It’s easy to put a negative spin on most of what happens in the VC-funded ecosystem (“VC-istan”) but a useful philosophical exercise is to look for positive, or at least forgivable motivations, behind unpleasant things.

It’s fair to say that VC-istan doesn’t work. It delivers meager returns to non-managerial investors (while the employees of venture funds get very wealthy) and squanders a lot of the nation’s top talent. Yet, I would believe that the main actors are not especially bad people, no more than anyone else. Are they worse than top investment bankers? Entertainment executives? Corporate kingpins? Almost certainly, they aren’t. It’s easy but intellectually weak (and, moreover, just shitty) to demonize them. It’s better to humanize them in an attempt to understand what is really going on. What caused a group of not-altogether-bad people to build such an awful ecosystem?

I’ve been in enough different places to see the common patterns, and a surprising number of startups fail because their founders want to be cool. It isn’t some rationally planned-out marketing need that I’m talking about. It’s emotional. They need to locate their businesses in the heart of San Francisco or Manhattan (although, increasingly, Brooklyn is the center of east coast “cool”). They want to hire “hip” 24-year-old Ivy grads who might not be the best fit for the work. They’d rather have millions of users who know their name than a couple hundred who pay handsomely. They’d rather be written about in business magazines than grow steadily at 25% per year and get rich slowly.

Wanting to be loved is, fundamentally, a deeper emotional need for most people than wanting to make money or perform useful, rewarding work. The latter are more abstract and artificial goals; being loved goes back to our evolutionary roots, including millions of years in which money didn’t exist. While they won’t admit it, most people would rather be loved “just for being” (or, in business, for being “visionary”, a concept so slippery in definition as to be effectively religious) than admired or liked for performing specific services to others.The problem is that no one is truly “loved” by society– at least, not while alive. Rather, society’s tendency is to ignore and forget, due to its size and volatility, while it turns vicious on those who continually demand its attention.

“Cool” is a major distraction for many founders, and I’ve seen plenty waste gobs of money on flashy launch parties, narcissistic indulgences, and high-risk gambits that were never wise. That’s bad; I’ve seen it crash plenty of businesses. Worse is the fact that investors themselves (and, by “investors”, I mean the employees of venture funds that invest others’ money) are seduced by the allure of “cool”. That’s why they throw themselves into extremely high-risk businesses that either return 100x or fail (and the vast majority fail). It’s why they age discriminate in choosing whom to fund; they choose incompetent young “midlife crisis” proteges to feel stylish again. Most VC-istan wunderkinds are, in truth, the 21st-century analogue of the trophy wife: they’re there to make some older guy appear and feel like he is young again.

Machiavelli said that it is better to be feared than to be loved, and many find this advice to be sociopathic. At first, it sounds horrible! Machiavelli wasn’t a sociopath, but a realist. He knew the cutthroat reality of 16th-century Florentine politics; but he also knew, even in that milieu, that the temptation to be loved was extremely strong, and that even very hard men could fall to it. His observation on society’s “love” (or a court’s) was the same as mine is: it’s fleeting. It turns on you at the worst time.

This what the MacLeod Sociopaths understand that the other tiers don’t. When Venkat Rao first applied the MacLeod tiers to The Office, it was hard to find a true Sociopath in the American workplace comedy. (The closest match was Robert California, more like an ineffective joke than a real character.) For insight into a real Sociopath– again, in the MacLeod sense; although he may be an actual psychopath– look no further than Frank Underwood in House of Cards. I can’t do him justice by describing the character; just watch him.

Now, in business, I wouldn’t say that “be feared” is a great strategy. You can fire people, but if you damage their reputations beyond that, you’re probably breaking the law. For example, the feudalistic reputation economy of VC-istan cannot possibly scale, because the inappropriate sharing of information and opinion between investors would attract lawsuits galore if it became any larger. Moreover, trying to extract favors or progress through fear will usually end in the territory of criminal extortion– and, for the majority who are not very powerful, it just won’t work. So I wouldn’t go so far as to say one is better to be “feared” (in a visceral, brutal sense) than loved, so much as it’s better to be competent (which one can earn, through steady progress) than to be loved (a fickle thing). Competence is itself dangerous and subversive– not in the short term, but in the long term. Businesses that fail the demands of high talent will decline. Competence doesn’t pose the immediate fuck-you-up threat of the extortionist, but its rarity gives it leverage and makes it badass. The people in control want those below them to be just competent enough to execute orders; if you go three degrees beyond that, and keep learning and questioning for your whole life, you become a man (or woman) made of guns. No one should focus on being feared– that’s a bit too uncivilized, and usually illegal in practice– so much as to strive for the intrinsic badassery of very high competence and deep knowledge.

VC-istan is not that kind of world. It’s not about developing competence over twenty years, but rather about flashiness and style. Somewhere between Hollywood for uglier people, Wall Street for those who can’t hack winter, and Washington for those who can’t build coalitions, it’s a connections-powered world in which people feel a deep-seated need to be adored. When one is starting out from zero (in the way of connections) that strategy actually makes sense, because there is no such thing as bad publicity for an unknown. On the other hand, for those who already have enough connections to start doing things, the race for further inclusion and “coolness” is a catastrophic distraction. Most writers exhibit a parabolic trajectory in output quality as they get better known; at first, more social inclusion gives them more inspiration, but eventually they rise into high enough social circles to succumb to the charismatic emptiness that is all around them, and become blithering, complacent, and boring.

I’m not writing this to denigrate anyone in particular. Paul Graham, for example, started Y Combinator to have the adoration of highly talented young people, at a rate of a few score per year. That’s fine. His motivations aren’t negative, and his effect on the world is almost certainly positive. Rather, I’m writing it to point out that the immaturity and general ineffectiveness of VC-istan doesn’t come from some evil conspiracy. The motivations of these people aren’t sinister, but pedestrian. They just want, badly, to be loved by society. They want to be hip and “visionary”, meaning admired just for being them. They want to be loved, that’s all.

I don’t think that’s so bad. It does give us the first bit of understanding if we want to analyze their weaknesses in leadership, and think about what we could do better.

My last post was about evidence for abuse in Hacker News’s ranking system, but I’ve also written at length on the failings of human organizations, in addition to the moral collapse of the venture-funded ecosystem (VC-istan). Having written a lot about social justice issues, and having been attacked personally for doing so, requires that I draw attention to a critical difference, which is that between unfairness and injustice. They are not two words for the same thing, and the differences between them are relevant to all of the social justice debates surrounding the startup and software ecosystems (and, perhaps, to work in general) cannot be ignored.

Unfairness

Unfairness exists. There’s some amount of it that can never be made to go away, especially because perfect fairness is impossible to define. Some people are born with advantages, and others are not. It’s just a fact of life. Children learn about unfairness early on and many complain when they realize just how overwhelmingly much unfairness the world has. “Life isn’t fair,” the adults say. The message is: get over it. On unfairness in the abstract, getting over it is the healthiest thing that one can do. Like death, there is no escaping it. Some people are rich and others are poor. Some are smart, others are dumb. Some are attractive, others are ugly. Then there are the unfairnesses that emerge from chance later in life, that can be impossible to decompose into luck vs. skill factors because of the strategic complexity. Some people have chance encounters that others don’t, but is that skill (in searching) or luck? Who knows? Sometimes, a business that ought to succeed fails, or vice versa. One can think of unfairness as like an impersonal error term– in other words, a noise factor– in the world. It’s not a good thing, but it’s inevitable and any zero-tolerance policy toward unfairness (especially the natural kind) will have side effects more undesirable than the unfairness itself.

That’s not to say that fairness isn’t important, and that people shouldn’t strive for a fairer world. They should, but there’s a tradeoff in most social problems between efficiency and fairness. More regulated arrangements are fairer, but impose drag and might (at the extreme) make everyone poorer. Less-regulated social arrangements that do not impose fairness constraints are often more efficient, but inequitable. I’m not going to go, at length, into the matter of how to find the best point on the fairness-efficiency spectrum. I will make the remark that while maximizing efficiency often allows unfairness (especially in the short term) there are plenty of unfairnesses that detract from efficiency.

Injustice

Injustice is an execrable subclass of unfairness. Natural unfairness– diseases, disasters, and accidents of birth– aren’t injustices in the political sense (which I will use) because no human is responsible for them. Shit just happens. Additionally, unfairness that emerges from true human accident isn’t injustice– only error.

Rather, injustice occurs when humans increase unfairness, either through cowardice or malicious intent. When people are brought down by bad luck, that’s unfair. When they are kept down by social stigma and others’ moral weakness, that’s unjust. Why do people commit injustice? There are a number of reasons, but the cause behind most intentional injustice is that is an expression of power; in fact, the way humans typically define power is in terms of the ability to inflict social injustice on other people, or to grant improper favors.

I can’t be sure of this, but I suspect that one of the reasons why injustice is so common in the human world is that, for the people at the highest levels of power, it’s actually addictive. People enjoy out-of-band power in beneficial and harmless forms (fast computers, automobiles, fireworks) but there are many who get a thrill from the damaging kind. Obviously, there are few people (even among the most corrupt) who get up in the morning and say, “I’m going to inflict social injustice today”. It’s more accurate to say that they love The Game. We all have our version of The Game; for me, it’s the cutting edge of technology and computation; for them, it’s human politics without regularization. A just victory means that one worked harder or played better or maybe was just a bit lucky; but an unjust victory is a sure sign of high social status. To many people, the latter is more enjoyable.

The importance of the difference

People who complain about unfairness are ignored or despised. They’re seen as insufferable whiners who raise a stink about issues that, like bad weather and death, no one can do anything about. So, people learn in childhood that they’re not supposed to complain about life’s intrinsic unfairness, that it’s depressing and obnoxious to do so. So they don’t. Unfortunately, most take this further and refuse to complain about the frank injustice that they observe around them. Since injustice comes from human origins, and usually malignant intent, this is the wrong strategy. Nothing can be done about the abstract but inflexible fact that life’s unfair in many ways, but things can– and absolutely should– be done about human injustice.

This is one of my moral problems with the current Silicon Valley elite. They espouse a libertarian worldview that, while it need not embrace unfairness per se, values individual freedom highly while accepting a large degree of unfairness. That’s fine. It’s not inconsistent, and while I disagree with them on how they trade efficiency off against unfairness (I tend to think that unfairness produces inefficiency for a long time before it is realized to be doing so) I don’t think they are morally defective for thinking a different way about the matter; they might be right. How much regularization society needs to operate at its best is an open problem. I cannot say the same for the increasing number who tolerate injustice. For that, there is no excuse.

Why I am so certain that Silicon Valley is following (and quite rapidly doing so) the crooked, downward moral paths of those supposedly benighted elites it claims to be replacing? The celebration and tolerance of injustices, especially pertaining to the advantages that come from connections to its parochial king-makers– those connections would be meaningless in a meritocracy– is the primary sign. When a group of people develops an entrenched upper class, there is a larger set who feel an irresistible urge to associate with these winners (it becoming nearly impossible to defeat them) and who begin to rationalize the injustices coming from above. It’s not unethical management and reckless firing; it’s a “lean startup” that “fails fast”.  That’s where the VC-funded ecosystem is now. It has gone beyond tolerance of the (morally acceptable, in my view) unfairness attendant to differing economic outputs and noisy returns; it now accepts the injustice inherent in being a “who you know” oligarchy– a feudal reputation economy driven by personal introduction and favor trading, because the supposed thirst for talent is purely marketing copy– instead of a “what you know” meritocracy.

Is it worthwhile to complain about such injustices? That’s a hard question to answer. Obviously, I think the answer is “yes”, and not because I intend to change it. The people who are running this game have already shown who they are, and that’s by building something so ugly while they had the power. They will not be convinced to be otherwise. However, like all elites, they will become complacent and be replaced by something else, and that will cause opportunities to form. Long before we rise up and take those opportunities, we must study the failures of our predecessors in order not to repeat their mistakes.

Regarding the anger toward VC-istan, that I have chronicled but also directed, that’s why I do what I do. I want the next phase of technological innovation to be superior. I wouldn’t be writing if I didn’t consider that both important and quite feasible. 

What I am about to say here is not based on a hunch. I don’t say this kind of stuff lightly, and I will give evidence.

Additionally, I make no pretense of knowing whether Graham himself participated in the adverse action. I know that people other than him have been given editorial power, and that some have, in the past, displayed serious incompetence, especially with regard to banning of posters. Reckless silent banning (“hellbanning”) is a notorious problem on Hacker News, and the general consensus is that the problem is with Graham’s hired editors, and not the man himself.

However, I believe that I am owed an apology. (If not, I seriously misunderstand the Hacker News comment ranking algorithm, which I believe to be based on age and votes of the comment.) In September, I was tipped-off (anonymously) that my comments were being downgraded in determining their position on the board. I’d suspected this, since I went at one point from several top comments to seeing mine often at the bottom, despite several upvotes.

At first, I didn’t believe that I’d been personally targeted because, while I have been critical of the VC-funded ecosystem (“VC-istan”) I’ve always supported Paul Graham and what he’s been doing. Additionally, I’m a high-quality contributor to the board: top-100 karma, high average karma, well-written comments. However, there did seem to be a change in the ranking algorithm; something flaky was happening. The tipper gave me a way to test whether something wrong was happening: check latency times from Hacker News while logged in, and though an incognito window (“slowbanning”). Sure enough, the 3- to 5-second latencies I’d experienced under my personal account were not experienced in incognito mode. Typical latency for me, when not logged in, is 250-400 ms.

A few years ago, Hacker News made karma ratings invisible. At the time, as I recall, the justification was to prevent runaway behavior whereby popular comments got even more (less deserved) upvotes than ones with mediocre scores. I now tend to think that the change may have been made for a less noble reason: to hide that certain posters were getting (in terms of comment placement) personal penalties. If it were true (and it may not be, and if I am wrong, then I will be the one owing an apology) then it would be extremely damaging to morale, and hiding the fact would be mandatory.

If I were being personally penalized (presumably, in direct retaliation for my criticism of the VC-funded ecosystem) it would be visible by looking at older comments. Why? With HNSearch, one can find the karma rating of any comment older than about a week. (You can, if you wish, check the assertions I am making here.) Additionally, multiple sources have given me that the age penalty on comments is on the order of (2 + t)^-p, where t is the comment’s age (in hours) and p is an exponent variously given between 1.5 and 2; this means that for old threads (t >> 1000 hours) age would, assuming the comments were within days of each other, which they almost always are, be pretty well factored out.

Looking into some high-karma comments, such as 99-point comment 5 months ago, I found strong evidence of a personal penalty. That comment was placed near the bottom, while the top comments on the thread had substantially lower scores. This is not of direct concern to me (few people read 5-month-old threads) but it confirms what I had suspected.

There are 3 possibilities.

1. (Least likely.) In retaliation for my criticism of the VC-funded ecosystem, Paul Graham has assigned a personal penalty to my comments, causing them to fall to the bottom, even when they are highly rated. If this is the case, I am owed a personal apology by Paul Graham.
2. (Most likely.) My comments have been personally targeted, but Paul Graham is not the culprit. In this case, Paul Graham should apologize not only to me, but to Hacker News at large, for giving editorial privileges to the incompetent who pissed off a top contributor. Additionally, this person should be dismissed from the editorial role.
3. (Other.) There’s something I am missing: perhaps an additional complexity in the ranking algorithm not related to comment success (karma) or age– I’ve tested for both. I can’t see what, but I’d be open to an explanation outside of what I’ve covered here. If I am wrong and my comments are not being penalized, then I must offer my apology for the suspicion. It is not one that I developed (much less voiced) lightly, but I cannot for certain guarantee that I am not wrong.

I look forward to learning which of these is the case. If I am not alone in suspecting chicanery, it should be discussed.

It’s autumn 2013, and there’s a lot of discussion around the current bubble (now obviously one) in the VC-funded technology world and how it will end. Business Insider acknowledges that a bubble exists, but gets some crucial details wrong. Let’s talk about one that most of us actually care about. Business Insider claims: “It’s not just tech asset prices that are high. Salaries are high, too.” Them’s fighting words. Is it true? Well, sort-of. Here’s the evidence, from tech recruiter Matt Allen:

Instead, we’re seeing sign-on bonuses for individuals five-years out of school in the $60,000 range. Candidates queuing-up six, eight or more offers and haggling over a few thousand-dollar differences among the offers. Engineers accepting offers and then fifteen minutes before they’re supposed to start on a Monday, emailing (not calling) to explain they found something better elsewhere.

Ok, let’s dissect this. One: a few people (and it’s not clear that they’re engineers) are getting huge signing bonuses. $60,000 isn’t a number to sneeze at, but it’s not that extreme. Management-level hires typically get signing/relocation bonuses that cover the cost of a cross-country move (easily over $20,000, for people with families) and there’s no reason software engineers shouldn’t get the same. Additionally, signing bonuses usually have clawback provisions if the employee leaves (even involuntarily) in the first year, penalizing the job-hopping for which the worst of our generation is known. Given the tax penalty associated with receiving a bonus and risking having to pay it back, I’m not sure I’d want a $60,000 bonus under typical terms. Two: some candidates are queuing up 6 to 8 job offers. I call bullshit on that one, if only because of the scheduling difficulties in a startup ecosystem where 7-day exploding offers are the norm. I’m sure there are people getting 6-8 offers in the course of an entire job search (I’ve had that) and that people are claiming to have portfolios of excellent offers in negotiation, but the logistics of getting 6 active, credible job offers at one time are unfavorable, to say the least. Three: people are being unprofessional dickbags, pulling out of accepted offers on their start date. I’m sure that that is happening, but how is an occasional episode in which a privileged young hotshot acts like a jackass newsworthy, much less the sign of a bubble? It’s not.

Managers and product executives are making a killing in the present-day startup economy, no doubt, and some of those people might be able to pass as programmers due to some PHP scripts they wrote in their teens, but when one actually studies the contemporary startup economy, there are not a lot of software engineers making over $200,000 per year outside of finance– and those who are tend to be either very good or unusually lucky. For a VC-funded startup to offer $200,000 to an engineer would be incredibly rare, even in the Bay Area, and equity allotments after VCs are involved are notoriously stingy.

Twenty years ago, when startups were underdogs almost by definition, the scene had a “Revenge of the Nerds” feel. A bunch of ragtag computer aficionados, typically from middle-class backgrounds and far away from the East Coast’s financial and corporate elite, were showing up the old guard. New, powerful technologies were being developed, and power shifted (temporarily, perhaps) to those few who understood them at a deep level. There was slight subversion of the 1%; they weren’t destroyed or even harmed, but they were visibly outperformed. For a contrast, the hot properties of the current VC-funded world almost entirely come from the 1%. Behind almost every single one of the VC darlings, there’s a series of strings pulled by powerful people repaying favors to the rich daddies of the founders. There’s no meritocracy in it. It’s not a challenge to the established and rich; it’s a sideshow for the supercapitalists. In a surprising reversal, the old-style corporate world (and the enterprise companies existing and being formed to serve their needs) has a much more middle-class culture, because the current-day rich find it boring.

Software engineer salaries in the VC-funded world are not especially low (nor are they high). They’re usually 75 to 95 percent of what more typical employers are offering. Equity distributions, on the other hand, are extremely lopsided. I worked for a company once where the board refused to allow more than 0.04% to go to an engineer. (Why? Because fuck the people doing the work, that’s why.) There’s something that needs to be discussed here, because it applies to the age-old question of why people who do actual work are modestly compensated, while vacuous celebrity types take the lion’s share. It’s the Teacher-Executive Problem.

The Teacher-Executive Problem

As a society, we need teachers, police officers, park rangers, and other such people who are modestly compensated. We don’t need celebrities, business executives, or professional athletes. I’m not going to argue that the latter are overpaid, insofar as it’s difficult and competitive to get to the top ranks in any field. That would be a subjective argument; all I intend to say is that, objectively, the need for the latter class of labor is smaller. If we didn’t have teachers or police, society would fall apart. If we didn’t have corporate executives, companies would find other ways to survive. So why are the more necessary people paid less? Because being necessary means that more workers will be drawn into the field, and that limits individual compensation. We probably pay more, as a society, for teachers and police than we do for corporate executives (as we should) but the individual slices for the larger, more necessary, job categories are smaller.

We have 3 million teachers in the US, and we need that large number of them, because individual attention per student is important. The functioning of society would be greatly impaired if that number dropped to 2 or 1 million. One might argue that competent teachers are “worth” $200,000 (or much more) per year– and I’d say that the best are worth several times that– but can society afford to pay that much for teaching? Three million $200,000 paychecks is a $600-billion annual liability. Taxes would go up substantially– in a time when the base of political power is (unfortunately) divided between a structurally disadvantaged (read: mostly fucked) emerging-adult cohort and retiring Boomers whose children are out of school– and society would likely determine that $200,000 annual paychecks for teachers “can’t be afforded” (especially given the claim that “they get off work at 3:00″). $200,000 isn’t a large amount of money for a single person, but for people who are actually needed in significant numbers, the multiplier of 3 million makes it seem unacceptable. (I am not arguing that teachers don’t deserve $200,000 salaries; only that it would be politically impossible to get them there.)

For a contrast, the social need for corporate executives (excluding entrepreneurs) is pretty minimal, and society recognizes this in a rational way: there aren’t a large number of slots: title inflation aside, there might be ten thousand truly executive roles in powerful companies. However, when the number of people performing a job is low, gigantic salaries (if those people control the distribution of resources) become socially affordable. Three million somewhat high salaries is a problem, ten thousand enormous ones is not. This is paradoxical because the middle-class conceit is that the way to become wealthy is to make oneself valuable (or, better yet, necessary) to society. What the Teacher-Executive Problem shows us is that there’s more potential for outlier compensation in doing things that aren’t necessary, because asking for more compensation doesn’t carry the implicit multiplier based on the size of the labor base. Society “can’t afford” to pay the 3 million teachers such high salaries, but it can afford the huge salaries of corporate executives, and the $850-million acquisition that enriches the top executives of IUsedThisToilet.com.

Why do so few software engineers get a fair shake in the VC-funded world? They’re on the wrong side of the Teacher-Executive Problem. They’re actually necessary. They’re required in order for technology firms to function.

What about 10X?

The generally accepted consensus (even among software engineers) is that average programmers aren’t very valuable. They write all that buggy, hideous legacy code. There’s little that software engineers and business executives agree upon, but the low status of the average programmer is probably not a point of disagreement. I don’t care to speculate on what the “average” software engineer is like, because while I have seen a ton of incompetents (and a smaller number of good engineers) out there in the world, I don’t have a representative sample. I also think that most of the engineering incompetence comes not from a lack of ability, but from an anti-intellectual culture originating in business culture at large, as well as nonexistent mentoring, so it’s not programmers who are mostly at fault. However, I will agree readily that the bulk of software engineers don’t deserve high ($200,000) salaries. They might have the talent, but few have that level of skill.

However, there is the concept of the “10x” software engineer, one who is 10 times as productive as an average engineer. It reflects a truth of software engineering, which is that excellence and peak productivity are tens to hundreds of times more powerful than the average-case output. (In fact, often that ratio is infinite because there are problems that require top talent to solve it.) Moreover, groups of engineers often scale poorly, so a team of 10 isn’t really (most of the time) 10 times as productive, but maybe 2 or 3 times as strong, as an individual. So it’s not surprising that a great engineer would be 10 times as valuable. The degree to which “10x” is real depends on the type of work, the context, project-person fit, and the competence of the engineer. It’s highly context-dependent, it’s not always the same people, and it’s quite unpredictable. The national average salary for a software engineer is about $90,000. The 10x-ers are not earning 10 times that and, to be honest about it, they probably shouldn’t. You can’t know, when hiring someone, whether the context that supports 10x output for that person is going to exist in the role. The bona fide 10x engineers typically earn 1.5 to 2 times that amount ($135,000 to $180,000) in the U.S. I’m not going to argue that they’re underpaid at this level– although, at least in comparison to MBA graduates earning twice that before age 30, I think they clearly are– but they’re far from overpaid at that level.

Why don’t 10x engineers get paid astronomical sums? For a large part, I think it’s because of the context-dependent nature of “10x”. It doesn’t require only a good engineer, but a good engineer connected with the right kind of work. Companies can’t afford (obviously) to pay $900,000 salaries to senior engineers just on the hunch that those (typically highly specialized) talents will find a use. When engineers do find environments in which they can deliver 10x output, they’re happy– and they’re not liable to clamor for huge raises, or to move quickly and risk starting over in a defective environment. This isn’t especially wrong; engineers would rather have interesting work at “merely” 1.5x salaries than risk happiness and growth for a chance at more. It’s just worth pointing out to establish that, in general, software engineers (and especially the most capable ones) are not overpaid. Moreover, the people commanding $500,000+ salaries in technology are typically not real engineers, but managers who might occasionally “drop down” and hack on one of the sexier projects to keep their skills sharp. Finally, the few (very few) software engineers making that kind of money are generally worth it: we’re not talking about top-1% talent at that level, but top-0.05% (and a level almost never achieved before age 40). There are plenty of people drawing undeserved high salaries in the Valley, but they aren’t the ones writing code.

Why must I point this out?

This (bubble) too, shall pass. The era when a well-connected rich kid can raise a $1-million seed round rather than eating his lumps in an investment bank’s analyst program will end. I don’t think that that’s a controversial assumption. Timing the end of a bubble is nearly impossible, and I don’t think anyone has shown reliability in that particular skill; but predicting that it will die off is trivial– they always do. When this happens, there will be a lot of job losses and belt-tightening. There always is. It’ll get ugly, and that’s fine. Most of these businesses getting funded and acquired don’t deserve to exist, and the economy will inevitably purge them. What I don’t want to see is the bubble made into an argument against the middle-class, hard-working software engineers. When the bubble ends, there will be losses to eat and austerity to go around, and it ought to go right to the people who reaped the benefits while the bubble existed. The end of the bubble should not be used to reduce the compensation of software engineers as a whole, whose pay is currently (I would argue) not quite unfair, but on the low side of the fair interval.

For the 99 percent, there is no software engineer salary bubble.

The SATs might have left people sour on analogies, but here’s one to memorize: VC-funded technology is to Corporate America as the Tea Party is to the Republican Party. I cannot think of a more perfect analogy for the relationship between this Sand Hill-funded startup bubble and the “good ol’ boy” corporate network it falsely claims to be displacing. It is, like the Tea Party, a more virulent resurgence of what it claims to be a reaction against.

What was the Tea Party?

Before analyzing VC-istan, let’s talk about the Tea Party. The contemporary American right wing has an intrinsic problem. First of all, it’s embarrassed by its internal contradictions, insofar as it fails to implement its claimed fiscal conservatism, instead getting us more indebted through wars fought to serve corporate interests. More to the point, it’s trying to get people to vote for things that are economically harmful to them– and it’s surprisingly good at that, but that requires keeping people misled about what they are actually supporting, which in turn mandates constant self-reinvention. For this reason, the Republican Party has a well-established pattern of generating a “revolution” every decade and a half or so.

First, there was the “Reagan Revolution” of 1980. Then there was the “join the fight” midterm election of 1994– the Republican landslide that brought us our first severe government shutdown. Around 2009, the modern Tea Party was born– and that brought us a second severe government shutdown. At first, this Tea Party appeared to be deeply libertarian, presented as a populist tax revolt without the overt corporate or religious affiliations of the Republican Party. It seems ridiculous in retrospect, but there were left-wing Tea Partiers at the beginning of the movement (there aren’t anymore). In time, the Tea Party was steered directly into the Republican tent, fueling the party’s electoral success in 2010. That’s miraculous for them, when one considers the gigantic image problem that the Bush Era created for that party. In 2008, some commentators believed the Republicans were finished for good, about to go the way of the Whigs; two years later, it had been reinvigorated by a populist movement that, at its inception, seemed radically different from the fiscally irresponsible GOP.

By promising a reduction in taxes and social complexity, the Tea Party managed to remove Bush and Cheney– old-style authoritarian stooges, big-government war hawks, and objective failures even before the end of their term– from the conversation in record time. Of course, time proved the Tea Partiers to be “useful idiots” for a more typical Republican resurgence– a reinvention of image, not of substance– and the most astute observers were not surprised. When the reputations of established players become sufficiently negative, reinvention (and “disruption”) becomes the marketers’ project of the hour.

Venture capital

Corporate America, too, has a severe image problem. The most talented people don’t want to work in stereotypical corporate environments. They want to be in academia, hedge funds, R&D labs, and cutting-edge startups– not dealing with the stingy pay, political intrigue, slow advancement, low autonomy, and archaic permissions systems associated that are stereotypical for large institutions. Of course, companies that need top talent can get it, but they must either (a) pay extremely well, (b) offer levels of autonomy that can complicate internal politics, or (c) market themselves extremely well.

Wall Street can simply buy its way out of the corporate image problem. However, this typically means that employee pay will go up by 20 to 30 percent per year, in order to keep abreast of the rapid hedonic adaptation that money exhibits. Few companies can afford to compensate that generously, especially putting that exponential growth in the context of a 20- to 40-year career. Venture capital’s ecosystem is an alternative solution to that image problem; a corporate system that appears to be maverick, anti-authoritarian and “disruptive”, when what it actually is is dishonest and muddled. The people would have been middling project managers in the old system are given the title of CEO/”founder” in one of VC-istan’s disposable companies. Instead of a team getting cut (and its staff reassigned) as would occur in a larger corporate machine, the supposedly independent company (of course, it is not truly independent, in the context of the feudal reputation economy that the VCs have created) is killed and everyone gets fired. This might seem like a worse and more dishonest corporate system, but it gives the impression of providing more individual prominence to highly talented (if somewhat clueless) people.

Not much of substance has improved in the transition from the older corporate system to the VC-funded world, but I think some things have actually been lost, particularly in reference to fairness. Bureaucracies can be dismal and ineffective, but those that work well are efficient and, most importantly, fair. In fact, attempts to achieve fairness (the definition of which seems, inexorably, to accrue complexity) seem to be a driving force behind bureaucratic increase. Obviously, bureaucracy is sometimes used toward unfair ends, or even designed maliciously (for example, over-restrictive policies are often built with the intentional purpose of making those with the power to grant exceptions powerful) but I would say, in general, that those negatives are not supposed to emerge from bureaucracy, and probably not characteristic of it in general. Bureaucracy is mostly boring, mostly effective, and only maligned because it’s infuriating when it fails (which is, often, the only time when most people notice it; bureaucracy that works goes unnamed). Without bureaucracy at all, however, social processes often devolve into a state where favor trading, influence peddling, and social connections– with those accrued early on (such as in school) and therefore most tied to socioeconomic status rather than merit, being most powerful– dominate.

VC-istan has reduced corporate bureaucracy (because companies are killed or sold before they can accrue that kind of complexity) but done away with the concern for fairness. It claims to be a meritocracy, and only accepts those who refuse to see (much less speak of( the machinations of power. Those who complain too loudly about VC collusion are ostracized. For just one petty example of the VC-funded world’s cavalier attitude toward injustice, people who voice the “wrong” opinions on Hacker News are silenced, “slowbanned” or even “hellbanned”. Injustice, accepted for the sake of efficiency, is tolerated as accidental noise that’s expected to converge over time, as the error from independent coin flips would smooth out as more occurred. The problem with social processes is that the errors (injustices that one hopes will be transient) don’t cancel each other out; they have a long-term autocorrelation.

In truth, what does self-assertion of meritocracy mean? It means that one is not even going to try to strive for additional fairness, under a belief that balance between fairness and other constraints has already been achieved. Of course, anyone who’s paying attention knows that not to be true.

Am I proposing that more bureaucracy is the solution to VC-istan’s moral failings? No. I’m only arguing that VC-istan’s selling point of “leanness” often comes at a cost, which is a sloppier and more unfair ecosystem. The old corporate ladder, with less of the ageism and emphasis on native social class and educational “pedigree”, was actually a much fairer one than VC-istan’s sloppily-built, poorly-thought-out one.

More virulent

The Tea Party turned out to be a more brazen and generally worse Republican Party than the one it supplanted. I’m not a fan of Bushite corporate stooges, but they would not have seriously considered the threat of fucking national default to be a valid negotiation tactic.  

Likewise, the VC-funded ecosystem is generally worse than the older and more stable corporate system that it is attempting to replace. To list some of the reasons why it is worse:

• less intra-corporate mobility, since most VC-funded startups are built around a single project. As VC-funded companies become large enough that internal mobility would be viable, many develop mean-spirited stack-ranking cultures that keep internal mobility low or nonexistent.
• the old corporate world’s large, announced layoffs, often with severance, have been replaced by dishonest “performance”-based firings designed to protect the company’s reputation (it may claim it is still hiring, and thus prosperous) at the expense of the departing employee’s.
• increased social distance– investors vs. founders vs. employees is a much larger (and more permanent) social gulf than executives vs. managers vs. reports, the latter having more to do with seniority while the former is largely an artifact of native social class.
• extreme ageism, classism, and sexism.
• low rates of internal promotion, due to the company’s increasing need to validate its status with flashier hires (who get leadership roles as opportunities emerge). External promotion is the way to go in VC-istan, but that creates a “job hopping” impression that makes it hard to move back into the mainstream corporate world.
• in general, meager benefits in meaningful dimensions (health coverage, 401k matching) matched with cosmetic or meaningless perks.
• defined (if spartan) vacation allowances replaced by undefined (“unlimited”) vacation policies where social policing keeps everyone under two weeks per year.
• on average, substantially longer work hours.
• less working autonomy, on average, due to the tight deadlines faced by startups whose investors demand excessive risk-taking and rapid growth.
• significantly more economic inequality, when the distribution of equity is considered. A hired (non-founder) executive might only earn 20% more, in salary, than an engineer, but typically receives 20-100 times as much equity in the company.

The future

What has actually emerged out of Silicon Valley is a failed social experiment that has generated much noise, little progress, and immense distraction. The good news is that it lacks comprehension of how to conduct itself outside of its own sandbox. For one small example, economics textbooks might argue that Uber’s “surge pricing” is supremely efficient and therefore right, even though the subjective experience for all who encounter it is extremely negative. I don’t intend to opine on whether Uber’s pricing model is morally right (it’s a useless discussion). I do find the observation valuable: the new economic elite of the Valley is shockingly gauche when it comes to self-presentation. It thinks it’s the height of science and culture, and everyone else finds it to be the worst case of uncultured new-money syndrome in over a century. It won’t last. If the gauche overlords of Silicon Valley– no longer engineers or technologists, but lifelong executives (with all the pejoratives appropriate to that word) who came up via private equity and good-ol’-boy networks– make a serious play for cultural prominence, they will be shoved back into their spider holes with overwhelming force.

The old corporate regime was deeply flawed, and that’s not going to come back either, but there was a certain humanity required of it if such organizations were to survive for the long term. The problem with VC-istan is that these companies don’t care about persistence; they’ll either be gigantic and invincible (and able to pay off old sins via meager settlements) or dead in five years. If VC-istan’s pretenses of building the future are taken at face value, then the future’s literally being built by people who give not a damn about it.

Uber can charge what it wants– that’s a private matter– but I’m disgusted when I see Valley darlings trying to shove their mindless, childish arrogance into politics. That’s actually scary. The price of housing and long commutes for which Silicon Valley is known are solid, incontrovertible proof that their little society is an utter failure.  Whatever they say about themselves is mitigated entirely by the messes– of their own making– in their own backyards. If they can’t even make San Francisco affordable, how are they equipped to handle the problems of the world? They aren’t. Just as the Tea Party proved itself incapable when it came down to the actual inherent complexity of politics in a nation of 315 million, the Valley darlings aren’t fit to rule more than a postage stamp.

No analysis of VC-istan would be complete without confronting the performance of venture capital as an asset class, which is, by all accounts, terrible.

Recall that the VC-istan Hypothesis asserts that the leading venture capitalists have assembled something that, while its disposable companies operate separately and may compete with each other, effectively functions as one postmodern corporate body, of which the leading investors (not founders, who are middle managers given better titles) are the true executives, and in which the nominally separate companies (whose investors and boards all know each other) are more accurately framed as departments. It seems to be, then, a poorly-performing company. It’s worthwhile to analyze that, since I’d argue that the cultural problems with VC-istan are bidirectionally related to its poor performance.

Normally, poor performance of a company is felt in layoffs. In VC-istan, it’s experienced by the shutdown of its subcompanies. This would be tolerable (people go into startups knowing there is risk) except for the fact that the failures are correlated. They happen in waves. Job loss usually isn’t a big deal in Silicon Valley, but is devastating (some people go down 50% in salary when the market tanks) when it happens to a large number of people at once. Indeed, if there’s one sin committed by the VCs against their counterparties, it’s not that they mislead about fair valuations (they don’t) but that they knowingly engage with people who misprice correlations. Savvy investors understand that, to price an asset, one must consider its correlation to others– a portfolio that is likely to tank when the economy tanks (and, quite possibly, you lose your job) is worth less than one with the same return, but that is independent of broad market conditions. The latter is more likely to have the money when you need it.

Venture capital is a fair-weather friend. There’s lot of opportunity when everyone (especially landlords) is getting rich, but it’s very easy (especially considering the age discrimination problem) for a whole generation to be tossed out like yesterday’s dogshit. Venture capital returns are dismal, most venture-funded companies fail, and most of these so-called “startups” are terrible places to be employees. Let’s hope that VC-istan isn’t the new economic regime that it claims to be; it’s not a very good one.

Root causes of poor performance

Why does VC perform so poorly? One might argue that they pay “too much” for companies, but I don’t think that’s true. If anything, they pay too little, because they’re mostly funding crap. After a typical Series A, option pools are so limited that even high-level hires are lucky to get more than $20,000 per year at-valuation– in exchange for an equal or larger pay cut. Startups become stingy not only with pay and meaningful benefits, but also with equity. This makes it hard for them to get the best people.

To be fair, I would argue that a company with outside investors shouldn’t be focused on hiring the best people. Hiring excellent people isn’t a business objective; turning a profit is. It’s quite possible to make a profit without staffing up with top talent; Wal-Mart does it. However, the get-big-or-die startups funded by the most stylish investors often do need the highest levels of talent, and they make two mistakes on that front. The first is that they underpay, not only in terms of salary, but also in terms of the equity that’s supposed to make the wage cut tolerable. This still works sometimes because there are some clueless people (typically, young ones) who are technically talented in spite of being extremely gullible, but it doesn’t scale because the pool of talented suckers is a small one. The second and, in my opinion, more devastating factor is that they grow too fast and overhire. Talented people will work for startup wages for a chance to own, but if you’re offering dimes (0.1% slices) and pennies (0.01%) while underpaying, you will find few talented people, keep almost none, and– if you have to hire fast, because your investors mandate rapid growth and aggressive risk-taking– you’ll flood the company with mediocrity.

Of course, paying more doesn’t guarantee getting good people. If you don’t know what you’re doing, it can have the opposite effect. I’m not going to cover that issue, and my point isn’t necessarily that VC firms give too little money; the problem is that the companies (perhaps due to investors’ demands, perhaps on their own accord) themselves are stingy even with equity, which is the only reason people put up with the shortfalls in wages, benefits, and autonomy. As to whether that’s the fault of the VCs– to whom founders are eager to shift the blame for their terrible employee options grants, but who are rarely in such discussions to defend themselves– or a more general problem with VC-istan culture (whose worst malefactors, in my observation, aren’t themselves VCs) I have no idea.

How could venture capital win?

Venture capital would have two ways of returning a real profit. One would be to buy low: to be better than anyone else at assessing fine-grained variables, such as the talent of the team, and get great companies cheaply. Trust me, they don’t have that skill; I’ve seen plenty of idiots get funded. They’re no better at picking talent than an average college-educated person. In fact, they’re worse, and I’ll get to the reason for that, later on. The other would be to add value to the businesses they fund, and then sell “high”. I don’t think, in general, that they do. On the whole, it seems pretty obvious that they detract. Why? Because the venture capitalists are the true executives of this postmodern entity that I’ve named VC-istan. They succumb to a personal need to manage.

Many day traders and poker players have, despite knowledge and superiority over their domain of confidence, been destroyed by trader boredom– that need to be active at all times, even when the additional work (outside of one’s domain of competence) will, at best, add zero-expectancy variance (noise) and, at worst, cancel out some of the gains. I think this is the case of VC-funded startups. It would be better for investors to give money and advice, but let the companies operate almost completely autonomously. This might not fulfill the emotional need of investors to be decision-making executives, but it would make those businesses a hell of a lot more successful, and that would improve their returns. By removing themselves from active management and taking a strictly advisory role, venture capitalists would do less work and get better returns.

This wouldn’t solve everything, of course, and it probably wouldn’t be enough to fix the VC-funded ecosystem. Founder quality is a much bigger problem than anything having to do with investor involvement. The investors are responsible insofar as they back the wrong sorts of people, but they aren’t directly causing the toxic cultures seen in most of these companies.

Founder quality

What are the causes of low founder quality in the VC-funded world? I think there are a few that deserve mention, and I’ll address them from least to most potent.

First, VC-funded companies are constantly fighting for survival. This might be said of all small businesses, and to some degree it’s true of all, but not in the same way. A non-VC business can grow happily at a “pokey” 32% per year, quadrupling every half-decade, and that’s considered healthy. Hell, most people would the thrilled to have their personal income grow at a mere 10 percent per year. That doesn’t cut it in VC-istan, where 5% per week is expected. That is, of course, utterly unsustainable at scale, and requires aggressive risk-taking for the small.

Additionally, per-week growth is hard to measure for companies that (a) might not have substantial revenues, and (b) aren’t publicly traded. The result is that companies are expected to post these increases in key metrics like “eyeballs” or usage, but before a company is profitable, that actually means that there is an exponential growth in costs (and, therefore, often losses) that keeps the business dependent on external capital, and therefore under VC-istan’s control.

Most small businesses must negotiate the market to survive. In VC-istan, the firm must battle not only the market, but demanding investors (who won’t accept 40% year-on-year growth) as well. What kind of person would sign up for this? In general, it attracts overconfident, exceptionalist people who, given the freedom to do so, will always overpromise (and underdeliver). It’s not that they do so maliciously; that’s the temperament that VC-istan’s way of doing things attracts.

Most investors would agree, privately, that they’re looking for people with the talent to make more with less; in other words, those rare people who can start or run a company on a shoestring budget and, against the odds, give it life. Typically, you won’t be able to hire a competent programmer at 50% of the market wage without offering serious (founder-level) equity. If you did luck into a golden hire, you wouldn’t be able to repeat it, and the bad programmers would sink the enterprise. It’s just very hard, and not at all typical, for a company that poor to have any life, much less rapid growth potential. Venture capitalists want to work with the atypical.

From first principles, I don’t think there’s anything wrong with that. Some people (perhaps 1 in 100,000) do have that sort of personal charisma– the kind that could convince a $200,000 per year programmer to take $80,000 and 0.05 percent– and I can’t blame VCs for wanting to fund those natural arbitrageurs. However, for each of them, there are hundreds of slimy hucksters who use deception (most typically, about the career benefits of the startup job) to bring talent in, and extortion (threats of reputation damage, negative reference, and exclusion from future ability to fundraise) to keep it. Just as 99.99+ percent of people selling $100 bills for $50 should be expected to be counterfeiters, and not charitable; most of these “more-from-less” operators are not preternaturally charismatic, but deceptive shysters.

The most devastating cause of VC-istan’s founder quality problem, however, comes from the fact that the VC-funded world is a feudal reputation economy. The people who excel in such settings tend to fall into two categories. The first are those who use extortion (including, often, hired physical intimidation) to protect and launder their reputations. In larger companies, they’re most likely to hide behind HR and offer generous settlements to wronged employees, but in the VC-funded environment where every company must operate on a shoestring, they have only the stick, and frequently take the extortion route. The second class are those about whom no one can say anything negative. They don’t piss anyone off, because they don’t really do anything, and they tend to thrive in reputation economies by attrition: everyone else is out working and (inadvertently) stepping on toes, while they’re smiling and making nice. These people make great figureheads and can be tapped to lead more established companies, but they’re terrible small-company founders. Those people are risk-minimizers, not excellence-maximizers. If you’re trying to launch a high-risk business, you require excellence-maximizers, but it’s impossible to find one who can thrive in a reputation economy. In a reputation economy, the first rule is never to overperform, but who wants that kind of person at the helm of a high-risk business?

Fixing the problem

There is a way to fix VC-istan’s poor performance, and it’s tied to an issue I’ll keep coming back to: collusion. Namely, before funding decisions are made, the VCs talk to each other and decide, as a group, who they like and who they don’t. This means that the funded people are the ones selected by a committee rather than individuals, giving the advantage to the reliable, affable risk-minimizers who are, to put it plainly, unsuited to lead high-risk technical enterprises.

Given that the flaws of design and selection by committee are well-known, why do venture capitalists collude? Shouldn’t there be a rogue investor or few out there who realizes the flaws of VC-istan, goes off and makes better choices, and shows up all of the established guys? Why doesn’t that happen?

The first thing to note is the distribution of payoff on investments. Stocks in established companies have a bell-shaped and approximately normal distribution in returns. Some will go up 20% in a given year, and others will drop by 20%, but for an established public company to change in value by a factor of 100 will virtually never happen. About half of the choices will outperform the market trend. The venture capital game doesn’t have the normal distribution, and it’s all about the outliers, or “black swans”, because far more than half of the investments are losers, but the winners hit big. These are the Facebooks and Googles of which two or three might exist per decade.

Being an early-stage investor in such a company makes an investor’s reputation and career in a way that a portfolio with more, smaller wins (even if the overall return were higher) wouldn’t. Becoming a partner in a venture capital firm nearly requires being part of a big-ticket item. It’s not about maximizing returns on capital to shareholders. It’s about the needs of the individual venture capitalists, if they want successful careers in that industry, to be involved in the two or three most important deals of the decade. A handful of smaller wins could be equally or more lucrative, but wouldn’t have the same career-making effects for individuals. Not surprisingly, this means they’re not interested in the small, less-risky, wins.

Because the venture capitalists need to know where the top few deals of the decade are coming from, there’s a premium on social access. Founders (much less engineers) are pretty much interchangeable. The talent-centric attitude that VC-funded companies feign is pure marketing, because the truth is that no one can reliably predict the biggest successes– not at that level of risk, and with such a long feedback cycle, it’s almost impossible for anyone to acquire the skill, data being already stale once collected. The best bet is to be near the blockbuster successes as they emerge, and be close enough to the gatekeepers to get involved. That is the source of the collusion.

In other words, VCs don’t collude because they’re exclusive snobs or bad people. They’re not. They collude because their careers mandate it. They don’t win by picking the best people or funding the most viable businesses and, in fact, operate at risk levels that make such predictions useless; rather, they win by being in access to the evident winners as they emerge. Those who can get into access may be able to escape the generally dismal returns that characterize the asset class, while those who remain out of access perish.

The alternative regime would be one in which VC collusion were banned outright. No comparing notes, no deciding as a group who gets to be a founder, none of this co-funding horseshit. It would represent a return to individual decision-making and beneficial (as opposed to degenerate) risk-taking. A legal ban on collusion would make venture capital fundamentally more decent and, quite likely, substantially more profitable on the whole (if disadvantageous to a few prestige investors)  on account of improved prospect selection. It may sound like a drastic move, but a collusion ban just might be the only thing that can save venture capital from itself.

Previous: VC-istan 1: What is VC-istan?

What is the Racist Judges Problem?

Let’s say that there’s a hypothetical country where everyone is either green- or blue-haired. (For this example, that distinction is “race”.) That nation has fifteen provinces and, each year, there is a nationwide beauty contest with one judge hailing from each province. Additionally, each province only gets to nominate one entrant. Each judge scores the entrants from 0 to 10, but (because these people are regional finalists, an above-average crowd) the contest average is usually around 8.0– meaning that a single zero can cancel out four perfect scores. Finally, while twelve of those provinces are pretty progressive, three of them, in the east, are deeply, obnoxiously, and uniformly racist against blue-haired people. They’re despised and considered unattractive in those parts, and judges hailing from those provinces will never give one a high score. Blue-haired entrants are typically given extreme low scores out of animosity. What happens?

Most likely, winning contestants are going to be uniformly green-haired. Moreover, even the non-racist provinces (though people in them might find the blue-haired to be equally attractive) are almost certainly going to nominate green-haired entrants, because anyone blue-haired will be at such a severe disadvantage that it will nearly impossible for him or her to win the contest. Eventually, it will be decided that blue-haired people just aren’t as attractive, or are otherwise unequipped to win such contests. They won’t even be considered. The biases of the few influence the many. That’s the Racist Judges Problem. It doesn’t require that all or most of the judges have a systemic “racial” bias; it emerges (a) from the biases of the few, and (b) from the forced accommodation of the many. Eventually, they reach a point where blue-haired candidates aren’t even considered, because their inability to sway the racist judges (even if the other judges find those biases abhorrent) renders them nonviable as candidates.

Does it exist in VC-istan?

The Racist Judges problem, of course, doesn’t necessarily need to apply to race.

With regard to specific racism, I’ve seen little evidence that VC-istan is prejudiced in that way. At least, let me put it like this. If you factor out the obvious and extreme classism of VC-istan, I don’t know that there’s much (or any) racism independent of that. There may be, but I haven’t seen evidence. As for the classism, I tend to believe that to be an artifact of the ageism. How so? Well, a person at age 50 has had enough independent influence over his or her level of professional accomplishment that work ethic and intelligence are likely to be as potent as socioeconomic class of origin. There’s been plenty of time for the apple to roll away from the tree. At 25, however, supposed professional accomplishment is almost entirely an artifact of socioeconomic status– did this person enter the first office job knowing how to navigate the scene, or did she have to learn it through trial and error? What schools did she attend? (College matriculation might seem meritocratic, but the US has a lot of extracurricular variables in admissions that, by design, inject socioeconomic status back in to the machinery.) Did her parents hand down powerful connections? After a couple decades of solid work experience, initial conditions get smoothed out a bit; but, by VC-istan’s standard, the time by which that happens is far too late.

In other words, I don’t think VC-istan is intentionally or explicitly classist, either. I believe it genuinely strives to be the meritocracy it claims to think that it is. The classism is an artifact of the brutal age grading, which makes it extremely difficult for those who weren’t born lifted to pass. I would guess that venture capitalists, for the most part, don’t have a specific interest in the native social classes of potential founders; on the other hand, they’re so used to seeing kids whose parents handed them impressive professional tokens that people with normal career histories, who might take 10 years to get where the lifted kids are after four, seem defective in comparison.

So where do the ageism, and the sexism– both of which I’ll cover in more detail, in future essays– come from? I don’t think most venture capitalists harbor either set of prejudices; but a few do, and the most stylish ones seem most ready to announce their prejudices. In truth, if the collusive, scummy culture of co-funding and note-sharing were busted, those issues would likely go away. Investors who harbored those prejudices would lose out to the ones who didn’t. The issue is that the lack of independence in the investor community means that a candidate for support must be broadly acceptable. A VC is unlikely to invest in a talented person that other firms are unlikely to fund. Ultimately, the biases of the few (with regard to, say, age) end up dominating the behavior of the collective.

The Racist Judges Problem is far from unique to venture capital, of course. It’s prevalent in politics and corporate culture, as well. People complain constantly about the bland, uncharismatic mediocrities that tend to rise in institutions simply by being inoffensive, but when you have a flabby culture of consensus that rejects those who offend the few, that’s exactly what you’re going to get: risk-minimizers, not excellence-maximizers. It’s generally agreed upon that some people are too creative, too interesting, to succeed in typical human organizations because of that specific effect. The VC-funded world sells itself as being above that historic problem, but hasn’t been so for a long time.

Sizes of minds and things

This quote has been variously attributed: great minds discuss ideas, middling minds discuss events, and small minds discuss people. I find myself coming back to it regularly. It’s quite true, and it’s sad, because the discussion of people (that is, reputation) is an incredibly powerful force in business– far more potent in its ability to make or destroy careers than the discussions of ideas or events.

Of course, there’s the whole spectrum of minds in every business, including venture capital. There are the few who have (and, boy, do I hate how this world has been overused) genuine vision. I’ve no use for the people who call themselves “big picture people” just because they aren’t smart enough to hack details, but there are a small number of people who have a solid grasp of the big picture (who would never call themselves “big picture”, because they also grok details) and what they’ve got there is an important skill. Those are the great minds. To their detriment, I’d argue that such great minds don’t fare so well in business unless they can pare up with event-aware tacticians, whom the above adage (unfairly, in this example) downgrades to “middling”. Between them, however, the great and middling minds are not enough to direct the behavior of the group. It’s from the people-focused small minds that we get the Racist Judges Problem.

See, judgment of people is the ultimate bike shed. People who have no other competence will, in business, delude themselves into believing that they’re supreme judges of character and talent. They need (1) to justify their existence, and (2) protect their own social status, and declaring oneself a social arbiter (if others accept this arrogation) fulfills both neatly. If anything, I think that these two capacities of judgment (talent vs. character) are antipodal in many ways (assessing people at their best vs. and their weakest) and that almost no one excels in both. However, the perception that one deserves to be the ultimate judge of others is the fundamental wish-fulfillment fantasy of the base-minded social aspirant. After securing their own status, such people develop a thirst for the ability to up- and downregulate the status of everyone else because, in human affairs, that’s what power, fundamentally, is. Such people love to make and break reputations, and its their discussion of people that often dominates a scene, much more than the rarefied and comparatively moderate debate of ideas and events. 

The small minds of Silicon Valley aren’t the only ones out there, of course. They’re probably not even a majority. There are a lot of great human beings in venture capital, no doubt. The good ones just don’t have nearly as potent an effect. That is the problem with VC-istan collusion. When you have a consensus culture, much less the feudal reputation economy that exists out there now, the small-minded few can have disproportionate, and even decisive, effects.

This is the first part of a series that was originally intended as one post, but will take more. For obvious reasons, I’d rather run five 1000-word posts than one 5000-word post. This assumes that I can keep a post short, brevity not being my strong suit. So, let’s just go into it. What the fuck is VC-istan?

I’ve used that term a lot, and many take it to be pejorative, as if there were something negative about “stan”. That’s not correct. I frequently use “stan” to describe one metaphorical space of people, and it can be a group that I’m fond of (e.g. “Nerdistan”) or one I dislike. After all, “stan” only means a place where people live. The name, itself, is utterly neutral.

So what is VC-istan? It’s not just a snarky name for venture capitalists and the toxic technology ecosystem that some of them (some, I reiterate, not all) have created. VC-istan means something, and I’m going to explain just what.

The VC-istan Hypothesis

The VC-istan Hypothesis is that the leading venture capitalists, the “cool kids” in that set who all know each other, have created a postmodern corporate entity– possibly the first of its kind. It functions as one company at the top echelon, but has recognized that corporations themselves are disposable (much moreso than projects or departments within a company, which are more difficult to cut). This insight isn’t new (shell companies are disposable by design) but the VC startup is a fully-fledged, single-product enterprise designed entirely to take on a specific high-risk business gambit (usually in a red ocean where first-mover advantages dominate, making VC “rocket fuel” especially powerful). The disposable company inside VC-istan is a true startup, almost free-standing if you don’t see the strings.

The “marquee” investors function as the executives of this larger, shadowy, not-exactly-a-corporation entity that I’ve described. Middle managers, maligned as inefficient, corrupt, and often stupid, have been replaced with founders and startup executives who inhabit about the same economic and social stratum as their gray-suited forebears, but have sexier job titles: Senior VP of something no one outside California has heard of, as opposed to Associate Director at a household name. (In truth, I think those founders are no more virtuous, as a class, than the maligned middle managers of the old companies.) The tech press are a bizarre HR organization, as are the fully-corporate bean-counters who sign of on acquisitions (the bonus committee). To attract top talent, one has to pay for it; the generous annual compensation for which banking is known has been replaced by less generous (but possibly more variable) lottery-ticket allocation given the name of employee equity.

The “one corporation” dynamic is held together by the collusive– and almost certainly illegal– reputation economy that the venture capitalists have created. As a group, they decide whether they like a company or not. If appropriate laws were enforced, stopping all of that anti-competitive note-sharing and forcing them to think independently, the VC-funded world would behave much more like a fair market. Then, there probably wouldn’t be a palpable entity or “scene” that one could call “VC-istan”. There would be a much more heterogeneous array of new businesses, not all concentrated in one sector or geographical area.

Like the Efficient Market Hypothesis, the VC-istan Hypothesis is neither fully true nor fully false. There is truth in it, but it is not absolute. It seems to be mostly true, now. Its truth might change as conditions do.

Why is VC-istan bad?

I find it important to describe VC-istan and why it emerged because, to be blunt, I want to kill it. In order to defeat it, we must know it. I want to bring truth forward, because its particular truth is ugly and, if proper information percolates, it will render the VC-istan route a second-tier career, starving it of talent unless it changes its ways. Every time a smart person learns what VC-istan truly is, its position becomes weaker, because it becomes that much harder for its established caste to peddle unreasonable dreams and broken promises.

It’s not that I want to end venture capital as a financing process. To the contrary, I think it’s a very good concept, if poorly implemented now. So, what went wrong? The feudalistic reputation economy of VC-istan has a simple (and disgusting) rule: the VCs are your owners. They are not partners; they can destroy your whole career by picking up a phone. If you say anything negative about a venture capitalist, much less sue one in the (admittedly, fairly rare) even that he robs you, you’ll never raise money again. This sort of blacklisting could not exist on a fair market, because a small set of people taking the “protect our own at all moral costs” approach could only exclude their enemies from a small social circle, and not preclude venture investment outright.

It is, of course, this collusion that enables investors to establish themselves as the executive suite, to which even the most talented entrepreneurs and technologists (who are too numerous and unruly to hold any kind of collusive arrangement together) are subordinate. On a fair market, investors, entrepreneurs, and technologists would not separate so cleanly into these distinct strata with the bottom of one still above or near the top of the next. Rather, the talented technologists would outrank the untalented investors. The parties involved would have to find mutual respect for one another as doing fundamentally different, but important, jobs.

Investors have always been the top jocks in VC-istan, but the distribution of power between business founders (i.e. people offering connections to investors) and technologists (i.e. those doing the actual work) seems to have evolved out-of-favor for the technologists. Of course, there are plenty of computer programmers (myself included) who frequently turn away solicitations from “idea guys” who “just need a programmer”, so it might seem that tech is hot right now. Not quite; most of those are cases of “8″ technologists turning down “5″ business guys. If you compare at-parity, the business side has much higher status. A Business 8 is on the partner track at a top-5 venture firm and can raise a six- or seven-figure seed round on an idea; a technology 8 cannot afford to buy a house in the Bay Area.

This lexicographic rank-ordering replicates the old industrial regime in which being an “8 worker” just didn’t matter, because a 2 manager outranked you. That led to a collapse of motivation at the bottom, caused a bilateral loss of trust, and produced the Theory X culture of a hundred years ago. It wasn’t pretty. I hope that the software industry doesn’t go that way and, to tell the truth, I don’t think that it will; I take it as obvious that technology is much stronger than VC-istan and will resurrect itself no matter what goes down in the Valley.

That said, VC-istan has replicated all of the worst aspects of corporate life, but almost none of its virtues. The old corporate regime was bureaucratic, slow, and prone to corruption and inefficiency, but there were good things about it. Companies invested in their people, and job losses were a rarity, taken as a sign of business failure, rather than an artifact of the mean-spirited “stack ranking” for which companies like Welch’s GE, Enron, and Microsoft have become notorious. The negatives of the old corporate regime were conformism, short-sighted profit-seeking behavior (externalized costs, mostly), subordination, political corruption and inefficiency, and the emergence of an exclusive, sexist and classist “old boy’s club” at the top. That those failures existed (and continue to exist) in many powerful corporations is not controversial.

Most VC-istan companies, as it turns out, have all of these negative traits as well! Startups who no-hire (or fire) over “culture fit” (often, synonymous with “being old, female, or of low socioeconomic origin”) are taking conformity to a far worse extreme than a 1970s-era corporation, which would make much more of an effort to find a place for a “nontraditional” but talented person. The evidence, in truth, is pretty strong that the stodgy bureaucracies of yesteryear were will much fairer (if frustratingly impersonal, since that is usually a prerequisite for fairness) than the new VC-funded “lean” regime.

Sure, there are excellent startups that are free of the above-mentioned ills. They exist, no doubt. However, it’s no easier to find one of those than it was (or is, now) to find a bullshit-free niche of a large company. On the whole, I think having traded in the large companies of the 1960s and ’70s for VC-istan has not been a good deal.

Then, there’s the issue of age discrimination. This will fuck all of us in the ass, and sooner than most of us think, so we need to address it head on. More importantly, ageism is just terrible for technology. Yes, the modeling profession has an expiration date as well; it’s not only programmers who face that. On the other hand, models get to start working in their teens, and there isn’t much of a learning curve, so the loss to the industry is minimal. In technology, on the other hand, it takes years of dedicated full-out work-your-ass-off experience to get any good. It’s an insult to programmers and technology as a whole that a group of talentless, superficial people who have no fucking idea what it takes to be any good at this work, have decided to impose age-grading that begins to close opportunities almost as soon as one has developed a passable level of skill.

In a later essay, I’ll reveal the true and secret cause of VC-istan ageism. It’s not lower wages or some belief that younger people are more creative. It’s far more damning. Here’s a hint. Watch The Office, pay attention to Michael Scott and Ryan Howard.

I don’t know if I will succeed in killing VC-istan. I don’t know what will replace it if I do. I do know that the guys at the top need us more than we need them. I’ll cover that in a future essay, as well.

What is not VC-istan?

Having described what VC-istan is and why I don’t like it, let me give a few comments on what it’s not. First, it’s not all of venture capital. I don’t consider biotechnology or clean energy to be part of VC-istan. The rules in those industries are different, because one actually has to know something about biology, for example, to launch a medical-device startup. The superficiality, ageism, celebrity culture, and lack of respect for hard work that characterize the current bubble crop are not found there; in fact, it’s the opposite, because there are objective goals to be met. VC-istan is focused on light technology, which I use to describe the marketing experiments using technology that, in 2013, seem to outnumber and outcompete (for funding and attention) true technology companies. In light technology, the sole technical challenge is “scaling”, which can be back-filled once flush with cash and able to hire the Valley’s best engineers; but the glory goes to the investors and founders who “had the vision”. So perhaps I might say, “venture-funded light technology” instead of VC-istan; the former sounds less pejorative; but VC-istan has fewer characters and it’s 10:40 at night so, fuck it, brevity wins.

What is it that marries VC-istan to light technology? After all, shouldn’t profit-maximizing venture capitalists go in search of meatier ideas that actually need the investment? Well, many do, and I’m not writing about them. I’m writing about the starfucker types who want to be profiled in business magazines, the ones who want social access more than success on the market, and who thereby sell out not only their own chances at success, but also human decency by creating the collusion and celebrity culture.

Where this ultimately leads is the Parable of the Bikeshed, or what Freud called the narcissism of small differences. People (even those in power) are generally willing to defer to the experts on the big, infrastructural, but usually aesthetically unpleasing (due to their complexity) matters, like how to design a nuclear power plant. “Just bring me the sausage; don’t tell me how it’s made.” On the other hand, on those matters that seem accessible, people form strong opinions. There is little power in the complex and objective, where those who are blatantly wrong will be punished regardless of who they are, and those who have knowledge generally got it through that rank-middling practice of working very hard; but much more power in the simple and subjective, over which simply having made the decision is victory. (The association of arrogant simplisticism with power seems to be present in literalistic religion, too. Notice how many historical deities had strong and explicit opinions about mandatory metaphysical beliefs and about gender roles; but said not a damn thing about how to make antibiotics, which would have actually been useful.) The consumer-oriented light technology that’s in vogue in modern VC-istan is a realm where it’s easy to debate what color to paint the shed, and that’s why it attracts the biggest narcissists.

Venture-funded light technology is, to put it bluntly, a multi-billion-dollar bike shed. In biotech, one can only fund companies whose founders actually understand the science, and pumping money into smiling, stylish idiots is equivalent to incinerating it. For a contrast, the upshot of VC-istan light tech is that any idiot can come up with a plausible scheme, which is much to the benefit of sad-but-established men who “see things in” mediocre but superficially attractive suitors.

One might prefer that this arrogance remain in light technology, which would render it fairly harmless and, in fact, useful. Light tech isn’t a bad thing. Often, it does a much better job at marketing real infrastructural improvements than the inventors ever could. It also can disrupt established and parasitic rent-seekers. I’m not a fan of Uber, a service used mostly because it confers the value of being able to say one uses it (i.e. is able to afford it) but I do welcome anything that threatens to take down the Medallion Mafia. The problem with light technology’s bubbles is that they overreach and, when they get beyond their natural territory, the marketing wizards become devastatingly incompetent. We see a once-great city ruined by absurd rents due to the complete inability of the supposed wunderkinder to solve the city’s biggest problem: housing scarcity. We see that horrific, Aspergerian foray into politics that is Mark Zuckerberg’s FWD.us (which I call “fweed-oos” because I refuse to call it “forward” anything). We see a whole society beginning to hate technology because a few hundred overprivileged celebrity jackasses (most of whom haven’t written code for decades, if ever) are going out and making a bad name for all of us. That’s bad for the future of technology. It’s bad for those of us who are coming up.

So… fuck it, let’s see if we can end this shit on our own terms, or at least take it down a peg or few. My job is to bring truth, and then it’s up to us as a group to decide what to do with it.

This review is written in some haste. Apologies for choppy writing.

Breaking Bad‘s finale aired last night, and at first, it felt a bit incomplete. There weren’t many surprises. The machine gun really was for Uncle Jack and his Nazi crew. The ricin actually did go into Lydia’s stevia. Walt died shortly after achieving what he needed to do– kill the remaining threats to his family, arrange his money to be given to his family, do his best to keep Skyler out of prosecution, and free Jesse. The finale was extremely tense, but everything went as it was supposed to. It was like the (intensely satisfying, and initially victimless) train heist “Dead Freight”– until Todd fucked it up and brought back the evil. Where was the horrible twist that everyone expected? There wasn’t one.

On reflection, I realized that that was the twist. Walt didn’t exactly “get away” with his crimes– he died alone in a meth lab, and his children will credit his ex-business partner for the benefit he’s conferred upon them. However, it was a happy ending, at least, as happy as it could be, given the horrors of the first 61 episodes. Let’s look at it:

• Eliot and Gretchen, who (regardless of the still unresolved backstory with Walt) didn’t deserve to die, lived.
• Walt finds an ingenious way to make sure the money will go to his children, as planned.
• No one more in Walt’s family died, and threats to them have been neutralized (machine-gunned, ricin-poisoned). Skyler has a good chance of escaping prosecution through cooperation (the coordinates).
• Walt was able to communicate, convincingly, to his wife that he didn’t kill Hank.
• Walt died at the height of competence, doing what he loved to do and achieving his goals brilliantly.
• At least for now, there will be no more blue meth in Albuquerque.
• Jesse went free.

It was as close to a happy ending as Breaking Bad could have, without losing credibility. (If Walt had lived another five years, or if Jesse and his family had forgiven him, that would break credibility). No more good guys died. That was the twist. The series is still, of course, a tragedy; tragedies can end happily (modulo the means, which are rarely justified by the ends) so long as they are pervaded with suffering.

So why did that happen? Here’s my theory.

Breaking Bad is fundamentally about a man and his lies. We don’t know, for sure, why his scientific career failed. In fact, he worked at Sandia for some time after his exit from Gray Matter, so he almost certainly can’t blame Eliot and Gretchen for his underachievement. Besides, all objective evidence the show gives is that they’re fundamentally good people; Eliot offered Walt a job. My best guess at why Walter failed? Impostor syndrome. To Walter, the excellent career he should have had– even after Gray Matter, he’d have had a lot of options– felt like a lie. Being a weak man when young, he let that sabotage him.

Walter White is not from a wealthy or happy background. His mother is still alive, as hinted early in the series, but he has no contact with his parents and, for a man who claims to be all about family, that’s weird. Are Eliot and Gretchen (who Walter attacked as being a “rich girl” in “Peekaboo”) at fault for Walter’s failure? Of course not. He would have had a million options even after that. Yet out of some cocktail of deep-seated insecurity, latent anger, and contempt for humanity, he threw his promise away in exchange for a thoroughly mediocre life: a wife who never fully respected him, a crappy financial situation, and a suburban lifestyle that bored him.

In Season 1, we’re confronted with the end of his first big lie: that he was happy in the humdrum life for which he’d settled. Cancer wakes him up. He begins down the road to Heisenberg. He swings from lawful-good (lawful neutral?) meekness to chaotic-good badassery, as seen when he destroys an arrogant investment banker’s car, terrorizes his son’s bullies, and nearly kills Tuco with (“this is not meth”) mercury fulminate. That chaotic good character, sadly, cannot live for long in the drug world, which is evil but has its own laws, and therefore pulls a person right toward a lawful-evil attractor over time. He swings toward chaotic evil (deaths of Jane and Gale, poisoning of Brock) and then, when he’s a fully-fledged kingpin, goes back to lawful evil. It’s a continuous C-shaped arc through the law/chaos vs. good/evil space that is imperceptible from episode to episode, but clear when the series is seen in totality.

Cancer strikes again, at Season 5′s midpoint, and kills Walt’s second big lie: Heisenberg. He was happy, he was good at it, but he refused to admit this to himself. He was doing this horrible thing– that he never needed to do, considering Eliot’s job offer given in Season 1– “for his family”.

Throughout Series 5b, Walter White’s lawful evil waned as the cancer weakened him, and as his life fell to ruin despite his best efforts to keep it together. Morally, he settled– into “dead to rights” neutral. Not good, not evil, not lawful, not chaotic. Walter is a bad man– a moral failure, a fundamentally weak person driven into bad choices by his own damaged personality– but not an evil one. Toward the end of 5b, his ability to be truly bad, even, waned. There ceased to be a point in it. At the end, he was a pathetic man who could only buy friendship, at a steep price of $10,000 per hour.

If Walter had become “good”, it would have been a fuck-you of sorts to the numerous victims of real-world methamphetamine. It would have made Walter’s trajectory “OK”. That couldn’t happen. Walter never became good again; one could debate whether he ever was. In that last episode he was, however, honest. “I did it for me. I liked it. I was good at it.”

Liberated from his decades of lies– the seemingly good-natured Eliot as the cause of his professional failure, the idea that he was ever happy in his underperforming suburban lifestyle, and the Heisenberg wish-fulfillment– he was able, at least, to summon the highest level of competence. He ended that way not because he was a man without choices, forced to protect his family. He did it for him. Yet everyone who deserved to die did, and not a man (or woman) more. Then the one who knocks, knocked off, pretty much on his own terms.

Had Walter been still mired in his lies, the ending wouldn’t have been nearly as happy. He might have killed Eliot and Gretchen in a vindictive rage, losing any chance of his family’s escape from the misery he created. He might have done his family in out of some hideous “mercy” justification. There are a million ways that, had Walter not broken away from his old self-deceptions, he could have ended things in a much worse way.

Oddly, the lack of a twist ending was the twist. Often, twist endings deal with concealment and artistic “dishonesty” that is rectified at the end. Here, there was no place for that. The lies that are torn apart in a drama’s ending were right in front of us the whole time, and their demolition was exactly what had to happen.

One of the more interesting game design challenges is to combine two games. What would a mashup between Chess and Go look like? Or Magic: the Gathering versus Backgammon? How about Arimaa meets Oh Hell? Most of these mashups flat-out wouldn’t work; some might. Here’s my attempt to create one that, I think, would at least be interesting. Perhaps a bit depraved, but so it goes…

Combinatorial game theory gives us a mathematical definition for the sum of two games, but that rarely creates interactions between the two and, anyway, the games I’d want to mash together tend to be more complex (3+ players, hidden information) than typical combinatorial games. So that’s not what I mean to talk about here.

There are two typical techniques for combining two (or more) games. One is to put them in conflict. Each has its own winning (or losing) condition and it’s nearly impossible to perform well in both (see: Attika). This creates a “between-game” game of figuring out which one to play, while defending against other players’ attempts to win either. The other is to make one game support the other, insofar as success in one leads to having more resources in the other, from which the winning and losing conditions derive. I’m going to take the second approach.

What would happen if you combined Ambition (go here if you don’t know what that is) and Cards Against Humanity (go here)?

First of all, a single round of Ambition works with 4 players, but that number seems to be pretty strict. I haven’t been able to come up with a decent variant for a different number. However, a full game of Ambition can be played with 5+, by rotating people in and out of 4-player rounds (“tournament style”). There’s a lot to say about table position and fairness (no player getting two or more rounds in excess of another) and ending conditions that you need to consider if you want to run a serious tournament, and that stuff I won’t get into here, because it’s not relevant to the deliberately unfair mashup game. Chances are, if you’re combining Ambition with Cards Against Humanity, you’re interested more in hilarity than fairness…

So how does this mash-up work?

Players: 5 or more. You could play it with 4, but the strategies aren’t as interesting because no one ends up sitting out of the Ambition round. Since each round of Ambition plays with exactly four, this means that some players will have to sit out of each hand (as with tournament play). However, each player participates in the Cards Against Humanity component, which is used to select players for each round of Ambition.

Equipment: you need a Cards Against Humanity set, the equipment for Ambition (cards and chips/counters), and an additional deck for (silent) ranked voting.

Round structure: each round begins with a Cards phase, in which everyone plays. To keep anonymity around whose choice is whose, everyone votes silently, and the choices are shown only once all have voted. Instead of voting for one choice, it’s a ranked voting system (each player ranks all submissions) resolved with a Borda count. That is, if there are 7 players, then each 1st-place vote is 6 points, each 2nd-place vote is 5 points, and so on… down to last place, which is 0 points. So if John gets 3 first-place votes, 2 seconds, a fifth, and a last-place, his total score is 3*6 + 2*5 + 2 + 0 = 30 points. These voting points (with one exception, below, should a player get all last place votes) aren’t scored to the game; they’re only used to determine who plays at a round of Ambition.

The top three vote-getters, and the last-place vote-getter, begin a round of Ambition. However, it’s a deliberately unfair round. The first-place vote-getter gets an initial hand of 18 cards; second-place vote-getter gets 16, third-place vote-getter gets 14. Each of those selects a 13-card hand from that pool. The last-place vote getter gets the remaining 4 cards, plus the 9 cards not wanted by the other players. Unlike in the typical game, the 3-card pass at a round’s onset does not occur. Then they play a round of Ambition, according to the normal rules.

Tie-breaking in voting: If there’s a 1st-2nd, 2nd-3rd, or 1st-2nd-3rd tie in vote points, you don’t need to break the tie; just average the initial hand sizes together. For example, in a 1st-2nd tie, you’d have the tied player getting 17 cards each. In a 1st-2nd-3rd tie, they’d each get 16. If there’s a 3rd-4th tie– meaning one player will sit out– then tie-break in favor of the person with more first-place votes (if tied in this, then use second-place votes, and so on). If there’s still a tie after all that, meaning they have the exact same vote distributions, then the player who is farther behind sits in the round. (If they’re tied in even that, then flip a coin.) Ties for last-place are resolved similarly, except in “favor” of the person with the most last-place votes (and so on) and, if that fails to break the tie, then in favor of the player who’s most ahead in the game.

Objective: points and strikes, earned during the rounds of Ambition, accrue from round to round. When a player accumulates four strikes, he loses and is eliminated from the game. Once K players (1 < K < N-3) have been eliminated, the game is over, and the player with the most points (among those without 4 strikes) is the winner of the game.

Note: choice of K, above, depends on what you want from your game; higher K means more players are eliminated on strikes, making avoidance of strikes more important relative to getting points. In tournament-style Ambition, typical K is 0.33-0.5*N, but if you’re looking to have a light flavor and don’t want player elimination, just use K = 1 (i.e. end the tournament as soon as one player’s eliminated).

Exception (Misere): if any player receives only last-place votes from each player in the Cards Against Humanity phase, the round of Ambition is not played, and that player scores 120 points (equivalent to the best possible outcome of an Ambition round). If someone chooses so horribly as to receive across-the-board last-place votes (including from herself) she did something right.

Strategy: note that this mash-up is an unfair Ambition tournament, with the unfairness derived from success in Cards Against Humanity. However, there are a few interesting considerations. Note Ambition’s two-dimensional scoring system. There are points, which are the normal objective; and strikes, which can cause you to lose even if you have the most points. If you have three strikes, you’re much more focused on avoiding strikes than if you have none; in the latter case, the risk of a strike is worth taking if there’s a good chance of getting a lot of points (e.g. a Slam attempt). Where you are in the game determines whether you’re more focused on avoid strikes or on getting points.

In general, in Ambition Against Humanity, you want to do well in the voting phase so you get to play Ambition rounds and score points. However, the third-place prize (getting into the round, but with a relatively mediocre hand) is not always desirable; sure, there are opportunities to score points, but also to strike. Conversely, the last-place (in voting) punishment isn’t always bad; you end up with a crappy hand, but that still gives you an opportunity to score. So you may find yourself trying to avoid a top-three finish in the Cards phase if you’re at two or three strikes; or, if you have relatively few strikes, you might go for full-on awfulness in order to get a last-place finish, just to get yourself into the Ambition round, or to attempt to get the 120-point bonus when a player completely fails in the voting.