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The New Yorker's venture capital broadside, Jill Hazelbaker's ascendancy, and Google's tumultuous ethical AI team.
Here are some stories from around the web that you might find interesting with a little commentary.
New Yorker | How Venture Capitalists Are Deforming Capitalism
It’s a nicely told story, but I don’t think it fairly reflects reality. Charles Duhigg writes another version of the well-trod WeWork story for the New Yorker. But Duhigg builds his narrative around Benchmark, Bruce Dunlevie, and the venture capital industry.
The piece concludes:
For decades, venture capitalists have succeeded in defining themselves as judicious meritocrats who direct money to those who will use it best. But examples like WeWork make it harder to believe that V.C.s help balance greedy impulses with enlightened innovation. Rather, V.C.s seem to embody the cynical shape of modern capitalism, which too often rewards crafty middlemen and bombastic charlatans rather than hardworking employees and creative businesspeople. Jeremy Neuner, the NextSpace co-founder, said, “You can’t blame Adam Neumann for being Adam Neumann. It was clear to everyone he was selling something too good to be true. He never pretended to be sensible, or down to earth, or anything besides a crazy optimist. But you can blame the venture capitalists.” Neuner went on, “When you get involved in the startup world, you meet all these amazing entrepreneurs with fantastic ideas, and, over time, you watch them get pushed by V.C.s to take too much money, and make bad choices, and grow as fast as possible. And then they blow up. And, eventually, you start to realize: no matter what happens, the V.C.s still end up rich.”
I have a couple problems with his narrative. For one, it’s amusing to see Tom Perkins and the venture capital firm that shares his name, Kleiner Perkins, cast as a hero of yore, back when venture capital firms did things the right way. This is the guy who compared the “war” on the one percent with Kristallnacht. (The New Yorker wrote about it at the time.) This was the firm that was shamed for its exclusive culture in the Ellen Pao case. You have to imagine that if the venture capital firms from the old days were scrutinized under modern standards, they would come out looking pretty bad.
Putting that aside, Duhigg has a challenge with the WeWork case. He has to explain why Dunlevie – in this account seemingly the investor most troubled by WeWork CEO Adam Neumann’s behavior – is also among the most culpable. One problem with Duhigg’s narrative is that he thinks the venture capital industry’s problems derive from its insularity. Duhigg describes the industry as “clubby” and writes, “The V.C. industry has grown exponentially since Perkins’s heyday, but it has also become increasingly avaricious and cynical. It is now dominated by a few dozen firms, which, collectively, control hundreds of billions of dollars.” Yes, it’s clubby, but that’s the opposite of the problem here. Intense competition is pushing venture capital firms to capitulate to lunatic founders. Winning over future founders is often more important for venture capitalists than staging risky interventions.
Reading this story, I can see why the tech industry can get so annoyed with journalistic storytelling. I would be no less surprised to wake up one day and read a story in the New Yorker that asks why so many Benchmark-backed founders have come to loathe the firm. This story brings up the Uber saga but doesn’t give the firm much credit for turning on its golden goose. I get that nobody is going to feel bad for one of the most prestigious venture capital firms in the world, but they have a pretty delicate dance to do here.
I think there’s a more straightforward telling of WeWork’s downfall: Adam Neumann was as close as you can come to a corporate cult leader and then SoftBank threw a bunch of money at the company without imposing sufficient controls. That set the company on a perilous course. Giving a company millions of dollars to experiment with is a very different matter than billions of dollars.
Both Uber and WeWork raised billions of dollars, weakening Benchmark’s leverage in both cases. Uber got its billions from Saudi Arabia and WeWork got them — oh right — from Saudi Arabia (this time via a Japanese telecommunications executive-slash-messiah figure). Maybe there’s a broader regulatory problem when American private companies can raise billions from foreign countries with few corporate controls.
Duhigg rightly makes the case that board members have a fiduciary duty to shareholders at large. But I think it would be hard to argue that it would have been self-evidently in shareholders’ interests to turn away those billions. Once Uber and WeWork took all that money, the problems metastasized. It became harder for Benchmark to intervene on founders with billions of dollars of validation in hand. When companies grow up, they’re supposed to take on more rigorous investors. Saudi Arabia and SoftBank invested because they were on board with what Kalanick and Neumann were selling. And more sophisticated investors like Fidelity, which invested in both WeWork and Uber, seemed happy to go along for the ride.
Lastly, I’ll note that the story treats present day Uber and Palantir like failures when the public markets say they’re worth $96 billion and $41.5 billion, respectively. Maybe investors are wrong and those companies’ losses will end them one day. But if that’s the case, it’s the whole financial world that’s gone crazy, not just the venture capital industry.
The Information | Uber’s Image Maker Emerges as Key Power Player
Jessica Lessin and Amir Efrati profile Jill Hazelbaker, one of the most important executives at Uber. Hazelbaker, who runs policy, communications, and marketing for the ride sharing company, is a fascinating figure. She was at the center of Travis Kalanick’s fall from grace and has seen her stature grow at Dara Khosrowshahi’s Uber.
“There may be execs who take the pulse of the room before speaking up. Jill takes her own pulse and then speaks up,” Khosrowshahi says. “The vast majority of the time she is right.”
It’s an approach that has won her admirers including Khosrowshahi, who has promoted her and expanded her power to encompass marketing, policy and communications. Apple CEO Tim Cook is a fan and recently tried to hire her, according to two people told about the process. Bill Gurley, one of Uber’s earliest backers, predicts she’ll be a CEO some day.
“She has had the ability to be successful in both phases of Uber and maintain her composure,” says Gurley, referring to the period before and after the tumultuous ouster of former CEO Travis Kalanick. “There aren’t a lot of people from those days who are still involved.”
People who influence the media and government like Hazelbaker tend to get less press coverage. Journalists are disinclined to emphasize how much our (and therefore your) perception of the world is molded by a professional class of public relations executives. Every serious tech reporter knows who Hazelbaker, Rachel Whetstone, Elliot Schrage, and Margit Wennmachers is. We whisper about them to each other, but they get written about far less than their bosses. It’s been smart of The Information (which just celebrated its seven year anniversary) to write about Hazelbaker and Airbnb’s Chris Lehane.
I tweeted, “Jill Hazelbaker is ferocious, smart, beloved and despised. She's the PR person you'd want on your side as long as she thought what you're doing is right.”
Kalanick’s defenders put Hazelbaker high up on the enemies list, so they were annoyed by the positive profile. There are lots of people who think a public relations executive’s job is to defend the company’s CEO. But Hazelbaker decided to see it another way as Kalanick’s reputation hampered the company. She told The Information, “I felt my job was to serve the company and its employees and its shareholders and not any one executive.” That “any one executive” is not just any one executive. It was the company’s CEO at the time. I think Hazelbaker’s moral calculus was correct. It made sense that she aligned with Benchmark who forced Kalanick’s ouster. But it’s a move that many public relations people would be never make.
Tying together both this story and the New Yorker piece, I do think there’s a lot to explore as I write this newsletter about what control of a company really amounts to. There are all sorts of cases where founders have total voting control of a company but venture capitalists outmaneuver them. How? By building close ties with executives, other board members, the press, and any other lever they can pull to get the outcome they desire. Benchmark did that in Uber’s very delicate case and yet they’re still getting hammered for not going hard enough against their founders. Rival venture capital firms murmur Benchmark goes too far.
It should surprise no one that I’m unendingly fascinated by the internal process that went into Coinbase’s decision to symbolically give the New York Times the finger. The crypto company decided to front-run a devastating exposé on allegations of racial discrimination at Coinbase by releasing a blog post about the story on Thanksgiving. The New York Times ran its story the next day.
Coinbase is one of the most important investments for Andreessen Horowitz, whose eponymous co-founders seem increasingly hostile to the media. Former Andreessen partner and former Coinbase executive Balaji Srinivasan has been urging people to avoid the press and to “go direct by default.” Coinbase Vice President of Communications Kim Milosevich’s last job was at a16z.
I tweeted Thursday, “If Jill Hazelbaker worked at Coinbase, I have to imagine the company's stance would not be blithely `we don’t care what The New York Times thinks.` If a bunch of old employees think you're mistreating black employees, maybe you should hear that feedback?”
Hazelbaker texted me the tweet accompanied by a heart.
I negotiated with her today as to whether I could tell you that. She worried it would come off as arrogant. I texted her, “I mean just that you do think companies should own their mistakes.” She replied in all capital letters, “YES.”
Casey Newton is chronicling the ongoing developments following the dramatic departure of Timnit Gebru, co-leader of the Ethical Artificial Intelligence team at Google. He published Gebru’s departing letter and Google’s response. In a separate story, Newton explored the internal reaction to her departure.
I’m eager to learn more about this case, because Gebru’s departure from Google reflects some of the most urgent tensions now unfolding inside the tech giants. One is whether Google and other companies can live up to the lofty commitments they made during the height of this summer’s Black Lives Matter protests, when they promised to build more diverse and inclusive organizations after years of glacial progress. (Until she left, Gebru was among the mere 1.6 percent of Black Googlers.) Two is whether Gebru’s departure will accelerate divisions inside Google between its management and its workforce, which have been on strained terms since the walkout in 2018.
And three is what this all means for the future of corporate-sponsored research. Every tech giant with a research division struggles sometimes to balance the desire to advance our collective knowledge with fears that too much truth-telling could make the organization look bad. Gebru leaving Google threatens to cast a pall over the company’s research efforts generally — just read the researchers and ethicists who have been tweeting (and Gebru has been retweeting) about it all day — and make it harder for Google to attract and retain good scientists.
This story is such a tangle, I can’t claim to understand it any better than Newton who writes, “The most important thing to say about all this up front is how little I really know about the situation.” But as Silicon Valley tries to diversify this seems like a major step backward. And it’s in an area — artificial intelligence — where diversity matters so tangibly, given the risk that we bake humanity’s racism into the algorithms that rule the future.