Gervais / MacLeod 4: a world without Losers?

This is a continuation of last week’s analysis of various work cultures and the patterns of degeneracy. I’ve analyzed hierarchies that form in organizational cultures and the relationship between ascendancy and bad behavior (in particular, psychopathy). I’ve touched on the VC-funded startup ecosystem (VC-istan) but don’t think I’ve done it justice. In these small, agile companies, does the MacLeod classification apply? Or has this dysfunctional and unfair arrangement been rendered obsolete? If so, then how? If not, then who are the Sociopaths, Clueless, and Losers? I’ll answer that. Today, I’m going to focus on the sociology of VC-istan, perhaps the first truly postmodern corporate body.

VC-istan likes to believe that it has evolved beyond the traditional corporate dysfunctions, meaning that the MacLeod hierarchy might be outdated or inaccurate. I will show that this is not the case.

VC-istan, as a post-modern corporate organization, has figured out that companies are disposable. I’m not talking about shell companies, but full-fledged corporate organizations where people actually go to work. These firms have a team and a product. People get hurt when they melt down. The product manager gets to call himself a “CEO” and the technical lead is a “CTO”. They identify as “a startup”, which has some attractive features. If it’s a startup, programmers are unlikely to confront 20-year-old legacy code, and divisions of labor may be undefined enough that an engineer who enters in the right way can get a very high quality of work. It almost looks like these entities are free-standing companies, as they would be, were it not for their dependence on continuing financial investment. That need to be hooked in to prominent investors and VC-istan press keeps them from being truly independent, but they have just enough independence that VC-istan looks like a pattern of separate companies merely flying in formation.

At the top of the VC-istan social pyramid are the venture capitalists. Rather than compete with one another, they collude in order to collectively determine which courtier projects deserve funding and which deserve to lose. As such, they’re effectively one executive team. These are the MacLeod Sociopaths and, as discussed, that doesn’t mean they’re all bad people or sociopaths in the true sense– only that bad people have a disproportionately high likelihood of rising to that tier. A better, more neutral, term would be Manipulators.

To understand why VCs behave in this way, it’s important to assess the mechanics of their industry. Most investments will lose, but the few that succeed will return 10, 100, or even 1000 times their original investment, and it’s nearly impossible to predict how a company will perform until it’s flat-out obvious to all in the know. This puts information and social access at a premium. Whether a VC will succeed has more to do with his access to emerging bargains than anything else. Most investors, therefore, would rather do right by other investors (in order to get an allocation in the next great deal) than by their entrepreneurs, who (as social inferiors) have no leverage. This creates the clubby, collusive nature for which VC-istan’s top echelons are known.

Where are the other two MacLeod tiers, the Clueless and the Losers? Here’s where it gets exciting. The rest of VC-istan is (almost) all Clueless– from the independent project managers called CEOs to the lowest-rung entry-level software engineers. Recall that the MacLeod Loser is, because he’s aware that he’s taking a raw deal, rationally disengaged and manages his performance toward socially acceptable averageness. Loser-level employees trade autonomy, time, self-respect and expectancy (average-case compensation) for minimized variance in compensation and social conditions. In The Office, they are the Stanleys and Phyllises and Angelas. They’ll get their assigned work done, stick around till 5:00, and follow orders… but they’re not likely to do more than that. VC-istan doesn’t want people like that.

The VC-istan culture emphasizes “leanness”, which is a code word for “No Losers”. Startups often say they’re looking for “true believers” (read: Clueless). Then there is the “brogrammer” culture (Clueless machismo) and the age discrimination problem, and it should be obvious what that’s about. Older people are likely either to have climbed the ranks (and, yes, VC-istan circa 2013 has ranks and its own ladder) or to be rationally disengaged Losers. Even the perks touted by many startups are aimed toward the Clueless. I know of one startup that brags about its free dinner (lunch is not provided). Losers would rather have more cash than a 7:00 dinner with co-workers; perks like that are for the Clueless. 

Venkat’s theory of corporate genesis ascertains that companies are started by Sociopaths, generate a Loser tier shortly afterward to handle dead-end administrative work, and then (in maturity) build a Clueless middle to handle growth as the social and economic distance between the company’s base and apex expands to the point that a buffer class is necessary. What causes corporate dysfunction, he argues, is the expansion of the Clueless tier, who lack the economic self-sacrifice (in exchange for social approval and comfort) of Losers and execution skill of the Sociopaths. VC-istan seems to prove, on the other hand, that companies can prosper not only with, but because of, a Clueless monoculture, if directed right.

What about the Sociopaths? Does VC-istan function without them? Well, no. There are Sociopathic founders and, among the people who are really in charge– investors, board members– there will probably be quite a few more. In VC-istan, however, they cleverly keep themselves out of view. Typical corporate culture celebrates the Sociopath lifestyle as something to which all should aspire, while tacitly understanding that the Losers, knowing their odds of making it are pathetically low, won’t depart from their rational disengagement. VC-istan, however, is supposed to be for the Clueless. Sociopaths just sign off on executive-level hires, move into top roles at VC-istan companies once they’re de-risked, and sign the checks.

How does VC-istan function without Losers? Or, are Losers necessary? Are they beneficial, or harmful? My opinion is that they’re beneficial to a large or stable organization. Losers are not really losers, so much as they trade opportunities for social status and economic expectancy for risk reduction and comfort. In addition to their desire for stability, they are stable. They’re loyal, willing to follow orders, and capable of delivering more economic value than they expect the company to provide for them (which is why they might be called “losers”). Rather than compete for better positions, they’ll perform well enough in the roles they have. For a stable, well-defined organization, hiring Losers is a winning proposition. You know that, on average, you will get more than you pay. However, fast-growing startups that can’t afford to tackle the communication problems of larger organizations are going to need to focus on average yield per employee rather than total yield. For this reason, they’d rather hire overachieving Clueless than rational Losers.

This Clueless-mania generates, as it were, a lot of terrible startups with stupid ideas. I’ve noted that Clueless aren’t strategic, and that shows. Most of these companies have silly ideas and crash and burn. For venture capitalists, this is not only tolerable but desirable. If VC-istan were a regular company, it would have to pay salaries month-to-month and pay severance when executives lost faith, projects were cancelled, and (for macroscopic reasons) there was no place to put the people. That gets expensive. With disposable companies, there’s no need to “waste” money on these “soft landings”. Investors can stop funding the companies and, to minimize harm to those they care about, soften the landings of any friends in those companies by handing out executive positions in other, healthier, firms.

I am, for my part, not averse to a tolerant attitude toward good-faith business failure. That’s one of the best things about American business culture. We aren’t perfect, but we’re far better than most other societies on this issue with our forgiving bankruptcy laws and (comparably) low level of small-business regulation. That said, I don’t think VC-istan holds moral high-ground here. VC-istan is tolerant of good-faith business failure, but only because companies are disposable. This also means that it’s tolerant of bad-faith business failure, which is what most “acq-hires” (which benefit executives, and screw employees) are. Furthermore, VC-istan’s tolerance of failure is superficial. It’s a world in which one is expected to be a CxO by 35, and in which the only socially acceptable role for someone after age 45 is investor. This harsh age-grading encourages the same kind of risk-aversion and backstabbing as the stodgy, old-style corporate world that VC-istan was supposed to replace. So how much progress has really been made?

There’s a question that remains about VC-istan’s attempt to “lean” itself down by eliminating the Loser class. Is that stable? Losers make a rational trade that has them “losing” from an economic point of view, but provides comfort and risk reduction. Unlike Clueless, they’re low maintenance. MacLeod Sociopaths embrace risk (and the truly psychopathic ones, as Venkat Rao observes, take “heads, I win; tails, you lose” positions) that Losers wish to sell. Clueless, for their part, are unaware of any risk trading that goes on. They are enticed with a delusion. They expect to rise through the ranks and win someday. To keep a Clueless-only world going, no one can lose. Everyone must win. The Technocrat’s positive-sum resolutions are ideal, but those opportunities are rare, and Clueless lack the skills to tell genuine world-improvers from pipe dreams. Also, the flashiest and often most effective Sociopaths are those who generate transfer (beneficial to them) through elaborate networks of zero-sum transactions. That requires that others lose, right? Not if today’s losers can be tomorrow’s winners…

VC-istan works this way. Every VC-istan engineer expects to be a “tech lead” in the next gig. Every tech lead expects to be an executive at his next startup. Every executive expects investor contact in order to be a founder in two years. Most VC-istan founders want to be investors so they don’t have to suffer the 90-hour workweeks, low salaries, and career volatility associated with starting a company. In a 100-person VC-istan company, there are 2 founders and 98 people figuring out a way to turn their current employment into a launch pad for future founderdom. That is the real selling point of VC-istan; the founders (and, later, executives) say, “You’ll have my job in two years.” That excuses the laughably low equity allotments that, otherwise, would in no way compensate for the drop in salary and the risk associated with such unproven businesses. Huge promises are made to attract the Clueless, and delivery almost never occurs.

An effort to propagate losses of zero-sum transactions into the future looks a lot like an economic bubble, and that’s exactly where I intend to go with this analysis. When you have Sociopaths and Clueless but no Losers, that’s BubbleWorld. You have a pipeline of zero-sum transfers that looks like value creation, with the losses merely being propagated into the future and delivered to people who are powerless to retaliate.

The first dot-com bubble was a textbook financial bubble.Wall Street didn’t know how to value this new class of companies, and “mistakes were made”. However, that bubble was a lot less evil than many. First, there was genuine, lasting economic value in the Internet, and the bubble was more of a result of humanity’s collective inability to evaluate this new thing than malicious manipulation. Second, the commodity in which the bubble existed (technology stock) was not something people needed to survive; the ongoing housing bubble has been a different matter. Wall Street, for its part, learned a lesson. In the current technology bubble, valuations have been fairly reasonable– for Facebook investors, disappointingly so. This time around, startups are overvalued by young talent. That’s the bubble. There are a lot of people eager to be Clueless in order to try at “a startup”. Since they have no idea how to evaluate equity allotments, growth companies, or job titles in a world where they are poorly defined, they often fall into jobs that are terrible deals for them.

The dot-com crash of 2000 was ugly, but the loss was in paper financial assets, meaning that most of the cost was borne by wealthy individuals. This one’s different. Some of the most talented young people are wagering their time on “social media” concerns in exchange for executive positions and investor contact that will not be delivered. When this bubble pops, they will have lost time that they can never get back.

In this light, we can understand the function that Losers perform, and arrive at an alternative formulation of how the MacLeod tiers form.

As I’ve discussed, Sociopaths can be split into the true Psychopaths and the Technocrats, but this delineation deserves certain scrutiny. It’s tempting to assume that, because the Psychopaths are clearly “bad guys”, that the Technocrats are the “good guys”. This would require us to make it a “true Scotsman” category of limited use. In fact, there are bad Technocrats. Some are inept, some are ruthless, and some are even unethical. What differentiates a Psychopath from a Technocrat is the type of goal that he has. Psychopaths want to play zero-sum games and win; the millennia-old, zero-sum fight for status is what they live for. Technocrats believe they can profit personally through positive-sum endeavors that enable them to win personally because a surplus is generated. It’s important to note that positive-sum does not mean “good” or “right”. It only means that more value is generated to the winners than is lost by the losers. Add to this the subjectivity of “value” or “utility” and one can see that incompetent Technocrats would be actively harmful. Most left-leaning people dislike Ayn Rand and find her to be psychopathic, but I would hazard the guess that she was actually technocratic in her aim: she legitimately believed that her ideas were the foundation of a superior society.

Psychopaths are harmful and generally evil, and they’re self-consistent in this. Technocrats believe they are doing good. Both categories of people can externalize harm. Psychopaths do it callously because they only care about their personal victories and dominance over other people. Technocrats often do it under the belief that more is being won than lost. Many ugly things have been built by Technocrats who believed they were doing the best thing for the world. Some were right, and some were wrong.

Novel organizations are started by MacLeod Sociopaths– Technocrats who embrace risk and disruption, and Sociopaths seeking new ways to eke out advantages over others– because Losers would rather play on an existing, proven team and Clueless don’t know how to start anything. Shortly after genesis, the organization must define a division of labor. Discrepancies in labor beget differences in leverage, which produce variation in compensation. Inequality forms, and the Sociopaths have two strategies for dealing with it. The first is to set up a trade, in which low-status employees win comfort and stability while relinquishing access to high-quality labor and outsized compensation. They won’t get rich, but they’re unlikely to be fired, and can leave at 5:00. That generates a Loser tier that will happily “eat” economic loss (the difference between wages and value rendered) in exchange for these intangible assets that only exist in a low-importance organizational role. The second strategy is to mislead people about their futures within the company and, because of the natural human tendency toward optimistic bias, this isn’t hard to do. That generates the Clueless tier, which is a mechanism for propagating losses into the future.

The typical organizational hierarchy presents the Clueless and a buffer between Losers and Sociopaths, but the Losers also form a buffer between Clueless and Sociopaths. Measured in social status and economic yield, Clueless outrank Losers. However, measured in hedonic terms (yield minus pain and discomfort) the Losers outrank the Clueless. This is a fairly stable arrangement, because both the Losers and Clueless think they’re getting the better deal.

MacLeod Losers probably comprise 80 percent of what we call “Corporate America”. They show up, do enough work to maintain adequate social standing, and go home. They care enough to want to do a good job, but not enough to fight authority or get into “vision” disputes. They’re the muscle of the working world. So why doesn’t VC-istan want them? The answer is that these companies cannot afford to make the Loser trade. Losers are strategic, and many of them are smarter than the Sociopaths who run companies. They want comfort and stability, so when undesirable change comes their way, they realize that the trade offered to them– low status and compensation, in exchange for a secure job where little changes– has ended, and they react. The Loser deal is just intolerable if the stability disappears. Most leave, and a few “wake up” and try to play the Sociopath game, but the Loser tier, as a bulwark of social stability and continuity, ceases to exist. When it melts down, it also clues-in the (formerly?) Clueless who tend to want to “protect” the Losers (cf. Michael Scott’s paternalism). Fast-changing VC-funded startups would rather that it not form in the first place.

The result is that one must recruit the Clueless solely into a tier that merges Clueless and Loser traits and functionality. However, it’s hard to predict how a person will assimilate into the organization. Since these tiers have a contextual nature to them, the game comes down to “pattern matching”: bring in the ones who look Clueless. This gets gendered and racial (favor the risk-seeking gender and the privilege-associated complexion) but especially ageist. VC-istan luminaries (investors and founders) claim that they prefer young people because they haven’t been “corrupted” yet by dysfunctional corporate cultures. (Yet they have no qualms about creating new pathological cultures.) As I’ve gotten older, I’ve realized that this isn’t what happens. Older people don’t, in general, get “corrupted”. They get less Clueless.

In truth, VC-istan is a society of the Clueless, by the Clueless… and for the Sociopaths (who justify the high housing costs in the Bay Area). The MacLeod hierarchy hasn’t been rendered obsolete. It has only been re-adapted into a different form. The loss of the Loser class induces instability, and VC-istan compensates for this by making companies themselves disposable. VC-istan is a world without MacLeod Losers, but not without losers.

51 thoughts on “Gervais / MacLeod 4: a world without Losers?

  1. By the way — I think your example of Ayn Rand is a very good argument for unifying the psychopath and technocrat class. To decide if a competition is zero-sum or positive-sum, you must first decide what is being competed for. That’s often a subjective decision and not everyone competing agrees.

    Ayn Rand would be convinced that it’s an economic competition and a competition for (her specific) morality. A socialist would see her “utopia” as *negative*-sum, which is why you call her an inept Technocrat. In fact she’s not inept in her own moral system, but she *does* value things very differently than you do.

    Trying to separate people into Psychopath (zero-sum) versus Technocrat (positive-sum) first requires that you decide what you’re measuring in a way the Sociopath/Clueless/Loser division doesn’t. It’s not just a hard decision, it’s necessarily a subjective one.

    • I think the motivational separation between Psychopaths and Technocrats is clear. Psychopaths want to dominate other people and that is their driving goal. Technocrats want to do something they believe to be beneficial for humanity– and capture some of the value they create.

      In other words, Technocrats believe that what they’re doing is positive-sum. That doesn’t mean that they’re right. Nor does it mean that they’re good people. If I performed an action that made me $100 and cost the world $90, that would technically be “positive sum” (net gain of $10) but it wouldn’t be right.

      The delineation between good and bad Technocrats is necessarily subjective, but I don’t think that between Technocrats and Psychopaths is.

      There probably is a spectrum, however, populated by various shades of narcissism. Psychopaths don’t care if what they’re doing is good for the world, but your garden-variety narcissists (more common in the corporate upper-class than out-and-out psychopaths) can delude themselves into believing that their own visions are what’s right for the world.

      • If the difference between Psychopaths and Technocrats is whether they *see* themselves as competing in a zero-sum or positive-sum game, I’m not sure it’s a useful distinction.

        As you say, +$100 for me and -$90 for the world is positive-sum — literally Technocratic, but its implications are Psychopathic.

        And I think that “whether they see themselves as X” is already an unanswerable question. Many, many people don’t operate in a particularly conscious way, Sociopaths included.

        Also, nothing stops a Technocrat from wanting to create value, but wanting to capture the majority of it for themselves. That’s a positive-sum game (creating value) *plus* a zero-sum game (allocating most of it to themselves).

        I’d argue that most such people would be playing *both* Technocrat games and Psychopath games. Not just consecutively, but concurrently. That seems less true of the Sociopath/Clueless/Loser hierarchy.

        • A lot of people create value, but keep even more then they create.

          Let’s consider a simple corporation.

          Value Creation
          CEO: 600
          Clueless: 200
          Clueless: 200
          Loser: 100
          Loser: 100
          Loser: 100
          Loser: 100
          Loser: 100
          Total: 1500

          CEO: 900
          Clueless: 100
          Clueless: 100
          Loser: 80
          Loser: 80
          Loser: 80
          Loser: 80
          Loser: 80
          Total: 1500

          CEO: +300
          Clueless: -100
          Clueless: -100
          Loser: -20
          Loser: -20
          Loser: -20
          Loser: -20
          Loser: -20

          Even if we consider the CEO a Randian ubermensch of productivity, he is still using his market power to take more then he produced. Thus the CEO can be negative sum even while being a great value producer.

          • Let’s add a network of start ups. We will assume each clueless cohort gets funded for a different venture.

            Value Creation
            VC: 600
            Clueless: 200
            Clueless: 200
            Clueless: 200
            Clueless: 200
            Clueless: 200
            Clueless: 200
            Clueless: 200
            Total: 2000

            VC: 1200
            Clueless: 600
            Clueless: 100
            Clueless: 50
            Clueless: 50
            Clueless: 0
            Clueless: 0
            Clueless: 0
            Total: 2000

            You’ll note in this case that the total value created in indeed higher ($2000 vs $1500) because you substituted clueless for losers. $500 units of extra value are created by the workers, with $300 going to the VC and $200 going to the workers. The VC earns $1200, which is $300 more then the CEO in the “safe” corporate model. This is needed because of the extra risk.

            However, the results are much more wildly distributed. Before the clueless and losers earned about the same, and everyone made enough to eat. Now many get nothing. Even though the EV of every worker went up the risk also went way up.

            Every single clueless thinks they will end up being the one baller clueless that makes the $600. The higher they rate their chances of this the more of that extra $500 in value the VC can keep and still get the clueless to work.

            In a bubble clueless rate their odds of becomming the baller so highly the VC can even keep more then the $500 of extra value created. Then the value left for the workers, even excluding risk discounting, is negative. They all would have been better off being clueless or losers at a big corp regardless of their risk profile.

            Of course this all precludes the idea of a risk positive clueless, who prefers variance in outcomes over steadiness of outcomes. Many young men hoping to be ballers have such a risk preference profile (or think they do) and as such “bubble” like conditions are possible. As people get older they either become less clueless (able to better judge the likelihood of the $600 outcome) or natural things like wanting to start a family change their risk profile.

  2. I like how you have developed this model, but I don’t think you’ve discussed yet how the bubble of “clueless” startup employees will collapse. Do the clueless become clued in?

    • Well, eventually they realize that nobody’s getting rich or getting promoted. Presumably there are other opportunities for being clueless elsewhere that will absorb them, but outside VC-istan.

      • Right, but using the bubble metaphor, what is the burst? Do the ranks of the clueless get clued in a single momentous pop and leave in droves? Does the bubble slowly deflate as the terms get worse and worse? What does the end-game look like?

        • I can’t speak for Michael, but I’d guess that the technical press will do a “no longer hot” series of articles making startup jobs look bad. The Clueless hate looking bad above all, so once VC-istan stops being played up by the press, they’ll have a lot of trouble getting the kind of people they need.

          The hiring crisis gets worse, companies that are already marginal stop being able to hire and start falling over… The companies have to pay through the nose for talent (like, way more than now) or slowly deflate to death as they can’t get the overperforming Clueless they need to keep going.

          A bunch of VCs lose a bunch of money for the current crop of startups, but reclaim a fair chunk of the value by swapping resources around. And they still have the earlier profits from before the pop.

          • This is a good synopsis. Like all bubbles, the small players and late-comers will be the ones hurt by it. Founders will become VCs and EIRs and have a same home and a cozy salary during the storm. Engineers, on the other hand, are likely to end up applying for Software Developer III roles at BigCo’s with bosses 5 years younger than them. That sort of thing is when you realize that you’re not as young or immortal as you once thought.

            The good news is that there *is* some substance to this bubble. The 2000 bubble was an overvaluation of Internet stocks, but the Internet itself was real. This one is an overvaluation of companies championing a new way of working– small companies, fast failure, agile teams– and most of the overvaluation comes from the fact that VC-istan companies are much, much more corporate and stupidly conformist than they admit. There is genuine substance here and it’s not going to go away. Perhaps the crash will wash out the pretenders.

            When I look at VC-istan, I dislike it not because of what it is– it’s no worse, but not much better, than regular ol’ Corporate America– but because it fails to be what it claims to be.

        • Slow deflation, most likely. Those are more common than dramatic crashes. Realization of the scam is gradual and complicated by locality. There isn’t a sudden “This is it” moment so much as a creeping realization that something has been overvalued.

          Bubbles are more visible in hindsight than at the time. For example, is Manhattan real estate still overpriced? Probably, but no one can prove it. For all anyone knows, it could go into another bubble for 5+ years.

          The same holds for VC-istan. No one knows for sure what it will look like in 2020. The exact same players could be in charge, or it could be a new crew. That stuff is sensitive to tax rates, politics, and macroeconomics in ways that no one can predict. I do consider it unlikely that the major players will, in 7 years, be able to fund 20 times as many startups as they fund now, or that there will be 20 times as much ad revenue to go around.

          The people who joined VC-istan startups expecting to be founders are banking their careers on rapid growth of an ecosystem where the rules are still being defined, and in which further growth is going to require departure from some of its basic assumptions. Bay Area VC-istan can’t grow anymore, because that geographical area itself is congested, so it would have to spill over to the rest of the country, but there are few risk-seeking investors out there.

          Most of the pain associated with the bubble’s end will be suffered in silence by people who spent 10 years of life working extremely hard for undervalued work experience. It won’t be a front-page news item, any more than the meltdown of large-firm law after 2008. It will just be another bit of the disgusting generational pattern where people work very hard for something that isn’t real.

  3. “As I’ve gotten older, I’ve realized that this isn’t what happens. Older people don’t, in general, get “corrupted”. They get less Clueless.”


    Young people, especially young men, don’t have much to lose but a lot of gain if they can “strike it rich”. So there is incentive. They don’t have the experience to differentiate between clueless and strategic options and they don’t exactely have a lot of options to begin with. So its pretty much blind incentive.

    As you noted the worst case scenerio is you wake up one day and your thirty and you didn’t make it in your 20s. So you apply to big corp and make $1XX,XXX. Maybe you could have made $1XX,XXX * (120% to 130%), if you did big corp the whole time, but really who cares. 1.2-1.3 times earnings isn’t going to change your lifestyle. You aren’t going to be in a much better neighboorhood, get a better wife, or have true “fuck you” financial independence. The fact of life for young men is that outcomes are basically baller or chump as far as many of them are concerned, and slightly less creature comfort is worth the shot of becomming a baller.

    People with the capital and connections to tap into that baller desire become VC funders who don’t mind giving up some of the value created to a few new ballers in the process of sucking all that value out of all those young men. They may in fact be creating value in the process, but they keep more then they create. The externality is, as you say, in the lost time and hopes of the twenty somethings who work like dogs based on clueless hope but don’t make it.

    • Young people don’t *think* they have a lot to lose, because they haven’t confronted age discrimination, health problems, and an increasingly complex family life, so they think they’re immortal.

      In reality, the 20s is a pivotal decade due to compounded interest and the need for career growth. That’s not to say that people can’t succeed after a lackluster decade, but the loss is much bigger in truth than it initially looks.

      Immortality is part of the Clueless con. Clueless haven’t caught on to the value of time and the reality of aging and death. They don’t realize how little time they have, which is why they’re willing to waste it paying dues to people who don’t deserve it and won’t repay.

      • Optimism has always been a trait of the young.

        I think the issue is that anyone smart enough to be working at a VC startup is probably going to end up with a good job someday. These people aren’t going to starve. They are going to be some kind of upper middle class.

        What young people seek is a *qualatative* difference in lifestyle. 20-30% more earnings doesn’t cause a qualatative difference in lifestyle for your average tech dude, especially when your already basically upper middle class.

      • What do I mean by qualatative difference?

        There are really only a few things that I think qualify:

        1) Total financial independance, especially at a young age.

        In IB we called it “fuck you money”. Fuck you money is the dollar amount that you would comfortable saying fuck you to your boss and if you got fired and could never work again it didn’t matter. It’s total freedom.

        In The Social Network its the point where Mark Zuckerberg gets to put, “I’m CEO, bitch” on his business card.

        Moreover, its important for this to come young, at least by the 30s. I know plenty of miserly upper middle class people that accumulate fuck you money slowly and retire at 55 only after basically living the majority of their life in boring mediocrity.

        Taking the reliable megacorp path is never going to make you fuck you money. Again, its just a minor difference in quantity.

        2) Does it get you a better mate?

        Let’s be straight, we all have a rough idea of “value” in mates. Particular traits are worth more to some people then others, but we’ve all said the words, “he/she is too good/not good enough for him/her.”

        Nearly all computer programmers fall into the same mate value bucket whether they pursued megacorp all the way and make $1XX,XXX * (120%-130%) or they tried a start up and failed and now they just make $1XX,XXX. The “he can buy me a house in a nice suburb” bucket. Most programmers I’ve met are dweebs who can’t exactely trade on masculinity, good looks, or charisma so they mostly try to attract women with earnings. That’s why they are willing to do a really boring job like computer programming instead of a more fun job that pays less. We can call this gold digging but the simple truth is all woman, even “honorable” ones, are gold diggers to some extent, money never hurts with them.

        Being in that bucket means getting a somewhat mediocore woman of roughly your same class around when she’s getting close to thirty and is willing to settle after not being able to do better. I’m not saying this is a terrible relationship, you may like and love each other, but it is what it is.

        Whatever traits you want in a woman: looks, smarts, humor, grace, etc all can be improved by improving your own value. But earning slightly more doesn’t really change what your offering. Only making a qualitative improvement in yourself can result in a qualatative improvement in the mate you can get. For a computer programmer that basically means making baller money. Baller money, by the time you are in your 30s and want a mate, can result in a significantely better mate. That means a happier life and better genes for your children.

        Those are the things people want. Indepence and access to better mates. Only a qualatative change can get those things.

    • I just read that article, and Arrington’s original.

      The “realize you’re a part of history” cracked me up. Only a Clueless would believe that some VC-istan social media concern constitutes “making history”.

      What’s amusing to me (and a bit disgusting) about VC-istan is how far down the Clueless behavior goes. Founders should be working hard. That only makes sense. I would work hard, too, with that kind of upside. I probably work harder than most of the VC-istan founders that I’ve known. In my experience, most VC-istan executives put in a lot of hours, but they don’t seem to be doing much.

      It’s disgusting that these VC-istan shops expect the same dedication out of subordinate employees, but aren’t willing to give real upside. If you’re engineer #26 with 0.04% equity and no authority to set priorities, you’re not an owner. You’re an employee. If you work 90-hour weeks, you’re just a chump.

        • The image I get when I think of “face time” is of people sticking around the office to impress their bosses. For VC-istan executives, the focus is more on setting the work pace. Perhaps it’s “inverse face time”. They stick around in order to make other people put in long hours. The difference is that, because they control the division of labor, they don’t mind being there.

          VC-istan executives are a different crowd from founders and engineers. They’re almost never internally promoted. Founders and engineers tend to be varieties of Clueless, but executives (almost always transplant executives) are Sociopaths.

    • These laws to prevent collusion exist. They are unenforceable in this case.

      You can prove statistically that the collusion is happening easily. But that’s insufficient to convict an individual VC of a crime in a specific case.

    • For one a lot of what Michael calls collusion may not even be conscious conspiracy. There is an incredible amount of group think and proof by who else believes it. I can’t tell you how many companies, assets, or people are valued highly for the sole reason that every else seems to value them highly. And that are tossed away for the same reason.

      • If VCs aren’t aware that what they’re doing would be illegal if properly exposed, they’re not paying *any* attention. Michael is far, far, *far* from the only person to point this out.

        But yes, presumably the justification for each individual VC goes, “while *they* are all a bunch of sheep following each other, *I* just happen to keep my ear out for the news but I make my own decisions.”

        The fact that that *is* illegal collusion is probably exactly as easy to explain as, say, the specific laws involving “detaining for questioning” and “search and seizure” are to most cops. What they’re doing seems right to them, which doesn’t make it legal.

        “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” — Upton Sinclair

    • I think Noah’s got it on this issue. How do you regulate what people say at parties? What can the government do to compensate for the fact that most investors would rather be in the good graces of other VCs than those of entrepreneurs, who have much lower social status?

      The worst of the collusion isn’t the price-fixing. That may exist, but it’s nothing compared to the extortion that exists out of the “take this term sheet or I will make calls and no one else will fund you either” dynamic.

  4. I sometimes find it informative to test an idea by making a game of it.

    Randomly saw this one today, which made me think of this post: I Choose Not to be a Billionaire”

    So, Philippe Courtot — Technocrat, Sociopath, or Loose Cannon.

    BTW, this brings up a point I try to make whenever it is on-topic. All these billionaires should be roundly shamed for not spreading it around. For every additional billion they have hoarded, there are 1,000 employees that are not millionaires. It’s not perfect, it doesn’t cover every instance, but it does address what I see as a core problem that humans are miserable at conceptualizing differences that are orders of magnitude.

    • It’s hard to classify an individual, but I’d say Technocrat.

      You make a strong point about billionaires. I’m not sure I’d categorically agree that it’s a bad thing to have a lot of money, but I certainly think that a large number of VC-istan founders use double-counting and ruses to hide how little they’re actually sharing with the people building their business. Mostly, they’re getting young people with no sense of their value to sacrifice enormous amounts of time in exchange for illiquid stock of unknown value. In essence, they’re traders who trade exclusively with the least sophisticated investors on earth.

      • Sure it’s hard. And that’s what makes it most instructive. Three more, my answer in parens. Anyone is welcome to opine.

        Paul Graham (Technocrat)

        Marc Andreessen (Sociopath)

        Woz (World’s luckiest Loose Cannon)

        • Marc Andreessen is an excellent example of why it’s so hard to separate Technocrat and Sociopath. What he’s doing is positive-sum. He *knows* it’s positive-sum. He’s taking a lot of value, but overall the world is winning from his actions and he knows that.

          So technically, he *fits* the given definition of Technocrat.

          And yet…

          I’m truly not sure they’re different categories.

          • I think it’s a question scale, of what you do with the bigger pie you’re making.

            John D. Rockefeller made a bigger pie, as did Andrew Carnegie and Henry Ford. But if you are taking the lion’s share, I’m not impressed. These ideas aren’t totally unique. These guys don’t have the market on brains cornered. We’d have a lot of the same things one way or the other. So, if they are using their connections and pocketbooks to ice competition and then hoard the profits for themselves, that’s sociopathic behaviour. It’s exactly what the Robber Barrons did a century ago.

            Probably the biggest question in my mind regards Graham. I know his talk, but I don’t have enough information as to his walk. However, based on the company he keeps, I’m skeptical.

          • Actually, I think I can come up with an intelligent defense of the splitting of the MacLeod Sociopath into “good” (Technocrat) and “bad” (Psychopath) categories.

            I’m going to use the D&D alignment system, which has two dimensions with 3 levels. One is {Lawful, Neutral, Chaotic} and the other is {Good, Neutral, Evil}.

            First, we have the 2-by-2 subsquare of social acceptability, which is {Lawful, Neutral} X {Good, Neutral}. Lawful Good is what people are “supposed” to be, while Neutral Neutral is what most people actually are. Anything in the rectangular region between the social ideal (LG) and actual behavior (NN) is, at least, familiar enough to most people to be socially acceptable.

            This leaves an L-shaped region (Chaotic Good, Chaotic Neutral, Lawful Evil, Neutral Evil, Chaotic Evil) that demonstrates what is socially unacceptable. Chaotic Good is attractive in narrative and theater, but regular people are so unfamiliar with chaotic morality that they can’t really evaluate it. These five cells are lumped together as “sociopaths” in the common lexicon (regardless of whether they are actual psychopaths).

            MacLeod Losers and Clueless live within the 2-by-2 “social acceptability” region. Losers tend to be Neutral. Clueless tend toward Lawful alignments.

            What about the “L of social unacceptability”?

            Chaotic Evil and Chaotic Neutral tend not to be very employable. These are the criminals, serial killers, and outcasts. Chaotic Good and Lawful Evil, however, can usually get by on account of their visionary charisma. Neutral Evil, for their part, tend to be socially very adaptable, so they can play the same game as the Lawful Evil. This splits the “L of social unacceptability” taken to be “sociopaths” into two clusters or islands. In one are the Chaotic Good, whom I’ve taken to calling the Technocrats. In the other are the Lawful Evil and Neutral Evil.

            In the MacLeod context, there’s no need to separate Lawful vs. Neutral Evil. Neutral Evil *like* law when they’re in charge.

            I think the MacLeod hierarchy comes more from the law-vs.-chaos dimension than the good-vs.-order one. Neutrals become Losers, Lawfuls become Clueless. To climb into an upper-tier organizational role (beyond the effort thermocline, which I detail in part #5) you have to be a bit clever about it and thwart credibility systems, and that has a dishonest flavor that requires Chaos or Evil. Most people conflate the two into a “sociopath” category but my contention is that the distinction actually matters.

            • Since you’re defining it in terms of a moral system, I’d say it’s more of a moral than a logistical category.

              That is, I’m still pretty sure it’s subjective. Otherwise, Andreessen is very clearly a Technocrat and Portlander’s distrust of Paul Graham is clearly misplaced. Just logistically (how much value is added, where does it go), Graham and Andreessen are clearly adding more outside themselves than to themselves directly. And both Technocrats and Psychopaths in your categorization generally do both, so it’s just a question of balance between them.

              When you start judging the company they keep for worthiness (“yes, but do they give it to people I don’t like?”), you’ve moved out of objective judgement and into subjective moral judgement.

              • You’ve heard the expression, it’s all sociopaths at the top?

                Sure there might be a exception or two, but for the vast and overwhelming majority they have to relied on the work of others in some fashion or another. So yes, how those at the top comport themselves is a moral distinction. Based on that moral distinction we may call them Sociopaths (overloaded term as it also applies to the apex logistical category; which I think is indicative ;-) ) or Technocrat (still in the apex logistical category, but benevolent).

                As for Graham, I’m not passing ultimate judgement. In fact, if forced, based on the publicly available data I’d have to call him Technocrat, but I’m cautious/skeptical/open to additional data.

                Also, creating a bigger pie in and of itself is not sufficient to absolve a person to keep it all but a few crumbs for themselves. If it were, the Robber Barrons would be given a free pass.

                • Sure. Creating a bigger pie isn’t enough by itself, which is why I said “are clearly adding more outside themselves than to themselves directly”. That is, I assumed it was a straight-up balance and you just had to compare one side to the other.

                  Here’s why it’s odd to me that he’s making that moral distinction: Loser versus Clueless versus Sociopath is *not* a moral distinction. It’s a logistical distinction based on the role they play in the corporation.

                  • I think the oddness comes from the overloaded name for the apex logistical category. That’s why I’ve called it apex logistical category. ;-) Clearly MacLeod had his biases. Blame him. :-)

                    Also I see no problem that defining where, within a category, one falls is sometimes a moral distinction.

                    • If where you fall in a category is a moral distinction, then the categories are subjective — they mean different things depending on who is speaking. That makes them much, much less interesting as a tool for shared communication than categories with a more specific shared meaning.

                      To intentionally exaggerate: “I divide the workers in the modern corporation into three classifications: ‘good’, ‘bad’ and ‘ugly.'” It’s cute, but it adds more heat than light to the debate, you know?

                      Having a “sociopaths I like”/”sociopaths I don’t like” classification has the same problem. That the Technocrat label also kinda-sorta means zero-sum versus positive sum makes it worse, not better — here’s a label which is *actually* used to mean whether I like them, but I’m *implying* it means something objective and verifiable.

                      Good for rhetoric, bad for clear communication.

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    • You know, I had that exact thought.

      It’s a good stereotype, but I wouldn’t take it too far. Losers make a calculated decision not to challenge authority because they enjoy comfort and stability. If those are threatened, they will adapt. So I don’t think it’s fair to call them uniformly weak.

      I am a MacLeod Sociopath (insubordinate, smart, dedicated, strategic) and I think I have a heart… but the corporate game tends to favor the bad kind over time. I get into the decay process in painstaking detail when I discuss alignment, and later in Part 21 when I give a 7-phase account of corporate decay.

      Clueless lacking brains? That is the most accurate stereotype of the 3. Where it hits a snag is on the fact that, in VC-istan, it’s often *highly intelligent* young men who get roped into the Clueless game. Male, 22-27 years old, and with a mix of hubristic ambition and upper-middle-class privileged idealism… those are the favorite snacks of the VC-istan vampires. They aren’t low-IQ people, and deliberate efforts are made to keep them Clueless. That, for example, is why 50-year-old programmers can’t get hired in VC-istan. Put someone who’s actually seen a few projects fail in the room, and suddenly the other Clueless 25-year-olds start to wonder if it’s worth it to put 100 hours per week into a project where still no one has any idea what it does.

      • I’ll point out that the Clueless game is also good for people with a high pain tolerance, a high value on money and dubious social skills. One more reason for the prevalence of Clueless Aspie techies as computer programmers: if you want more money and you know you’ll have a lot of trouble building social skills, the executive career path isn’t open to you and the Loser strategy pays less.

        You can absolutely be “like Clueless, but job-hopping often enough to turn built-up social karma into cash.” That’s not really a Sociopath career trajectory in that you keep doing hard work forever — indeed, you wind up in higher and higher Clueless categories so the work keeps getting harder. But instead of the typical Clueless tradeoff, you wind up getting more money and less respect for it.

        You’re not making executive-level compensation, probably ever. But without the social skills to do serious politicking, that’s just not available to you.

        But you’re also not doing Loser slacking. You’re not optimizing for money-per-pain, you’re just optimizing for money.

        It’s not unlike how good salesfolk work, but said Aspie *also* lacks the social skills to be a genuinely great salesman. And being a dubious salesman pays less for even more pain than what he’s already doing.

        This whole description isn’t far off from my own career trajectory, though I’ve veered somewhat toward Sociopath as my social skills improve. That’s taken a huge investment of time and energy, though, and most people don’t seem to be able to improve whole new skill areas late in life. I’m kind of a a weirdo in treating everything as a buildable skill. I’m also necessarily very patient — that takes many years to get right, and I may fail in the end.

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