constructive confrontation" -- became a trademark. Yet Grove routinely gave himself a sharp tongue-lashing, too. In November 1976, Grove wrote: "[D]issatisfied w/overall co. performance (hence: me!) ... frequently depressed; thoughts of bailing out."

"Reinvention" has been so overused that it now has the resonance of a sitcom theme song. But Tedlow describes how Grove saw himself as a student at many junctures of his career and refreshed his skills with the same tenacity Intel applied to designing each new generation of computer chips.

Grove held his standards high, sometimes achingly so. Colleague Sean Maloney recalled devoting more than a month to a piece of analysis only to have Grove return it, saying, "I'm bitterly disappointed."

For some, such critiques cut to the bone; others, including Maloney (who is now among Intel's top executives), took it as a goad to excellence. "He would get the best of every individual," Maloney told Tedlow. "He may piss them off, which he frequently did, but he got the best out of [them]."

Tedlow's book veers closer to an appreciation of Grove than to a hard-hitting critique. He concedes as much in his acknowledgements, noting, "the reader should be aware that Andy Grove is a magnetic man. It is impossible, at least for me, to have spent as much time with him as I did and to have immersed myself as completely as I have in this project without developing feelings of admiration and affection that must have colored this account to some degree."

More insight into Grove's jousts with Microsoft founder Bill Gates would have been welcome. Tedlow devotes the bulk of one chapter to the topic but didn't interview Gates. That's a pity.

So many successful people become consumed by vanity or arrogance. Grove certainly wanted to be recognized for his accomplishments. Yet no matter how many times he reinvented himself, he never quite shook the traces of the boy who once hid from the Nazis. His lifelong belief that disaster lurks just around the corner became his constant goad, his strength, his humanity -- and makes for a story well worth telling.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/11/26/RVGSUME5VL1.DTL&hw=Elizabeth+Corcoran&sn=001&sc=1000


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Monday, November 20, 2006

Column: What It Takes to Succeed

Forbes.com

Letter From Silicon Valley

11.20.06, 6:00 AM ET

BURLINGAME, CALIF.--There is only one person who is both on the Forbes Rich list and the Computer History Museum’s Hall of Fellows--essentially the all-star list for computer science pioneers. (Hint: He probably isn’t your first guess.)

The chasm between who collects the big bucks and who invents new technology struck home for me in the past week. On the one hand, there’s YouTube, the Web’s current repository for video clips. YouTube made use of technology developed by others, notably Macromedia. The company went from startup to score ($1.65 billion in Googlebucks) in a dizzying 20 months. (Cashing out those winnings will take a bit longer; Google has tucked 12.5% of the equity due to YouTube--about $224 million--into escrow for a year until the dust kicked up by copyright lawyers scrambling to sue the company settles.)

On the other hard, there’s privately-held NeoPhotonics, based in San Jose, Calif., whose roots stretch back ten years. If business continues to ramp up, the company hopes to get off what has been a financial roller coaster and turn cash flow positive next year.

The scientists who built NeoPhotonics have invented things you’ll never see but that could change your life. Topping the list: better batteries for medical devices and optical chips for communications networks. The batteries are used in implanted defibrillators, devices that get an irregular heartbeat back in sync. The optical components sit at the end of fiber optics, repackaging data sent via light waves into electronic ones and so opening the spigot of data flowing from the Internet into local homes.

NeoPhotonics is a case study of how much persistence it takes to build a business around genuine invention.

The company started in 1996 with the promise that new nanomaterials could store energy more efficiently than conventional techniques. At the time, Sean Bi, a Chinese-born post-doctoral student in physics at the Massachusetts Institute of Technology, was working on a unique way to create powders of nanoscale particles by shining laser light through gases. Nanoparticles are almost like new elements: They have different properties than bigger versions of the same molecules. (Super tiny things have much bigger surfaces than they have volume--and this changes many properties.)

An MIT professor introduced Bi to a successful Japanese-born physicist turned businessman, Nobuyuki Kambe. Together, Bi and Kambe spent a year refining the technique. Pete Thomas, a venture capitalist then with Institutional Venture Partners, was intrigued. “They created a platform technology that could be focused to develop batteries,” he says. Thomas provided $1 million in seed funding, enough to enable them to turn lab bench experiments into a process that could churn out big batches of nanosize-particle powders. They called their company NanoGram.

Led by Tim Jenks, who joined NanoGram as chief executive, the company started developing batteries that scored high for efficiency. Yet as they experimented with the properties of their powders, Bi and Kambe realized their novel batteries released charge fast--ideal for implantable defibrillators, less so for consumer devices like cell phones.

Jenks was hunting for other applications for the powders, too. Optoelectronics was hot; NanoGram’s scientists soon realized they could create perfect coats of glass on top of silicon wafers--a boon for those making optoelectronic components. In 2002, they divided the company into three: NanoGram Devices, which kept the battery-making technology for medical devices; NeoPhotonics, which went after the optical devices market; and a third firm, NanoGram Corp., which managed the intellectual property.

As the tech bubble burst, NeoPhotonic snapped up another technology-centric company, 14-year-old Lightwave Microsystems, which was on the verge of closing shop. The technologies of the two companies meshed well, but the business liabilities did not: NeoPhotonics filed for Chapter 11 in 2003.

Most of NeoPhotonics investors did not lose heart, however. Thomas continued to sit on the board. The battery company was sold to Greatbatch for $45 million; NeoPhotonics emerged from bankruptcy. With additional financing, Jenks merged the company with a Chinese-based manufacturing operation and began building a portfolio of optoelectronics devices. Revenues were $55 million last year and have most recently exceeded $25 million per quarter. Altogether, NeoPhotonics has amassed a treasure chest of 128 U.S. patents, along with almost 100 overseas patents and few dozen more pending.

Was it worth it?

Yes, say Thomas, Jenks and Bi, in separate conversations.

“The technology created the road for NeoPhotonics,” says Thomas, now with ATA Ventures. "The proof that patents are valuable is that you're winning in the market with products that use that technology," which NeoPhotonics is, Thomas asserts.

It also led to other products such as the batteries for defibrillators and equipment for producing literally tons of nanoscale particles, he observes. “Where NeoPhotonics goes in five years time couldn’t have happened without the early nanotechnology work,” he says.

Jenks is also upbeat. Millions of new subscribers for high-speed Internet connections could mean very high double-digit growth for NeoPhotonics, he says. Although its beginnings have been tumultuous, Jenks believes the company's deep technological strength will make future growth steadier.

And Bi, who is now an executive with software maker ArcSoft says he is grateful for the chance to have developed new technology--and for the opportunity to see how it takes just the right combination of people, technology, market readiness and funding to bring an idea out of the lab and into production.

“Commercializing fundamental technology generally takes a longer time” than building on existing technology, Bi notes. “Should you wait for someone else to do this hard work?”

“This is what risk capital is about,” Thomas says. Such experiences test the mettle of entrepreneurs and inventors--but does create long-term value, he says.

And that guy who made both the Forbes list and the Computer Museum’s Hall of Fame? Intel's co-founder, Gordon Moore.

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Monday, November 06, 2006

Column: India Revisited

Forbes.com

Letter From Silicon Valley

11.06.06, 6:00 AM ET

Burlingame, Calif. --Is India's gain America's loss?

Sunny globalists like New York Times columnist Thomas L. Friedman delight in India’s rising economic prominence, led by its vast pool of high-tech engineers.

Then there’s the apocalyptic crowd, who believe that India’s advancement is inexorably tied to America’s ruin. In their eyes, every time a U.S. job leaves for India--where well-trained people will get the job done for 30% or less of U.S. wages--American workers and the overall U.S. economy suffer a grievous wound.

The answer is less clear-cut than either side would have you believe. India’s new status as a high-tech powerhouse is creating headaches that could soon cause India to look a lot more like any prosperous Western country wrestling with complacency, obesity and all the other ailments of the well-to-do. That doesn’t mean Americans can kick back and chill. But as the monetary costs of doing business internationally level out, new opportunities for clever capitalists will appear.

Back in the 1980s, I got to know India as a student of developmental economics and as a visitor who rode rickety overnight buses that swerved around roadside cows. Back then, government restrictions and infrastructure problems made it simply too hard and too expensive to do much high-tech work in India.

Returning to India earlier this year, I was awed by many of the changes triggered by more liberal economic policies and the influx of work that came as international companies first swerved to avoid Y2K problems, then looked for cost savings by piping work overseas via the Internet. Now cities like Bangalore and Hyderabad hum with energy, money and opportunities.

When I returned to the U.S., a Silicon Valley friend glumly asked if I too was convinced that American businesses would soon be hollow shells, mere marketing fronts for legions of harder working Indian engineering enterprises.

Not quite, I said.

On the one hand, there is plenty of evidence of the energy and smarts of the Indian workforce.

Stuck in a traffic jam in downtown Bangalore on a work morning, I saw jauntiness in the step of the people heading to work. Locals even take a weird pride in the morning traffic snarls. Look at how busy we are! Just about everyone clutched a cellphone. Just about everyone looks young--because they are. More than a third of India’s population is under the age of 15, making it among the most youthful nations on the planet and certainly younger on average than China.

The startups and companies I visited in Bangalore included giants such as Wipro as well as homegrown ventures such as Cosmic Circuits, which design analog circuits for companies making wireless gadgets. (See: “Chips and Biranyi” and “TI Seeds It,” April 2006.)

These little companies are virtual cousins to Silicon Valley startups. Ganapathy Subramaniam started Cosmic Circuits with four colleagues after he had spent 16 years at Texas Instruments-India. The engineers kicked in their own money and got their start in Subramaniam’s living room. Within a few months they had lined up a couple of international clients and were recruiting on top Indian campuses for “freshers,” or recent engineering graduate students. They were so keen to meet one deadline that many people in the company worked for seven days without leaving the office.

Now, 15 months later, Cosmic Circuits employs more than 50 engineers working on analog chip design and has a dozen international customers. The company's offices have moved to the eastern fringe of Bangalore in part because the cost of downtown office space rivals San Francisco. From its building, you can see a rash of construction: luxury homes, tunneling into streets to lay fiber optic cable, even bamboo scaffolding swaddling a new local temple. Subramaniam loved his tenure at TI. But he is eager to demonstrate that Indian companies can hold their own with the best. “India has proved herself in software services,” he says. “Can we do it in semiconductor design? That’s our ambition.”

India’s more established companies are now struggling with the problems their American competitors face. Big companies, including Wipro, Microsoft, Google and Dell, fill up towering modern offices surrounded by carefully manicured lawns. It’s only a short stroll across those lawns, however, to another office--and another job and a bump up in salary. Managers are reluctant to discuss turnover, but it’s a big issue here. Wages are rising steadily, particularly for more experienced engineers. Dataquest India reported last year that engineers could expect an 18% average salary bump each year.

Those who watch broad trends worry, too, that India may be running thin on good help. The National Association of Software and Service Companies released a study this year that found that only one in four engineering graduates were employable. The others lacked technical skills, English fluency, ability to work in teams or presentation skills. Some of India’s big companies, such as Wipro and Infosys, have begun recruiting top graduates in any field of engineering to work in information technology, creating a vacuum of talent in other fields.

Managers tell me that even when they can find employees, they’re increasingly difficult to please. One Indian boss--who has supervised engineers in both the U.S. and India--was vexed at the challenges of managing in India. “People don’t say no,” noted one manager, even if they don’t know how to get a job done. They may be willing to put in long hours on a project, but may not know how to get the help they need to solve a problem.

When projects are finished, employees crave evaluation. “They want lots and lots of recognition,” sighed one manager. Employees at another company practically stopped working until executives procured fancier ID badges, simply because friends at nearby companies had such badges.

I idled away half a day in the Bangalore airport, waiting for a delayed flight for Hyderabad, watching well-dressed Indian families also waiting for flights to various local destinations. Everyone looked well fed, many bordering on plump. Teenage boys grinned, flashing silver braces on their teeth. Gold bracelets jangled on the arms of young women as they snapped open the latest Motorola Razr cell phones. We all flipped through the local papers, which carried big stories about cricket match championships, the latest Bollywood scandal and advertisements for luxury apartments.

One business executive pressed me for information about cultivating grapes, as he is keen to start a vineyard. Another reveled in describing trips to Paris, a cultural mecca that made up for the “boring” time spent in the U.S. Yet a third despaired that his elementary school age son is too spoiled and spoke admiringly of the stricter discipline he had observed in American families.

What’s more, just as Americans have nervously watched India’s ascendancy, so too do the Indians keep a close eye on China and other emerging economies. Indian executives fret that their country lacks China’s manufacturing muscle. They worry about outsourcing operations starting up in Eastern Europe. Indian politicians talk eloquently about the need to improve the schools that lack the star quality of the seven Indian Institutes of Technology. They also wonder how to foster leadership in other industries, including automobiles.

Sound familiar? A few years ago, anthropologists Akhil Gupta and James Ferguson of Stanford University observed that “the ‘distance’ between the rich in Bombay and those in London may be much shorter than that between different classes in ‘the same’ city.”

Translation: India is embarking on some of the same ups and downs that characterize America. True, Indian companies will beat out some U.S. competitors for jobs. But as India’s upper middle class continues to expand, smart U.S. companies will look for ways to tailor products to consumers in Mumbai and Bangalore. That’s already happening in the mobile phone business.

Does it mean more or fewer jobs for Americans? It means different jobs, different opportunities, different markets. And realizing that our competitors look very much like we do.

http://www.forbes.com/home/technology/2006/11/05/india-outsourcing-employment-tech-cz_ec_1106valleyletter.html

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Friday, November 03, 2006

CALIFORNIA Magazine: Stalking a Killer

November/December 2006 | VOLUME 117, NO. 6


Stalking a killer
Rewiring cells: Prof. Jay Keasling blends
biology with chemical engineering to create
synthetic organisms capable of altering
nature and fighting deadly diseases.
Photographs by Marcus Hanschen
FEATURE STORY
Stalking a killer
by Elizabeth Corcoran
Will Jay Keasling's team of synthetic biologists and Bill and Melinda Gates's foundation fin d a low-cost treatment for one of the world's deadliest diseases?

Jay Keasling carries a picture in his mind of a place he has never seen, of children he has never met. But it is an image that radically changed how he felt about his research in chemistry — and has set Keasling, a Berkeley chemical engineering professor, on a quest far grander than he ever imagined.

The picture in Keasling’s mind is of a medical clinic in Malawi, filled with thin, feverish children lying in cribs. Some die, succumbing to a virulent strain of cerebral malaria that leaves them deeply unconscious or convulsing as if they were in a devastating car accident. But the lucky ones — the ones who reached the clinic in time — receive a dose of an expensive drug called artemisinin. A day or two later, these children are on their feet, playing in their cribs.

“Playing!” Even now, almost two years after Keasling heard the searing description, he shakes his head in wonder at the magic of a chemical compound that pulls children back from the shadow of a horrible death. At the time, he had not expected to be jolted. He had just finished giving a lecture about his work, this one at Michigan State University. His slides described the science and laid out the case for the research: artemisinin drugs were too expensive for most people in developing countries. Afterward, Keasling visited with a few researchers doing related work, including one who spent half her year teaching at Michigan and the rest in Malawi, performing autopsies on child victims of malaria. Her descriptions swept away the academic tidiness of Keasling’s work. To her, artemisinin was almost a mirage: a compound derived from a plant with tremendous healing power yet out of reach of those who needed it most. As he listened to her, Keasling realized that his work wasn’t just about science anymore. If all went right, he might make the price of a dose of artemisinin plummet to the value of a U.S. postage stamp. He could save lives.

Keasling, 42, is a biological and chemical engineer. He has fused chemistry and biology in a novel way to design microbes to churn out specific products. He has helped catalyze a unique collaboration of academia, private industry, and philanthropy to move his research from the laboratory into real products. And he has found a passion that runs even deeper than the satisfaction that he has drawn from pushing the boundaries of academic science. His research has taken on the shape of those Malawi children rising, shaking off death, and playing—playing!—in their cribs.

“This is what I’m doing,” he says, with an unblinking gaze. “My plan is to make sure this gets out — and to do it to the very end.”

Students who have worked with Jay Keasling at Berkeley marvel at his steady temper, his optimism. Nothing seems to unnerve the matter-of-fact scientist with the square jaw, compact build, and fondness for Italian-made shoes. When complicated pieces of machinery are irrationally balky, or when experiments that took days to set up yield nothing, Keasling shrugs and carries on.

“As bad as the day gets,” he confides, “it’s still better than shoveling pig manure.” He means it. Keasling grew up on a farm in Nebraska, the only son of a farmer who raised cattle, soybeans, and at least 200 pigs. Keasling doesn’t like to talk about pigs. “They’re smart, but they’re mean,” he says curtly. If he never saw another pig — except as a side of bacon on his breakfast plate — Keasling would be a happy man.

But he learned a lot of lessons on the farm that have served him since the day he dusted the dirt off his jeans and headed to the University of Nebraska to study biology. The ethos of farming — the ceaseless battle between farmer and nature, each trying to bend the other to its will — was deeply etched into Keasling. Nature wasn’t something that you just admired; it was something you worked with, battled, tended, nurtured — in short, did whatever it took to get the results you wanted. “Biology is pretty robust,” Keasling says. “You don’t have to worry too much about tinkering with it.”

And farm work was continual, too, filling every moment of the day from dawn until dusk, and afterward. Keasling took to heart the core lesson of farm life: If you want to have a prayer of getting things done, you’d better get up early in the morning.

When Keasling took his first genetics class at the University of Nebraska in 1983, biotechnology was gaining momentum. The first flush of biotech companies — including the likes of Genentech and Amgen — were still refining how to manipulate the genetic material of different organisms. Genes were the key. Scientists had decoded how genes served as instruction manuals for making just about anything, including proteins, which in turn are the catalysts for so much of what our bodies do — growing, moving, carrying oxygen, fending off infections, and so on. Genetic engineering promised to take just the right snippet of DNA, put it into an organism that acts like a natural copying machine, and let it rip. The resulting protein could then be given to people whose bodies failed to make enough of the right protein on their own.

It was fascinating — but to the restless young man from the farm, too much of biology still seemed devoted to observing nature rather than taming it. Keasling opted for engineering.

When he reached the Ph.D. program in chemical engineering at the University of Michigan, Keasling had to catch up on engineering with a few undergraduate courses. A class in process controls dazzled him. He marveled at how engineers could isolate one element of a system, then fine-tune it to do a job. Twist the red knob to add heat; twist the blue knob to release pressure.

Biologists, by contrast, were working with the equivalent of half-built Rube Goldberg machines. They had a powerful tool: the ability to add or delete a gene. But a single change could trigger a cascade of unanticipated reactions. Sometimes researchers got what they wanted; more frequently they did not. Worse, they couldn’t reliably predict what might happen.

By the early 1990s, malaria had grown fierce, wiping out an estimated 1.5 million people a year (particularly children and pregnant women), and collectively costing African nations as much as $12 billion a year.

Keasling envied the controls of the process engineers. “I wanted to manipulate a cell like an engineer does a chip,” Keasling says. Electrical engineers string together components — transistors, resistors, capacitors — to build a system that behaves in predictable ways. Keasling wanted to do the same thing inside a cell. “I wanted to create the equivalent of oscillators, pulse generators — subsystems that can turn reactions off and on—anything that would give us finer control.”

After a postdoc at Stanford University, Keasling joined Berkeley in 1992, intent on devising biological subsystems. Senior colleagues had doubts. One quietly advised him not to bother: “He told me, ‘Jay, we have all the tools we need. Work on modeling,’” (predicting what a cell might spew out when it got a new gene) rather than on trying to tinker with the mechanisms themselves.

But Keasling remained stubbornly focused on trying to build tools that would let him do chemistry inside a cell, say, catalyzing a series of reactions just as the “metabolic pathways” in plants or microbes do when they encounter different chemicals. His timing was pitch-perfect. Elsewhere, scientists were sequencing the genomic structure of organisms from humans to corn — then putting the data on the Internet or into electronic databases, available with a few clicks of a computer mouse. To Keasling, these databases became like extensive lists of ingredients he could make or use in the reactions he catalyzed within cells.

Other researchers also were trying to bring an engineering mind-set to biology. At the Massachusetts Institute of Technology, for instance, longtime computer science pioneer Tom Knight was building a new team aimed at building biological circuitry. Knight and collaborators, including Drew Endy, popularized the term “synthetic biology” to describe this emerging discipline of catalyzing precise reactions within living organisms to create novel biological products or systems. Some work on “software” for cells — ways of instructing a cell to do something differently than it naturally would do, such as blinking off or on. Others, notably Keasling, work on the equivalent of rewiring cells. For instance, inside the cells of a plant, hundreds of enzymes work to convert carbon into a more complex molecule. The results of one chemical reaction trigger another, which triggers another — and so on — until a rose produces a sweet scent or a maple tree leaks sap. Synthetic biologists may isolate a snippet of those reactions — a sort of recipe called a metabolic pathway — and then try to re-create it in an entirely different organism. If they pick the right recipes and figure out how to ensure that the reactions dovetail nicely (instead of catalyzing unanticipated results), then they might be able to get the second organism to do something beyond what nature intended.

By the late 1990s, Keasling was developing a collection of tools, reliable metabolic reactions that he could depend on. Biotechnologists had long used “promoters” like switches to turn genes off or on. Keasling developed what he nicknamed a “bio-rheostat” — like an individual dimmer switch — which could gradually turn on a microbe’s genes, one by one. He began plucking the design of metabolic pathways from various organisms and trying them in different microbes — designing new biological circuits and trying to get the organisms to do something new.

At the same time, Keasling built an eclectic laboratory team, looking for talented people in diverse fields. Among them: Vincent Martin, a postdoctoral microbiologist from the University of British Columbia, with a deep interest in using engineered organisms to combat pollution created by the pulp and paper industry; and a Ph.D. student, Neil Renninger, who had degrees in environmental and chemical engineering from MIT. Later, Jack Newman, who earned his Ph.D. in microbial systems from the University of Wisconsin, Madison, joined, too. A full year before Newman finished his degree, he had been won over by a lecture he heard Keasling give. “That was it,” Newman declares. “I didn’t even apply anywhere else for my postdoc.”

As they developed their tools, Keasling’s team looked for ways to use them by customizing microbes to clean up waste and by creating new products. For instance, the researchers added new pathways to bacteria so that the microbes could absorb heavy metals out of wastewater and then deposit the contaminants on their cell walls. The water could be cleaned by precipitating out the metal-loaded microbes. Other microbes got pathways that made nerve agents look like nutritious snacks. Even so, Keasling and his team knew the work was unlikely to leave the laboratory. “The public won’t let you clean the environment with microbes,” he says tersely.

Making products with microbes is a different story. The biggest category of byproducts created by plants is “terpenoids” — chains of hydrocarbons that become plants’ fragrances, colors, resins, flavors, and other byproducts. Some help a plant reproduce, attracting the insects or creatures that pollinate it. Other terpenoids are rudimentary defense systems, warding off hungry pests or choking weeds. Scientists have identified more than 50,000 terpenoids, many of which show tremendous medicinal promise, such as the extract from the Pacific yew tree, which is used to make the anti-cancer drug Taxol. But because chemists can’t easily brew them and plants make them only sparingly, many terpenoids are not cheap.

Other researchers had tried sliding a plant gene into microbes, but even the most successful attempts produced only minuscule amounts of relevant material. “The genetics of plants are not well suited for microbes,” notes Martin, the microbiologist.

Keasling’s approach: add another pathway or two to create a chain of reactions that would ultimately lead to the terpenoids he wanted to produce. For starters, he took a chemical pathway typically found in yeast — which happened to be triggered by a chemical common in bacteria—and wove it into his colonies of E. coli.

That combination, in turn, produced so much particulate byproduct that it threatened to drown the bacteria — until Keasling added a third subsystem, a pathway from a plant, which could convert that stream of byproducts into a chemical that was a step closer to a terpenoid. To Keasling, that third step—the pathway from a plant—gave the system its particular character — would it make one terpenoid or another? Even better: Others could be swapped in its place. All he had to do was to pick a manageable terpenoid.

He considered trying to make carotenoids — a group of well-characterized compounds that give salmon its pink glow, make carrots orange, and tomatoes red, and so are an important flavor, fragrance, and colorant. “They make very pretty microbes,” Keasling observes.

Fate intervened. A member of Keasling’s team pointed out an article describing how another scientist had cloned the first gene in amorphadiene—a compound that led to a drug called artemisinin. Typically, artemisinin was derived from a Chinese weed called sweet wormwood (a close relative of American sagebrush). But artemisinin had two intriguing characteristics: It could cure malaria and was of little interest to the big-league pharmaceutical companies.

Artemisinin was a relative newcomer to the crusade against malaria. In the late 1960s, during China’s Cultural Revolution, the Chinese government launched an ambitious program to investigate the properties of plants used in traditional herbal medicines. Among them was the weed qing hao — in Latin, Artemisia annua, or sweet wormwood. Herbalists used teas made of qing hao for centuries to treat hemorrhoids and reduce fevers. (Europeans used oil from a local variant, wormwood, to flavor vermouth and absinthe.)

About five years later, Chinese scientists announced that they had created a new remedy for malaria by soaking qing hao leaves in ethyl ether and extracting the active chemical. Western scientists were skeptical, in part because the Chinese gave scant details of their techniques. But by the mid-1980s, international scientists confirmed the results.

It was none too soon. Malaria was surging through Africa and other parts of the developing world. Decades of haphazard use of chloroquine, the cheapest remedy against malaria, had incubated a disaster: Throughout much of Africa, the parasite that causes malaria grew resistant to chloroquine and other mainstream remedies. By the early 1990s, malaria had grown fierce, wiping out an estimated 1.5 million people a year (particularly children and pregnant women), and collectively costing African nations as much as $12 billion a year.

The scientists who anonymously reviewed Keasling's proposal to the Gates Foundation peppered their comments with words like "risky," and "ambitious." "They were right," Keasling concedes. "But it wouldn't be worth doing if it wasn't scientifically risky."

But artemisinin was tough to get. Crops of sweet wormwood were low and unpredictable. Manufacturers used diesel fuel as the solvent to extract the active chemicals, hardly a benign process. Unscrupulous traders hoarded supplies, driving up prices. Chloroquine treatment could be had for about 10 cents a treatment; a comparable regime of artemisinin officially costs $2.40 — or, on the black market, as much as $27, reported experts in Africa.

To Keasling, artemisinin sounded like a grand target. “We like to do things in a big way,” he says. “And artemisinin was big.”

So much real science happens in quiet moments. There was no magical instant when Keasling’s team realized that their techniques and theory would work. There were long, unmarked hours through days and evenings, when the incubator shakers in Keasling’s lab hummed softly, swishing glass flasks filled with mocha-colored solution. There were countless times when one of the researchers would draw a few milligrams of the pungent, yeasty liquid from the flasks with a long syringe, then squeeze a few drops into tiny vials for additional testing. And there were afternoons when they would put the vials into gas chroma-tography machines — hulking machines that whirred and blinked red lights as they baked the samples until they turned to gas, before spitting out charts striped with faint bars. The researchers would squint a bit and debate — was it there? Yes, there was a trace: Their microbes were making amorphadiene, a precursor to artemisinin. Could the microbes do better? Could they produce more? They designed new experiments, switched microbes. The data came steadily back: Yes, they could make amorphadiene. Yes, they could produce a lot more.

By the spring of 2002, Keasling was confident that his techniques could reliably churn out amorphadiene. The science was invigorating: What should they do with it? Martin urged Keasling to think broadly: What about designing a company around making terpenoids?

Soon, Keasling and his team, including Martin, Newman, and Renninger, were putting in even longer hours. Once a week, after a day in the laboratory, they would meet at Keasling’s house with yellow notepads to list questions and ideas about building a company around their science. None of them had ever worked in a company, much less started one. Newman and Renninger signed up for seminars about entrepreneurship and managing your own business.

After a year of late-night pizzas, take-out Chinese food, and wine from Keasling’s cellar, they incorporated Amyris (at the suggestion of Martin’s wife), named for a plant that produces fragrant oil, frequently used as a substitute for sandalwood. They knew they wanted to be in the business of producing artemisinin but were unsure how to fund the work. Malaria had no shortage of victims, but those victims lacked money to pay for drugs. No money meant no market, no eager venture capitalists, in short, no funding for a startup.

Keasling reached out to his peers within the university. A colleague who had wangled an interview with senior officials at the Bill and Melinda Gates Foundation to discuss his work added three slides describing Keasling’s science at the tail end of his presentation. It was just enough. Word came back to Keasling: Make a pitch to the Gates Foundation.

The Gates Foundation had already galvanized the once-moribund field of malaria research. In 2001, the Gateses began supporting research on combating malaria — and were horrified to realize that they had effectively doubled the worldwide funding for such work. Funding would grow:

By the end of 2004, the foundation would pump $345 million into malaria research.
These were no simple handouts. Gates himself was too much of a pragmatist. He wanted the foundation to act like a seed fund, catalyzing big change with carefully tended investments. The program managers hired by the foundation to oversee its programs were experienced public health officers, many of whom had spent years in Asia and Africa fighting malaria and other pandemic illnesses. They wanted to fight malaria on every front they could — with medicines for treating patients with malaria, with research on vaccines, and ultimately with programs that supported low-technology interventions such as bed nets soaked in insecticides. And they set “milestones,” or objectives that the programs they financed had to meet for funding to continue.

Another Berkeley colleague in public health introduced Keasling to an unusual San Francisco-based entrepreneur by the name of Victoria Hale, who was running a not-for-profit pharmaceutical company. Hale, who was awarded a MacArthur “Genius’’ grant in September, had worked for the Food and Drug Administration, and had seen pharmaceutical companies abandon work on drugs desperately needed to fight illnesses in developing countries because they were likely to be unprofitable. She hoped to take the most promising formulations for treating neglected diseases through the final stages of regulatory approval, then make them available at cost in developing nations.

Hale’s startup, the Institute for OneWorld Health, was in the midst of reinvigorating work on a drug for curing visceral Leishmaniasis, a deadly disease transmitted by the bite of a sand fly. She jumped at the chance to work on malaria. With prodding from the Gates Foundation, Keasling, the fledgling Amyris, and Hale fused their programs into an unusual collaboration, as unique as Keasling’s scientific approach of integrating the metabolisms of multiple organisms: Keasling’s university lab would continue to work on the scientific foundations for using microbes to make precursors to artemisinin. Amyris would take that research and develop industrial-scale processes for manufacturing the chemicals in bulk. And Hale’s OneWorld Health would ensure that those chemicals would wind up as real medicines—whether manufactured by Amyris or by another partner. The University of California agreed to give Amyris royalty-free rights to develop Keasling’s technology for making artemisinin, which would be a component in medicines sold at cost in more than 80 developing countries. But Amyris agreed to pay the university royalties if it used the technology.

Even so, the science was still new, the ideas demonstrated only in a university laboratory tended by researchers as anxious as first-time mothers. The scientists who anonymously reviewed Keasling’s proposal to the Gates Foundation peppered their comments with words such as “risky” and “ambitious.”

“They were right,” Keasling concedes. “But it wouldn’t be worth doing if it wasn’t scientifically risky.” He pauses. “Malaria is killing a child every 30 seconds. Someone has to take the risk.” In December 2004, the Gates Foundation agreed to back the Keasling-Amyris-OneWorld Health partnership with a five-year grant of $42.6 million. OneWorld Health would oversee the effort, helping Amyris weigh manufacturing decisions such as how much product it would need to make. What would be the optimal price for the artemisinic acid that Amyris would produce? How fast would it be able to drive down costs? How should the final drugs be packaged and distributed? How will they be protected against rogue companies that try to counterfeit the products? And what will be the political implications of manufacturing artemisinin-based drugs?

Amyris will have to tiptoe around some explosive issues over the price and supply of artemisinin. Current supplies are tight, pushing spot prices for artemisinin up to $600 or even $1,300 per kilogram. Such prices are persuading more farmers in China and even in Africa to plant sweet wormwood. Manufacturing artemisinin should drive prices down—ideally as low as $100 per kilogram—a blow to farmers even as it is a boon to malaria victims.

In the meantime, Keasling still had some science ahead.

Soon after winning the Gates grant, Keasling began plotting out what was needed to finish the journey to artemisinin. Step one: Add the key genes—Keasling believed there were three—from sweet wormwood to his microbes so that they would produce artemisinic acid. If microbes could produce enough artemisinic acid, the last step to the final conversion to artemisinin itself would be classic chemistry. Keasling once again figured he needed to graft a new specialist into his group. He recruited a postdoctoral researcher, a plant biochemist from the University of British Columbia, Dae-Kyun Ro, for the job.

Ro had his doubts about joining an engineering lab. He decided to take a different job — one at the University of California, Riverside, in a highly regarded plant biology program. Ro hopped a flight to Riverside to join a conference and accept the job, grabbing a copy of Time magazine from a newsstand along the way. An article stopped him cold: “Death by Mosquito.” Millions of people were dying from malaria, noted the article. Why wasn’t more effort going into finding a cure? When Ro got off the plane, he politely told the researchers at Riverside that he had decided to join Keasling’s laboratory.

“We’ve got to get the artemisinic acid out as soon as possible,” Keasling insists. “There are rogue pharmaceutical companies making artemisinin-based drugs.” Some sell fake drugs; others make pure artemisinin-based products — a development that health experts warn could lead to a new generation of parasites that develop immunity to artemisinin.

When Ro joined in late 2004, Keasling suggested a classic chemist’s approach for sifting out which genes from sweet wormwood triggered the production of artemisinic acid. The genes proved more elusive than a four-leaf clover.

Ro abandoned Keasling’s approach and began thinking about the problem like a botanist instead of a chemist. What other plants might be like sweet wormwood? After three months and some hefty database analysis of sunflower and lettuce, relatives of sweet wormwood, Ro found a four-leaf clover: one short DNA sequence. Ro copied the gene that produced the sequence and plunked it into yeast.

One night in March a little after 8:00 PM, Ro put the first samples of his newly concocted material into a gas chromograph. Because he had only one of what Keasling estimated to be three key genes, Ro simply hoped to see traces of artemisinic alcohol—a few inches closer to the ultimate goal. Instead, he saw artemisinic acid itself. It was a bull’s-eye that would have impressed Robin Hood.

“It was shocking: It did everything we needed it to do,” Keasling says. “Ro’s approach was shorter and more innovative than the one I had suggested,” he adds. And better: Ro’s success meant Keasling could speed up the research program by about six months.

Keasling still gets up before sunrise every day. Although he teaches classes in the spring semester, meetings fence in his autumn-semester days. He also now leads a multi-university research program funded by the National Science Foundation called SynBERC (Synthetic Biology Engineering Research Center). And in his Berkeley laboratory on Potter Street, some 50 researchers and students work on projects that include bioremediation and biofuels. Still the biggest single group — more than 20 — is the artemisinin team.

Keasling’s laboratory isn’t tackling the science solo this time, though. On Monday mornings, Keasling’s team meets with researchers from Amyris to discuss progress on the last significant scientific hurdle: picking the right microbial “engine” for brewing artesmisinic acid. Biologists classically use either yeast or E. coli to copy genetic sequences. Typically, E. coli produces a precursor in higher concentrations. But yeast is naturally more compatible with the kinds of pathways that Keasling’s process introduces. So which will it be — E. coli or yeast? “There’s a sort of horse race going on,” Keasling confides. He isn’t placing any bets. Interesting scientific results will come from the work on both platforms, he says. “If artemisinic acid production in either E. coli or yeast gets over a particular threshold, the choice will be clear,” adds Newman, who is now vice president of research at Amyris. “Either could be a fine choice.”

“They’ve made really tremendous scientific progress,” says Thomas Brewer, senior program officer at the Gates Foundation who oversees the artemisinin grant. “They’re a year ahead of the milestones we optimistically hoped they’d meet.” Even so, Brewer is realistic, saying, “There’s still a long way to go to get the project to meaningful volume” — meaning a few tons a year of artemisinic acid.

Figuring out how to turn what Newman calls the “dreamy science” that happens in laboratory flasks into production in 100,000-liter vats falls squarely on the back of Amyris.

Along with Newman, Renninger threw in his lot with Amyris and now works as the vice president of development for the three-dozen-person firm, housed on one floor of a modest brick building just across from the Emeryville train station, a few miles from Keasling’s lab. They persuaded another postdoc from Keasling’s lab, Kinkead Reiling, to join Amyris as president and co-founder. Vincent Martin returned to Canada and took up an assistant professor post at Concordia University in Quebec. (Ro also has moved on, joining the University of Calgary as an assistant professor.)

Friday mornings at 7:30, Keasling drives over to Emeryville to talk through big strategic questions with the Amyris team. Early on, the founders agreed that Amyris would aim to be a specialty chemical company, but not a pharmaceutical maker. Still, they must plot out how quickly Amyris will be able to make product—and what else the company should do.

“We’ve got to get the artemisinic acid out as soon as possible,” Keasling insists. “There are rogue pharmaceutical companies making artemisinin-based drugs.” Some sell fake drugs; others make pure artemisinin-based products — a development that health experts warn could lead to a new generation of parasites that develop immunity to artemisinin. “We’ve got to beat them,” Keasling says. “We’ve got to put those rogue manufacturers out of business.” But it’s a race in slow motion: If everything goes right, the earliest Amyris could hope that products based on its chemicals could be available would be by late 2009 or early 2010.

And Amyris is broadening its horizons, too, weighing the commercial products it could make as the artemisinin project matures. “All the founders share one belief,” Newman says. “We don’t want to make trivial products” — not even if the potential market looks lush. “Green chemistry” interests the group—that is, finding non-polluting techniques to make widespread products. Biofuels also keenly interest Keasling and the Amyris executives, who have signed a deal with Kleiner Perkins Caulfield & Byers, a well-known Silicon Valley venture capital outfit.

Yet with all the products that his chemical tools may yield, Keasling remains haunted by the images of the children in Malawi, and so fixated on artemisinin. He pauses and says, “This may be the most important thing I ever do in my life.”


Copyright © 2006 California Alumni Association. All Rights Reserved.

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Monday, October 23, 2006

Column: Why Apple Won

Forbes.com

Letter From Silicon Valley

10.23.06, 6:00 AM ET

Burlingame, Calif. -The best piece of management advice I’ve ever heard came from a boss who said his job was to set the bar for performance incredibly high and cheer like crazy for his employees to clear it.

I thought of that advice this past week as I set my iPod to “shuffle,” and flipped through a new book on the iPod and that sultan of Silicon Valley, Steve Jobs. The Perfect Thing: How the iPod Shuffles Commerce, Culture and Coolness, by veteran journalist Steven Levy, is a gushy but fascinating set of essays about the iPod. (Levy and his publisher have taken iPod’s “shuffle” motif to heart: Every copy of the book starts with the same essay, entitled “Perfect.” The next eight essays, however, are “shuffled” and so appear in different orders in different copies of the book.)

Every great company starts with some phenomenal product. The hard part is doing it again, and again, and again.

Google's big breakthrough was its search engine. Since that smash hit, Google has been vacuuming up talent and then giving them enormous latitude. (See: "Who's Really Running Google?") Managers encourage engineers to spend about 20% of their time on projects they’re passionate about. This lets Google crank out dozens of new products and widgets a year, but few have had much impact. And the company's most notable new products are ones that started outside the Googleplex : GoogleEarth and now YouTube.

What has been most remarkable about Apple Computer under the steely scrutiny of Steve Jobs is the number of genuinely big hits the company has rolled out. It certainly has not invented everything it sells. But because we’ve seen Apple with Jobs and without, the company is almost a laboratory experiment of the role of top management in turning an idea into a “perfect” thing.

In his book, Levy vividly chronicles the story of the birth of the iPod in the essay entitled “Origin.” The first team of engineers who tried to squeeze a thousand songs into a gadget that fit in your pocket was a team from Digital Equipment’s Palo Alto, Calif., research division. (Interesting historical note: A group of engineers in that same lab also invented a marvelous search engine called AltaVista, which, before Google, was topnotch.)

Other companies, both in the U.S. and Asia, were scrambling to create small MP3 music players. Still others were working on software that would simply let Macintosh computers play MP3s. None of this was going on at Apple.

By June 2000, Apple executives, starting with Jobs, realized that they would be missing a big opportunity if they didn’t jump into the music business. Apple snapped up one tiny company that had written Mac-based music software. What was missing from that product, Levy writes “was the trademark conviviality that characterizes just about everything that Apple does. Steve Jobs would not tolerate a program that was ugly or acted ugly.”

For music aficionados--and Jobs counts himself as one--playing music on computers wasn’t good enough. (Most of the speakers were lame.) None of the first flush of MP3 players was good enough. The only answer was to build a player that would be not just good enough but awesome.

Levy’s account has all the great details--how Apple contracted with an outside developer to put together a prototype, how Apple strong armed the guy into working full time for the company. (“I’m doing this for your own good,” Apple executive Jon Rubinstein loftily told the engineer, who would have preferred to make up his own mind.)

Where does Jobs come in?

At every go or no-go checkpoint. On every detail. Engineers were told to finish “builds,” in-process prototypes of software and hardware, on Fridays instead of more typical midweek deadlines. “I think ... they were giving the build to Steve, who would take it home for the weekend and play with it,” one engineer told Levy. Mondays started with long “to fix” lists.

“Steve would be horribly offended [if] he couldn’t get to the song he wanted in less than three pushes of a button,” another engineer said.

“Jobs certainly has an aesthetic that permeates the whole company,” Levy told me, when I asked him about Jobs’ influence on the iPod. “He can be super, super critical--it can be very frustrating to work with him.”

There are more than a few stories about people who worked their hardest on a project only to have the results razed in a review with Jobs. “Yet after a horrible evaluation, you crawl back to your office and try again--and this time, you surpass what you thought you could do,” Levy says.

Ideas can germinate anywhere. Getting you to surpass what you thought you could do is ultimately the job of top management. Somebody has got to hold up that bar insanely high. That can make for an agonizing work environment or an inspiring one, depending on how the critiques are delivered.

Just remember to cheer like crazy.

http://www.forbes.com/digitalentertainment/2006/10/20/ipod-itunes-jobs-tech-media-cz_ec_1023valleyletter.html

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Sunday, October 22, 2006

Book Review: Andrew Carnegie

San Francisco Chronicle

Man of steel -- and silence
Carnegie felt himself to be 'trustee' of his wealth

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Reviewed by Elizabeth Corcoran
Sunday, October 22, 2006

Click to View

Andrew Carnegie

By David Nasaw

THE PENGUIN PRESS; 878 Pages; $35


At a time when you can learn almost anything with a few hops around the Internet, our expectations of biographers have grown steeply. They must have exquisite (and of course accurate) details. And they must have sweep and scope, offering us more perspective than even the subject of the biography could ever have done.

In "Andrew Carnegie," historian David Nasaw provides more than 800 pages of marvelous detail about Carnegie's cinematic, rags-to-riches story. Carnegie was a Scottish immigrant who became America's largest steelmaker, an insatiable industrialist who became a leading philanthropist. Nasaw's research is extraordinary, drawing on everything from family letters to private business memos. Nasaw falls short, however, by packing these details into a disappointingly bland analytical framework.

Nasaw concedes right away that he isn't sure what to make of his subject. "I find him one of the most fascinating men I have encountered," Nasaw avers in his introduction. But it's a story with muted colors: Carnegie is neither as heroic nor as villainous as he has often been portrayed.

Instead, Nasaw plays it down the middle. We learn that Carnegie was born in 1835 to a poor linen-weaving family in Scotland. Industrial looms put Carnegie's father out of work. His mother, Margaret, or "Mag," shepherded the family to Allegheny City, Pa., where she had relatives. She would become her oldest son's heroine and constant companion, until her death in 1886.

By age 17, Carnegie had joined the Pennsylvania Railroad as chief assistant (and telegraph operator) for an up-and-coming manager named Tom Scott.

Railroads were hot. It was a giddy time to be in a growth business. There were few of today's checks and balances on aggressive business practices: government regulations, labor unions and litigation, and so on. Carnegie's boss, Scott, helped him make his first investment at age 20.

It was probably a sweetheart deal: Adams Express had just won an exclusive contract to use the Pennsylvania Railroad to ferry packages between Philadelphia and Pittsburgh. Nasaw suggests the shares were a quid pro quo for the contract. Carnegie got his nugget because, as the telegraph operator, he would have known all the details of the deal.

Thrilled by investing, Carnegie looked for more opportunities. As he liked to tell the story, he spotted one when he met a man who had designed a novel sleeping berth for railways. Carnegie claimed he showed the design to Scott, who invested in the inventor's company, and that he, Carnegie, scraped together enough funds to invest, too. The happy story ends with the inventor's success -- and appropriate winnings going to the savvy investors, starting with Carnegie.

But that account is just smoke and myth, Nasaw contends. Carnegie got a toehold in the deal between the berthmaker and the railroad because his bosses were arranging for kickbacks and he was, once again, in the know. "Capitalizing on insider information to invest in companies that were about to be enriched by lucrative contracts was standard operating procedure for railroad executives," Nasaw writes.

Nasaw steadily chronicles how the charming, tiny Carnegie (he stood not quite 5 feet tall) rose through making smart investments, selling bonds, knowing when to get in and out of deals and negotiating fiercely. What will truly awe readers in our Blackberry and e-mail-centric world, however, are the number of holidays Carnegie managed to take while building up his fortune.

As he was leaving for a year of travel in October 1878, Carnegie described his leaving this way: " 'Bang! Click! The desk closes, the key turns and goodbye for a year to my wards,' " meaning companies, which then included Union Iron Mills, Lucy Furnaces, Keystone Bridge Works, Union Forge, Cokevale Works and the Edgar Thomson Steel Rail Works. "I'm off for a holiday, and the rise and fall of iron and steel 'affecteth me not.' " Despite this cavalier attitude, Carnegie became perhaps the world's richest man when he sold his company to J. Pierpont Morgan for $400 million in 1901.

Carnegie's philanthropic streak ran deep and true, Nasaw reports. Carnegie outlined his intention to give away most of his fortune when he married at age 52 in 1887, years before clashes with unions and his retirement. In 1889, he wrote his influential "Gospel of Wealth," a primer on why some people had so much money and how to give it away. Carnegie had no love of religion but instead was strongly influenced by the English philosopher Herbert Spencer. Core to Carnegie's beliefs was an idea that Bill and Melinda Gates continue to espouse: that the wealthy are "merely 'trustees' for their communities, with no individual right" to their fortunes.

Nasaw's decision to keep his narrative firmly glued to Carnegie's schedule leaves some holes, however. "What was remarkable about the library and organ [donation] programs was how little time or energy Carnegie invested in them," Nasaw writes. So the biography spends little time exploring the effect these kinds of works had and significantly more time on the conflicts Carnegie navigated with labor unions at his steel plants and on Carnegie's self-appointed campaign to halt American imperialism.

Carnegie lived with gusto through 1914, when he suddenly retreated into silence. "We cannot diagnose Carnegie's condition," Nasaw writes. He speculates that the world war depressed Carnegie, who died in 1919. Carnegie changed his world in profound ways. Nasaw's account tells us how -- and leaves the implications of those changes for another account.

Elizabeth Corcoran is a contributing editor for Forbes magazine.

http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/10/22/RVGIHLOC6K1.DTL


©2006 San Francisco Chronicle

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Monday, October 09, 2006

Column: The Irony Of Large Numbers

Forbes.com

Letter From Silicon Valley

10.09.06, 6:00 AM ET

Burlingame, Calif. -Call it the irony of large numbers.

It’s not just enough to make a fortune in technology these days. To be taken seriously, you’ve got to have a philanthropic cause. Bill Gates, of course, is saving the world from nasty diseases. John Doerr, the Valley’s über-venture capitalist at Kleiner Perkins Caufield and Byers, wants to save the planet from greenhouse gases. Jeff Skoll, eBay co-founder, is footing the bill for movies with a message, including An Inconvenient Truth, Syriana and Good Night, and Good Luck.

But in order to make those big fortunes, the venture firms that nurture entrepreneurs want to invest in Really Big Ideas--ideas that hold out the promise of making 30% to 40% returns, the kind of ideas that Google might be willing to fork over $1.6 billion or so for, such as YouTube. That means that technology that might do good for many people--but not quite enough to be a lucrative market--falls through the cracks.

“An idea that requires, say, $3 million upfront investment only to make break-even returns is a nonstarter in the for-profit world. But it could be a barn burner in the not-for-profit world,” says James Fruchterman, founder of the nonprofit Benetech, based in Palo Alto, Calif.

Fruchterman speaks from experience. He is one of a handful of people at the forefront of starting not-for-profit technology companies. Another such person is San Francisco-based Victoria Hale, founder of OneWorld Health. Both of them were among the John D. and Catherine T. MacArthur Foundation’s most recent pick of “geniuses.”

Both Fruchterman and Hale have traveled different paths to reach strikingly similar conclusions: There are orphaned technologies out there with great potential. They’re unlikely to make anyone fabulously wealthy--with patience, they could be break-even investments--but they could do a world of good. The trick is finding them a home.

Fruchterman has been a lifelong entrepreneur and technologist. He got his start by quitting a PhD program at Stanford University to join a commercial rocket launching company. (The rocket went up in flames.)
In the early 1980s, Fruchterman co-founded Calera Recognition Systems to commercialize a character-recognition system that let computers read printed text. It was a hit. But when Fruchterman proposed using the technology to build reading machines for the disabled, the idea was nixed. The market was too small.

Fruchterman wound up starting a not-for-profit venture to make the reading machines. Over a decade, the company began generating annual revenues of $5 million--enough to be slightly profitable and even attract a buyer. With the proceeds from that sale, Fruchterman started Benetech. This time, instead of just developing one technology, Fruchterman decided to try to incubate multiple ideas. “We’ve got an engineering team to develop the technology. We don’t give people seed money--we bring them in house and help them launch their idea.”

Benetech currently has six projects underway, including two aimed at promoting literacy for disabled adults. Another hopes to develop hardware to help farmers pinpoint live mines in their fields, based on technology originally developed for the U.S. military. “It’s our riskiest project,” Fruchterman says, “but has tremendous humanitarian payoff.”

Hale was a government bureaucrat--a pharmaceutical chemist working at the Food and Drug Administration in Washington--who got frustrated when she saw pharmaceutical companies shelving medically promising compounds because the anticipated profit margins would be too thin. (See: “Protecting The Orphan Drugs.”)

In the computer chip industry, squeezing more transistors onto roughly the same postage stamp-size slice of silicon means the cost of computer power has fallen dramatically. By contrast, the more complex pharmaceutical products have become, the more expensive the final drugs. “The pharmaceutical industry has created wonderful products for the West but not for the poor,” Hale says.

At OneWorld Health, Hale decided to look for drugs already developed by industry that could be targeted at devastating illnesses in impoverished countries. For instance, visceral leishmaniasis, also called “black fever,” is a parasitic infection transmitted by sand flies that causes blindness and death. About 500,000 people, many in India, are infected every year.

An established antibiotic, paromomycin sulfate, had been used to treat a range of parasites. It had been experimentally shown to combat visceral leishmaniasis, but again, given the relatively small (and impoverished) market, it was a nonstarter for any mainstream pharmaceutical company. OneWorld Health negotiated the rights to the abandoned drug, arranged a partnership with an Indian drugmaker to reformulate it and ran clinical trials to demonstrate its effectiveness against visceral leishmaniasis. In August, the Indian government approved the drug, which should go on sale by the end of the year in the state of Bihar for about $10 per treatment course.

Hale’s group is now working on a new generation of low-cost anti-malaria drugs. Researchers at the University of California, Berkeley and a startup called Amyris are developing novel techniques for creating an anti-malarial agent. So far, the science works: The scientists have shown they can use biotechnology techniques to produce materials that otherwise must be extracted from plants. Now OneWorld Health and Amyris must make the economics work by demonstrating they can manufacture the substance at affordable prices.

Come up with a novel way to distribute video clips these days and you’ll find no shortage of investors: The Silicon Valley support network that helps startups with big ideas works just fine in the for-profit world. But projects that payout in goodness, not gold, are a much bigger challenge. That makes Fruchterman and Hale true technology mavericks.

http://www.forbes.com/technology/2006/10/08/benetech-philanthropy-fruchterman-tech-cz_ec_1009valleyletter.html


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