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Interview with Angel Investor Esther Dyson

Last semester, Esther Dyson, an angel investor focused on health, biotechnology, and space flight innovation, was featured as a keynote discussion sponsored by the Telluride Association. After Ms. Dyson shared snapshots of her experiences, including her work as a journalist on Wall Street and her completion of cosmonaut training for a future space flight, I invited her to share some of her perspectives on investment with our readers. The following is an edited version of our conversation.

When did you start investing in startup companies?

To give you some background first, I started working as a fact-checker for Forbes. That provided tremendous training for all my work – perhaps the best training you could have – in asking the right questions, and being properly skeptical of the answers. I worked for Forbes for three years and then worked as an analyst on Wall Street for five years. Next, I worked for Rosen Research and bought the company, renamed to EDventure. I wrote its monthly newsletter about the computer industry, and ran its annual conference (PC Forum) from 1982 until 2006. That’s where I learned the most about computers and the internet.

Then, in the early ‘90s, I started spending a lot of time in Eastern Europe. An investor said to me, “Considering the amount of time you spend in Eastern Europe, why don’t you invest?” I had never thought of that; I was a journalist. But, when he offered me $1 million to invest, I closed down my Eastern European newsletter and started investing instead. I learned a lot from these early investments, including how much fun it could be. I started investing in United States startups as well.

You mentioned in our correspondence not having an MBA. Was it difficult breaking into the financial industry without this degree?

An MBA makes it easier to find a job, yes. But once you get the job, it all depends on how well you do it and whether you can learn.

When someone on Wall Street looked at your resume and asked, “Why no MBA?” what did you say?

I told them I worked as a fact-checker and reporter for Forbes for three years, and that I understood business from the players’ rather than from the professors’ side.

What other characteristics do you believe make you a good investor?

Curiosity and enthusiasm. I love what I do! I would love to make money with my work, and I am glad when I do – and of course I need money to keep investing. But for the most part, I don’t do anything I wouldn’t do for free. Fortunately most of it pays off anyway!

How important is it for investors to share ideology with the company receiving their investment?

Oh, very important. When you need to make a tough decision for the company, it is important to have your interests aligned. Startups should be selective when it comes to picking their investors because their investors end up having a big say in the company’s direction.

Do you use investment to promote or change public policy?

No. It’s hard to change public policy. In fact, I am very frustrated with Congress and both political parties. I use investment to do what I can to help companies, ideas, and people fulfill their potential. I do get involved in policy, but not usually through my investments. Unfortunately for most companies, the less they have to do with policy the better – at least until they grow quite large.

What role should public policy play in investment?

It depends on what the policy is. Generally, the best policy for free markets is antitrust enforcement. Competition and transparency are crucial for building companies and fostering success of the best players. Maintaining consumer choice is also important.

Most markets work well. If you introduce public policy in the market, such as subsidies for health care, you should make sure the policy has no adverse side-effects. Moreover, these policies should be clear, transparent, and have discrete objectives. For example, it’s usually better to subsidize people rather than specific products. You can help the poor or the ill without interfering with their ability to choose. Though I would support policies such as prohibiting the purchase of cigarette or soda pop with food stamps.

For me, areas in need of public spending are health incentives – not just health care – education, and our country’s infrastructure, such as roads and bridges and mass transit.

Thinking about your involvement as a board member for 23andme, what role should public policy play to protect privacy? For example, should public policy protect privacy over consumer health information?

The government should foster clarity and informed consent, and leave privacy choices to individuals. People should have access to their own data and retain control over whom to share it with. However, if individuals want subsidized health care, they have certain obligations to provide accurate data to be used in the context of that care – but mostly not in the context of an employer making job-related decisions.

The problem, however, is not privacy. The problem is how the data may be used and society’s overall economic and health-related policies. I would hate to see people with diabetes being charged an extra tax on junk food, for example.

Unfortunately, we are conflating economic issues, such as who should pay for health care and what they should pay for, with privacy issues, such as what health information individuals should be required to reveal and to whom these disclosures should be directed.

How should companies properly use the data they receive from consumers?

They should use it only in the way they have contracted with the user to use it.

Switching gears a little, and in closing, what are your most memorable accomplishments?

First of all, I like to say that I’m not done yet. I don’t sit around and think about everything I have done. I am proud of having trained as a cosmonaut and I am proud of being one of the first ten to publish my DNA with the human genome project. I am also proud of 23andme. But there are so many things I still need to learn and to do.

For more information about Esther Dyson please visit EDventure Holdings or check out her contributions on Project Syndicate.