How Common Is It For VCs To Just Be Lucky Early Employees Given Stock And Have No Idea How To Run A Business?

Money does not equal merit. Yes, it is quite common for people, attached to the right burgeoning companies (plural, I’ll explain), to end up with plenty of cash to become comfortably full of themselves, confounding their newfound money with merit.

I call the phenomenon you describe the Ferrari symptom. Simply put, the ability to buy a Ferrari does not make you a better driver, nor a capable one. Many onlookers will think so, and eagerly bow down to become, in sports parlance, just like Mike.

I know quite a few (albeit skilled) developers (and others with similarly narrow purview) who made a lot of money, and yet have no real merit, no intelligent foresight, or tested wherewithal to run or advise on the sum-off-all-parts of a viable business. To frame a corollary, a great builder is not by definition a great architect.

Many people who flock to Silicon Valley as the gold-rush of riches, now make it a sport to hop from one fledgling company to another to build a diversified equity pool for themselves and get out right before their accountability is put to the test or expires. You can accumulate quite a few riches if you play this game well, plus gain a gigantic hydrocephalus of misplaced merit.

The opinions of these people putting money in companies are quite useless, if not extremely dangerous, and a net-negative game to society. Especially when such hydrocephaly join venture capital. Vinod Khosla calls it the negative value of 70% of venture investors, I call it the self-induced failure of 99.4% of venture capitalists to yield consistent monolithic venture-style returns.

Innovation is destroyed by the malpractice of its arbitrage, in the same way, a game of soccer can be killed (not made) by a referee not applying the rules of soccer correctly. These people with money so desperately short of merit, as the primary reason why, despite the massive greenfield opportunity of innovation, venture capital, on the whole, remains a mediocre performer of returns.

The returns from innovation should have outperformed any other aging asset-class over the last 30 years if innovation arbitrage had only assumed the risk commensurate with, and tailored to, the risk of the asset (innovation) in question.

Same with investors with the cunning wherewithal to raise money, yet in reality have no propensity of foresight to yield an outlier thesis without precedent. Let alone understand the economics to build renewable socioeconomic value, way beyond the rat-race for money sold to “greater-fools”, with a proposition the world continues to care about.

You see it happening all around us, propped up by the mindless self-infatuation and fawning over the self-appointed über-mensch in Silicon Valley.

For example, Mark Zuckerberg is a wealthy guy by now, and his cunning ability to build an advertising empire around the (often unbeknownst) resale of your personal information may impress many fawning after his riches and power. But it is in actuality a game of moral and evolutionary deceit.

Facebook has turned from a fledgling company with reasonable socioeconomic value into a non-renewable and thus unsustainable behemoth of organized propaganda and socialism. As our luck will have it, he will now begin to use his wealth to do “more good” for the world, like a Wall Street dealer supporting the arts from the money he cunningly and mysteriously extracted from society.

I love technology, but I hate how our human-operating systems fundamentally confound money with merit, with technology as its willful conduit. Such is the source of evolutionary deceit that – unchanged – will make the most intelligent animal on our planet live the shortest. A serious problem that must be addressed, here or extra-planetary.

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