The world that tech startups delivered to us is not what we were promised: Benjamin Shestakofsky

Benjamin Shestakofsky, assistant professor of sociology at the University of Pennsylvania.

In the early 2010s, Benjamin Shestakofsky, now an assistant professor of sociology at the University of Pennsylvania, joined a Silicon Valley-startup as an intern and, as he worked his way up into middle-management, spent the next 19 months studying its functioning and ecosystem from the inside. His book Behind the startup: How venture capital shapes work, innovation, and inequality is an analysis of daily life inside All Done—mentioned only by its pseudonym—and dissects the systematically damaging impact of venture capital (VC) investors on entrepreneurs, workers, and societies across the world.
 
Shestakofsky writes: “To help offset the risks, they [VCs] assume when investing in new companies, venture capitalists take an active role in the startups they fund… Investors monitor the firm’s performance and participate in corporate governance… They use this authority to protect their investments and ensure that the company acts in ways that will maximise the financial interests of their limited partners… control the firm’s most important decisions including when and how to change corporate strategy, when to raise additional funds, and whether to replace the company’s executive team.” 
 
In current times, with the promises of a golden future made by tech startups mostly coming to naught, Shestakofsky talks to Forbes India about the all-pervasive atmosphere of low information and high uncertainty within the startup ecosystem, the factors that give rise to the cults of so-called genius founders, and the growing backlash within society and governments against technology companies and their walled gardens. Edited excerpts: 
 
Q. What gave you the idea to study the startup ecosystem from within, the role that venture capital plays in its functioning, and, therefore, join All Done? 
There are two ways of answering the question. The first is simply related to my prior work experience in a startup. I was part of this company; I think I was the third employee. I had joined because a college friend just told me one day, ‘hey, I'm starting this company, and I'd like you to come work for me’. He was such a good talker; he could convince anyone of anything. I was fascinated with how this young kid could get seed funding to get this thing off the ground. He talked his way into a feature article about our company into New York Times on the weekend we were set to launch.  
 
That early experience gave me a lot of questions and a sense that, in the startup world, there can be this disjuncture between what’s promised and what's actually delivered. And I wanted to explore that world more. 

Also read: Explained: Why some Indian tech startups are 'reverse flipping' now
 
As the research developed, I got more interested in the influence of funders and venture capital. Partly because the stories that were being told [in the media] about startups were incomplete. On the one hand, the stories were about founders who, maybe, are bad boys; brash, arrogant, trying to shape the world in their image. Stories that focussed on individual personalities.  
 
At the same time, in the academic space, so much of research in the last decade has relentlessly focussed on the technology itself and carries the assumption that, when good or bad things happen, it's the algorithms that did it, it's the AI that did it.  
 
All those stories were missing these powerful institutions and actors who set the agendas inside these companies and generate the incentives that cause both—tech founders to behave the way they do, and software developers to create the kinds of software they create. That's why I wanted to examine and tell the story of how all the activity inside the firm was set in motion by this quest for venture capital investment. 
 
Q. Over the years, there has emerged the phenomenon of the founder as a genius, by which they are able to convince others—investors, employees, consumers or future shareholders—of whatever it is they want to build. How do you think the rise of personalities, such as Steve Jobs and Bill Gates from among the Big Tech companies, has influenced this phenomenon among startup founders? 
From a sociological perspective, it's important to remember that when it comes to the world of tech startups, everyone is operating in a low information environment, with very high levels of uncertainty. So, oftentimes, founders don't really know exactly what their product will be, where they will find their mark. They have some ideas, some inklings, some things they want to try out. But, at the same time, they have to be ready to pivot at any moment, to try something new when what they were imagining isn't working out.  

Also read: Startup report card: India versus the world
 
So, they have to hold on to the specific ideas about the product very loosely, while being incredibly adaptable. In those kinds of environments, where there's such a high degree of uncertainty, other stakeholders are looking for signals that this is someone I should place my bets on. Whether that's because they are able to develop an aura of unique genius, or—I'm thinking of the Travis Kalanick-type—the take-no-prisoners, alpha-male approach of not going to let anyone tell me what I can and can't do.

 
 
There are probably different personas that founders might take on. These big personalities are, in a lot of cases, just trying to fill an information vacuum and to send signals that say, ‘I am a person who can be trusted to bring a vision to fruition’.  
 
One other thing that we see from sociological literature on organisations is what's often called mimesis. [This means] if there are versions of strategies or personalities out there that appear to have been successful in accumulating resources, then other people tend to copy those models. Like, ‘my company is like Uber, but for ice cream delivery’.  
 
There's that way in which founders try to signal to others they are fitting the mould of pre-established success. So many startups seem to conform to the same kinds of office environments, with open office plans and foosball tables. 
 
Q. Do you think these office formats actually make a difference to employees? 
I think the symbolic importance matters perhaps more than the manifest importance. 
 
I don't know whether it really matters that much to startup employees that, ‘oh, after 6 pm I might go and grab a free beer out of the fridge’. But it really matters to people because it shows that they work in a high-status place where people trust them to use their judgment to make good decisions. ‘I work in the kind of place where there's a lot of perks that are offered, where people are encouraged to have fun as they're doing their work.’ I think that symbolic element, the signalling to other people about your status because you're involved in a venture like this, that fits that mould. That can matter as much to employees and founders as the actual benefits.

Also read: Is it time to call time on traditional office hours?
 
Q. An Uber for ice-cream is a relatively familiar concept. But where startups dealing in scientific or high-tech subjects are concerned, it is often difficult for the media to figure out what exactly the company is building. As was the case with, say, Theranos and Elizabeth Holmes. What do you think has been the media's role in building up the conviction and confidence that startups are able to generate? 
In these kinds of high uncertainty, low information environments, it is so important for founders and entrepreneurs to acquire these external signals of legitimacy, and media coverage is a really important one, to be able to say to your investors or employees that we are in TechCrunch today, a Fast Company next week. All of this really matters when it comes to acquiring resources. So, you know, the incentive is clearly there for founders to over-promise. Then, of course, in some cases, there seems to be outright fraud occurring as well. 
 
But it's not just members of the media who are receiving this sort of messaging; It's anyone who holds resources that a company might want to secure, such as investors. The media is a piece of this ecosystem, and a sort of hype machine. 
 
And the media can be in a difficult bind because, of course, there's not only the black box of scientific research or machine learning algorithms, where even the developers themselves may not fully understand why they are making the decisions that it is, but also the factor of not giving out trade secrets to competitors.  
 
Q. How has the broader perception of tech startups evolved over time? 
Over the past decade, reporters in the media have gotten a lot wiser, given how the public mood, at least in the US context, has shifted from reverence of tech companies and founders to what is now widely known as a ‘tech lash’. There's a lot of open criticism and scepticism coming from all corners and now you're less likely to see the sort of fawning portrayals of founders and companies that promise to change the world. 
 
We are in a place where there is more self-consciousness about the need to be, if not outright critical, at least sceptical. The media's role at this point is really to be forthright about what we know and what we don't know, what can and can't be demonstrated right now, and to pay attention to the here and now and the present effects of technologies, rather than staying focussed on stories about what will happen in the future, which may be quite enthralling but often are never going to come to pass. 
 
Q. In his book Techno-feudalism: What killed capitalism, Yanis Varoufakis talks about the concept of ‘techno-feudalism’. About how Big Tech companies such as Amazon and Facebook have carved up the once-free internet, which is likened to free land, and now charge people for using the products of the land, much like feudalism. Now, you're talking about the tech lash. How do you think this is taking shape, and what are the reasons behind it?  
It comes from a lot of different fronts. The media, in tandem with the tech industry, really got people's hopes and expectations up about what this current wave of technology [can do]. In the decade following the rise of Google, there were really big claims about how the world was going to be transformed in a way that would decentralise power and democratise different social systems.  
 
I'm thinking of all the hype around the sharing economy that came up in the early 2010s. And the idea that tech platforms like Airbnb and Uber and Lyft were going to wrest power from the established incumbents in a variety of industries and distribute that power to the people, to individuals who would themselves all become small business owners and entrepreneurs who were able to pursue their dreams and maximise both their individual compensations and also their own personal values, whether it's by creating content or renting out their spare room or using their spare time to drive a car. 
 
There really was an exciting vision that was propagated by both the tech industry, and echoed in the media. There was, on the one hand, bound to be a letdown when it turned out that these new tech companies were, in fact, displacing old incumbents and weren't really distributing power to individuals, so much as they were consolidating their own power.  
 
They were creating what's sometimes referred to as walled gardens, a space that we have to play in. And this infrastructure that we have become so incredibly reliant on—and not just Facebook, Instagram, TikTok and Amazon.com but the web services and cloud computing infrastructure that the entire digital world runs on—is in so few hands. 
 
Part of the tech lash may have come from the letdown—that the world that was delivered to us is not necessarily the world that we were promised.  
 
Q. What is the way forward? 
I'm not a determinist when it comes to technological change. And I do think there's a lot of promise and possibility for change. There are plenty of social movements, government agencies in different countries, and actors in all sorts of places who are organising to try and provide a counterweight to some of these problems that have been created by new technologies, whether it's people organising against police departments using facial recognition technology, or the [Joe] Biden administration in the US that brought in an FTC commissioner who really did start taking a harder line on some of these monopolistic actions of tech companies than the previous couple of decades. 
 
So, I don't think it's inevitable that we're stuck forever in the world of big tech. There is a lot that is being done at local levels, at state or provincial levels, at the national level to try to level the playing field and balance things out. There's enough awareness and interest among the general public about many of these issues, and it feels like the tide has started to turn. Of course, these are massive corporations with incredible amounts of power and political influence, but it seems like things are at least pointing in the right direction, even if they're not quite there yet.