(A response from the authors)
Thanks for reading our piece, Silicon Valley’s Unchecked Arrogance. We’re motivated to create a different/alternative vision — one where if you want to put in the effort to build a better world, and a better livelihood, you’ll have the chance — instead of a world where a few people get to create, but don’t worry, the majority will be taken care of.
In order to do this, we propose a few alternative experiments:
Recruit for entrepreneurs like we recruit for college athletes.
Instead of giving a few people a universal basic income, let’s give a few people from different ZIP codes the same opportunity that YC founders have likely had. Jim Clifton, the CEO of Gallup, notes that our society spends millions finding point guards and quarterbacks, regardless of ZIP code (if you’re a kid born into a not-great situation but could be a great basketball player, we’ll find you, says Jim), but spending almost no time finding great entrepreneurs. Jim Clifton suggests that we give a test such as Gallup’s EP-10, which tests entrepreneurial ability, to all 9th graders in Detroit and give unrestricted cash to the kids most well established to build a business. Whether or not this is the right idea, if we spent a fraction of what we spend on pro sports on making entrepreneurship more inclusive, we’d see founders create wealth in new places.
Change how we make decisions.
95% of decision-makers in venture capital funds are men — and 95% of investees are men. 83% of venture dollars are in California, New York, or Massachusetts — and 78% are invested there. And fewer than 3% of investing partners at venture firms are people of color — and fewer than 3% of their investees are, too. To change the results, change the process. Ross’ firm Village Capital has a peer review methodology that has entrepreneurs themselves make investment decisions. The result: a portfolio that is 40% women, 30% people of color, and has a 91% survival rate over 5 years (compared to a benchmark of 50%), as well as a 4.5x growth in revenue and a 3.5 growth in funds raised compared to a control group. This article in the Stanford Social Innovation Review talks about the specific results of greater investment in women CEOs. Lenny has written about the large investment opportunity from closing the gap to gender equality from a century to a decade. Instead of giving the “losers” a basic income, recognizing that winners and losers are as much by chance as meritocracy, why not give different people control of resources. This simple change might yield more inclusive results — whether it’s looking to different places or people that will solve problems for those other than those in the Silicon Valley bubble.
Look for examples that work beyond the moat.
If Tim Draper’s foolish initiative to split California into six states had succeeded, Silicon Valley would have become the richest state in the country and the Central Valley (only 100 miles away) the poorest. That poorest state does not have any growth stage venture funds there. While the brilliant minds in Silicon Valley are rediscovering that helping those less fortunate is a good idea, some like Pete Weber in Fresno are actually doing something about it — lifting those in the poorest zip code in the country out of poverty. Maybe when the high speed rail is completed, and it is faster to go from San Jose to Fresno than commute to San Francisco from there, our innovation investors might actually venture outside their neighborhood.
Look at how existing Silicon Valley successes can create more value for more people.
Instagram sold for a billion dollars — with twelve employees. Whatsapp sold for $19B — with 42 employees. Uber has a $51B valuation and AirBnB is worth over $25B — and their 1099 employees are contributing assets to their success but making a fraction of the worth. Mark Zuckerberg’s paternity leave at Facebook is a good start — but what does the 21st century company that shares wealth look like? New Belgium Brewery, for example, is a 100% employee owned company, generating wealth for team members from janitors to the CEO, and REI has always been a co-op. Innovation in products and services should extend to innovation for all the people making the company successful.
Re-shift the playing field to encourage job creation.
We had the pleasure of serving on a commission co-chaired by Steve Case and Carly Fiorina, “Can Startups Save the American Dream?”, which explored how to encourage entrepreneurial job creation, not just wealth creation. We discussed changing to regulation that incentivize new businesses across the country, rather than solidify existing ones; changing education to encourage entrepreneurs, not industrial-revolution style line managers; and changing in how funds invest to better reflect the capital needs of the majority of startups (not just a few Silicon Valley-style consumer tech companies).
The commission had a great starter list of nonpartisan ideas, from how to build entrepreneurial ecosystems outside Silicon Valley to more fully utilizing CRA and PRI/MRI pools of capital. Tom Friedman wrote about it earlier this month, highlighting how cities such as Louisville (which he says, rightly so, could be Anytown, USA in today’s startup culture) are providing a bright spot in a discouraging political environment.
We might go even further. For example, today we don’t allow discrimination in pensions- we require testing to ensure the benefits are not heavily weighted to highly compensated employees. Why shouldn’t we require that for equity distribution in stock options or warrants? Our tax system shouldn’t be regressive, neither should our distribution of tax advantaged benefits. And don’t get us started on the length of software patents or applying capital gains tax treatment to asset trading.
We love entrepreneurs — especially those who really change the world and not just their bank account. Perhaps if we looked outside the Silicon Valley bubble to find and help them, we might be able to encourage them — not pay them a basic income to stay placid.