Silicon Valley is living inside a bubble of tone-deaf arrogance

By Paul Mackintosh - 23/12/13

In keeping with the festive season, here’s an item on the Christmas Spirit – or lack of it. Because Silicon Valley’s venture capital (VC) and VC-backed community seems to have been distinguishing itself lately for arrogant and condescending comments on less fortunate inhabitants of their neighbourhoods. To such a degree that Business Insider concluded that: “Silicon Valley is living inside a bubble of tone-deaf arrogance”.

Some Valley alums were not exactly repentant. A propos the negative coverage, as quoted in Strictly VC, Marc Andreessen, veteran entrepreneur and VC investor (into companies like Skype, Facebook and Twitter) via his own Sand Hill Road firm Andreessen Horowitz, said: “The stories crack me up. There’s sort of two criticisms. One is that Silicon Valley is the new elite, the new one percent, the new oligarchy, and that all the billionaires don’t give a shit about society and [welcome a] Mad Max dystopian wasteland of no jobs [as] technology takes everything over. The other argument is that technology produces nothing of value; it’s all just Snapchat apps so 14-year-old girls can send selfies to each other… These stories are very well-written and they’re entertaining, but they’re typically written by someone outside the Valley who wants to reach a certain conclusion.”

The conclusion that many Valley outsiders reached is certainly negative. And it’s worth recalling how the Valley ecosystem actually operates. Many hungry young Valley start-ups or early stage companies, like the ones that Mr. Andreessen funds, are pre-revenue, let alone pre-profit. They depend on VC money to keep them going until some – usually around three out of ten – break even or go on to better things. That VC money comes from institutional investors into the VC funds. So essentially, pension funds are paying VCs and their investees to insult and abuse the rest of society.

Elsewhere, pension funds have not been slow to act lately when they feel their money is being abused due to political or other reasons. The Louisiana Sheriffs' Pension & Relief Fund has recently taken IBM to court, alleging that the technology giant abused it and other investors’ trust by concealing links to the NSA that led Chinese customers to abruptly withdraw business, leading to a sharp share drop, when the details of surveillance program Prism became public.

That is the kind of moral suasion that many pensioners and others might want to see exerted on Valley VCs, who are, after all, playing with their money. Meantime, alas, the proceeds from the Twitter IPO are likely to keep that bubble and its passengers in the stratosphere for quite some time. Merry Christmas to everybody else, and especially the poor and unfortunate.