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Startups and Privilege

One fine day, the NBA executives have a realization: there are not enough players trying to join the league (we must have entered a bizarre dimension but stay with me for analogy’s sake). What do these marketing geniuses do? Increase the funnel, of course. They tell everyone who will listen that the NBA is awesome, and that anyone who tries hard enough has a chance.

Of course, it is not true that anyone who tries hard has a chance. You can predict at birth that the odds of a given person making it to the NBA are 1/10000th of someone else’s. If both your parents are short, it is extremely unlikely that you will be tall enough. As of this writing, no player in the NBA is shorter than average.  The odds of making it to the NBA if you’re short are ridiculously small; if you’re seven feet tall they are pretty good (about one in ten).

What does this have to do with startups? It is pretty clear that the odds of startup success are dependent on factors that are outside of everyone’s control. Some just do not have what it takes to succeed, no matter how hard they try. Others have it relatively easy. I suspect that the sweet spot in terms of predicting first-time startup success (all else being equal) is some sector of the middle class that has:

  • enough desire. If you worry about paying the rent, the prospect of working ridiculously hard for a few years and becoming rich is more appealing than if you are already financially independent.
  • enough education. You cannot be successful in business without knowledge that privileged people (like yours truly) sometimes take for granted. You do not necessarily need a college education, but you do need to spend thousands of years educating yourself somehow.

Someone who is really poor may indeed have a lot of motivation to get out of that situation. When I say “really poor” I do not mean someone like myself but penniless. That is not what I have in mind. I think of those born in slums, in poor countries without safety or basic infrastructure. Even in the US there are people like that.  It is very hard for me to imagine such a person spending hours every day reading or researching online.

Paul Graham gives the example of Brian Chesky as someone who did not come from money, and that is true. That does not mean that he was not born to a certain privilege. I do not know him personally, but his Wikipedia page says his parents were social workers in New York, and he was able to go to college. He is also male and white. Those things are sufficient privilege to me. Had he been black, or born in a poor country, his chances would have been substantially lower.

Paul proposes a statement to debunk:  “startups are for the rich.” Without further formalization, it is not possible to prove it or disprove it. It is obvious that you do not need to be rich in order to become a successful startup founder. However, it is also easy to prove (by sampling of successful founders) that privileged backgrounds are over-represented.

I have one final beef with this whole thing. At the beginning of the post I imagined a universe in which the NBA believes there are not enough applicants, and this sounds absurd. Why do people believe this may be true of startups? Why do we need to motivate potential entrepreneurs with “you can do it too”-style pep tweets?

I believe the opposite is true. What I see in Silicon Valley is way too many people trying to become rich, and not enough trying to fix the problems that are not permeable to capitalism. Too many people tell themselves a story of trickle-down economics and wealth creation that benefits everyone. All you need to do is take a look at the crazy degree of homelessness in the Bay Area (or the state of public health in the US) to know that it is simply false. Some social problems take decades to solve. Some of them may not generate returns on investment that would satisfy a venture fund. I would like to see more smart and well-meaning individuals get into politics instead of playing with technology and venture funding to “make the world a better place.”