VC-istan 2: The Racist Judges Problem

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What is the Racist Judges Problem?

Let’s say that there’s a hypothetical country where everyone is either green- or blue-haired. (For this example, that distinction is “race”.) That nation has fifteen provinces and, each year, there is a nationwide beauty contest with one judge hailing from each province. Additionally, each province only gets to nominate one entrant. Each judge scores the entrants from 0 to 10, but (because these people are regional finalists, an above-average crowd) the contest average is usually around 8.0– meaning that a single zero can cancel out four perfect scores. Finally, while twelve of those provinces are pretty progressive, three of them, in the east, are deeply, obnoxiously, and uniformly racist against blue-haired people. They’re despised and considered unattractive in those parts, and judges hailing from those provinces will never give one a high score. Blue-haired entrants are typically given extreme low scores out of animosity. What happens?

Most likely, winning contestants are going to be uniformly green-haired. Moreover, even the non-racist provinces (though people in them might find the blue-haired to be equally attractive) are almost certainly going to nominate green-haired entrants, because anyone blue-haired will be at such a severe disadvantage that it will nearly impossible for him or her to win the contest. Eventually, it will be decided that blue-haired people just aren’t as attractive, or are otherwise unequipped to win such contests. They won’t even be considered. The biases of the few influence the many. That’s the Racist Judges Problem. It doesn’t require that all or most of the judges have a systemic “racial” bias; it emerges (a) from the biases of the few, and (b) from the forced accommodation of the many. Eventually, they reach a point where blue-haired candidates aren’t even considered, because their inability to sway the racist judges (even if the other judges find those biases abhorrent) renders them nonviable as candidates.

Does it exist in VC-istan?

The Racist Judges problem, of course, doesn’t necessarily need to apply to race.

With regard to specific racism, I’ve seen little evidence that VC-istan is prejudiced in that way. At least, let me put it like this. If you factor out the obvious and extreme classism of VC-istan, I don’t know that there’s much (or any) racism independent of that. There may be, but I haven’t seen evidence. As for the classism, I tend to believe that to be an artifact of the ageism. How so? Well, a person at age 50 has had enough independent influence over his or her level of professional accomplishment that work ethic and intelligence are likely to be as potent as socioeconomic class of origin. There’s been plenty of time for the apple to roll away from the tree. At 25, however, supposed professional accomplishment is almost entirely an artifact of socioeconomic status– did this person enter the first office job knowing how to navigate the scene, or did she have to learn it through trial and error? What schools did she attend? (College matriculation might seem meritocratic, but the US has a lot of extracurricular variables in admissions that, by design, inject socioeconomic status back in to the machinery.) Did her parents hand down powerful connections? After a couple decades of solid work experience, initial conditions get smoothed out a bit; but, by VC-istan’s standard, the time by which that happens is far too late.

In other words, I don’t think VC-istan is intentionally or explicitly classist, either. I believe it genuinely strives to be the meritocracy it claims to think that it is. The classism is an artifact of the brutal age grading, which makes it extremely difficult for those who weren’t born lifted to pass. I would guess that venture capitalists, for the most part, don’t have a specific interest in the native social classes of potential founders; on the other hand, they’re so used to seeing kids whose parents handed them impressive professional tokens that people with normal career histories, who might take 10 years to get where the lifted kids are after four, seem defective in comparison.

So where do the ageism, and the sexism– both of which I’ll cover in more detail, in future essays– come from? I don’t think most venture capitalists harbor either set of prejudices; but a few do, and the most stylish ones seem most ready to announce their prejudices. In truth, if the collusive, scummy culture of co-funding and note-sharing were busted, those issues would likely go away. Investors who harbored those prejudices would lose out to the ones who didn’t. The issue is that the lack of independence in the investor community means that a candidate for support must be broadly acceptable. A VC is unlikely to invest in a talented person that other firms are unlikely to fund. Ultimately, the biases of the few (with regard to, say, age) end up dominating the behavior of the collective.

The Racist Judges Problem is far from unique to venture capital, of course. It’s prevalent in politics and corporate culture, as well. People complain constantly about the bland, uncharismatic mediocrities that tend to rise in institutions simply by being inoffensive, but when you have a flabby culture of consensus that rejects those who offend the few, that’s exactly what you’re going to get: risk-minimizers, not excellence-maximizers. It’s generally agreed upon that some people are too creative, too interesting, to succeed in typical human organizations because of that specific effect. The VC-funded world sells itself as being above that historic problem, but hasn’t been so for a long time.

Sizes of minds and things

This quote has been variously attributed: great minds discuss ideas, middling minds discuss events, and small minds discuss people. I find myself coming back to it regularly. It’s quite true, and it’s sad, because the discussion of people (that is, reputation) is an incredibly powerful force in business– far more potent in its ability to make or destroy careers than the discussions of ideas or events.

Of course, there’s the whole spectrum of minds in every business, including venture capital. There are the few who have (and, boy, do I hate how this world has been overused) genuine vision. I’ve no use for the people who call themselves “big picture people” just because they aren’t smart enough to hack details, but there are a small number of people who have a solid grasp of the big picture (who would never call themselves “big picture”, because they also grok details) and what they’ve got there is an important skill. Those are the great minds. To their detriment, I’d argue that such great minds don’t fare so well in business unless they can pare up with event-aware tacticians, whom the above adage (unfairly, in this example) downgrades to “middling”. Between them, however, the great and middling minds are not enough to direct the behavior of the group. It’s from the people-focused small minds that we get the Racist Judges Problem.

See, judgment of people is the ultimate bike shed. People who have no other competence will, in business, delude themselves into believing that they’re supreme judges of character and talent. They need (1) to justify their existence, and (2) protect their own social status, and declaring oneself a social arbiter (if others accept this arrogation) fulfills both neatly. If anything, I think that these two capacities of judgment (talent vs. character) are antipodal in many ways (assessing people at their best vs. and their weakest) and that almost no one excels in both. However, the perception that one deserves to be the ultimate judge of others is the fundamental wish-fulfillment fantasy of the base-minded social aspirant. After securing their own status, such people develop a thirst for the ability to up- and downregulate the status of everyone else because, in human affairs, that’s what power, fundamentally, is. Such people love to make and break reputations, and its their discussion of people that often dominates a scene, much more than the rarefied and comparatively moderate debate of ideas and events. 

The small minds of Silicon Valley aren’t the only ones out there, of course. They’re probably not even a majority. There are a lot of great human beings in venture capital, no doubt. The good ones just don’t have nearly as potent an effect. That is the problem with VC-istan collusion. When you have a consensus culture, much less the feudal reputation economy that exists out there now, the small-minded few can have disproportionate, and even decisive, effects.