VC-istan 5: Wanting to be loved

It’s easy to put a negative spin on most of what happens in the VC-funded ecosystem (“VC-istan”) but a useful philosophical exercise is to look for positive, or at least forgivable motivations, behind unpleasant things.

It’s fair to say that VC-istan doesn’t work. It delivers meager returns to non-managerial investors (while the employees of venture funds get very wealthy) and squanders a lot of the nation’s top talent. Yet, I would believe that the main actors are not especially bad people, no more than anyone else. Are they worse than top investment bankers? Entertainment executives? Corporate kingpins? Almost certainly, they aren’t. It’s easy but intellectually weak (and, moreover, just shitty) to demonize them. It’s better to humanize them in an attempt to understand what is really going on. What caused a group of not-altogether-bad people to build such an awful ecosystem?

I’ve been in enough different places to see the common patterns, and a surprising number of startups fail because their founders want to be cool. It isn’t some rationally planned-out marketing need that I’m talking about. It’s emotional. They need to locate their businesses in the heart of San Francisco or Manhattan (although, increasingly, Brooklyn is the center of east coast “cool”). They want to hire “hip” 24-year-old Ivy grads who might not be the best fit for the work. They’d rather have millions of users who know their name than a couple hundred who pay handsomely. They’d rather be written about in business magazines than grow steadily at 25% per year and get rich slowly.

Wanting to be loved is, fundamentally, a deeper emotional need for most people than wanting to make money or perform useful, rewarding work. The latter are more abstract and artificial goals; being loved goes back to our evolutionary roots, including millions of years in which money didn’t exist. While they won’t admit it, most people would rather be loved “just for being” (or, in business, for being “visionary”, a concept so slippery in definition as to be effectively religious) than admired or liked for performing specific services to others.The problem is that no one is truly “loved” by society– at least, not while alive. Rather, society’s tendency is to ignore and forget, due to its size and volatility, while it turns vicious on those who continually demand its attention.

“Cool” is a major distraction for many founders, and I’ve seen plenty waste gobs of money on flashy launch parties, narcissistic indulgences, and high-risk gambits that were never wise. That’s bad; I’ve seen it crash plenty of businesses. Worse is the fact that investors themselves (and, by “investors”, I mean the employees of venture funds that invest others’ money) are seduced by the allure of “cool”. That’s why they throw themselves into extremely high-risk businesses that either return 100x or fail (and the vast majority fail). It’s why they age discriminate in choosing whom to fund; they choose incompetent young “midlife crisis” proteges to feel stylish again. Most VC-istan wunderkinds are, in truth, the 21st-century analogue of the trophy wife: they’re there to make some older guy appear and feel like he is young again.

Machiavelli said that it is better to be feared than to be loved, and many find this advice to be sociopathic. At first, it sounds horrible! Machiavelli wasn’t a sociopath, but a realist. He knew the cutthroat reality of 16th-century Florentine politics; but he also knew, even in that milieu, that the temptation to be loved was extremely strong, and that even very hard men could fall to it. His observation on society’s “love” (or a court’s) was the same as mine is: it’s fleeting. It turns on you at the worst time.

This what the MacLeod Sociopaths understand that the other tiers don’t. When Venkat Rao first applied the MacLeod tiers to The Office, it was hard to find a true Sociopath in the American workplace comedy. (The closest match was Robert California, more like an ineffective joke than a real character.) For insight into a real Sociopath– again, in the MacLeod sense; although he may be an actual psychopath– look no further than Frank Underwood in House of Cards. I can’t do him justice by describing the character; just watch him.

Now, in business, I wouldn’t say that “be feared” is a great strategy. You can fire people, but if you damage their reputations beyond that, you’re probably breaking the law. For example, the feudalistic reputation economy of VC-istan cannot possibly scale, because the inappropriate sharing of information and opinion between investors would attract lawsuits galore if it became any larger. Moreover, trying to extract favors or progress through fear will usually end in the territory of criminal extortion– and, for the majority who are not very powerful, it just won’t work. So I wouldn’t go so far as to say one is better to be “feared” (in a visceral, brutal sense) than loved, so much as it’s better to be competent (which one can earn, through steady progress) than to be loved (a fickle thing). Competence is itself dangerous and subversive– not in the short term, but in the long term. Businesses that fail the demands of high talent will decline. Competence doesn’t pose the immediate fuck-you-up threat of the extortionist, but its rarity gives it leverage and makes it badass. The people in control want those below them to be just competent enough to execute orders; if you go three degrees beyond that, and keep learning and questioning for your whole life, you become a man (or woman) made of guns. No one should focus on being feared– that’s a bit too uncivilized, and usually illegal in practice– so much as to strive for the intrinsic badassery of very high competence and deep knowledge.

VC-istan is not that kind of world. It’s not about developing competence over twenty years, but rather about flashiness and style. Somewhere between Hollywood for uglier people, Wall Street for those who can’t hack winter, and Washington for those who can’t build coalitions, it’s a connections-powered world in which people feel a deep-seated need to be adored. When one is starting out from zero (in the way of connections) that strategy actually makes sense, because there is no such thing as bad publicity for an unknown. On the other hand, for those who already have enough connections to start doing things, the race for further inclusion and “coolness” is a catastrophic distraction. Most writers exhibit a parabolic trajectory in output quality as they get better known; at first, more social inclusion gives them more inspiration, but eventually they rise into high enough social circles to succumb to the charismatic emptiness that is all around them, and become blithering, complacent, and boring.

I’m not writing this to denigrate anyone in particular. Paul Graham, for example, started Y Combinator to have the adoration of highly talented young people, at a rate of a few score per year. That’s fine. His motivations aren’t negative, and his effect on the world is almost certainly positive. Rather, I’m writing it to point out that the immaturity and general ineffectiveness of VC-istan doesn’t come from some evil conspiracy. The motivations of these people aren’t sinister, but pedestrian. They just want, badly, to be loved by society. They want to be hip and “visionary”, meaning admired just for being them. They want to be loved, that’s all.

I don’t think that’s so bad. It does give us the first bit of understanding if we want to analyze their weaknesses in leadership, and think about what we could do better.