This is the transcript I spoke from last night. I might have skipped some of the bits at the end. As a result of last night’s road test, the answers to the personal questions are: 1. definitely; 2. something more irresponsible, like posting the transcript on my blog.
I’m going to read this very quickly from my screen which isn’t my usual style but there are good reasons why. Although this talk is put together at very short notice it concerns ideas that I’ve been researching somewhat longer. I call it simply: narcissism meets venture capital.
My central thesis is this: much of the world of venture funding is useful and prosaic. But what’s new — a kind of disease brought about by a bizarre gold rush — is:
- That poorly-formed tech companies with grandiose visions,
are backed by abundant capital with insufficient diligence.
- This attracts the wrong kind of founders,
who are encouraged to build the wrong kind of organisations,
and whether you’re part of them or not, but particularly if you are,
these companies are bad for the world around you, for your livelihood, and your mental health.
One thing I need to make clear: this is not about my experience at ROLI and it’s not an indictment of anybody I’ve met here. But, working at a new company brings you into the orbit of others, and can expose you to some of that world.
I suggest a need for vigilance: I believe that these dangers are intrinsic in the current climate and can be felt widely.
My personal reason for giving this talk is to answer two questions:
- If I were to write a book about this, would you read it?
- What would it take to get me fired?
Let’s look back at ancient history. Before the world went mad, Google took eight years to reach a billion-dollar IPO; Apple took five; they had investment rounds that were fairly modest by today’s standards. $25m in Google’s case; Apple’s was in the Seventies so it doesn’t make sense in today’s money.
Today an eight-year timescale to a public offering would barely make Google newsworthy. Last month, a pair of founders obtained VC based on a nine-figure valuation of their company. They’re not old enough to shave and their company, a graduate project, didn’t seem exceptional to me; it will scale only with tremendous luck and exceptional talent. The anecdote can remain anonymous while we still recognise the story. We know what usually happens next.
I started talking about the money, but that’s just the food; narcissism is the organ it sustains.
Beyond name-calling, what actually is narcissism? There is a narcissistic spectrum where a dark personality disorder lies at the extreme right-hand end, but the continuum is more interesting than the endpoint.
Sandy Hotchkiss in her book, ‘Why is it Always about You?’ lists a number of narcissistic traits, including:
- Shamelessness, and an unwillingness to engage with feelings of shame;
- Use of other people in order to maintain self-image: reflected glory, obsession with celebrity, diffusion of shame by finger-pointing. Steve Jobs’s legendary hair-trigger dichotomy of his staff into assholes and gods is an archetypical example.
- A belief that one is exceptional, so that reward is predicated on entitlement rather than merit and hard work;
- Grandiosity and magical thinking, where the belief in something makes it real;
- Poor personal boundaries, so expecting people to be on call all hours of the day to buff your halo and heal your wounds.
Narcissists are constantly shopping for the opportunity to exercise power, and this is one thing that attracts them to the startup world.
(While we’re discoursing on personal narcissism, here’s a health warning. Although it’s inferred that narcissism is undesirable here, you can and should possess a healthy amount: the ‘zero end’ of the scale is also dangerous. You need, for example, to look after yourself to avoid being rejected or exploited by others. An acknowledgement of your own gifts is an essential part of the urge to create. And a prerequisite of being self-aware, which is good, is being somewhat self-regarding.)
That’s the background matter.
Thing one: the tech startup culture is like crack to narcissists.
Globalisation of software distribution and social network effects mean that companies can get big user bases fast. A wide reach and a lot of engagement usually results in an exaggerated sense of importance.
The ‘Get Big Fast’ mentality emphasises big gambles: maximising risk-to-return at the extreme high end of both. If you’re a VC with a portfolio comprising many companies, it can be a responsible gamble. For those affected, though, it can over-inflate the ego.
Founders, selected principally by charisma and confidence, can practise their pitch a hundred times in a big market. They have many chances to access a lot of power and a lot of money quickly.
Thing one point five: as well as attracting narcissists, this world protects their delusions.
It is built into to the VC model that you outdo incumbents because you don’t compete authentically. Uber offers cheap taxi rides because it’s bankrolled by Californian investors. It’s called extinction pricing. You can ride a wave of early success because you’re cheating. This lets you extinguish the competition. Then you put the prices up.
Endemic poor handling of negative publicity (and frequent denial that it’s actually happening) is seen as typical and sometimes even endearing. People look at Trump’s pronouncements and say ‘that’s just Trump’; people see misconduct in our industry and say ‘that’s just tech’.
There’s a poor public understanding of risk in capital, so the more irresponsibly you borrow, the more uncritical attention you attract. Listen to John Humphrys on the Today programme interviewing a founder of Improbable after its half-billion-dollar valuation. He is severe with politicians, but is out of his depth when confronted with the ludicrousness beyond this sphere.
The limited company model and bubble mentality means that founders generally walk away without a scratch and start again if it all goes wrong.
Let’s zoom out. We live in a world where shamelessness and grandiosity are feted, everyone’s gambling with someone else’s cash, and accountability is minimised. If you don’t do the same then you can’t keep playing. The messages that are radiated influence us.
Thing two: this is routinely screwing with people’s heads.
Jeannie Yang’s talk yesterday provided an interesting illustration, in Smule’s redefinition of the way they measured their software’s success.
In the early-stage model, the goals were about personal joy: software was plotted on a graph of sounds-good versus easy-to-play. Then the goals became about effective self-promotion: connecting people versus expressivity, and the product took off. Narcissism leverages the network effect. The pretext is ‘I am special, and people have to know’.
Consumers can be creators. We can debate finer points, but this is true. Most people will be rubbish though: taste and talent are things that are part learnable, part innate, and both rare. Not all people who watch football on television want to play it; very few of those who do will end up being good. Football playing, like music creation, is a pyramid scheme when to do it for a living is not a healthy aspiration for the vast majority of people; of those who do, only the top 1% are wealthy, and the top 0.1% are super-wealthy.
Jean Twenge [prounounced ‘Twengy’], author of ‘The Narcissism Epidemic’, suggests that there are four pillars on which our narcissistic society rests. Think about these first in a personal capacity:
- Obsession with fame;
- Social media, where attention-seeking behaviour is rewarded;
- An unhealthy ‘win at all costs’ view of competition engendered by poor parenting;
- Easy credit so you can live a fantasy world.
Run through that list again and think of the tech sector, with the venture funder as the parent.
As with any bubble, when the sun is shining, a capitalist will lend you an umbrella, and when it rains, they’ll have it back. Meanwhile money is traded for control, so you’ll have to convince colleagues to work in conditions they didn’t sign up to, and shut them out of conversations.
If you can structure your start-up in the old-fashioned way, staying within a magnitude of your ability to repay until you’re ready to go to market, and otherwise pursue a nice quiet life, then you totally should.