Why is VC Twitter so peculiar?

Here is an email from an anonymous MR reader, on exactly that question:

– VCs are in the business of speculating about the future and identifying underestimated trends. They are subjective to evolutionary pressure that selects for heterodoxy.

– As capital supply increases, the importance of differentiation on other axes increases. VCs have a growing incentive to personally market their product.

– VCs lack conventional bosses who could sanction them if they say something ill-advised on Twitter.

– VCs face some of the most asymmetric return distributions of any profession. Two instances of being correct can outweigh being wrong in every other case.

– Much of what supposedly-controversial VCs say is not actually contrarian but widely shared but repressed since most people have a strong disincentive to attract opprobrium. This disparity heightens the oddity of VC twitter.

– Unlike many occupations that profess to be about ideas but often put form above substance, VCs in some substantial sense actually are. What can seem like naivete is often a genuine engagement with the basic questions.

– Therefore, in our shared pursuit of novel ideas, we should give thanks to VC Twitter. Which category of Twitter users is most similar?

Should we expect those seeking VC money to tweet in similarly idiosyncratic ways?  They too face long odds on particular projects and tend to end up in equity-heavy positions.  Should the most “conservative” tweeters be those with high perks but no job security, for instance still untenured professors?  Heads of philanthropic foundations?

Overall, I find it striking that most individuals use Twitter for “double down” strategies, rather than “portfolio diversification” insurance strategies.  For instance, people who pursue overall risky courses of career action don’t play it safe on Twitter as a kind of career fall-back or insulation.  Perhaps that means at the margin “marketing” is more scarce and valuable than “insurance,” and thus start-ups — and venture capitalists — should pay heed to that.

Comments

– VCs lack conventional bosses who could sanction them if they say something ill-advised on Twitter.

"Ill-advised" refers to anything other than bland recitations of innocuous consensus for the purpose of impressing peers and coddling activists"

VC's don't have bosses-but they do have other external constraints. For example, the money allocators at pension funds, family offices etc might not like a constant politically tweeting VC. Entrepreneurs are known to cut right leaning VCs out of deals these days, so many VCs stay in the closet politically. Some VCs are indeed bland and innocuous and not out of the box thinkers. They wear the sweater vest and went to the right schools so they could get a gig in VC

As someone who is afraid to post innocuous comments on MR and slatestar codex under my real name for fear of losing my job, I can't imagine anyone 'diversifying' their Twitter persona as cancelable. Someone who is unafraid to lose their job need not placate anyone with their tweets.

One the text analysis AI gets good enough we will find you.

1. We could find *everyone*. New equilibrium is not obvious.

2. Maybe before/by the time text identification gets accurate, text generation based on someone's writing style will already exist, giving the anonymous an out – at least for recent writings.

I find it interesting that Tyler views Twitter as having any bearing on one's career at all. The vast majority of Twitter users can neither improve nor worsen their professional status through the platform; most just use it to read posts from the tiny sliver of users who actually "create content."

The "diversification" idea also doesn't translate very well to many careers. I'm a lawyer; my clients hire me in large part because of my reputation for probity, reliability, etc. (Or at least so I hope.) Going wild on Twitter would directly contradict these values. For example, see George Conway, who left the partnership at what's probably the most well-regarded law firm in America (Wachtell) in what I can only assume was a direct result of his newfound Twitter celebrity. That might be a fair tradeoff for him, but it's one or the other -- he certainly couldn't "diversify" through social media in any meaningful way.

George Conway has almost 1M followers. If that didn't make sense to you that is okay but for a lawyer that is just nuts. In today's social media environment, it means that he has a very capable channel to monetize, to influence, or to do both. He will likely do both. Trump Derangement Syndrome is a very profitable business model. Many people will want a piece of that pie.

Including his wife Kellyanne, Mr. Trump’s senior counselor.

It's an intra-family diversification strategy, like James Carville and Mary Matalin. One member will remain in favor no matter who's in power.

Is Matalin a Trump supporter?

"The vast majority of Twitter users can neither improve nor worsen their professional status through the platform"

Actually, I think most people can worsen their professional status, through Twitter or any other public forum.

"my clients hire me in large part because of my reputation for probity, reliability...Going wild on Twitter would directly contradict these values."

Perfect example.

Conway has a lot of followers, but they're basically tuned in to watch a monkey-cam. When will he fling poo next? No one considers him influential; even the tiny community of never-Trump Republicans suspects that he doesn't really share their deeply-felt aesthetic objections to the Trump presidency and is in fact just a disappointed office-seeker. Once Trump is gone, Conway will have no following and no legal career.

I guess it is possible for people who live in the consensus bubble to be unaware of the dangers of cancel culture. It is unidirectional.

https://www.theatlantic.com/ideas/archive/2020/02/evidence-conservative-students-really-do-self-censor/606559/

The number of levels at which you as an entity is recognizable is likely hard to grasp. The modern Internet, especially when accessed with mobile devices, is a finely meshed surveillance machine in the interest of profit. Though not as common as before, a certain category of people like to point out that power is what governments pursue, not profit - a fact often kept private by those profiting from the contracts made with governments.

Palantir, to use an MR friendly example of a successful VC scoring a big payoff, is based on a business model which allows potentially anyone to know what you do online. A more concrete example in our case might be to reference i-360, the sort of background data aggregator that happily collects all data possible from any web source willing to share it.

The amusing thing is that this web site is also upgrading in the background - various IP addresses are tied to various actions, apparently. Nonetheless, enjoy reading about all the ways i-360 knows who you are, provided even minimal access to MR's server logs. https://www.i-360.com/

Tyler, when are you going to have a 'conversation' with Michael Lind about his book 'The New Class War?'

Many years ago, I worked for a truly small man named Michael who employed colorful metaphors at staff meetings. "Holy Gabardine!' and "Get our ducks in a row!" come to mind. Some of us would keep count.

President Trump at Daytona 500, "No matter who wins 'God, Family, Country' matters most."

I was under the impression you true-believers believe the dreaded one-percent is the source of all evil. Now, you're allowing one to buy the nomination. The irony is delectable.

Michael Bloomfeld at a staff (some kept logs of his "michaelisms")meeting, "If Jesus was a Jew, why did he have a Puerto Rican name?"

Great post. Thoughts:

1. > "people who pursue overall risky courses of career action don’t play it safe on Twitter as a kind of career fall-back or insulation."
Statistically, isn't this selection? Individuals' riskiness influences job choice more than jobs influence riskiness. Dr. Non-Strange or: How I Never Learned to Stop Worrying and Love Tenure.

2. Generally, culture scales nonlinearly. Put enough VCs together offline in SV or online on Twitter, and you create a magnetic safe space, an insulation, where weirdness isn't nearly as taxed socially or professionally, and where the heroes themselves are weird. There are plenty of other peculiar Twitter communities; they just don't matter.

3. Specifically, arbitrage can be financial for money or epistemic for status. Venture capital selects for those willing and able to go against the consensus, whether that's betting against the market for goods and services or the marketplace of ideas.

On point 2, there is a TON of virtue signaling in VC Twitter. There are taxes to be paid if you are right wing and a VC. Can mean you don't get a job, or have a significantly harder time raising a fund.

and a harder time with deal flow. Thiel didn't leave SV because he couldn't raise a fund or didn't have a job.

"They are subjective to evolutionary pressure that selects for heterodoxy."

To call it heterodoxy got a chuckle out of me. They all come from the same few schools (Ivy, Stanford) in the same majors (Business, MBA, maybe engineering) from the same social milieu (middle to upper class) and all worked in the same few prior jobs (tech, finance, consulting) at the same few firms previously (Wall St bank, Big 3, Big Tech). The "evolutionary pressure" seems to select for the orthodoxy no matter what.

VC is notorious for groupthink and herd behavior. Watch them pile on to oversubscribed cap tables after YCombinator demo day. They might appear insightful sounding once in a while but that's all marketing as Tyler wisely called it. VC is still a low risk, cushy job for overeducated types but the real measure of grit is on the founder side.

+1

Veni , Vedi VC.

+1 Let's not forget VC's anti-minority and misogynist biases.

+1. VC's make a big deal about diversity but they could do a lot more to recruit from state schools (from all 50 states not just the big ones!) or even those with just a high school diploma but from different life experiences. Or somebody who's held a blue collar job. Or from the military.

I learned about an impressive individual the other day named Jonny Kim. He was a Naval lieutenant, a Seal Team 3 sniper, a mathematician summa cum laude from a non-Ivy (a plus in my book), a medical doctor
(unfortunately from Harvard Medical School), and now a NASA astronaut. He served over 100 combat missions in Iraq and has a few medals to his name. His father had not even a high school education but turned one corner liquor store into thousands. This one guy alone is more diverse than an army of Silicon Valley VC's.

https://en.wikipedia.org/wiki/Jonny_Kim

This is true. Techcrunch did a study on where larger VC funds recruited. Most partners went to: Harvard, Stanford, MIT, Penn, Cal-Berkeley. The sort of next tier of schools represented were Columbia, Michigan, Chicago Booth, Northwestern (Kellogg). The first five outweighed any others. Even if the person were non-white or female, they usually went to one of the first five.

> VC is still a low risk, cushy job for overeducated types but the real measure of grit is on the founder side.

Indeed.

Now that globalization has commoditized qualities such as skill, intelligence, creativity, and persistence, it's the authentic and truly sociopathic CEOs who are difficult to locate.

Venture capital "kills more businesses than it helps". That's not necessarily my view, that's the view of the founders of startups that succumbed to the temptation of easy money. Call them "VC road kill". Fairway Market is just the latest on a highway littered with road kill. So why so much idolatry when it comes to the "killers" in venture capital? It's just an extreme example of the reliance on rising asset prices for prosperity. Here's a story about Fairway Market: https://www.theatlantic.com/ideas/archive/2020/02/how-private-equity-ruined-fairway/606625/ Here's an interview of Jason Fried: https://www.vox.com/2019/1/23/18193685/venture-capital-money-kills-business-basecamp-ceo-jason-fried

One major problem is the high debt levels employed to acquire which are pushed down to the target corporation causing huge over-leverage.

Many too-big-to-fail banks have huge amounts of highly-leverage transaction loans on the books, many which are less than creditworthy. Info on these so-called syndicated loan issues is readily available from the federal banking agencies through the annual shared national credit program.

no, it's not high debt. That's Private Equity. VC is purchasing small amounts of equity in a company and hoping it grows big. Typically a VC will own 10% or less of a company at exit. But, if you invest at a $7MM valuation and it exits for $1B, you can make bank.

Only by killing startups can VCs create capital scarcity to Jack up asset prices and create "wealth" by monopoly.

"As capital supply increases..." asset prices fall and wealth is destroyed, a situation contrary to the needs of VCs serving savers who expect 10% returns when the Fed pushes interest rates toward zero.

Some of the most wanted criminals are often caught during traffic stops. One would think they have extra incentive to obey minor laws to avoid arrest, but that is not who they are. The same goes for VCs on Twitter.

Truth. Seems, every time I'm in a hurry and I get behind a guy driving 20 mph in a 35 mph or being stopped five seconds at a STOP sign, I think the guy must be an escaped convict.

"For instance, people who pursue overall risky courses of career action don’t play it safe on Twitter as a kind of career fall-back or insulation. "

This is often a fatal mistake, I think. It is best to be radical in the most conservative way you can possibly manage, in order to maximize chance of success, as Robin Hanson pointed out: http://www.overcomingbias.com/2007/06/how_to_be_radic.html

That blog post was extremely influential to me personally. It's also why I don't have a public Twitter at all!

I am honored. :)

Is it really interesting content from this section of the twitter sphere though other than more navel gazing?

They certainly aren't going to reveal any interesting business ventures or upcoming investments unless for marketing purposes.

Weird political Twitter has actual divergent political opinions and takes on current events - but still nothing useful.

Contrast this with MSM personality twitter, their vapidness, and their lack of track record predictions, and actual ability to sway public opinion given their follower count.

Note, the number 1 VC tweeter is clearly Elon Musk.

Elon is perhaps the most successful VC today:

SpaceX, Tesla, Boring Co, Neurolink are his current ventures.
Past ventures are ZIP2. X.COM, Solarcity.

Unless you define VC as someone only tweets about things that can't do, like economics professors and pundits.

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