I have struggled, for years, to figure out whether Silicon Valley can be beaten. That is, can that toxic society be outperformed, shown up, and replaced by something with that has better moral values and that is more conducive to technical excellence? I’m starting to suspect that the answer is “yes”, and I’m starting to get a sense of what that might look like.
Some history
The original Silicon Valley, of the 1970s, is gone. To get started, it required cheap real estate and, more importantly, a laid-back and accepting cultural climate, completely opposite of what exists now. You can’t have a decent culture when middle-class houses sell for millions, when cutthroat behavior is the norm, and when so many silly cosmetic “defects” (if they can even be called that) such as being “too old” to program (no such thing exists) can be used as justification to deny someone a job. The old Silicon Valley was built by people who were passionate about technology; the new one is run by MBAs who can’t get private equity jobs and end up in venture capital or as executives in VCs’ portfolio companies.
The current Silicon Valley is a cultural failure, with no values other than growth at all costs. It doesn’t even value technology itself, other than as a means for aggressive personal advancement. This culture says: be a “unicorn”. It says: take reckless risks, and hire and fire fast, and behave as if it weren’t peoples’ lives in the balance, but just currencies in a video game.
Silicon Valley also isn’t selective enough. It’s exclusionary in all sorts of stupid ways related to age, gender, and social class, but it failed to be selective on the things that actually matter. It didn’t keep out the sexism and ageism and crassness of its colonial overseers (the mainstream business culture) out. Rather, it allowed those illnesses to metastasize into something that makes the old corporate culture, from the Mad Men era, appear civilized in comparison. It fails to be selective on culture, allowing the worst kinds of corporate crudeness– like bonuses paid in cash that is wrapped in bacon, because apparently vegetarians, Jews, and Muslims don’t count– in; but it also fails to be selective with regard to people, because its major decision makers are too intellectually limited to recognize talent, and therefore operate according to nepotism and pedigree. Any idiot who went to the right schools and has the right connections can swoop in as a founder and manage nerds. It doesn’t matter if that person is an idiot; he just has to convince half-retired businessmen called “venture capitalists”, investing other peoples’ money, to like him. Likewise, on housing: talented, objectively desirable, people get pushed out by when they have children, but any douchebag with a couple million to blow can live there. California, to be blunt, failed because it was too accepting. It didn’t reject people whom it should have known would trample its values. Burning Man’s “we are all one tribe” mentality was admirable, but it needed, at some point, to stop the billionaires from dragging in what didn’t belong, and it didn’t, and now Burning Man has been invaded by the worst kinds of people. I don’t think that this transformation can be reversed, any more than one can un-mix sewage and wine.
I would argue, in fact, that California won in the latter half of the 20th century because of its former culture of inclusiveness, but that it was too inclusive and therefore didn’t last, and that its loss of integrity came from the . If you’re going to build something, you need, preemptively, to exclude the people who’ll set themselves up as the new elite and exclude you.
The fatal flaw of the California and, possibly, of the United States, is that it bought in fully to the market state and that it failed to reject. To make it clear, I’m not advocating the rejection of people, but of culture and of power. With culture, one needs to block out the bad stuff before get it gets in; and, to the tasteless expressions and derivations of power, you need to say, “Your money is no good here”. I have no belief in superior or inferior people, but there are superior and inferior cultures (if one does not believe this, then one gives up on improving one’s own culture) and it’s important to recognize this. Moreover, almost always money, power, and influence of an unsavory kind should be rejected, even if it seems expedient in the short term to let them in. For example, the U.S. doesn’t have to let every crooked overseas billionaire own residential real estate in this country, and its doing so has damaged many of the nation’s best cities.
The biggest problem with failure-to-reject is there will always be rejection, one way or another. Ideas and interests conflict. If a nation accepts the will of the market state and cedes too much (such as the right for non-resident non-citizens to own property there) to the global wealthy, then it is rejecting its own people’s right to live there at affordable prices. Fifty years ago, California may have been the epitome of inclusion and novelty. Now it’s traffic-ridden, expensive, and stratified. This has the emergent effect of rejecting people who might otherwise belong in a place that intends to be a capital of technology (as absurd as that very notion may have proven itself to be). Talented, hard-working people get pushed out because they can’t afford to raise a family there. At the same time, the worst non-resident billionaires in the world can buy houses, that they do not intend to set foot in, as insurance policies in case their own people rise up against them.
Silicon Valley has been lost. That war is over, and the bad guys won. The mainstream business culture, or “the Establishment”, has colonized it and repurposed it outright. The metastatic entity that has taken it over is a loosely-connected network of powerful investors (of other peoples’ money, mostly) who all talk to each other and decide, as a group, which of their disposable companies will be selected to die, and which will be turned into “unicorns” or sold to massive companies. They’ve managed to create a company-like entity in which they’re the real executives, but through the magic of disposable companies, they’re able not only to convince their middle management (founders) that they’re quasi-autonomous entrepreneurs, but to limit their own legal risk as investors rather than executives. Corporate managers can’t legally discriminate based on age, gender or race, but venture capitalists can. Information about founders’ health history and family background is frequently shared by VCs, when such things would never be discussed in a traditional corporation, because HR would prevent it.
The VC-funded ecosystem is the first postmodern corporate entity, and it concentrates American passive capital (“dumb money”) in a tiny, congested region of the country, and an increasing number of talented young people are being drawn into that machine because of its false promises regarding professional autonomy, technical excellence, and the likelihood of life-changing wealth. In reality, these companies often provide less professional autonomy than larger, wealthier corporations; the few of those newly founded companies that value technical excellence are an oddity and often inaccessible without an advanced degree; and those not born into the connections have far worse odds of life-changing wealth than they’d have if they joined more stable companies like investment banks and hedge funds.
Silicon Valley’s VC-funded meta-company is starting to hurt the world in ways that would be unimaginable, 20 years ago. For just one of many examples, let’s talk about the open-plan office, a destructive practice (for cognitively intense work) that has metastasized beyond the VC-funded world, spilling out into large companies. Silicon Valley loves open-plan offices, because VC-funded companies need continually to manage up into investors, until those companies are pawned off to a corporate giant like Google or to the investing public. While counter-productive to creativity and intolerable after age 40 (or after a diagnosis of an anxiety disorder, which is where the open-plan lifestyle leads) the open-plan environment looks busy. It’s atrocious, but it photographs well, and it remains in place because it shows a good look on the one day per year that the investors actually come on-site.
To me, the growth of the open-plan monster establishes that most corporate programmers are more useful as office ornamentation than for the work that they actually do. Their job is to make the company look productive, more than it is to solve technical problems. When I noticed that programmers at Fortune 500 companies were being crammed into panic-box, bull-pen offices because it was what the “hip” startups were doing, I realized that Silicon Valley needed to be destroyed. Open plan offices are discriminatory, immature, malevolent and anti-intellectual. We need to take the Valley down– at least, be must demolish the impression that it is a leader in culture and innovation– before it destroys the whole economy. The Valley, alas, won’t be destroyed until it is outperformed. So let’s talk about that.
Imitation does not lead to victory
A large number of cities wish to become “the next Silicon Valley” and see themselves getting there by playing by the Valley’s rules. That’s a mistake. It’s a recipe for brain drain. There’s nothing exciting about creating a replica. If a random city were to start pumping itself up as “the next Silicon Valley”, or as a future startup hub without distinguishing itself in a meaningful way, then it would find most of its best people moving away for “the real thing” as soon as they had their first glints of success. In fact, that’s often what we see in second-tier locations that have tried to make themselves into “the next tech hub” via conventional means.
On the other hand, there’s growing consensus (or, to use a more correct term, acknowledgement) around the fact that Silicon Valley’s culture is toxic. Between the sexism and classism and ageism, the horrendous management ideas (e.g. Scrum and open-plan offices), the founder-quality issues, and the obsession with financial growth (unicorns!) at the expense of all else, it’s a place and arena that has lost its values. Increasingly, true technologists look at the culture of the VC-funded world and realize that it has to die, because marketing experiments using technology have won the decade while the larger goal of improving the human condition has been forgotten. To be a technologist used to mean that one wanted to invest in humanity’s total capital; now, the industry has been swarmed by champion value-capturers. Consequently, the short-term “next quarter” mentality, couched in juvenile lingo about “failing fast”, has won and to have vision is to make oneself a pariah.
It’s becoming obvious that the status quo needs to die. So what will replace it? Smart people pile into places like Silicon Valley in their 20s, and most leave in their 30s and 40s, but they don’t all go to the same place in that outbound phase. Some go to Seattle, others to Chicago, still others to Austin, others to North Carolina or Colorado. This isn’t necessarily a bad thing, since it prevents urban congestion, but it also prevents an obvious successor “hub” from showing the Valley that it ain’t all that. In terms of what shall replace the VC-funded monstrosity, there seems likewise to be no obvious replacement in any one place. Talent concentrates, and then most of it is discarded by a business elite that realizes that too much talent is dangerous to its interests (you might get unions! or a new elite with better values!) and the talent doesn’t seem to re-concentrate in one place.
One could conceivably choose an affordable city like Chicago or Portland or Philadelphia and announce that that place is going to be where the Valley’s best go when they become adults and can’t stand the juvenile culture anymore, and maybe something would happen. To me, though, it seems that it’s going to take a lot more. There are many cities that could step in and become the Silicon Valley For Adults, but it doesn’t seem that there’s one obvious winner, and maybe that’s the point. Maybe Silicon Valley’s arrogant dismissal of all other locations equally as second-class citizens in technology is something that did us all a service, because maybe the successor shouldn’t be one physical place. Anyway, building a new startup scene that’s defined as “not San Francisco” isn’t enough. We can all agree that the Silicon Valley scene is toxic, because it is; even still, negative definitions aren’t inspiring. Besides, should Silicon Valley’s successor even be location-dependent in the first place? Won’t that just risk making yet another place self-referential and obnoxious?
We need a different attitude. We might need a core location– perhaps an affordable but talent-rich city in the Midwest– when things are starting out, but our goal should be to transcend one physical place and, eventually, one country. For the long game, we need to accept that no location ever had anything close to a monopoly on quality people, and transcend the placism of the old regime. That’s actually very hard to do, because while remote work is a solved problem, remote leadership requires a degree of multilateral trust that forms over time and is often incompatible with “unicorn” growth. Moreover, no company will be able to manage up into the short-attention-span Silicon Valley cadre without being parked in one location, preferably no more than an hour away from the man-child Versailles that is Sand Hill Road.
Chutzpah: or, why Tel Aviv will outlive Mountain View
I’ve spent years studying the economic, geographical, and historical forces that choose winners and losers among locations. The long-term forecast of Silicon Valley isn’t good. As soon as there’s a downturn, people will abandon it. It’s a place where people go to make money, but no one really cares about the place. What happened to the people who did care about their communities, in the Bay Area? They were priced out a long time ago. After a crash, I don’t see it likely that they come back.
What’s considered to be the second-most vital startup environment? Many people cite Israel. I was discussing this with a friend who has lived in Russia, Israel, and now the U.S., and from the conversation, I got a sense of why Israel is so entrepreneurial. The root concept is: culture of substance. A culture of substance keeps a region vital, and prevents fragility. The selfish “party” culture that one gets in the absence of substance, on the other hand, makes for a place that will be abandoned as soon as there is any difficulty there.
When you have a culture of substance, you trust that the people around you will support you even if you have a difficult year, become unpopular, or suffer a career setback. This allows people to take entrepreneurial risks that they might avoid in other cultures, and supports the famous Israeli chutzpah. Nordic nations, beset by frigid winters that force a person to reflect on one’s own mortality and, therefore, our interconnectedness through life and death, also have a culture of substance. (The issue, in many European countries, is a lack of capital.) The United States is very large and the country certainly has cultures of substance within it, but there is also a profound culture of commercialism and superficiality that one must sometimes contend with, and the latter dominates the upper echelons of the corporate world.
The Bay Area had a culture of substance at one time, but it’s been driven out by the Damasos sent West by the Establishment to manage nerds, the colonial overseers who are now the champion value-capturers in Silicon Valley. Cities that have sold themselves out to the global rich, like Dubai, are also going to score poorly on the culture-of-substance scale. Other cities that conserve their creative energy, like Budapest, do well. With the VC-funded Silicon Valley, the majority of an entire industry has lost its culture of substance. It doesn’t have values; it has slogans.
The culture-of-substance advantage explains why Israel and Finland don’t suffer severe brain drain at the hands of Silicon Valley, while the most suburbanized, denatured stretches of the United States do. Moving from a subdivision to an office park doesn’t feel like a step down; moving out of a genuine community where one has support, does. I think, however, that it explains a lot more. A culture of substance encourages people to integrate their ethics, relationships, creativity, and work. It opposes the siloization of human life that allows people to be one person in the office and an entirely different person at home. It makes the rotten culture of the VC-funded world in Silicon Valley impossible, because it disallows a person from doing something unethical and calling it “just business”. In a culture of substance, you don’t betray your friend because you think he’s inconvenient to your immediate career goals.
In comparison to the flash- and marketing-driven Silicon Valley, Israel is far more focused on fundamental research. I think that some of the ideas that we’ll need, if we wish to defeat Silicon Valley, originated in the Israeli kibbutzim. The kibbutzim were residential, communal farms founded on socialistic principles, and the movement transformed a stretch of land that most had thought of as a non-productive waste into a beautiful, wealthy country. Obviously, farming requires physical presence, so the kibbutzim were mostly residential. What we create, to replace Silicon Valley, will have to be geographically distributed. Membership is intended to be lifelong, while residence in one location rarely is. Moreover, while it will have to be very selective when it comes to values and merit, it will be ethnically, religiously, racially, and gender/gender-preference inclusive as a constitutional requirement.
Most modern Israelis don’t live in kibbutzim, and the kibbutzim have had to evolve with a high-technology society, so most of them are no longer residential or purely socialistic. However, the egalitarian ethos of the kibbutzim has enabled an Israeli chutzpah that encourages risk-taking and economic growth. From everything that I’ve read and heard about Israel’s startup culture, Israel’s strength seems to come from a “we’re in this together” attitude and a pay-it-forward mentality. Unlike in the Valley, where people are constantly sizing each other up for social rank, and where introductions and access are resources to be hoarded, the prevailing tendency of Israelis to help each other out and to pool resources.
Where does the chutzpah come from? One trait that I find admirable about Jewish culture is the emphasis on virtue as its own reward. Judaism is generally agnostic on the existence of an afterlife: you should be virtuous for its own sake, and not to achieve some supernatural reward. Moreover, to have doubts about the existence of God is almost expected as a phase in life. Judaism, in most interpretations, considers it no offense to disbelieve, and you’ll never be driven out of the community if you are agnostic or an atheist. Membership in many Jewish communities is held to be deeper than the fluctuations of one’s theological convictions. The kibbutzim, likewise, have a never-turn-your-back ethos. They’re hard to get into, but once you’re in, you’ll be a member for life, even if you become sick and unable to work. Although Israel is now a capitalistic, technologically advanced country, that spirit has lived on. When you know that your brethren will never abandon you, you can have chutzpah, you can take risks, and you can create.
For a contrast, examine Silicon Valley, where simply not being happy is cause for a person to be ostracized, fired, and discarded. In cultures of substance, it’s accepted as normal that one will not always be happy, and that there will be good years and bad ones. Cultures that emerge in the absence of substance, like most corporate cultures, drive out the “morale risks”, as well as the eccentrics and the perceived troublemakers, first.
When you’re backed by a community that won’t turn its back on you no matter what, you’re also capable of great creativity. This was observed in celibate or ascetic 19th-century American Christian movements and often attributed to self-denial or sexual sublimation. Whether this is a wholly accurate depiction, it seems either way that creative anti-fragility emerges in a community that accepts life’s difficulties, and treats failure in good faith as a lesson rather than a stigma. Israel is possibly the hardest place in the developed world to live, because, in addition to the heritage of having been set in a harsh desert climate with no natural resources, it’s been under attack for decades. It’s a place where people wouldn’t survive if they didn’t have each others’ backs. California is a place where people go because they want easy lives and clement weather– and, prima facie, there isn’t anything wrong with that. Israel is a place where people go, knowing that life will be difficult, because there is something there that they value.
The #1 and #2 startup hubs in the world could not be more different. The first, when it began, was so admirably inclusive that it inadvertently invited in its own destruction by failing to recognize the bad intentions of the Establishment, and by therefore inviting in those who became its colonial bosses. The second comes from a community that also values inclusion and social justice, but that has learned the hard way that it needs to protect itself. A common metaphor for the Israeli character is the sabra, or cactus: thick-skinned and tough on the exterior, but sweet and delicate on the inside. The character of Silicon Valley, on the other hand, is sweet on the outside but toxic on the inside.
Cultures of substance are anti-fragile, while cultures without substance (such as Silicon Valley) are brittle. Silicon Valley venture capitalists stop returning your calls at the first sign of trouble. If your reputation takes a hit, they don’t back you or take your side, but they move on to a younger, not-yet-challenged person. In fact, what I find most unpleasant about the California character is the social institution of mandatory happiness. In the passive-aggressive culture that dominates the VC-funded world, the thinking is: if you’re not smiling and energetic at all times, you must be a loser. Something I’ve observed in people who come from Eastern Europe and Israel, is that you aren’t abandoned if you’re unhappy. Negative or difficult emotions are accepted as a part of life, rather than being ignored and stigmatized by people who’d prefer to pretend that they don’t exist.
A culture of substance values people based on their character, not their popularity or success, because it understands implicitly that those fluctuate over the years. A culture of substance exerts itself to make the people of character successful, rather than assuming that people who succeed are of good character, and that those who fail are not. If you fail in good faith, in a culture of substance, you’re not discarded. The attitude is: that happens, we’ll help you get back on your feet, and let’s get on with it. The color-negative of a culture of substance is a party culture where you’re constantly required to remain popular and “cool” or you will be tossed out like yesterday’s dogshit. Silicon Valley is the latter kind. Sure, you can distract yourself from the day’s work by attending a jungle-themed launch party with a 600-pound caged tiger; but if you haven’t had enough of a personal take to be independently wealthy by age 40, you’re tossed out. Over time, this leaves Silicon Valley with cultural and moral blind spots, and drives it toward hubris and fragility.
If you look at cultures of substance, the attitude of not abandoning people based on fluctuations in their success and popularity makes them anti-fragile, meaning that they become stronger under adversity. Silicon Valley is the opposite. Silicon Valley stopped leading in actual innovation a couple decades ago. Snapchat is simply not on the same level as the integrated circuit. The odd brand of “nerd chic” (which is neither) is the only thing that the Valley has. It has an image that draws people in and enables that system to abuse people for five to ten years. After the next crash in the VC-funded technology market, Silicon Valley will probably collapse. There is nothing to hold it together. Anything other than continuing good fortune will cause what communities exist within it to fall apart.
Of course, Silicon Valley people love to claim that “failure is good” and that it’s not stigmatized to fail in good faith. That was probably true at one time, but it’s not true now. Sure, an entrepreneur can bounce back from a failure– if he gets a good reference from his social superiors (investors). If not, he’s screwed. Engineers have even less of a chance to recover. Technology companies are notorious for disguising layoffs as “low-performer initiatives”, meaning that the company chooses to save its reputation at the expense of the people it must let go. “Fail fast” is often an excuse for sloppy hiring-and-firing, and being “scrappy” is often a justification for below-market salaries (offset by future-oriented promises– equity, rapid promotion, investor contact– that are often never delivered) and nonexistent severance compensation. In general, Silicon Valley’s “failure is OK” attitude is code for “it’s OK for me to fail you“, the “me” in that statement referring to investors and founders, and the “you” referring to the engineers and technologists who’ve been rendered a peasant class. If you fail in good faith, you recover if and only if your patrons in the investor class aren’t bored with you. A kibbutz won’t abandon you if you get sick and have a bad year, and even though most Israelis no longer live in kibbutzim, that ethical impulse remains within their society. Bay Area VCs, on the other hand, will stop returning your calls if they catch even a whiff of a possibility that other VCs don’t like you.
When you have faith that your colleagues will not abandon you no matter what, you can innovate. You can take genuine risks and put yourself out there to do things right. When you’re trying to execute a social climb in a culture where “fail fast” is just a code word for “disposable companies”, you can’t.
Beyond
Israel is a place where people, from all over the world, go to live. The Bay Area (except for isolated communities within San Francisco that aren’t accepting new members) is only a place where people go to make money, preferably as quickly as possible so they can “cash out” and start living the lives (far, far away from the plebeian engineers on 0.03% equity slices, who all blend together, as far as they see it) that they feel they were meant to live. There was a culture in the Bay Area, but it has been driven out. What remains is Silicon Valley, which is nothing more than the cloud of human attention that surrounds a massive pile of money and resources.
One requirement for a culture of substance seems to be exclusivity, not in the sense of rejecting people per se but in rejecting the behaviors that will corrode it. It needs to be able to protect itself and its values. This means that it must be “K-selective” ( a term that I’ll discuss, just below) in terms of its growth.
Evolutionary biology discusses the pressures of r- and K-selection, with r referring to the base reproductive rate and K to carrying capacity (as a proxy for the quality of an organism). An r-selective organism will have hundreds of offspring but offers no parental investment, while a K-selective organism focuses on quality over quantity and seeks to have its few (meaning “less than 25”) offspring thrive. I doubt, for an example of this, that a mother spider having hundreds of offspring cares nearly as much about each one as a K-selective human, elephant, or whale does about her few children. We generally view spiders as r-strategists and ourselves as K-strategists. Of course, nature isn’t so simple that any complex organism can be categorized as a pure r- or K-strategist; an example would be the tree, which disseminates many seeds but produces long-lived, hardy individuals. We’re all both, and it’s arguable that the birth of human culture and religion emerged in an arms race between the r- and K-strategic modules of our own minds.
Why are humans r- and K-strategic in reproduction, and what does that have to do with morality and culture? Objectively speaking, there’s no reason to consider either set of natural impulses “bad” or “good”. The r-strategist that lives in most humans, demonized as satanic by Abrahamic religions and called “the id” (actually “das Es”, to be pedantic) by Freud, is not a socially well-adjusted creature. That said, r-strategic organisms excel at repopulating after an ecological catastrophe, and “r-ish” behavior patterns like polygyny often become acceptable in communities that would otherwise reject them, when there is a sudden collapse of population. The r-drive is great at repopulating a species after a catastrophe, and that’s presumably a major reason why nature left it in the human psyche. The K-drive (superego) seems to be where civilization comes from, though. The r-strategist would be content to spawn 400 children and die. The K-strategist, having a small number of children, wants them to be successful, and it wants to remain alive so that it can support and teach them. So a K-strategist cares about social justice and civil progress, because high-quality offspring (by which I mean, offspring with a large degree of paternal investment) are going to fare better in a low-volatility, stable society than in a “might makes right”, chaotic one. The r-drive, on the other hand, doesn’t care about social stability or preserving cultural integrity. It just wants to exert power and spread its seed, so it’s fine with the “might makes right” culture that one gets when ethics degrade.
If we want to replace Silicon Valley, we’ll have to avoid devolving into “might makes right” culture in the way that Silicon Valley did. We’ll need a culture of substance, not a “what you can take is yours” culture. Silicon Valley capitalism is r-selective capitalism, because it encourages companies to grow rapidly with no consideration for preserving values or culture (often, the company is encouraged to have neither, morality being a distraction and an impediment). We need to figure out how to develop a K-selective capitalism based not on rapid growth but on smart growth. That is how we will defeat Silicon Valley (or, at least, render it irrelevant, which is enough). We have to be better, not just technically but morally.
The day-to-day decisions that transfer power must be criticized and cultural degradation must be fought. This is why I am so zealous in tearing down unqualified or culturally blighting founders. Letting people like Evan Spiegel, hailing from a since-banned rape frat at Stanford, be rewarded with his own startup is to accept cultural decay because it is convenient in the short-term, or fills some marketing need of some sub-contingent of the society. Venture capitalists chose to make Evan Spiegel a billionaire– to “produce” him in the Hollywood sense of the word– because they needed a frat-boy figurehead for a sexting app. In doing so, they prioritized a short-term marketing impulse over the long-term health of what’s left of California’s entrepreneurial culture. Why? Because they can; they live in the might-makes-right world of Silicon Valley. I reject all of that.
Cultures of substance tend to be K-selective. They want to thrive, but not to grow at all costs. Scandinavian countries, for example, aren’t interested in enforcing their variety of libertarian socialism on the rest of the world. They want to get their own societies right. That’s a K-strategic behavior. Judaism, with a conservative policy around conversion, is culturally K-selective, as are many strains of Christianity (e.g. Society of Friends, also known as the Quakers). Most Jews would like to see their vision social justice, democracy, cultural vibrancy and religious freedom in all of the world, but they have no desire to convert billions of people into their religion. K-selective cultures value growth, but not if it compromises their character.
Silicon Valley, having no meaningful culture and being dominated by a “might makes right” ethos, is intensely r-selective. “Fail fast” is a more polite way of saying “throw shit at the wall and see what sticks”. Business and employment relationships are purely transactional, formed quickly and cut for arbitrary reasons or no reason. Rapid growth is demanded and it is better to tolerate existential risk to the company than to grow at “only” 50 percent per year. “Make the world a better place” is a brand designed to appeal to the young quixotic people who will do all the work, but the leaders of that world mock such slogans and ideals behind closed doors. VC-funded companies are designed to take on massive risk, with little to no concern for the people employed by them or for their long-term career needs. Engineers are abandoned in middle age if they don’t have the most stylish kind of work experience, and even founders are contingent on their investors for the all-important reference.
It’s going to take a K-strategic impulse to beat Silicon Valley. We can’t play their sloppy “spray it anywhere” r-selective game. We’ll lose at that; they’re way too good at it.
The business end
I’ve come to the conclusion that there is a “natural growth rate” to technical businesses. It’s industry-dependent and varies with scale, but I’d guess that it’s typically between 10 and 50 percent per year. This isn’t want unicorns are made of, unless they’re given 20 years or more to develop; this is the “get rich slowly” avenue that no one seems to be willing to talk about.
Growth at the natural rate is fast enough. I believe that I can increase the value of my work at 20 percent per year over the next 25 years without anyone else losing. Growth beyond the natural rate, however, seems to increase risk to a degree that most people find unacceptable. Usually, growth beyond the natural rate involves entering zero-sum territorial squabbles. That causes loss for others, and this leads to conflict, which is a source of risk. For most of human history, the natural rate of economic growth for humanity’s technical level fell short of population increases, resulting in constant war and exploitation. That’s different now. Growth at 10 to 20 percent per year, with no one losing in the process, is possible now and it probably will be possible for a very long time. That could continue until we have a post-scarcity society.
World economic growth in the agrarian era (up to 1800 AD) was on the order of 0.1 to 1 percent per year, and that’s still the typical appreciation rate of land. In the industrial era (1800 to 2050 AD??; I would argue that we’re still in it) the prevailing rate jumped into the 1 to 10 percent range, and late-industrial companies still see that as a typical level of growth. The prevailing growth rate of technological enterprises seems to be 10 to 50 percent. For an inspirational but probably optimistic upper limit, Moore’s “Law” suggests 59% growth. Technology companies can achieve 20 or 40 percent annual growth without taking on unacceptable risks. At 300 percent, however, technology companies are usually taking on large risks and getting involved in zero-sum games. That’s not necessarily the wrong thing to do, but it shouldn’t be venerated or made the default behavior.
Usually, when an industrial-style company seemed “too good to be true”, it was. If it grew at 30% per year, there was probably something rotten behind the curtain. Most of the exceptions were in technology: actual technology, not this VC-funded Snapchat nonsense. Technology companies could improve themselves so quickly that 30% annual growth, without hiding risks or taking unwise gambles, was actually possible. It required a lot of work, a very high level of internal talent, and large investments in R&D, but those types of numbers actually could be achieved while doing things the right way. Technology companies aren’t immune to the “moral speed limit” or the “too good to be true” factor, but their limits are much higher.
Y Combinator expects 7 percent growth per week. If you don’t make those numbers, the YCs lose interest and, since every YC company is built to later be pitched to real venture capitalists and requires the YC connections to get a chance, that’s a problem. Anyway, 7 percent growth per week is 34x annual growth. There’s very little that can grow at such a rate sustainably, and if someone promised 3314 percent annual growth of his business, I wouldn’t invest in him. I’d suspect that something bizarre and possibly unseemly was going on.
Some companies are built for rapid growth or total failure, with no room for the intermediate outcome of merely fast (20-40% per year) growth. Their escalating expenses mandate rapid acceleration, and their get-rich-quick cultures mean that they can only maintain talented people with rapid compensation increases and growing headcount (so the talented people can have teams built under them, fast, to deal with the mounting chaos). Others target lower growth rates but are less likely to fail. These aren’t new concepts, but it’s worth noting that a spectrum exists between low-margin businesses without much risk, and high-risk businesses capable of rapid growth, and that the extremes aren’t the only options.
There’s a spectrum of risk and expected growth, which are known to be positively correlated. The extreme leftward end of the spectrum would be to buy treasury bonds: very low risk, not much gain. At the rightward end, we reach and surpass a concept that I call the “moral speed limit”. But what is the moral speed limit, and why should one exist? Is there anything immoral, prima facie, about high-risk investments? No, I don’t think so. Ethical breach exists not when the risks are “too high”, because that’s a subjective notion, but when people are misled about what risks exist. Economic growth seems to have moral speed and growth limits because the willingness and ability to take risk are limited.
The current Silicon Valley system is not interested in defrauding financial investors, because that’s a quick way to end up in court, or in jail, and with a ruined reputation. The “marks” in the new game are the people investing their careers in it: the software engineers. They move into one of the most inflated real estate markets on earth and throw down 90-hour work weeks, because they’ve been promised rapid career growth. Ten years later, they’re unemployable elsewhere, because getting one’s due in the Valley requires a job-hopping strategy that still retains a stigma everywhere else; they have developed or are developing open-plan syndrome; they are starting to face age discrimination and the “Why aren’t you a founder?” question; and they still haven’t had the investor-level introductions that they were promised in exchange for that first 20% pay cut and for the ten years of mediocre raises.
Meanwhile, those same people have traded away millions of dollars in opportunity cost and future income for… if they’re lucky, a couple hundred grand in tech stock. Why does these ruses work? Why do people move to the Valley despite the long odds and toxic work culture? The answer is that there’s a kernel of truth to what Silicon Valley represents: rapid growth, powered by technology, is both possible and a good thing. 7 percent per week, the YC target, means that you’re probably looking at a pyramid scheme, but 7 percent per four months is an achievable growth rate for even a modestly ambitious technology company. Silicon Valley itself may be ethically bankrupt, but there is a truth behind it, which is that rapid career and economic growth through technology ought to be possible.
On the risk spectrum, the mid-risk/mid-growth space is undercapitalized. For low-margin businesses that are unlikely to fail, bank loans are a possibility. Traditional banks aren’t interested in innovative R&D, however, and they shouldn’t be, because it’s not their job. For high-risk gambits that either turn into unicorns (and don’t deliver much social benefit, unless one counts the bank accounts of a few people) or die within three years, there’s venture capital. Technology’s natural place, though, is in the middle of this spectrum: 20 to 40 percent annual growth. It’s not that we hate risk. It’s that we dislike the superiority in importance of social manipulation over technical expertise and effort that inevitably sets in once the levels of risk are so high that measuring genuine merit becomes nearly impossible. The more noise there is in a system, the more likely it is that social garbage will infect the evaluation process around who and what succeeded or failed and what the reasons for these outcomes are “officially” determined to have been.
Speaking for actual nerds and not the frat-boys who’ve colonized our world, we’re not that into the “unicorn” fetishism. It’s great when you can build a billion-dollar company by doing the right thing, but we’d rather build companies that make long careers possible, that have progressive cultures, that invest in their people, that grow sustainably, that value R&D, and that are responsible citizens of their community. We view it as acceptable for a person or company to fail in good faith, but we’re not interested in courting 90% chances of closing down out of some belief that failure isn’t a big deal. It is a big deal. It hurts people. Mid-risk/mid-growth businesses shouldn’t be derided as “lifestyle businesses”, and 35 percent annual growth is still quite fast: that pace would turn $100,000 into $40 million over 20 years. Rather, that region of the risk/growth spectrum is where technology naturally lives. On the other hand, the extreme-high-risk region that VCs love to invest in, is a salesman’s paradise, dominated by charlatans and influence peddlers. It’s a place where “hustlers” get 50 times the equity of builders. It’s a place where one would expect for true technologists to be a subordinate, colonized people.
It’s also not great for business. At some point, the positive correlation between expected returns (i.e. average performance) and volatility (i.e. risk) seems to disappear and reverse. Venture capital is, in fact, an underperforming asset class. While individual firms are held accountable for rapid growth, so many of these disposable companies are scrapped that the portfolio performance is mediocre. It might be better to fund mid-risk/mid-growth companies than to try to hatch unicorn eggs. Portfolio performance would probably improve. So why doesn’t that happen?
The honest answer to that question is that VCs are optimizing for their careers, not for portfolio performance. I don’t regard that as especially wrong– I care more about my career than about the performance of any company where I’ve worked, so can I blame VCs for being the same?– but it should be acknowledged. Venture capital is a volatile business where one can do everything right and still have mediocre returns, just because there are just so many random influences outside of one’s control. Consequently, savvy VCs realize that exposure and social access matter more than portfolio performance, and optimize for personal association with “unicorns”. It may be (and probably is) better for one’s portfolio to invest in the mid-growth, mid-risk businesses. However, every investor is going to have good years and bad years and, after a bad year, it’s critical to one’s career to be able to point to a “unicorn” and say, “I was in that thing’s A round”. The group-think and mediocrity that characterize the Bay Area venture capital industry are, likewise, what one would expect in a career where social access and influence matter more than excellence.
Category theory
Fixing technological capitalism is going to require a focus on the mid-risk, mid-growth businesses. Of course, 200 percent annual growth may happen for a “mid-growth” company that happens to do everything right and has a bit of unexpected luck; it’s just not sustainable at scale. A company whose managers or investors expect 200% annual growth is going to lose its culture. We need to focus on businesses that target 20 to 50 percent annual growth rates, and where the risk of utter failure is low enough that people can have careers building such companies, and that people other than Bay Area venture capitalists (who invest other peoples’ money to chase their own career goals) can feel comfortable investing capital in it. It’s also going to demand that we focus on returning technology companies to the hands of technologists in ideology as much as trade.
Although there are few kibbutzim in contemporary Israel, the advantage conferred by that country’s kibbutz heritage is a culture in which people aren’t abandoned when they have a year or few of bad economic fortune. Unlike in the Bay Area VC-funded culture, it’s not socially acceptable to turn your back on someone because that person goes through tough times or is unhappy. That creates cohesion and allows chutzpah, instead of generating fragility and imbuing fear.
Can the U.S. generate such a culture of innovation and substance, as opposed to the passive-aggressive one that currently exists in Silicon Valley? Absolutely. We have almost 320 million people, from every country in the world, and we have millions of the most talented people wanting to get in to this country. We have cities that are the envy of the world, and more variety in natural landscape than almost any other nation. We have the raw material and talent to build anything we want. We already have cultures (plural) of substance in the U.S.; we’ve simply failed to create one that is powerful enough to corner the American corporation and force it to take social justice, innovation, and cultural integrity seriously. Perhaps the technologist’s ideology (which I’ll define, below) is what it will take, but it can be done. I am, through all of this, an optimist.
So what is the technologist’s ideology, and why is it so important? The critical tenet of the technologist ideology is that scarcity is an enemy that we should be working to abolish. Additionally, it holds that social justice must be achieved and is more important than raw economic growth, and that human freedom (not only from government power, but from corporate power) should be upheld along the way. You don’t have to be a liberal or leftist to be a technologist. (Perhaps I might describe the ideology as eventual socialism, insofar as its long-term objective is a world that does not use scarcity to drive people to work, but it is a common belief among sincere technologists that some capitalistic machinery will be required to reach a post-scarcity world.) It does require a belief in basic principles of justice, decency, and social equality that are not observed in the stratified Silicon Valley world.
Is there room, in the corporate world, for values other than short-term profits? Or is the idea that business corporations might do anything other than maximizing their bottom line one that is hopelessly naive? I think that the next-quarter malady can be defeated, but it requires re-framing companies within some sort of ethical community of a kind that, at the scale of the United States, probably has never existed.
Silicon Valley people love to claim that their companies are “changing the world”, but starting a company is not the most effective way to make positive change. Creating a business is a great way to enhance one’s own income and autonomy, and possibly improve the world a little bit. That said, if businesses ran themselves to maximize positive change, they’d be in constant conflict with investors, and unlikely to last very long. If we want to change the world in a meaningful way, we must also change companies: how they are built, what demands are made of them, and how they interact with the larger world.
Paul Graham, after getting lucky in the 1990s and ending up with enough money to retire, launched a project called Y Combinator (“YC”). Graham had legitimately earned a reputation as a solid programmer after writing a couple of good Lisp books, and the Y Combinator project was a brilliant way for him to monetize his reputation. Since this anointed and seemingly magical incubator had access to venture capitalists right out of the gate, due to Graham’s ’90s luck, it managed to line up successful outcomes for a disproportionate number of its portfolio companies. Has Y Combinator changed the world? Not in any meaningful or inspiring way. It has made life easier for a few hundred founders, it has made it harder for people who aren’t in its target audience to secure seed or venture funding, and it has made Paul Graham and his cronies a lot richer. Mostly, it’s been a zero-sum transfer of reputation and social access.
What can a person do that might have a faint shot at positive change? Another damn company? Another damn incubator? Another damn venture fund? I’m not seeing it. In order to mix with the elite of Silicon Valley, any institution must be so stripped of its original values and culture as to leave no social purpose for its existence. Well, then… perhaps one needs to come up with something different.
That concept is: a category. In order to explain the concept, I must derive it.
Reading up on differences between European startup economies and Silicon Valley, Israel’s seemed the most different, and this seemed to be tied to the kibbutznik heritage. This got me thinking about whether something like a kibbutz could work in the U.S. technology industry (and, later on, that industry in other countries). The literal concept of the original kibbutz as an agrarian, socialistic, residential community is probably not going to appeal to American or European software engineers, who tend to be nomadic and individualistic. Perhaps there is something that can be learned from the spirit of a kibbutz: the concept of an ethical, intellectual, and creative community that will have your back no matter what. Entrepreneurs could use that kind of support, and they’ll never get it in the current “kick ’em when they’re down” Silicon Valley.
The core concept of a category is no more socialistic than existing capitalistic structures like unions, guilds, and venture capital funds. It is different in its devotion to ethics and cultural integrity in addition to success in business. It values quality of growth over rapidity of it. Unlike Y Combinator, a category is defined upon founding values (and I’ll elaborate a good starting set of them). Like a kibbutz, a category is designed to be highly selective but provide lifelong support. This mandates that it transcend specific companies, which can and will die at the will of the market.
If you’re a YC founder, but your company ceases to exist, you’re no longer part of Y Combinator. It isn’t lifelong support. It’s “support as long as you stay in the good graces of the Sand Hill Road community”. Y Combinator’s purpose is to serve an HR function within the postmodern meta-company of Silicon Valley. Its purpose is to assist its members and slightly improve their chances of ascendancy into the existing system, but not to support its members if one has a short period of time in which he or she is deemed not useful to that system. Moreover, I don’t think that we can expect any corporation or incubator or venture fund to support people or retain them for the long term. If the firm decides that it doesn’t need that person’s services, it will end the relationship. That’s just what companies do. Lifelong employment or even support is not a reasonable demand to put on something that has already determined and disclosed that it is, first and foremost, a profit-seeking business. The ideal of a category is that it seeks profit and growth, but also its own cultural health. If a business must contract, then people are let go, and the category does what it can to line those people up with other jobs and opportunities.
Should a category be realized by, or dominated by, one company? No, I’m going to argue, fervently, that it shouldn’t. We can’t put all of our hope in one firm. That’s not realistic. Like Silicon Valley, it should be a postmodern, distributed organization that transcends specific firms, matching talent to opportunity at scale. In fact, if a category is created in the right way, there should only need to be one of them, the purpose of a category being to unify talent (against an anti-intellectual world with uncultured leadership) and to pool resources.
There’s a brass-tacks, business definition of what I see a category being, and then there’s a philosophical, political concept of The Category, to which a category (as an organization) is to doomed be an imperfect (but, one hopes, not too imperfect) approximation. I prefer to talk big first, so I’ll describe what The Category is, and then describe what categories as organizations should do in order to realize it.
What is The Category? I’ve come to the conclusion that the iron law of oligarchy is, fundamentally, true. We need democratic structures within society in order to hold accountable whatever representative elite exists. That said, neither autocracy (all power held by one individual) or democracy is stable. Why? Let’s start at one extreme: autocracy. With a dictatorship, the autocrat needs information in order to make decisions, and one person just doesn’t have the bandwidth to get all of that information on his own. He’s going to rely on his lieutenants. Even if the autocrat himself is a person of good moral character, he’ll need to create an organization around himself and the people who become his trusted sources of information will likely be… the sorts of people who are good at rising within organizations: the psychopaths and natural oligarchs.
Democracy, on the other hand, is unstable because, on any issue, there will always be people who are indifferent and would (if it were legal) sell their vote quite readily. These are the “cheap votes”. In business, they’re the consumers who pay little attention to quality and respond most to advertising. Cheap votes can become the “swing” constituency that determines which politicians rise and which fall, or which brands prosper and which fail. In a democracy, those who are skilled at bundling together cheap votes into packages, that they can deploy or sell, become the emergent oligarchs. It seems to be difficult, if not impossible, to ban that pattern of behavior. For example, vote-buying is illegal in most democracies, but the leverage of cheap votes through advertisement and, therefore, campaign financing, is legal. A robust modern political system must have democratic machinery that gives the people the ability to fire the elite, in order to keep them accountable to the rest of the population, but there will always be an elite.
So what makes a good elite? A good elite might concentrate decision-making power in itself, but it makes those decisions for the benefit of all. This is a pretty rare arrangement, because most elites become complacent and self-serving if they can get away with it. Most elites, historically, have been held in place by racial, geographic, familial or economic barriers, and that has proven to be a disaster.
I’ve come to the conclusion that the most creative, intellectually curious, and cultured people comprise, or ought to, a new form of human group: not a tribe or a nation or a race or a religion or a social class, but something else entirely. Its people are male and female, gay and straight, cis- and transgender, light- and dark-skilled, theistic and atheistic and agnostic, Christian and Jewish and Muslim and Hindu and Buddhist and Jainist and non-religious and … (this list could go on for a while). They’re born on Manhattan as well as in sub-Saharan Africa and rural China. Some are born rich, some are born poor. I call the natural, optimal, elite of the human species The Category. It might comprise 1 to 2 percent of the population, for now, not necessarily because the natural ability is biologically scarce (it may be, or it may not be, and I lack the knowledge that would give me any authority on that topic) but because our species is at a low level of cultural evolution. At least now, very few people have the depth of knowledge, the perspective, and the intellectual curiosity necessary to lead– and most of the people who actually get to lead in our society fall into the lacking contingent.
In human societies, an elite will form. This is too important of a process not to get it right. I must make it clear that there is no justification for such an elite treating its own members as “better” than the rest. Being equipped to make important decisions doesn’t make one a superior person. The people in The Category are the natural pilots of the airplane that we call human civilization. The passengers are not less important or less deserving of good lives. They just don’t belong in the cockpit. It’s dangerous to all of us if we let them go there.
It may sound like I’m claiming to have invented the concept of “meritocracy”. That’s not my intention, because “meritocracy” is so often just another damn brand. Every elite claims to be a meritocracy based on the values of its time, whether they are religious, military, or industrial. So does every corporation in existence. No company states in its official values, “We promote loyal idiots and the boss’s kids”. An elite will form and it will call itself “a meritocracy”, but if The Category emerges as a political force, there will actually be a chance for genuine meritocracy.
What I advocate, ultimately, might be interpreted as some sort of Talent Nationalism. Of course, The Category (the realization of Talent as a cohesive force) is trans-national, multi-ethnic, and post-corporate. Its goal is to reach a society in which curiosity, creativity, social justice, and cultural integrity aren’t “nice to haves” that should be discarded when it is profitable or expedient, but non-negotiable ideals. Talent “Nationalism” is, additionally, one of the least racist or sexist or nationalist or classically elitist positions, because Talent is everywhere. One who wishes to promote Talent, and all of it, cannot reject people because of where they are born. The next Albert Einstein might have been born three days ago in the slums of Lagos. Or she might be a young girl in Saudi Arabia. Category Nationalism is aggressively anti-racist and anti-sexist and anti-classist; our species can’t afford to keep wasting talent!
In the philosophical sense of it, I am not arguing for creating The Category. My argument is that it already exists. It just has not developed a cohesive awareness. Intelligent, compassionate, creative and intellectually curious people are an oppressed minority in every society on earth, because anti-intellectualism, brutality, and authoritarianism rule the day everywhere. That’s just how human societies seem to devolve. A tiny proportion of our members, in the Category, are rich, and a few (although very few) are powerful; but most of humanity’s important decisions are made by The Uncultured: the current elite that we will have to evict. We live in a world where heredity and social manipulations and extortions allocate the resources. Nothing stops billionaires among The Uncultured from purchasing Manhattan apartments not even to live there, but to store artwork purchased solely as an investment, that they will never look at. We need to fix that. We need to protect the Category. We need to get society run for the benefit of all (or, let’s be honest here, all but a few powerful malefactors, who will lose) but with the natural pilots (the Category) calling the shots.
If we consider The Category to be an elite, it’s to be an elite whose goal is its own extinction as a meaningful distinction. Perhaps only 1 to 2 percent of people right now are cultured enough to qualify for membership. (That number is a swinging guess; it might be less or more.) However, I believe that the Category’s ultimate long-term aim is a post-scarcity society that eradicates the social and economic limitations that prevent people from reaching their full potential. Right now, most humans are underdeveloped because society blocks their improvement and forces them to engage with a system that degrades everyone in it. In a more evolved humanity, whose culture and ethics are in a superior state to what exists now, The Category might comprise 5 percent, or 10 percent, or 70 percent, of the human population. If humanity evolves to a state in which the majority of people can be trusted to be pilots, then The Category ceases to be a meaningful distinction, and it’s no longer relevant. That’s something that all should wish for. The best and most creative people shouldn’t be a cornered minority living among a species that ignores their values. These values ought to be universal.
Why has corporate capitalism not produced rule by the best, or by The Category? I think that corporate capitalism is a good way to vote on businesses, insofar as it decides whether a search engine company should exist, but it doesn’t do a good job, at all, when it comes to voting on people. The market eventually punishes firms when they become too inefficient, but doesn’t intervene on the matter of how they choose their own leadership. The theory is that companies will somehow “learn” how to select leaders and organizational structure, as the ones that do so poorly will be nudged out of existence. In practice, this doesn’t happen because the feedback cycle is too long, the process is too opaque, and almost no one in a decision-making role for a specific business actually cares about