Welcome to the Showtime year of the residuum of our lives.

Afterward 36 months of corrections, recession, and scandal, we're ready for a break. The good news is that the worst is over (war and its aftermath nevertheless). The bad news is that the end of the bear doesn't signal the start of the next balderdash. "Sometime between January i, 2002 and Jan 1, 2003, the earth figured out that this downturn isn't a bleep in an otherwise unfettered march to untold prosperity," says veteran applied science investor Roger McNamee, who has seen his share of booms and busts (and managed to extract stellar returns during both). "People faced upward to the fact that we're never going dorsum. The '90s are over."

McNamee has a message for businesspeople mesmerized past the contempo past (mooning over the boom and tallying upwardly their losses from the bosom) or frozen past fear of the future (terror, war, double-dip recession). "Forget nigh the Adjacent Big Thing," he says. "The next thing has started. Information technology's called the New Normal, and 2003 volition exist the first full year of it. The New Normal isn't where you lot wait for the next boom. It's well-nigh the rest of your life."

McNamee has spent almost all of his professional life as a tech investor, and he has produced a shining tape over his 21-year career. He has not simply been alee of the curve on an array of investments (including venture deals with such tech superstars as Electronic Arts, Flextronics, and Intuit), he has also pioneered new modes of investing. Later a stint every bit a portfolio fund manager at T. Rowe Price Associates (where his Science & Technology Fund delivered center-popping returns during his iii-year tenure), McNamee cofounded Integral Majuscule Partners effectually the new category of "crossover investing": a combination of public-market investing and late-phase venture capital. Integral, which is backed by legendary venture-uppercase firm Kleiner, Perkins, Caufield & Byers and shares Menlo Park, California offices with that firm, outperformed the venture-capital category throughout the early 1990s. The firm's first $85 million fund delivered a 168% return in a menses when the S&P went upwards 43.5%.

Fifty-fifty more impressive than Integral's return is the restraint that McNamee and his partners showed when they gave back $i.v billion to investors at the height of the Net boom. In the calendar month that the Nasdaq peaked and Cisco Systems was briefly the most valuable company on earth, McNamee returned sixty% of his fund's capital, "because we saw rampant speculation and prepared ourselves with our version of duct tape and plastic wrap."

As early as 1997, he says, "I realized that we had escaped the earth's gravitational pull — that we were in the midst of a true mania. The next question was, What practice you do after yous crash and burn? Y'all need a strategy for investing in a long-term bear market place." So, along with a set of superstar partners, McNamee assembled the first large-scale private-disinterestedness fund focused on tech. Silver Lake Partners, which launched in May 1999, raised $2.3 billion in a thing of months, attracting a who's who of Silicon Valley and Wall Street, including Bill Gates, Michael Dell, Larry Ellison, major investment banks, and big institutions such as CalPERS and the World Banking company. In the 4 years since its launch, Argent Lake has invested approximately $1.6 billion of the fund in 9 megatransactions — which included involvement in a landmark $xx billion leveraged buyout of legendary disk-bulldoze maker Seagate in late 2000 and that company's IPO 2 years later.

To say that Roger McNamee'due south career is a triumph of smart money is to say that Jerry Garcia (to invoke one of his heroes) had a decent following. While the world makes excuses, McNamee names the moment — and maps out a productive path forward. In the case of the New Normal, that ways unlearning nigh of the principles of the past decade. Forget everything that you've learned most fourth dimension (faster is meliorate), money (upper-case letter is costless), and leadership (no feel required). "Everything takes longer in the New Normal," says McNamee. "Longer is better than never, but it requires a different frame of reference. Wealth is no longer an entitlement. Vision isn't a template in PowerPoint. Patience will one time once more be a virtue of keen event."

In the New Normal, the trick is to get real about the new fix of challenges we confront and what it takes to win in an surroundings where there are no shortcuts. "You have two choices," says McNamee. "You can say, 'I'm out. I'yard never going to do this again.' Or, if you lot're a lifer, you say, 'Okay, what lessons have I learned? Considering I accept to exercise it again, any the circumstances in the market place. I'yard just going to be a lot smarter this fourth dimension.' If you're willing to do some homework, and if you're willing to be a little different from anybody else, at that place are countless opportunities worth pursuing. That'southward what the New Normal is all about."

In a series of conversations with Fast Company, McNamee explained how the New Normal redefines our human relationship with time, our grasp of coin, and the practice of leadership — and what it takes to invest, compete, and win in that environment.

During the belatedly 1990s, the business globe was captivated by the idea that "the Internet changes everything." Does the New Normal change it back?

The problem with that line is that people used it as license to defer profitability forever to build a really large beachhead against the total transformation of the economy. The rules were: Create your own metrics — eyeballs, page views, it didn't matter what they were, equally long as they grew at exponential rates — and uppercase would be freely bachelor to your thought. Everything was defined in terms of market capitalization. People weren't building businesses so much equally participating in a kind of arbitrage. Investing was nearly the thrill of victory. Everyone from venture capitalists to cabdrivers became a compulsive trader. And while the Internet touched everything, it simply transformed three industries: travel, brokerage, and retail (of books, video, and music).

When the music stopped, there were just three chairs for tens of thousands of people. The rules changed again, but nobody told you what the new rules were. All of a sudden, if you weren't already assisting, yous were never going to get a chance to become assisting. As unreal equally it was on the way upwards, the consequences of that were inescapably existent.

You know what? That's the textbook definition of a "mania." And that'south what the belatedly '90s were. This is how it works: When great new technologies come forth, everybody wants a piece of the action. Speculation tends to get manus in hand with entrepreneurship. Uppercase is infused indiscriminately into the industry. This funds a huge burst of creativity — which is followed past a Darwinian process that rationalizes the industry.

The bad news is that the speculators lose a lot of money at the end. The good news is that as much as nosotros lose in the short run, there's more to win in the long run. Every great industry in America has been congenital on the back of a mania, from railroads and autos to PCs. We're non talking about tulips; we're talking about industries that have get central to our economy.

So let's be articulate: The '90s were non normal. The affair I am well-nigh certain of in this earth is that the engineering science universe will not see that '90s blazon of growth explosion again — not in our lifetime. This is the New Normal, and it's about the balance of your life. And so the start piece of advice is, Let'due south move on.

Before we go on with the residuum of our lives, isn't there a monster hangover to bargain with? Do things still go worse before they get better?

Without a incertitude, at that place's a lot of adjustment left to exist done. There are three-legged deer running all over the place, and we have to thin the herd. Phase one of the New Normal is virtually every company looking at its price structure. The quick hits are to head count and the It budget. For the starting time time in history, IT people constitute it to exist good for their careers to spend less than their budget. As a result, we're in the midst of a kind of truce where the whole economic system has decided that nosotros're non going to invest in tech while we figure out what went wrong. Simply it would be dangerous to forget that technology even so remains the principal weapon in terms of creating a competitive edge.

There's another key issue here. To focus exclusively on the negative reverberations is to miss the indicate. We may non be going back to the boom days, but nosotros're not going dorsum to the normal of the '80s either. Engineering science is completely interwoven into the social fabric. That's the "new" part of the New Normal. Twenty years agone, technology was a noncore action for enterprises, and information technology barely touched individuals. Today, it's near ten% of the Gdp, and doing without information technology is inconceivable to nigh people.

Old Normal

Internet Fourth dimension

New Normal

Real Time
Measured in days, weeks, and dog years (for the business bike). Absolutely everything was accelerated, from hiring to going public. Xviii months was the magic number for major undertakings, from startup to ship, from funding to IPO. The bumper sticker was, "Stop for lunch and you are luncheon." Says McNamee: "It was a kind of hormonal reaction. There was then much urgency that every standard — for due diligence, leadership, recruiting, and investment — was relaxed." "The New Normal," says McNamee, "is about real life — and real time. Getting things right the outset fourth dimension is more important than getting things done rapidly." That'south the opposite of the late-'90s mantra, "Neglect faster to succeed sooner." Everything — whether it be building companies or hiring top talent — takes longer in the New Normal. Fifty-fifty more important in the new fourth dimension frame: Don't waste your own fourth dimension. Dedicate it to what you truly enjoy doing.

And considering Moore's Law has pushed down prices, almost every new consumer device is priced under the discretionary-spending limit of the average family. Prison cell-phone penetration is staggering: More 400 million handsets were sold last year. DVD players stand for the fastest penetration ever of a consumer-electronics device. Y'all can purchase a good one for $200. My favorite new production is Roomba, a $200 trivial robot that vacuums your whole house without whatsoever human intervention. I gave 10 of them abroad at Christmas. Information technology's going to get cheaper, and it does something truly useful. Nosotros'll never again take to worry about down cycles where nobody buys this stuff because they don't understand information technology.

This is a very solid foundation to work from. Sure, the toll of marketing is high, because markets are now mass markets. Merely there are a lot of things in life worse than mass markets. Some of these markets are too big for venture-backed deals. Then what? That simply means that at that place will be interesting opportunities for big companies. That's a positive reality. To everyone who thinks that there's no room for innovation, I point to Google. It's one of the five virtually compelling individual companies I take seen in my career. This stuff volition keep to happen.

If we can't wait another startup revolution anytime soon, how will all of this growth and innovation happen?

Hither's the "normal" part of the New Normal. If there'southward annihilation you need to sympathize about this environment, it's that the time calibration has returned to a more rational level. Internet fourth dimension measured everything in days or weeks. New Normal time is measured in years (probably not 3; more like v to 7, or even x).

Internet fourth dimension didn't really change the nature of fourth dimension; it was a kind of hormonal reaction. In that location was then much urgency that every standard — for due diligence, leadership, recruiting, and investment — was relaxed. Things moved so chop-chop that even dumb ideas were successful.

The New Normal is all about real life — and real time. Everything only takes a lot longer now. If Internet time lowered every standard, today there is a compensating amount of selectivity in the system. People aren't sure what the right metrics are, and so they pick arbitrary ones, and for now, the metrics are arbitrarily conservative. That applies to investing. It applies to recruiting. It applies to IT spending.

Onetime Normal

Grow Market Cap

New Normal

Create Real Value
The '90s were all about fast coin. Uppercase was quickly bachelor and virtually free to businesses growing at exponential rates. (And it didn't matter what was growing. Any metric would practise: eyeballs, page views, or click throughs.) The logic was, spend to grow. Today, information technology's all about smart coin. Capital letter is expensive, only it's available to truly committed entrepreneurs who have rigorously developed business plans that demonstrate existent positives in the near term. In the late '90s, customers got a free ride, and upper-case letter underwrote everything. The new logic is, pay as you go.

Investors and businesspeople alike have to suit to that new time horizon. Cisco is a smashing case of smart thinking in this context. The company may have lost lxxx% of its stock-market value, but information technology has a clean balance sheet, a ton of cash, no debt, and respectable growth rates. One matter that Cisco is doing today that reflects a five-twelvemonth time horizon is using its remainder sheet as a weapon. Whenever Cisco competes against a Lucent or a Nortel for large business organisation, it offers to finance those tiptop-tier customers. That's smart.

Even more important than adjusting the length of your time horizon is adjusting your expectations well-nigh what the end bespeak is. If the animating payoff of the '90s was an exit strategy that would state you lot on the Forbes 400 before you were 40, the New Normal expectation is, "Make your life a petty meliorate." In the belatedly '90s, people did things that they hated for cursory periods of time because they could make a lot of money doing them. When everything takes longer, it's really important to enjoy what you're doing. The question on your heed shouldn't exist,

"What'south my exit strategy?" It should be, "Why am I hither? What am I good at? What piece of work is the best fit for me?"

What does the New Normal time horizon tell us almost where the smart coin goes today? Going forwards, who is going to fund growth?

In the New Normal, the big shift is from a focus on growing marketplace capitalization to a focus on creating real economic value. The logic of the late '90s was, spend to abound. You lot could lose $100 million today because at the cease of the rainbow, you lot were going to make a trillion. The logic of the New Normal is, pay as yous go. And estimate what? Tech works perfectly well that way. It turns out that you don't need $200 million in venture majuscule in order to build a swell company.

Ii of the venture deals that I am most proud of in my career were both founded in the teeth of the last mania — the PC revolution of the early '80s — and survived. One of them was Electronic Arts. The other one was Intuit. There was no capital letter available for either one of those companies. They emerged from very crowded fields and evolved business organisation models that didn't require a lot of external capital. They believed in their categories, and they had patient, committed teams. And now they're ii of the most successful and heady companies in the earth. That's living proof of what people who piece of work hard at a great business model tin can practise. Tech is non about overnight success. It's about doing information technology every day for years and years.

The central problem of the belatedly-'90s business model was that customers got a free ride. In the residuum between customers and majuscule, capital underwrote everything. Today, the best concern plans are the ones where customers pay for their share of the toll. That's a very elementary exam. The customers pay either by acquiring lots of production or by underwriting the development. If the customers don't want your product now, why are you doing it now? I don't care what customers are going to want in the hereafter. Don't tell me about the new, new thing. The matter that matters in the New Normal is, What are people buying today? What are they probable to buy more of tomorrow?

What this means for entrepreneurs is that not only is it non enough to take a groovy production or service idea, it'south also not plenty to have a rigorous, detailed plan, a deep understanding of the customer, a go-to-market strategy, and a team that tin get it done. You likewise have to have paying customers signed up. That's why I always tell entrepreneurs, If you can't imagine doing anything else, do your deal. But if you can imagine doing anything else, practice that, because entrepreneurship should be left to the truly committed.

What about average investors? How do they get an edge in the era of the New Normal?

Y'all have to distinguish between the technology economy and the applied science market place. The engineering economy will be increasingly productive from now on, while the technology equity markets will exist very selective in how they reward. Darwinism has returned with a vengeance to tech investing. Average returns will be low, but the standard deviation will be huge. There will be many more than losers than winners, just a few of the winners will be large ones.

When Darwinian forces rule, you have to be a stock picker. You don't focus on sectors or "what's hot." There are winners and losers in every category. And because there's no tailwind for the tech manufacture (and there's even a slight headwind), momentum is sufficiently unusual, and you've got to take information technology where it comes. Look for a actually skillful production cycle, a great management team, and strong positioning. Yous don't want to ain the averages. A fully diversified tech portfolio will ever underperform. That goes for companies also. Companies that are too diversified are not going to perform as well as the ones that are narrowly focused and take a large product cycle.

Old Normal

Vision

New Normal

Leadership
In the age of Biz Dev, PowerPoint was confused with "vision" and exit strategies were mistaken for bodily strategies. The urgency was effectually marketing communications rather than creating existent value. Leadership was more than about looking good on CNBC than in-the-trenches direction. Now there's a premium on a management team willing to commit for the long term. Serial entrepreneurs from the boom are like Earth War I generals adjusting to Earth War Two conditions. Success has less to exercise with looking good than with crafting change-the-world (or at least improve-the-earth) ideas and executing them every day.

Finally, don't underestimate the staying power of a technology franchise — and the fact that things that work oftentimes go along to work. Bigger companies have some advantages. They're also important just to get away. The other thing to keep in mind is that technology markets develop over xv to 20 years. And the manner that compound involvement works, most of the money that investors make is in the final 5 years. You lot don't have to rush.

Every bit hard as it is to get excited nearly return on investment these days, it's fifty-fifty tougher to run a business concern or manage a team in an surround where there are more demands and fewer resource than e'er before. What are your lessons for leaders in the New Normal?

What's challenging about the New Normal isn't so much that it'due south strange or make-new. It's that then many of the people running companies were trained in the tardily '90s. The analogy I would use is that of the military in World War I. Betwixt the American Civil State of war and World War I, the technology of armaments progressed rapidly, and military strategy didn't motility at all. In Europe, most no lessons were learned from the American Ceremonious War. The effect: Generals on both sides persisted with outmoded strategies in the face of mass destruction. The incredible tragedy of World War I is that nobody figured information technology out. Right upwardly until 1940, the French insisted that the Maginot Line would protect them from Germany. And during the course of World War II, various armies made progress in direct proportion to how apace they incorporated new technology.

Past the same token, what fabricated people successful in the belatedly '90s is not particularly relevant right now. The belatedly '90s were all nigh people who looked good in the spotlight. I call information technology the CNBC CEO. Now it'due south about people who get things done. The question isn't, What'southward your vision for the futurity? The question is, What are you doing today? Yous still need a vision, simply that is no substitute for a realistic programme. Without a doubt, it's harder now, and you get paid a lot less. But the battleground promotions go to people who are willing to take the earth as it is and make the best of it.

That means two things. First, the management team has got to want to invest in itself. Leaders have to be buyers, not sellers. In the first two years of running Silver Lake — 1999 and 2000 — almost every meeting that nosotros had was with executives from companies whose stocks had gone from $100 to $ii. They had figured out in their heads that if they could get the stock to $4 they could keep the aeroplane and the firm in Hawaii. And they would spend the entire meeting trying to figure out how to sell the business organization to usa for $four. Plainly, we were more than interested in leaders such as Steve Luczo of Seagate, who not simply was interested in owning a piece of the business, merely who was also committed to pursuing an heady strategy to grow the business, a strategy that had zip to exercise with the priorities of the public markets.

2nd, we need more leaders who aren't afraid to act in the midst of uncertainty. The problem with the New Normal is that there's no obvious ane-size-fits-all strategy. And in the absence of an obvious strategy, most people would like to change equally few things equally possible. People are paralyzed when information technology comes to setting meaningful strategy. That'south why flexibility and responsiveness are the most disquisitional skills of the New Normal leader.

Accept Eric Schmidt, CEO of Google. Eric has totally modified his beliefs in order to play a new game. When you lot have been as successful as Eric has been, y'all're entitled to recall that yous know a affair or two. He could have been forgiven if he had shown up at Google and said, Hey, y'all young whippersnappers, permit me show you how it'due south washed. Instead, he listened. He watched. He figured out what the business was. He figured out which parts of what he did well would make it better and which parts of what the original squad did were going to brand him better. That's the essence of management. For all of Google'due south success, Eric is less visible today than he was a few years ago. He's spending time on the business, not in the spotlight.

Polly LaBarre (plabarre@fastcompany.com) is a Fast Company senior editor based in New York. Her most recent comprehend story was "How to Lead a Rich Life" (March 2003). Learn more than nigh Roger McNamee'due south ventures on the Web (world wide web.slpartners.com and www.integralcapital.com).