Silicon Valley and the Rise of the Disneypreneur

Someone once explained the Las Vegas gambling complex as “Disneyland for adults”, and the metaphor makes a fair amount of sense. The place sells a fantasy– expensive shows, garish hotels (often cheap or free if “comped”) and general luxury– and this suspension of reality enables people to take financial risks they’d usually avoid, giving the casino an edge. Comparing Silicon Valley to Vegas, also, makes a lot of sense. Even more than a Wall Street trading floor, it’s casino capitalism. Shall we search for some kind of transitivity? Yes, indeed. Is it possible that Silicon Valley is a sort of “Disneyland”? I think so.

It starts with Stanford and Palo Alto. The roads are lined with palm trees that do not grow there naturally, and cost tens of thousands of dollars a piece to plant. The whole landscape is designed and fake. In a clumsy attempt to lift terminology from Southern aristocrats, Stanford’s nickname is “the Farm”. At Harvard or Princeton, there’s a certain sense of noblesse oblige that students are expected to carry with them. A number of Ivy Leaguers eschew investment banking in favor of a program like Teach for America. Not so much at Stanford, which has never tempered itself with Edwardian gravity (by, for example, encouraging students to read literature from civilizations that have since died out) in the way that East Coast and Midwestern colleges have. The rallying cry is, “Go raise VC.” Then, they enter a net of pipelines: Stanford undergrad to startup, startup to EIR gig, EIR to founder, founder to venture capitalist. The miraculous thing about is that progress on this “entrepreneurial” path is assured. One never needs to take any risk to do it! Start in the right place, don’t offend the bosses-I-mean-investors, and there are three options: succeed, fail up, or fail diagonal-up. Since they live in an artificial world in which real loss isn’t possible for them, but one that also limits them from true innovation, they perform a sort of Disney-fied entrepreneurship. They’re the Disneypreneurs.

Just as private-sector bureaucrats (corporate executives) who love to call themselves “job creators” (and who only seem to agree on anything when they’re doing the opposite) are anything but entrepreneurs, I tend to think of these kids as not real entrepreneurs. Well, because I’m right, I should say it more forcefully. They aren’t entrepreneurs. They take no risk. They don’t even have to leave their suburban, no-winter environment. They don’t put up capital. They don’t risk sullying their reputations by investing their time in industries the future might despise; instead, they focus on boring consumer-web plays. They don’t go to foreign countries where they might not have all the creature comforts of the California suburbs. They don’t do the nuts-and-bolts operational grunt work that real entrepreneurs have to face (e.g. payroll, taxes) when they start new businesses, because their backers arrange it all for them. Even failure won’t disrupt their careers. If they fail, instead of making their $50-million payday sin this bubble cycle, they’ll have to settle for a piddling $750,000 personal take in an “acqui-hire”, a year in an upper-middle-management position, and an EIR gig. VC-backed “founders” take no real risk, but get rewarded immensely when things go their way. Heads, they win. Tails, they don’t lose.

Any time someone sets up a “heads I win, tails I-don’t-lose” arrangement, there’s a good bet that someone else is losing. Who? To some extent, it’s the passive capitalists whose funds are disbursed by VCs. Between careerist agents (VC partners) seeking social connection and status, and fresh-faced Disneypreneurs looking to justify their otherwise unreasonable career progress (due to their young age, questionable experience, and mediocrity of talent) what is left for the passive capitalist is a return inferior to that offered by a vanilla index fund. However, there’s another set of losers for whom I often prefer to speak, their plight being less well-understood: the engineers. Venture capitalists risk other peoples’ money. Founders risk losing access to the VCs if they do something really unethical. Engineers risk their careers. They’ve got more skin in the game, and yet their rewards are dismal.

If it’s such a raw deal to be a lowly engineer in a VC-funded startup (and it is) then why do so many people willingly take that offer? They might overestimate their upside potential, because they don’t know what questions to ask (such as, “If my 0.02% is really guaranteed to be worth $1 million in two years, then why do venture capitalists value the whole business at only $40 million?”). They might underestimate the passage of time and the need to establish a career before ageism starts hitting them. Most 22-year-olds don’t know what a huge loss it is not to get out of entry-level drudgery by 30. However, I think a big part of why it is so easy to swindle so many highly talented young people is the Disneyfication. The “cool” technology company, the Hooli, provides a halfway house for people just out of college. At Hooli, no one will make you show up for work at 9:00, or tell you not to wear sexist T-shirts, or expect you to interact decently with people too unlike you. You don’t even have to leave the suburbs of California. You won’t have to give up your car for Manhattan, your dryer for Budapest, your need to wear sandals in December for Chicago, or your drug habit for Singapore. It’s comfortable. There is no obvious social risk. Even the mean-spirited, psychotic policy of “stack ranking” is dressed-up as a successor to academic grading. (Differences glossed over are (a) that there’s no semblance of “meritocracy” in stack ranking; it’s pure politics, and a professor who graded as unfairly as the median corporate manager would be fired; (b) academic grading is mostly for the student’s benefit while stack-ranking scores are invariably to the worker’s detriment; and (c) universities genuinely try to support failing students while corporations use dishonest paperwork designed to limit lawsuit risk.) The comfort offered to the engineer by the Disney-fied tech world, which is actually more ruthlessly corporate (and far more undignified) than the worst of Wall Street, is completely superficial.

That doesn’t, of course, mean that it’s not real. Occasionally I’m asked whether I believe in God. Well, God exists. Supernatural beings may not, and the fictional characters featured in religious texts are almost certainly (if taken literally) pure nonsense, but the idea of God has had a huge effect on the world. It cannot be ignored. It’s real. The same of Silicon Valley’s style of “entrepreneurship”. Silicon Valley breathes and grows because, every year, an upper class of founders and proto-founders are given a safe, painless path to “entrepreneurial glory” and a much larger working class of delusional engineers are convinced to follow them. It really looks like entrepreneurship.

I should say one thing off the bat: Disneypreneurs are not the same thing as wantrapreneurs. You see more of the second type, especially on the East Coast, and it’s easy to conflate the two, but the socioeconomic distance is vast. The wantrapreneur can talk a big game, but lacks the drive, vision, and focus to ever amount to anything. He’s the sort of person who’s too arrogant to work for someone else, but can’t come up with a convincing reason why anyone should work for him, and doesn’t have the socioeconomic advantages that’d enable him to get away with bullshit. Except in the most egregious bubble times, he wouldn’t successfully raise venture capital, not because VCs are discerning but because the wantrapreneur usually lacks sufficient vision to learn how to do even that. Quite sadly, wantrapreneurs sometimes do find acolytes among the desperate and the clueless. They “network” a lot, sometimes find friends or relatives clueless enough to bankroll them, and produce little. Almost everyone has met at least one. There’s no barrier to entry in becoming a wantrapreneur.

Like a wantrapreneur, Disneypreneurs lack drive, talent, and willingness to sacrifice. The difference is that they still win. All the fucking time. Even when they lose, they win. Evan Spiegel (Snapchat) and Lucas Duplan (Clinkle) are just two examples, but Sean Parker is probably the most impressive. If you peek behind the curtain, he’s never actually succeeded at anything, but he’s a billionaire. They float from one manufactured success to another, build impressive reputations despite adding very little value to anything. They’re given the resources to take big risks and, when they fail, their backers make sure they fail up. Being dropped into a $250,000/year VP role at a more successful portfolio company? That’s the worst-case outcome. Losers get executive positions and EIR gigs, break-evens get acqui-hired into upper-six-figure roles, and winners get made.

One might ask: how does one become a Disneypreneur? I think the answer is clear: if you’re asking, you probably can’t. If you’re under 18, your best bet is to get into Stanford and hope your parents have the cardiac fortitude to see the tuition bill and not keel over. If you’re older, you might try out the (admirably straightforward, and more open to middle-class outsiders than traditional VC) Y Combinator. However, I think that it’s obvious that most people are never going to have the option of Disneypreneurship, and there’s a clear reason for that. Disneypreneurship exists to launder money (and connections, and prestige, and power; but those are highly correlated and usually mutually transferrable) for the upper classes, frank parasitism from inherited wealth being still socially unacceptable. The children of the elites must seem to work under the same rules as everyone else. The undeserving, mean-reverting progeny of the elite must be made to appear like they’ve earned the status and wealth their parents will bequeath upon them.

Elite schools were once intended toward this end. They were a prestige (multiple meanings intended) that appeared, from the outside, to be a meritocracy. However, this capacity was demolished by an often-disparaged instrument, the S.A.T. Sometimes, I’ll hear a knee-jerk leftist complain about the exam’s role in educational inequality, citing (correctly) the ability of professional tutoring (“test prep”, a socially useless service) to improve scores. In reality, the S.A.T. isn’t creating or increasing socioeconomic injustices in terms of access to education; it merely measures some of them. The S.A.T. was invented with liberal intentions, and (in fact) succeeded. After its inception in the 1920s, “too many” Jews were admitted to Ivy League colleges, and much of the “extracurricular” nonsense involved in U.S. college admissions was invented in a reaction to that. Over the following ninety years, there’s been a not-quite-monotonic movement toward meritocracy in college admissions. If I had to guess, college admissions are a lot more meritocratic than 90 years ago (and, if I’m wrong, it’s not because the admissions process is classist but because it’s so noise-ridden, thanks to technology enabling the application of a student to 15-30 colleges; 15 years ago, five applications was considered high). The ability-to-pay factor, however, keeps this meritocracy from being realized. Ties are, observably, broken on merit and there is enough meritocracy in the process to threaten the existing elite. The age in which a shared country-club membership of parent and admissions officer ensured a favorable decision is over. Now that assurance requires a building, which even the elite cannot always afford.

These changes, and the internationalization of the college process, and those pesky leftists who insist on meritocracy and diversity, have left the ruling classes unwilling to trust elite colleges to launder their money. They’ve shifted their focus to the first few years after college: first jobs. However, most of these well-connected parasites don’t know how to work and certainly can’t bear the thought of their children suffering the indignity of actually having to earn anything, so they have to bump their progeny automatically to unaccountable upper-management ranks. The problem is that very few people are going to respect a talentless 22-year-old who pulls family connections to get what he wants, and who gets his own company out of some family-level favor. Only a California software engineer would be clueless enough to follow someone like that– if that person calls himself “a founder”.

15 thoughts on “Silicon Valley and the Rise of the Disneypreneur

  1. ” Silicon Valley breathes and grows because, every year, an upper class of founders and proto-founders are given a safe, painless path to “entrepreneurial glory” and a much larger working class of delusional engineers are convinced to follow them. It really looks like entrepreneurship. ”

    You, my friend, are brilliant. Couple this reality with the reverberating echo chamber syndrome … not to mention the blatant collusion among all the “YC” or “500 Startups” startups within their respective echo chambers … devoid of hard work, their expectations of reward within the padded room are ridiculous

    It’s messed up but the sad fact is that there’s no mechanism (economic or otherwise) to stop it. It works just well enough to be legal (although it shouldn’t be legal) and deludes just enough people (despite the fact that nobody believes they’ve been deluded) and contains just enough evil ones who are really good “actors” to perpetuate the mindset that it’s all OK.

  2. This is not a complete, well formed thesis, and I’m not entirely convinced I believe in what I am writing, but here are thoughts that came to mind while reading this:

    Officially the United States utilizes a free market system to allocate resources. Individuals within this system are supposed to make choices which will maximize their personal income, and as a side-effect their personal maximizing choices will help the economy reach its full potential. In the recent past many people have chosen to maximize their personal income by seeking employment in the financial sector; unfortunately all of the “innovation” in that sector has come with some side-effects. One problem was that it was more profitable [and supposedly less risky] to swap paper around than it was to invest in actual innovation (it often seems that finance is more about rent-seeking than investing in innovation).

    If as a policy maker you saw that what was happening was not long-term optimal for the economy as a whole and wanted to get things back on the right track, what would you do? You might need to convince people to go into science related fields rather than finance, and you might also need to convince people to put their money into innovation rather than rent-seeking. How would you accomplish that? If there are no jobs, or no well paying jobs, in the technology sector, then people are certainly not going to go into that field. If investing in technology is less profitable than rent-seeking, then people are not going to invest in technology.

    Since you allude to an oligarchic class (e.g. there are tacit agreements between wealthy people on the employment of their children), let’s assume there is such a class. If this class was of the same mind as the policy maker, then they may agree to create a shining example of how the next generation should seek wealth: become a scientist or engineer, or invest in technological innovation. This shinning example of the future of work and investment would most certainly have mythical qualities; that is often what inspires people.

    I like your blog; due to the nature of modern technology tech workers do not need to flock to Silicone Valley, and you have a way of presenting that. I think that real innovations [and economic recovery] will happen once the types of things that are happening in California become more distributed throughout the US (or the world), regardless of what insiders like Andreessen think about Valley outsiders. Perhaps that is also what it will take for technology to break out of its white male dominated bro-grammer model.

    Technologists of the midwest unite! Or, something.

  3. I’ve encountered several wantrepreneurs and twice fallen their pitches. Once it did nothing but cost me a few thousand dollars. The second time was possibly life altering in a bad way, because I turned down a good stable job that might have been one to retire from, to follow this guy for an early version of a can’t possibly win startup that blew apart in six months when the “founders” had a disagreement.

  4. This is another example of your out-of-the-box thinking. Nice. However, there seems to be a flaw in your description. “Any time someone sets up a “heads I win, tails I-don’t-lose” arrangement, there’s a good bet that someone else is losing. Who? To some extent, it’s the passive capitalists whose funds are disbursed by VCs. ” So basically the passive capitalists are naive people who are hoping to become investors in early investors of the next Facebook, and are willing to accept some low returns in the meantime.

    But for me this doesn’t add up. Someone willing to invest passively some money has multiple choice, such as real estate or emerging market, and I don’t see why the passive capitalists would keep putting investment into VC’s if they can only generate mediocre returns.

    I don’t have the figures of the returns of the VC’s, so maybe they can generate some nice returns using some kind of Ponzi scheme, but for me it’s not coherent that people will keep putting their money into an inefficient investment. I’m curious to have your opinion on that.

    • Good point, and I agree with you that it doesn’t make sense. A lot of private equity has to do with weird tax laws and loopholes (e.g. carried interest).

      The main thing, though, is that passive capitalists often want “in on” the exotic investment vehicles that can do 20+ percent per year. These include hedge funds, private equity funds, and venture capital. Of course, some of the best ones *do* generate those kinds of returns. As a class, though, they’re not great.

      For example, a well-run stat-arb fund can generate 20-40% returns with relatively low market risk. If operations are solid, it will do fine. However, not all hedge funds are well-run. If you don’t know what you’re doing, you’re just as likely to pick a crappy one.

      One possible theory (and I’m not saying whether this is right or wrong) is that it’s like poker. Most bad poker players know they’re losing money but think they’ll become good at the game and be able to win. It could be that the reason people throw money behind crappy hedge funds and VCs is to gain social access and skill, in the hope that it’ll pay off in the future. (Yes, I know that this smells like a pyramid scheme.)

      • Eric Falkenstein has a whole body of work dealing with the fact that people substantially overpay for high volatility, high risk plays. People/investors are not rational actors and in fact the data shows no real risk premium.

        • People tend to overestimate their locus of control. If you think you can affect the outcome, the risk is performance risk– and (almost) everyone believes they’re above average. Or, failing that, they believe that poor performance and loss will be a learning experience and lead to wins in the future– which is true in some endeavors and not in others.

          The reality, of course, is that most people have no ability to predict or play the market and will never get better. They’re better off parking their money in index funds– and there’s nothing wrong with doing so.

          I wish there were a way to connect passive capital to the most productive/intelligent citizens *without* the VC middleman (who takes a hefty premium, and does a mediocre job of deciding what to fund) but as of now, there is none.

          • The problem for these passive investors is how to make a value judgement on who is “most productive” or “most intelligent” among the citizenry. Crowdfunding might be one approach to cut out the Vampire Capitalists, but current laws need to evolve.

    • Part of it is that tech is sexy. People invest in Broadway shows for the same kinds of reasons (indeed, the term “angel” comes from the theatre): they think some of the glamor will rub off on them.

  5. The people who enter and graduate from east-coast ivy leagues are just as screwed up. It is just that they lack the opportunities for displaying it in the tech sector.

  6. Wow, that sounds like a soul-sucking singularity of self-serving sociopathy. It’s not my world, but if it was I would look for a way of finding+making meaning as far away from all that as possible.

  7. This is a work of fine art.

    What we are seeing here is the foundation of an internet Bubble 2.0. Everyone remembers the anger Americans felt at seeing how 2007-era Wall Street bankers were paid enormous bonuses for what turned out to be fraud and larceny. Since then, those same bankers get much less compensation for their fake “financialization” work of rearranging numbers…the result is that many of those folks have left for Silicon Valley.

    Whenever you see this toxic combination of entitlement, overcompensation and irrationality…combined with the current bullmarket which is being fed entirely by the practice of “Quantitative Easing” resulting in a new type of bubble…prepare to see a “correction” in the near future.

  8. I have been saying this MY WHOLE LIFE, thank you for immortalizing it here! BTW, you just summed up the founders of Riot Games and outlined the companies very brief, but lucrative history. I dare anyone to take a closer look into the backgrounds of the two founders and find any different. If anyone were to do so, they will find all of the above happened to both of them along the way.

  9. Pingback: Quotebag #108 | In defense of anagorism

  10. Pingback: Silicon Valley and the Rise of the Disneypreneu...

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