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June 28, 2017

Time to Rethink Silicon Valley?

Summary:

Silicon Valley got a free pass on ethics when computers were for nerds and hobbyists. Now, technology is the underpinning of economic growth.

Photo Courtesy of Pexels

The downfall of Travis Kalanick should show the world of would-be tech entrepreneurs that they need better role models, that they need to stop looking up to the spoiled brats who lead some of Silicon Valley’s most hyped companies and the investors who fund their misbehavior.

Travis Kalanick’s ouster from Uber is literally a watershed for the Valley, something that is capable of shaking up its entrepreneurs and venture capitalists alike. For too long, the elite have gotten away with sexism, ageism and, to coin a word, unethicalism. The cult of the entrepreneur idolized arrogant male founders who plundered money and even sank companies; the more money they raised (and often lost), the higher the valuations their companies received and the more respect they gained. Corporate governance and social responsibility were treated as foreign concepts.

Uber was not the worst offender in the tech industry; it was just the most visible and the one that got caught. Its investors have been rightly humiliated for having their heads in the sand. This is because it has for so long been clear that Uber needs management that is more responsible — to its employees, its drivers and its customers.

The trouble first surfaced in 2013, when complaints about male drivers’ assaulting female passengers met with denials of responsibility by the company. Then followed sexist “boober” comments by Kalanick; ads in France that pitched attractive female drivers; suggestions by an Uber executive that he would dig up dirt on a journalist; and the rape of a woman passenger in New Delhi partly caused by a lax screening of drivers.

See also: What to Learn From Uber’s Recent Troubles  

But through all of this, Uber investors supported the company and accepted the ethical lapses as if they hadn’t happened. All that seemed to matter was that valuations were rising; the business, expanding. Who cared that a top Uber executive had secured a copy of the medical report of the Delhi rape victim and shared it with other company executives, including Travis Kalanick, in an attempt to discredit her? The company was growing; investors were valuing it in the billions!

Things finally reached a boiling point with a series of allegations by a woman employee about rampant sexism and sexual assault at Uber headquarters. And, fortuitously, a board member illustrated the root of the problem by making a sexist remark at a meeting about eliminating sexism. The board was finally compelled to do something it should have done years ago: force Kalanick out and clean up its act.

To be fair, there are many technology companies that are, in this regard, exemplary, including Salesforce, Microsoft and Facebook. They are going to extremes to correct problems that they had found in their ranks. I know from discussions with executives such as Microsoft CEO Satya Nadella that they have been working hard and sincerely. But too many Silicon Valley stars are like Uber.

With the help of Arianna Huffington and Eric Holder, the company is at last working on reforming itself. And maybe the downfall of Kalanick will provide not only valuable but lasting lessons for the hotshots of Silicon Valley, and of tech cultures worldwide. If Uber can do it, so can the rest of the Boys Club. They have to realize that press releases won’t suffice, that real change is necessary.

Who are “they”? To begin with, the people who fund the offenders, the venture capitalists. They have not been held accountable, and they need to be.

The Diana Project at Babson College documented that, as of 2014, 85% of all venture capital-funded businesses had no women on the executive team, and only 2.7% had a woman CEO. The proportion of women partners in venture capital firms had also declined to 6% from 10% in 1999. And this is part of the problem for an obvious reason: Women don’t tolerate boys-will-be-boys behavior, because they aren’t boys. Moreover, as any number of studies have documented, diversity in companies yields a broader range of perspectives on the business itself and, often, better bottom-line results. And, as I have pointed out, high-tech women who are measurably better than men have been consistently discriminated against.

Venture capitalists are susceptible to business pressure. The money that they invest is not their own. It is raised from pension funds, universities and state governments. They must require venture capital firms to provide public disclosures about the diversity of the companies they invest in — including the gender and age of the executives. They must have a diverse set of investment partners, without sugarcoating the numbers using inflated titles for junior associates.

Next are the boards. Venture capitalists demand seats on boards as a condition for their investment but don’t usually fulfill their fiduciary duty to all shareholders and employees — they always put the interests of their own funds ahead of those of the company. They must take responsibility for the employees as well as for the success of the company, as board members are supposed to do. And startups must have diverse boards that provide balance and broad perspective, not chummy boys clubs dominated by venture capitalists.

Finally, all tech companies must take heed of the report that was put together by former Attorney General Eric Holder for Uber. There are obvious procedures to employ in making diversity a priority: such things as blind resume reviews; interviewing at least one woman and one minority candidate for each open position; limiting alcohol at work events and in the office and banning employee-manager relationships.

In most industries, discriminating on the basis of gender, race or age would be considered illegal. Yet, in the tech industry, venture capitalists brag about their “pattern recognition” capabilities. They say they can recognize a successful entrepreneur when they see one. The pattern always resembles Mark Zuckerberg, Bill Gates, Jeff Bezos a nerdy male. Women, blacks and Latinos need not apply. Venture capitalists openly admit that they only fund young entrepreneurs because, they claim, older people can’t innovate.

See also: A Trip Through Silicon Valley  

Silicon Valley got a free pass when computers were just for nerds and hobbyists. Few cared about its arrogance and insularity, because its companies were building products for people who looked just like their founders. And these child geniuses inspired so much awe that their frat-boy behavior was a topic of amusement. But now technology is everywhere; it is the underpinning of our economic growth. What is more, the public is investing billions of dollars in tech companies and expects professionalism, maturity and corporate social responsibility.

There is no free pass for the tech industry anymore. It must grow up and clean house.

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About the Author

Vivek Wadhwa is a fellow at Arthur & Toni Rembe Rock Center for Corporate Governance, Stanford University; director of research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University; and distinguished fellow at Singularity University.

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