Why have new jobs been so hard to come by? One view blames cyclical economic factors: at times when everyone is cautious about spending, companies are slow to expand capacity and take on more workers. But another, more skeptical account has emerged, which argues that a big part of the problem is a mismatch between the jobs that are available and the skills that people have. According to this view, many of the jobs that existed before the recession (in home building, for example) are gone for good, and the people who held those jobs don’t have the skills needed to work in other fields. A big chunk of current unemployment, the argument goes, is therefore structural, not cyclical: resurgent demand won’t make it go away.

Hook, line and sinker. Whether in the Bay Area, New York, Philly or anywhere else First Round has investments, 2010 was more challenging than 2009 when it became more challenging to recruit candidates to new roles within our portfolio. Contrary to the broader economy, in the seed capital world there were too few people chasing too many jobs. My favorite anecdotal Bay Area economic indicator (rising commute times on 101), seemed to represent this as well.

Surowicki goes on to make a strong case that we’re probably not seeing structural employment loss. He points to a number of times in history when this argument has been made (the Great Depression, the early 80′s) and it turned out not to be the case. Proponents of the structural job loss paradigm may simply be looking at job data in a far too localized (sector, geography, time period) manner. I can buy this argument, or at least, I can buy this argument until we have significantly more data to review in a few years. But what I can’t stomach is Surowicki’s closing argument (emphasis mine):

Structural issues aren’t irrelevant, of course; there are certainly plenty of construction workers who are going to have start plying a new trade. But what defined the recent recession was the biggest decline in consumption and investment since the Depression. Dealing with that is the place to start if we want to do something about unemployment. The structural argument makes government action seem irrelevant. But if we don’t do more to get the economy back up to speed, it won’t be because stimulating demand won’t work. It will be because we’ve chosen not to do it. If we can’t find the way, it’s because we don’t have the will.

Presumably, he’s making the case against structuralist doom & gloom by arguing for greater fiscal stimulus in lieu of structural investment. The implication is that those making the structural argument don’t have the fortitude to spend what is required to jump start the economy. I take issue with this. The structural argument makes government action seem MORE relevant. It is precisely the job of government to provide the infrastructure required to educate and train it’s citizenry. Government action, whether investment in our schools or financial support for students is highly relevant. We certainly have the will to spend and the want for government stimulus. Do we have the will to really invest in education and jobs training? If Surowicki’s right, we’ll find out once everyone has gone back to doing what they did before they recently stopped doing it.

As novices, we don’t trust our judgment. Then we have some success, and begin to feel a little surer of ourselves. Finally, we get to the top of our game and succumb to the trap of thinking that there’s nothing we can’t master. As we get older and more experienced, we overestimate the accuracy of our judgments, especially when the task before us is difficult and when we’re involved with something of great personal importance

*****

Perhaps this is part of why we play games: there is something intoxicating about pure expertise, and the real mastery we can attain around a card table or behind the wheel of a racecar emboldens us when we move into the more complex realms. “I’m good at that. I must be good at this, too,” we tell ourselves, forgetting that in wars and on Wall Street [or any business] there is no such thing as absolute expertise, that every step taken toward mastery brings with it an increased risk of mastery’s curse.

The Sequoia item began to recirculate following a piece in PE Hub. PE Hub was reporting on a conference panel at MIT where a Sequoia partner, Michael Goguen, explained that despite widespread speculation that his firm had purposefully leaked their presentation, this was not the case. In fact, they were surprised that it leaked at all. While some may find this revelation surprising, I think it’s charming and can find reason for optimism in his claims. Ten years after the first Internet bubble began to inflate, even the backer of Yahoo!, Google and YouTube is amazed (shocked! shocked!) by the interweb’s power to rapidly disseminate information. Although I do wonder how they manage to keep their LP reports under wraps…

Switching gears, annual Top 10 lists are always a fun passage of December. I tend to scan them to try to find the great albums I missed the year before. Last year, that was how I came across the great Pet Sounds-esque album, “Person Pitch” by Panda Bear. I’m less bullish this year. I really liked the new albums from Death Cab for Cutie, Radiohead, George Strait and AC/DC but albums which I initially thought I loved proved fleeting (My Morning Jacket, Coldplay, John Legend). Nevertheless, I’ll scour the lists and hopefully add some good ones to my collection. These are always little “Merry Christmas to me” presents.

This year, I thought it might be fun to combine the these two ideas. Like Sequoia I’ve long believed that we were headed for a rough economic journey over choppy waters. But I never failed to see the silver lining around the magnitude of their doom & gloom. I still think there exist opportunities for great entrepreneurs and great ideas. At First Round, we know the spirit of entrepreneurship is still there. After all, we had 60+ people attend our Palo Alto Office Hours event. So with a nod to Sequoia, a tip of the hat to to the annual top ten albums lists, and a salute to those entrepreneurs who are about to rock, I salute you with the following list:

The Top Three Albums Made While Horrific Shit Was Going Down All Around

1. Back in Black (AC/DC) What do you do when the lead singer of your band chokes to death on his own vomit? Well, if you’re AC/DC you don’t stop. You craft the definitive hard rock album. Yes, you start the first track, “Hells Bells” with a bell tolling for your lost mate, but that’s where the self-pity ends. By the time the opening chords of the second track, “Shoot to Thrill” come on, a statement has been made: the band ain’t stopping. Songs you might know from this album: Hells Bells, Shoot to Thrill, Givin’ the Dog a Bone, Let Me Put My Love Into You, Back in Black, You Shook Me All Night Long, Have a Drink on Me, Shake a Leg, Rock ‘n Roll Ain’t Noise Pollution.
2. Eat a Peach (The Allman Brothers band) The greatest slide guitarist to ever live, and the leader of your band, Duane Allman, crashes his motorcycle into the back of a lumber truck. Just as the band was taking off after their legendary Fillmore East shows, and halfway through the recording of a new album, The Allman Brothers Band had to recreate themselves and carry on. Eat a Peach did more than that. First the band declared that they Ain’t Wastin’ Time No More. Next Dickey Betts cemented his status as a musician worthy of standing outside of Duane’s long shadow. With Blue Sky, Betts also moved the band in a western country direction that would influence them for over a decade. Other songs you might know: One Way Out, Trouble No More, Little Martha.
3. Layla & Other Assorted Love Songs (Derek & the Dominoes) Just about the worst thing that can happen to a guy is to fall in love with his best friend’s wife. Eric Clpaton topped that. First, he fell in love with George Harrison’s wife, Pattie Boyd. Next, he descended down the spiral of heroin addiction. But in the midst of it of depression and addiction, Clapton wrote Layla to exorcise his unrequited love for Pattie Boyd (they later married and divorced). Some other songs from the album: Bell Bottom Blues, Tell the Truth, Why Does Love Got to be So Sad?, Little Wing.

Realizing that all of these albums were produced at least 28 years ago, I would also submit the entire Foo Fighters catalogue as proof that great things can come out of very bad things.

So to all of you who are feeling gloomy, and especially to my friends and former colleagues at Yahoo, remember bad times create opportunities. They are a chance to rediscover or reinvent yourself. They are the perfect excuse to chuck it and do exactly what it was that you always wanted and knew you could do. Take these times as a bizarre, twisted, painful gift. And make greatness from it.

The impact of the economic slowdown is beginning to hit other parts of the economy as well. Today the Wall Street Journal has a cover story on the slowdown in charitable donations. So while I would never be so glib as to suggest that shopping is a core aspect of patriotism, ask yourself if there is anyone you can make a charitable gift. As horrifically craptastic as the financial markets and economy have been (and will be), I promise you there is someone who truly needs more than you.

If you have plans to travel somewhere exotic over the holidays, find a way to spend a few days helping the local community. I have a friend who has done this on a few continents and she now understands the places she has visited better than any tourist. If you have kids, think about giving them $25 to donate to the charity of their choice. It’s a gift which will last for their entire lifetime.

The economy sucks but that’s no excuse. We all have much for which we should be grateful. Time to give it away.

I’ll be sending a little bit extra here.

Happy Thanksgiving.

As is the case with any beta release, we’d appreciate your feedback. In the comments below, please let us know what we could have done better. This is as much your event as ours, help us improve it. From my perspective, the biggest disappointment was running out of time before we could meet with everyone. Coincidentally, the thing that had me most fired up was witnessing the interactions between people while they waited. So as we look to our next Office Hours, we’ll look to find a way to balance a more scheduled approach with one that will allow / encourage spontaneous connections between founders.

Josh, Rob and I were energized by the event and the 50+ people with whom we were able to meet yesterday. Thank you. This is something that First Round Capital is committed to doing again. We want to help make it easier for founders to meet with the venture community – and we also want to find a few great ideas fund! More geographies and more dates to be announced. Stay tuned for more details.