The ethics of VC — Tech’s optimism problems (#11)
It was almost midnight, but still unbearably hot outside. New York can get muggy in the summer and the beautiful trees in the Brooklyn space I was invited to that night didn’t help the crawling heat. The crowd was young and mostly here for a famous NYC DJ playing a set. I had come down with friends to try out the food and to listen to the sound system; but meeting an acquaintance of my host’s ended up being the most interesting part of my night. He was enthusiastic, charismatic, bold and eloquent — talking about his restaurant ventures, his involvement in members clubs and in a futurist city project at Lake Nona. I liked him. We got to talk about how some of the big pharmaceuticals — such as Johnson and Johnson as one of the backers of Nona — are in fact really trying to do good. He was strongly in support, appreciated their attempt of creating a better future. I was highly critical of any white-washing initiatives of a company that was as much engaged in the opioid crisis as it is in curing people. He wanted to tell me about how great their engagement with this future-facing community on Floridian land, focused on the ultra-elite, built around ‘impact’ and with lots of yoga and a sculpture garden was (Lake Nona, that is) — and he wasn’t open to a rebuttal, any kind of more nuanced or even critical understanding of the situation. He was focused on looking forward, on improvement, not on looking back. The conversation ended quickly after.
The above encounter is a good example of what I call tech’s first optimism problem: tech people and many VCs are unreflectively and a-historically optimistic.
Obviously, there is nothing wrong with being optimistic per see (in fact I wrote a whole book about how hope is key for people experiencing homelessness), but tech’s optimism is often unable to be self-reflective. Some would argue being all-consuming optimistic, bulldozing over any doubters is one of tech’s strengths; but too much confidence in a ‘good future’ leads to blindness. Critics are shut down.
How loud (and weak) were the VC-defences on Twitter when the Theranos book (and articles like the New Yorker piece) came out. ‘Theranos didn’t even have real VC money in it’ (just Tim Draper’s whom many don’t accept as a real VC). Let’s not use Theranos as an example then. But how about WeWork? Did you really have to let the guy buy a whirlpool company (and blitzscale a real estate business hiding behind a tech cloak)? ‘We didn’t have control over the board (and we needed to let him be a genius).’ Uber’s story followed a similar pattern and so did Deliveroo’s (both deeply indicative of VCs’ shortcomings).
In fact, critical voices are often cancelled altogether — some of VCs’ biggest names are well-known for blocking journalists and others with differing opinions on Twitter, all while shouting loudly about freedom of speech.
Obviously, we have seen high-profile cases of that in some big-tech companies. What happened to Timnit Gebru is possibly the best-known example of tech’s cancel-culture; Gebru was explicitly tasked with scrutinising AI practices (including her employer’s) and when she published critical findings, Google fired her. Her case was only the tip of the iceberg at Google (as the founding of her new independent research institutes with lots of X-Googlers on staff shows) and cases of ‘fired researchers’ keep happening. Facebook’s oversight board has been criticised for similar problems (think: ethics-washing) and from all we know Amazon doesn’t even bother with pretending to be self-reflective (but might ban employees from talking about ‘ethics’ on its internal communication channels).
Tech’s optimism is worsened by its blatant a-historicity. My favourite tech-historian Margaret O’Mara has made this point again and again (and so has Bill Janeway): tech and VCs mustn’t forget about all the people (and institutions, most notably the state) that have come before them to enable it to flourish. The idea to create a ‘new Silicon Valley’ in Miami out of nowhere (missing most notably the research and university ecosystem with trillions of state funding) is ludicrous and lacking exactly this historical understanding and reflection. ‘Infrastructure’ has to grow over decades. Perhaps more VCs and founders need to read Tom Nicholas’ VC history book — instead of raving about Mallaby’s account of VC success stories.
Let’s look at another concrete example of the a-historicity of tech’s optimism. We know that history tends to repeat itself — but VCs do really seem to think that the immediate delivery wars currently eating up billions of VC money are going to be very different from the delivery wars some years ago. Many immediate delivery giants from Gorillas to Gopuff have already been found to have concerning issues with both their financial viability and (responsible) operations — but keep getting VC funding. Crypto would be another obvious source to look for a-historical optimism; do we really need to re-invent restaurant reservations with NFTs (and make them a big market place benefitting the richest bidder)? How can crypto-bros continue to talk about democratisation and increased access that for instance NFTs allow for ‘creators’ — while they really only benefit men (like in the traditional art world)?
This takes us to tech-optimism’s second problem: its exclusivity. I guess I should be glad that supposed VC-wunderkind Harry Stebbings invited the failed Fast founder on his podcast for an exclusive story after burning through more than 150m in funding and days after announcing the failure of his company. This was going to be a reflective conversation, right? Not exactly. The undertone of the conversation was not ‘you fucked up — what do we learn from that’. Instead, it was strongly focused on producing some clever marketing for one of Stebbings’ portfolio founders. Blaming every other stakeholder (mostly the board) to rescue his own butt, this kind of fake-reflection is really about enabling the founder to ‘fail forward and upward’. My big question mark: would the same have happened to a black woman (or just a woman, full stop)? Tech is optimistic but really strongly so when it comes to backing white, male, elite-educated and able-bodied founders. I won’t repeat all the stats (one of my recent Sifted articles with Erika Brodnock has lots of them) but you all know (or have no reason not to know): 90% of VC decision makers are male (managing even more money than that!), less than 1% of partners (even in the US) are black and 40% of VC partners went to Stanford and Harvard. And the worst about this: these VC-level statistics translate more or less on-to-one to the level of funding for startups.
We need real critical engagement with the failures that are increasingly being observed as startups turn into big (and powerful) tech. And we need to turn the learnings into action, rather than making a marketing tool out of producing non-learnings.
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This wouldn’t be a blog about the Ethics of VC if I didnt have specific suggestions for the Kingmakers to stop throwing money at the same boys’ club and seemingly contrarian ideas. We’ve had a decade or several of optimistically (or blindly) embracing tech-solutionism and -determinism without thinking enough about unintended consequences; that needs to stop.
1. Practice what you preach — and fund solutions to actual problems. The A of a16z early on in the pandemic published one of his widely distributed essays entitled ‘It’s time to build’. He talks about how we need more healthcare and infrastructure, housing and education — what he isn’t saying is that it is his own industry’s shortcoming for NOT focusing on quintessential problems (what some, including myself, call public purpose technology). Shift away from throwing money at at-best speculative (and at worst: fraudulent) NFTs and use your optimism to learn from the past and build things we need.
2. Systematise reflection (or: do your due diligence). I’m half happy that the market environment is changing and money isn’t going to flow so freely anymore. It means that we have time (hopefully) to reflect more. People need to be less afraid of the next best VC running into the room and dropping 5 or 50 million without even talking to the company. Take this opportunity of the market putting power into investors’ hands again to think critically. See and understand the founders’ optimism but also question it as much as you can.
3. Finally write that cheque to someone who doesn’t ‘tick your boxes’. The message is simple: extend your optimism outside of your usual network and outside of who gets all the funding — we need that you have good chances to even increase your financial returns this way …
