My first job out of academia was at a startup. The company was perhaps 40 white-collar employees at the time I joined (i.e., not counting the dozens of minimum-wage workers employed at our warehouse). In my first month or two, I remember meeting a “senior” software engineer — “senior” meaning he had a few years of experience, not that he was some wise old hand — and asking him what he thought of the job. He told me, after some prying, that he didn’t want to be a software developer much longer. Instead, his real interest was entrepreneurship. He hoped to parlay his technical experience into a job at a venture capital firm, likely one focused on investing in software companies. From there, he envisioned becoming a CEO himself. I recall being puzzled at how abstract his ambition was. He would seemingly be happy as CEO of, well, anything, and what that thing was almost seemed besides the point. He did not unspool a personal story, like the archetypal medical researcher who seeks to cure their father’s cancer. The raison d’etre would come later. What was relevant now, besides finding this waystation VC job, was making connections with people possessing the money or ambition to allow him to realize his ultimate vision. He correctly surmised that I had neither, and we maintained a cold yet professional relationship until his departure less than a year later.
The story of my colleague is, oddly enough, not uncommon. The ambition to become a CEO of a company often precedes the idea of the company itself. In some respects, it is similar to politics. Second-generation politicians, in particular, are groomed for power before they realize what it’s for; the result is people like George W. Bush and Andrew Cuomo, vessels for soulless ambition. Many graduates of top business schools are the same way. (I remember one of my MBA friends, whom I like in most respects besides this, telling me that we should start a company together. She would supply the business and product acumen, and I would provide the technical know-how. I demurred, saying that I didn’t have any good ideas, although she did not think that constituted a real obstacle.)
One manifestation of this soullessness is the way in which relatively banal concepts for startups are gussied up in revolutionary and utopian language. It is as if it is too gauche to say, straightforwardly, that your objective is to make money and gain power and prestige, and instead you must retcon an absurd fable about how you were inspired to make the world a better place. Here’s a sampling from job postings on a jobs forum I frequent.
- “Lemonade” is “disrupting insurance industry in a big way”. How? By giving some portion of the insured’s premium to charity. (They further claim that this business model implies that “[they]’re not incentivized to deny claims”, which doesn’t make sense at all.)
- “GlossGenius” is “fundamentally changing the beauty industry” and “disrupt[ing] the beauty and wellness technology space”. How? By selling software that allows beauty salons to process payments and manage bookings.
- “Perpay” is a financial technology company that purports to help households that “struggle to handle an unexpected expense of $400 or more.” How? By providing these households “with sensible financing” to buy goods on a “Fintech-enabled e-commerce marketplace”. (Customer reviews imply that it makes its money by imposing large markups on these goods.)
- “Loop” is “revolutionizing the post-purchase experience. We’ve taken one of the most fragile commerce interactions – returns – and turned it into something consumers actually love”. How? By providing an API — a snippet of code — that integrates with Shopify so customers can make exchanges and print shipping labels.
- “Courier” is making “computer-to-human software communication delightful”. How? By, again, building an API to make it easy for software developers to send messages via Slack, email, and other communication mediums.
- “Gusto” wants to “create a world where work empowers a better life”. How? By selling small businesses a human resources (HR) platform to manage employee benefits.
Set aside the gap between the rhetoric — ameliorating poverty, empowerment, “love”, and the rest — and the reality. How many of these founders woke up one morning with the thought that the world is a deeply fucked up place and that the way to fix it is to create a software as a service company? Far more likely is that avarice came first, and the feel-good gloss second.
Of course, most startup stories are, at best, exaggerated, and, at worst, completely made up. (As one example, YouTube’s founders claimed that its core idea was conceived at a dinner party, when they recorded a video and had no easy way to share it. Later they admitted the dinner party never happened.) It almost makes me appreciate the crude honesty of Jeff Bezos, who started Amazon after realizing that “web usage in the spring of 1994 was growing at 2,300 percent a year…and that started me about thinking, ‘What kind of business plan might make sense in the context of that growth?’” (“He decided on books because of their low cost and universal demand”.)
Does any of this matter? Propaganda in capitalism is commonplace, and there’s no reason startups would be exempt. Why should we care that a company’s purported reason for being does not match its actual one, or that our grasping MBA brethren merely view CEO-dom as the last rung on their ascent up the ladder?
The most obvious reason is that if the only purpose of a startup is to get rich, then the kinds of ideas that get funded need not be ethically sound or socially valuable. The New Yorker published a short piece recently about a new course at Stanford, “Computers, Ethics, and Public Policy”, that “urges students to move responsibly and think about things”. The professors
recount the story of Joshua Browder, who “entered Stanford as a young, brilliant undergraduate in 2015.” After three months at Stanford, he invented a chatbot to help people get out of paying their parking tickets; within a year he was the C.E.O. of DoNotPay, an “online robot lawyer” startup now valued at more than two hundred million dollars. “He is not a bad person,” the professors write. “He just lives in a world where it is normal not to think twice about how new technology companies could create harmful effects”—such as encouraging citizens to stop funding public roads, which tend to crumble when people DoNotPay for them.
(Admittedly, this may not be the best example — it would be far better to raise taxes to pay for roads than to sic the cops on whoever lives in an overpoliced neighborhood. But I think the point stands: many startups exist not because they “should”, in a utilitarian sense, but because they can.)
Separately, many of the startups that are not actively making the world a worse place are simply mediocre clones of existing business models. Anna Wiener, author of Uncanny Valley, writes
There was a running joke that the tech industry was simply reinventing commodities and services that had long existed. Cities everywhere were absorbing these first-principles experiments. An online-only retailer of eyeglasses [Warby Parker] found that shoppers appreciated getting their eyes checked; a startup selling luxury stationary bicycles [Peloton] found that its customers liked to cycle alongside other people. The online superstore [Amazon] opened a bookstore, the shelves adorned with printed customer reviews and data-driven signage: “Highly rated: 4.8 stars & above.”
(Wiener omits proper nouns in her narrative; I have added them in brackets for clarity.)
Perhaps my favorite example is the slew of companies that have repackaged ordinary consumer goods as part of a “subscription service”, in which the customer receives a box of stuff every month, whether they need it or not. There are at least 9 meat subscription services, including ButcherBox, Crowd Cow, Carnivore Club, and Bacon Freak. Smalls is a subscription service for cat food; The Farmer’s Dog is an analogue for dogs. There are startups trying to get you to subscribe to toothbrushes and toothbrush accessories, children’s clothes, cannabis products, shaving kits, cosmetics, and more. There is even a startup that does not confine you to these narrow categories, and allows you to take a quiz to personalize your “bespoke” box. Creating a recurring order on your favorite e-commerce platform is often a much cheaper and more efficient way of getting the same service, and, unsurprisingly, many of these startups have very poor retention and unit economics.
In the short run (i.e., before these startups fail), venture capital money and the startup “growth” model make their products appear much cheaper than they are. (That’s even after setting aside the externalities of packaging waste and delivery trucks clogging roads.) Kevin Roose wrote in 2018 that the entire economy was beginning to resemble MoviePass, the company that famously burned hundreds of millions of dollars to subsidize millennial movie watching (seriously!). His cynical take was that:
For consumers who are willing to do their research, though, this can be a golden age of deals. We can get our “Avengers: Infinity War” tickets and pecan-crusted salmon meal kits, reaping the benefits of artificially cheap goods and services while investors soak up the losses. The current crop of money-losing companies may not survive forever, but as long as someone is willing to keep funding these types of gambles, there’s no reason to stop enjoying the fruits of their optimism.
I suppose I can’t disagree, although it gives me a queasy feeling.
Perhaps the worst part of letting recent Stanford graduates design the next generation of the economy is that, well, the next generation of the economy starts to resemble things that recent Stanford graduates would want. The funniest example I’ve seen is a (now shuttered) company named Shyp, which was an app for people too lazy to go to the post office. You would take a picture of items you wanted shipped and upload the image to the app, whereupon a “courier” would drive to your residence, pick up the items, take them to a warehouse, and yet another worker would package them in a box to be shipped by a major carrier like USPS or FedEx. And this idea raised $60 million! In fact, large swaths of the startup economy are, essentially, butler-like services, in which one half of the population undertakes the drudgery the other half views as beneath them. (Presumably because that latter half is too busy building the next startup?). There are Uber and Lyft for transportation, Doordash and Just Eat (Grubhub) for restaurant delivery, Instacart, Gorillas, and Fridge No More for grocery delivery, Handy and TaskRabbit for household chores, Wag for dog walking, and Fiverr for “freelance services” (like being a CEO’s secretary, err, “executive assistant”).
We could give the money we shower on people with no real life experience, expertise, or good ideas, to people who have at least some of those. We could reward people who actually want to make the world better, as opposed to those who claim so on their shiny website. I was reading an article in The New Yorker about Kate Orff, a landscape architect. She works with the Billion Oyster Project, which seeks to build structures out of oysters that can protect human habitats from storm surges and rising sea levels. (It’s fascinating stuff, and I’d recommend reading the entire piece to understand the technical details.) Orff has deep expertise, having worked on ecological and environmental issues for over 20 years, and being the recent recipient of a Macarthur “genius” grant. The federal grant awarded to her initiative to protect the South Shore of Staten Island — one of New York City’s most vulnerable locations — is $60 million, which, in a strange coincidence, is the exact same sum that Shyp raised and then lit on fire.
And that’s the heart of the matter. We live in a society with abundant resources, but the money needed to effect great change is not easy to come by. We can continue to rely on the derivative, wasteful, tech-centric approach that Silicon Valley touts, or we can claw back that money and dole it out more sensibly. We all understand that people like my software developer colleague, mentioned at the start of this essay, have no intention of addressing the world’s pressing problems (even if they might claim so after the fact). So why do we continue to make millionaires out of those like him, and, moreover, insist that this is the way “innovation” ought to work?
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