BUSINESSWEEK ONLINE : SEPTEMBER 27, 1999 ISSUE
COVER STORY -- E.BIZ -- THE E.BIZ 25

Commentary: The Great Equalizer? Not by a Long Shot
It'll take conscious effort to make the Net more minority-friendly

The Internet was supposed to herald the dawning of a new era of fairness. As the great leveler, the Web would put obscure entrepreneurs, smart 15-year-olds, and outsiders of every stripe on the same footing as multinationals and the rest of the Establishment.

But as BUSINESS WEEK identifies e.biz's top 25 movers and shakers, the executive elite of this new industry looks a lot like the traditional corporate world. Nineteen are white men, four are white women, one is Asian American, and one a Japanese citizen. None is African American or Hispanic. In Corporate America as a whole, white males account for about 56% of managers; white women 32%; African Americans 6%; Hispanics 3.2%; Asian Americans 2.5%; and Native Americans less than 1%, according to the U.S. Equal Employment Opportunity Commission.

Not that we didn't try hard to avoid overlooking anyone. We racked the brains of our editorial staff and queried Net gurus to identify the captains of this new industry. But here's the sad truth: Few minorities have emerged as leaders of top-tier e-businesses.

What happened on the way to the e-revolution? For all the hype about a new order in cyberspace, the old order, for the most part, still rules. While the high-tech crowd likes to view itself as a meritocracy where nothing matters but brains and moxie, this credo masks an important truth: Relationships and crony networks count heavily, even in e-business. Who you know still helps determine whether you'll get a crack at leading one of the companies at the cutting edge of this new industry.

Cozy relationships are hardly the only factor, though. African Americans and Hispanics often don't have the backgrounds and experience considered by many to be necessary for the Internet. Just 7.2% of engineering and computer science degrees went to African Americans and 5.9% to Hispanics in 1996, according to the National Science Foundation. And only 23% of African-American households are online, compared with 34% for white Americans, 36% for Hispanics, and 64% for Asian Americans, according to Forrester Research Inc.

But rationalizing a largely white male leadership doesn't make it good or right. Remember, the promise of the Net was something more revolutionary than making twentysomethings into multimillionaires: It was about transforming the daily lives of all people. The masters of this new universe must recognize its lack of diversity as a shortcoming if they are to lead the Web to its full potential. Without more managers of color who can tap into the hopes and dreams of the people who use the Net, the Web could end up reinforcing the divisions within society instead of erasing them. ''Ultimately, if this is going to be a mass medium, it's critical that it be reflective of society,'' says America Online (AOL) CEO Stephen M. Case.

Fortunately, there is a kernel of truth to the idea that the Net can be a democratizing force. In 1998, immigrants of Indian and Chinese descent ran 25% of Silicon Valley high-tech startups, according to a study by University of California at Berkeley Professor AnnaLee Saxenian. There are examples of success elsewhere, too. Consider Benjamin Sun, the 26-year-old CEO of New York's Community Connect Inc. At first he was unable to get funding for Asianavenue.com, a portal for Asian Americans, because the concept of an online gathering place for an ethnic community didn't resonate with venture capitalists. ''The idea was foreign to them, because the people we approached were not people of color,'' says Sun, a former Merrill Lynch & Co. investment banker. But after he scraped together 100,000 members in his first year, he was able to attract $4.5 million in financing.

And the number of women tech executives is on the rise. Carly Fiorina became the first female CEO of a Dow 30 company when she was named to head Hewlett-Packard Co. (HWP) in July. eBay (EBAY) CEO Meg Whitman and Exodus Communications (EXDS) CEO Ellen Hancock have become industry stars. And they're working hard to encourage women's success in the future. For example, Hancock has mentored 15 female entrepreneurs.

But these are exceptions to the lack of diversity. You can count on one hand the blacks and Hispanics who hold real power in the industry. There's E. David Ellington, CEO of Net Noir, a San Francisco-based portal targeting African Americans. Robert Knowling, CEO of Covad Communication (COVAD) in Santa Clara, Calif., rules a telecom company. Fernando Espuelas, CEO of Star Media Network Inc. (STRM), has had his site dubbed the Yahoo! of Latin America. Raul Fernandez, the Cuban-American CEO of Proxicom (PXCM) in Reston, Va., sells e-commerce software. These leaders suggest talent is available, but they're a tiny group in the defining business phenomena of our time.

The problem in part stems from a sometimes-unconscious reliance on the old-boy network. When venture capitalists look for managers for the startups they fund, they often look first to friends and colleagues. ''These companies are founded by small groups of friends, funded by friends of friends, and grow into businesses that look like them,'' says Joseph Mouzon, the black CEO of Imhotech, a Redwood City (Calif.) company that designs music and entertainment Web sites and software.

As the world of business is changed by the Net, it's important to listen to new voices. Some black leaders feel free markets alone won't make diversity happen. Angel investors, VCs, and CEOs should be mindful of promising minority entrepreneurs. Ellington suggests that VCs earmark a certain percentage of their funds for minorities. Beyond money, they can offer advice, as Hanock is doing. As this generation of minority entrepreneurs grows from rags to riches, it can seed a new wave of minority-led companies.

With blacks and Hispanics coming online fast, it makes sense to diversify at the top. African Americans still have the lowest percentage of online usage today, but the number will soar to 40% next year, according to Forrester. Hispanic households online will surge to 43% in 2000, from 36% this year. As Net users diversify, there will be increased demand for sites tailored to ethnic tastes.

If the minority presence in leadership roles doesn't soon reflect the general population or the online population, it will be time for Net boosters to ask themselves why what was supposed be a democratizing influence didn't work out that way. The answer may be in the nearest mirror.

By Catherine C. Yang

For interviews with Net Noir CEO David Ellington and other minority executives, see ebiz.businessweek.com.
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RELATED ITEMS
The e.biz 25: Masters of the Web Universe

COVER IMAGE: The e.biz 25

Commentary: The Great Equalizer? Not by a Long Shot

TABLE: Who's Lagging in the Net Age


[empire builders]
Jeffrey P. Bezos
AMAZON.COM INC.

Stephen M. Case
AMERICA ONLINE INC.

Timothy A. Koogle
YAHOO! INC.

[the innovators]
Louis H. Borders
WEBVAN GROUP INC.

Jay S. Walker
PRICELINE.COM

Margaret C. Whitman
EBAY INC.

Glen Meakem
FREE MARKETS ONLINE INC.

James H. Clark
MYCFO INC.

Christos M. Cotsakos
E*TRADE GROUP INC.

[bankrollers]
Masayoshi Son
SOFTBANK CORP., JAPAN

Robert C. Kagle
BENCHMARK CAPITAL

Lawton W. Fitt
GOLDMAN SACHS & CO.

L. John Doerr
KLEINER PERKINS CAUFIELD & BYERS  

Bernard Arnault
LVMH MOET HENNESSY
LOUIS VUITTON  

[the visionaries]
Mary G. Meeker
MORGAN STANLEY DEAN WITTER

John Hagel III
MCKINSEY & CO.

William Joy
SUN MICROSYSTEMS

[the architects]
Louis V. Gerstner Jr.
IBM CORP.

Pehong Chen
BROADVISION INC.

David C. Peterschmidt
INKTOMI INC.

Kevin J. O'Connor
DOUBLECLICK

Ellen M. Hancock
EXODUS COMMUNICATIONS

[the pace setters]
David S. Pottruck
CHARLES SCHWAB CORP.

John T. Chambers
CISCO SYSTEMS

Michael S. Dell
DELL COMPUTER



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