I went to see Arlan Hamilton of Backstage Capital speak this week. Her remarkable story is pretty well known by now — she “built a venture capital fund from the ground up, while homeless,” to quote Backstage’s site. She said several interesting things, but let’s start with this one: as of 2019, she will no longer be giving talks on diversity and inclusion.
That may raise eyebrows, given that her fund focuses on funding underrepresented minorities. Her reason, and I’m paraphrasing here but I feel I’ve captured the gist, is that Diversity & Inclusion have become to the tech industry as Human Resources is to a big company; a fig leaf there to protect the status quo, not to improve it.
It’s hard not to agree with her. Companies host D&I events and speakers; hire vice presidents of D&I; organize “diversity training” (which, according to copious evidence, doesn’t work and in fact often backfires.) They talk about diversity. They add diversity slides to their PowerPoint decks. But what do they actually do? I am reminded of Nassim Taleb’s famous dictum: “Don’t tell me what you think, just show me your portfolio.”
Well, here’s that portfolio. According to PitchBook, as reported by Fortune, all-women teams received 2.2% of total VC funding in 2017 — which is on par with 2013 and substantially lower than 2014 — while all-male teams got 79%. This while the industry paid unprecedented amounts of lip service to “diversity and inclusion.”
There is a slight upward trend for VC investment in woman-led teams when considered as number of deals, rather than number of dollars: that has increased from 2.42% in 2007 to 4.44% in 2017. Why, at this rate that number just might break the 10% mark … in the year 2045. Party time! It’s harder to find data on other underrepresented cohorts, but there seem to be zero indications that their representation is improving any faster.
We do, however, have big-company diversity statistics. Let’s compare 2014 to 2017 again, that same period of unprecedented lip service. Google went from “2% Black, 3% Hispanic, 4% Two or more races” to … “2% Black, 4% Hispanic, 4% Two or more races.” Is that progress or what? How about Facebook? In 2014, tech workers there were “3% Hispanic, 2% Two+ races, and 1% Black”, whereas in in 2017, those numbers were — well, this is awkward. They were unchanged.
Cue the usual complaints about how it’s a pipeline problem not a cultural problem (the MeToo movement should have made it painfully obvious that the pipeline is all too often poisonous, from the tip of its funnel to its big-company CEOs); how identifying people or cohorts by gender or ethnicity violates tech’s alleged utopian meritocracy (guess what, the so-called meritocracy started it, by systematically, if often unconsciously, selecting against those groups); and how companies that want to excel can’t afford to lower the bar (this is the stupidest complaint of all, as, to quote Cindy Gallop, “diversity raises the fucking bar!” The tech industry, like every industry, is overfull of complacent mediocre white men.)
Now that that’s out of the way: looking at their portfolio, it’s possible that venture capitalists are, consciously or not, maliciously or not, actually making a deeply cold and cynical bet: sometimes — often — betting on (relatively) mediocre white men on the grounds that their systemic advantages outweigh any/all greater talent and ability of underrepresented counterparts in whom VCs could invest.
It’s a bit like betting on monarchy over democracy, which actually used to be a thing. Individual monarchs may be mediocre, goes the theory, but they’ve been trained from birth to rule and to understand the wielding of power, so they’re more likely to thrive then someone, however talented, suddenly thrust into the position by the will of the unwashed masses.
Similarly, maybe VCs figure — on some level, perhaps unconsciously — that since white men benefit from the cultural systemization of their primacy, their socialized confidence / arrogance, their better networking prospects, and the various other advantages they’ve accumulated since birth, then they’re better bets than underrepresented outsiders who, however tough and driven and brilliant, don’t boast the same advantages.
You may have noticed this didn’t work out so well for monarchy. I predict a similar fate for the “pattern recognition” of e.g. white men who graduated from Stanford or dropped out of Harvard. (And don’t even get me started on the many inequities of America’s top-tier universities, starting with their “legacy admissions.” Attempts to preserve systemic social hierarchies do not get much more blatant than that.)
For a while that approach worked out fine for VCs, because a) the entire tech industry was rising on the twin tides of the Internet revolution and the smartphone revolution, so someone was going to be enormously successful creating e.g. the dominant photo sharing app, probably whoever got the biggest push from the industry powers-that-be, and b) those white men who founded new tech companies were still outsiders, in their way.
It’s good to be an outsider, if you’re trying to do something new. It makes you think originally. It makes you more resilient. Most people are herd beasts; exceptional people usually are, or have been, cut off from the mainstream society around them in some way. Once, long ago, believe it or not, being a tech nerd actually made you an outsider, or at least enough of one that you got many of the advantages of outsiderdom.
That is, to understate, no longer the case. Nowadays hordes of conformist mainstream business-school graduates call themselves geeks and want to launch tech startups, just like everyone else they know. Almost all follow the same formula: lean startup, MVP, seed funding, accelerator, and so forth. Ironically they are doing this at the very same time that — as I’ve argued before — the lean startup era is ending, because that rich vein of worldwide hardware revolutions which fed venture capital for the last two decades is now almost entirely mined out.
When everyone is seeking the same diminishing prize by following the same formula in the same way, the real rewards are inevitably elsewhere. There are other, ancillary veins yet to be mined; but they require a different approach. Different markets. Different values. Different networks. Different mindsets, informed by different life experiences. As a wise friend of mine puts it, “different isn’t always better, but better is always different.” That’s a lesson that VCs will learn soon enough, one way or another.