New Yorker Magazine: How Venture Capitalists May Be Deforming Our Industry
In this week's New Yorker magazine, Charles Duhigg explores how venture capitalists may be harming our businesses. The article shares that instead of the best company winning, the charismatic charlatan with the most venture capital backing may be winning. In WeWork's case, the company almost won by reaching its IPO. Yet, even bottomless buckets of money couldn't save the company from the economics of office sharing--and its wildcard CEO Adam Neumann.
We have a few businesses in our retail industry that are founded on venture capital, including Faire (raised $100m+), Zola ($160m+), Gilt ($286m), and Wayfair ($190m+). Sadly, many of our industry's trusted brands do business with these unfairly supercharged bullies. One may ask: how are indie stores supposed to compete with such well-funded competitors? The New Yorker article thankfully shares that these companies may drown themselves in their own well of money. But, what of those companies that don't drown and simply make the lives of other honest businesses miserable? Therein lies the question of how we identify and weed out those actors.
When reading the article, the author stressed what a competent salesman Mr. Neumann was and how he hoodwinked so many people. This brought to mind other people with the power of persuasion, such as doomsday cult leaders, televangelists, politicians, con men, and some tech CEOs. These people can get the victim to trade in today for the promise of tomorrow; the TV preacher can convince parishioners to tithe $100 today for salvation tomorrow. The politician can convince you to vote for him today, and he'll release his tax returns tomorrow. In Mr. Neumann's case, to invest $1m today for stock worth $100m tomorrow.
The article reminds us that the fault is not totally with Mr. Neumann, though. VCs are supposed to be stewards of sound financial practices, and in this case, performed in a suspect manner. We need checks and balances in business, religion, and politics to safeguard us from those that practice the art of the steal.