It’s easy to recognize that the current state of Silicon Valley is unacceptable. Innovation has nearly ceased, and what we now have is a resource-extraction culture with no sense of ethics or even a coherent vision. So can we fix it? Or, can we replace it with something better? There’s good news and bad here. The good news is that the problem is simple, obvious, and demonstrably responsible for many of Silicon Valley’s failures. The bad news is that, though simple in etiology and nature, it may be complex and difficult to fix. What’s wrong with Silicon Valley: founder quality.
Almost all of the cultural illnesses of Silicon Valley can be traced to the fact that most startup founders are shitty people. Why are open-plan offices, despite their unacceptable health load, in vogue? Low founder quality. Why is there so much sexism and ageism in the VC-funded world? Low founder quality. Why are there hundreds of IUsedThisToilet apps but few companies doing fundamental research? Because the people being selected as founders aren’t capable of solving real problems, which tend to be way outside of their intellectual frequency bands. Silicon Valley is shitty because it’s creating shitty companies, and it creates shitty companies because VCs are selecting shitty founders.
The irony is that many venture capitalists love to say, “We don’t invest in business plans; we invest in people.” Y Combinator even invited founders to apply without an idea. That canard about “we invest in people” is about the worst thing for that set of individuals to say, because they do such a terrible job of it. I honestly can’t evaluate whether they invest in good or bad business ideas. I don’t think that they know what they’re doing, on that front, but I don’t either, so it’s a wash. When it comes to picking people, however? They couldn’t be doing a worse job of that. Here’s the disturbing part: I think that it’s intentional.
Obviously, I don’t believe that venture capitalists wake up in the morning and say, “I’m going to fund some horrible human beings today!” When it comes to the personal qualities of those they fund, they don’t care. And perhaps they shouldn’t, since their only interest is selling a company for a short-term profit, and the effects of the personal qualities of a company’s leadership tend to unroll over the long term. However, there’s something in their selection process that benefits the worst human beings, and we see it in corporate management as well. Why, despite the supposedly higher level of personal and ethical scrutiny at such levels, are there so many horrible people in managerial positions? Ultimately, most executives who are hiring middle managers are biased toward rewarding those who’ll favor the interests of the executives over the interests of those being managed. The thing about “those being managed” is: they’re not stupid. If it’s obvious that their managers don’t really care about their own growth and advancement, then they’ll become minimum-effort players and the team will be mediocre. Ultimately, this creates an environment in which the people most primed to succeed are the duplicitous: those who will consistently favor the interests of executives over those of the workers, while misleading the workers enough that they actually work hard, and keeping the ruse for long enough to get themselves a promotion.
Over time, this dynamic leads to a moral corrosion of the organization, as well as pervasive distrust. Companies get to a point where the workers don’t trust the managers to look out for their career interests, and the managers don’t trust the workers to get anything done. This leads either to bureaucracy or, worse yet, to its mean-spirited and borderline-psychotic cousin: the micromanagement death spiral, in which aggressive management leads to diminished performance, leading to even more abusive management practices. Micromanagement death spirals can surround individuals, teams, projects, or even whole companies, and they tend to be “fatal” insofar as the only thing that reverses them is for people to leave the company.
Startups were supposed to be an antidote to these “big company” woes. In the 1990s, it was because of the bureaucracy, misaligned incentives, and self-dealing management that 20-person startups could compete with giant companies. We no longer see that. In 2015, VC-funded companies either become giant corporations themselves (quickly and sloppily, with exactly the kind of culture that you’d expect) or they are shut down. What used to be about a legitimate “10x” (or more) factor is now just about king-making and throwing resources around. These VC-funded startups aren’t efficient or elite. Mostly, they’re in existence because the mainstream corporate world still hasn’t recovered from the catastrophe of 2008, and for many people, they’re the only game in town.
Why has founder quality tumbled in the past 20 years? More importantly, is there an intrinsic reason why the VC-funded ecosystem might require low founder quality? The first question is easy to answer; the second, not as much. Founder quality is low because VCs fund people whom they trust to put the VCs’ interests over those of employees. It’s the same dynamic as what afflicts middle management. In the inevitable trade-off between performance and control, they’re favoring control. Is this atypical? Is it irrational? I don’t think that it is. No one cares about performance, of a company or an ecosystem like the VC-funded world; people care, much more, about their own careers and social status. This isn’t an indictment, because I’m the same way. Managers favor control over performance insofar as they want to remain managers, and same with founders and venture capitalists.
Where does Y Combinator fit into all of this? Y Combinator, by design, selects for the young, naive, and reverent. It has defined that sort of semi-precocious but fundamentally inexperienced person as the ideal startup founder. Paul Graham explicitly put an upper age bound of 38 on startup creation. Why so, and what does this really mean? Graham claims that it’s about the ability to work long hours. First of all, sustained long hours aren’t productive for anyone, young or old. Second and more importantly, I’ve met plenty of people over 50 who are just as capable of working hard (and, usually, more efficiently) as their younger peers. What’s different, in the older workers, is that they don’t make sacrifices for pointless reasons, such as working 12-hour days to improve a manager’s optics. In other words, they’re harder to control.
It’s not by coincidence that the incubator with the most prestige is one of the most ageist ones. It’s not the ageism per se that attracts venture capitalism to Y Combinator, but the YC Vision of the ideal founder: a starry-eyed, inexperienced, overly eager person who’s easily swayed by charismatic personalities (especially charismatic people whose achievements occurred in a different century) and who’s easy to control. It’s not that these people are picked for their business acumen. They aren’t. They’re picked because they’ll follow orders without complaint or question.
The swirling conclusion… and what it means
Over the past ten years, I’ve seen Silicon Valley become a lot more ageist, as well as more aggressive in micromanagement. Open-plan offices dominate, Scrum boards and “story time” meetings are the norm, and engineer time now has to be justified, in many places, down to a two-week increment. So what’s happening here? It’s our good friend, that micromanagement death spiral, on a massive scale. The larger part of a whole industry is trapped in this undesirable (and often unfixable) pattern. The erosion of trust isn’t limited to one team or even a company. It pervades the whole industry.
How will it end? Badly. We can’t fix the Valley’s founder quality problem without a catastrophe that’s big enough to make venture capitalists care about it. Firing founders is hard, so it’s hard to imagine the needed flush-out happening except in the context of a downturn that closes many of these startups for good. This won’t happen without innocents being affected. We could be in for a repeat of the early 2000s.
Moreover, a micromanagement death spiral is symptomatic. It signifies weakness at higher levels, and perhaps in the business as a whole. People don’t micromanage, in general, when things are going well. When it comes to the performance-versus-control trade-off, executives tend to favor performance during periods of opportunity and expansion, and control when things aren’t as good. On the dog’s-eye level of the worker, if one has a micromanager, this means that one’s manager doesn’t have enough real work to do. Up a level, a company defined by micromanagement (e.g. “a Scrum shop”) is one whose executives are floundering. So, if the VC-funded ecosystem is increasingly defined by micromanagement, then what does that suggest about it? That it’s reaching its limits, and that there isn’t a lot of useful work to be done in it. The picture that comes from that is… imminent decline. Will it take three months or five years? That, I don’t know. Will its decline be a “crash” or more of a sputtering out? That, I can’t predict either. It does seem obvious that this particular incarnation of Silicon Valley, with this particular leadership class, is running out of gas. That’s why we see all the damn micromanagement, down to the open-plan offices and “Agile” methodologies.
We know why Silicon Valley is toxic: founder quality that has reached levels that can only be described as excremental. The two-class Valley wasn’t great, but the three-class one, with founders and executives competing against employees, leaving a raw deal for almost all of those doing the actual work, is far worse. Founder quality is a simple problem that is easy to spot, and indisputably present. Unfortunately, to solve it may be difficult, and reasonable solutions may be complex. That is where we’ll go next.
