Dear Silicon Valley, You used to be the envy of the world. Over the last decade I’ve seen countless cities try to become you, from the Silicon Savannah..
Dear Silicon Valley,
You used to be the envy of the world. Over the last decade I’ve seen countless cities try to become you, from the Silicon Savannah to the Silicon Bayou.
At last year’s Global Entrepreneurship Summit on Stanford’s campus, hundreds of entrepreneurs from Mongolia to South Sudan came to listen to President Obama and Mark Zuckerberg and get a touch of your magic fairy dust. The American Dream — anyone with an idea, a garage, and a good work ethic can build a great company — might as well have been born in your backyard. I admire your innovation, openness, creativity, and all you stand for.
In case you haven’t noticed, though, you’ve changed from hero to villain. You’re too expensive and exclusive for the rest of the world: The garages that gave us Hewlett-Packard and Google now cost millions of dollars. You’ve moved from icon to joke — the show that bears your name is a cringe-worthy, true-to-life satire.
You’re churning out companies that are raising hundreds of millions of dollars, and going bankrupt in literal satires of themselves: a $700 million blood-testing company that never had any actual results; a $120 million juicer with packets that can actually be squeezed by hand.
Now Fast Company is declaring the end of the public’s “love affair” with the Silicon Valley ideal, and everyone from socialist Bernie Sanders to hard-right Steve Bannon is calling for your biggest companies to be heavily regulated, and your reputation is fast approaching that of Wall Street (which actually used to have a good reputation too).
Here are a few places that you went wrong — and what you can do to fix it.
Your ideas are only as good as the people in the room. And your door is shut to most people.
As evidenced by the major backlash over the recent launch of a company called Bodega — where the founders and investors genuinely didn’t understand why the name was problematic — you don’t always have the best handle on how your ideas will be received outside of the Silicon Valley bubble. You’ve got major blind spots.
Why might this be? Face the facts: when Silicon Valley investors are considering new ideas, you don’t have very many different perspectives around the table. Over 90% of the decision-makers in the venture capital industry are white men.
You’ve known this is a problem for a while, but haven’t done anything to fix it: less than 5% of the new ideas that get funding are founded by women, and less than 1% of venture funding goes to Latinos and African-Americans.
You’ve concentrated capital in the hands of a few people (nearly all white guys) who have huge power to determine which people, places, and industries get funding. And your decision-makers are often (unintentionally) overlooking ideas that come from people who aren’t like them, which exacerbates gender, racial, and geographic divides in our country. Much worse, this financial privilege creates power dynamics that leads to too-frequent cases of investors sexually harassing founders or tone-deaf ideas like Bodega.
Your rainforest of innovation has turned into a factory farm.
Silicon Valley, perhaps your greatest achievement is that you’ve built a community where the little guy could build a great company to disrupt the establishment. Silicon Valley’s innovation engine has been driven by the creation of iconic companies: HP, Intel, Apple, Google, Facebook, that took on bigger competitors.
But that’s changing. In his famous book Zero to One, Peter Thiel writes, “Competition is for losers. Be a monopoly.” And that philosophy has come to prevail—the average venture capitalist would say that in a portfolio of 20, they are OK with 19 losers and one grand slam. Follow that to its logical conclusion: for every billionaire Peter Thiel, Silicon Valley, you’re OK with 19 broke people. It’s no wonder that inequality is at a 100-year high, entrepreneurial activity is at a 40-year low, and eight men control half the world’s wealth.
Over the past fifteen years, big has crushed little in Silicon Valley, to an increasing degree. The former giant-slayers like Apple and Google have become giants themselves, shutting out or buying up new entrants.
The worst of it: you’re even controlling which ideas get out there – as we saw when Google chairman Eric Schmidt complained to the New America Foundation for criticizing the company’s monopolistic practices. The entire team got fired.
In short, your present leaders are cannibalizing your future. If a startup is raising money today, one of the first questions they’ll be asked is, “What’s your exit strategy?” Specifically, that means, “Whom among Google, Facebook, and a few other companies will acquire you?” A few tech giants are dictating which problems founders want to work on, and how we’ll solve them.
The result? You haven’t produced a new firm that has cracked the world’s top 200 since Facebook’s founding in 2003.
And your insulation makes tomorrow’s problems harder to solve.
Your leaders are increasingly coming from a narrower group of universities, companies, and socioeconomic classes. Your companies are now solving “my-world problems” (food delivery, cold-pressed, on-demand juice versus the “real-world problems” you used to solve (getting affordable computers in the hands of everyone; inventing the Internet). Your solutions literally create the script for a satire show on HBO–and you don’t see what a big problem it is.
And because of the first problem — the lack of new ideas in the room — you don’t know how to solve this. Your best idea for social inequality: universal basic income, where the wealth of the billionaires will continue to grow, but don’t worry, the rest of the serfs (who are otherwise unable to do any work!) will receive a daily stipend.
To you, in the words of one Silicon Valley investor, this seems like “the only logical conclusion.” To the average person, this seems like the height of arrogance. People are uncomfortable with universal basic income because you’re essentially saying their labor isn’t worth anything — but you don’t see it!
So, what can you do about it?
Maybe I was a little harsh on you when I said you didn’t see any of this happening: we’ve seen the beginnings of conversations around diversity and inclusion, and mea culpas have recently been flying out of your board rooms as fast as rejection e-mails.
So now that you’re paying attention: what can you do? Here are a few ideas:
1. Put as much attention into finding founders as you do deal flow. Your leaders talk a lot about investing in diverse companies; well, that won’t be easy unless you invest in the infrastructure to find them. We spend billions of dollars to make sure that the best high school and college athletes have their shot at the pros; why don’t we do the same for entrepreneurs? Instead of asking entrepreneurs for a “warm introduction”, build technology that actively encourages cold calls and outreach from founders-and can help them.
