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TechEquity's Catherine Bracy On What Venture Capital is Doing to our Economy
2025/3/11
KQED's Forum
A
Alexis Madrigal
C
Catherine Bracey
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Isaiah
M
Michael
帮助医生和高收入专业人士管理财务的金融教育者和播客主持人。
R
Ryan
讨论创建自由派版本的乔·罗根的播客主持人。
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Srivan
Alexis Madrigal: 我认为风险投资是科技行业许多问题的根源，它导致了科技公司的贪婪和粗心。Catherine Bracey 的新书《世界吞噬者：风险投资如何吞噬经济》深入探讨了这个问题。
Catherine Bracey: 我创立的 TechEquity 致力于解决科技与经济公平问题，特别是住房和劳工问题。通过多年的工作，我发现科技本身没有价值，其价值取决于围绕它的商业模式，而这种模式由风险投资定义。风险投资最初是为了解决缺乏资金支持高风险初创企业的问题，但其关注点已经从追求突破性技术转变为追求幂律分布的财务回报。为了追求高回报，风险投资公司会推动所有投资公司走同一条路，即使这些公司不具备这样的潜力。这导致这些公司采取各种手段来追求快速增长，最终损害了消费者和社会。Good Eggs 公司的例子说明，风险投资模式并不适用于所有行业。风险投资的问题在于，它将一种方法应用于所有问题，而没有考虑这种方法是否合适。风险投资支持的公司往往追求快速扩张，而不考虑盈利能力或社会影响。“闪电式扩张”是一种风险投资公司常用的快速扩张策略，其代价是忽视负面影响。“闪电式扩张”策略导致了劳务剥削等问题。低利率环境下，风险投资公司可以不计成本地追求市场份额。Uber 的发展模式是“闪电式扩张”的典型案例。风险投资存在道德风险，早期投资者可以获利而无需承担负面后果。风险投资不应该投资快餐店、运动鞋店、床垫店等非突破性技术公司。风险投资已经成为一种单一文化，排挤了其他类型的资本。风险投资通过避免其他市场，以及其自身方法的创新不足，最终杀死了比创造的价值更多的价值。企业家为了获得风险投资，可能会改变自己的商业计划。风险投资挤压了其他类型的企业。大部分责任在于有限合伙人，而非风险投资公司本身。风险投资的资金分配模式导致企业家难以摆脱融资压力。风险投资的激励机制导致投资者关注的是公司估值的提升，而非公司的实际盈利能力。我认为风险投资应该专注于支持突破性技术，而非所有类型的企业。影响力投资与风险投资的目标不同，影响力投资更关注社会影响，而非财务回报。追求“幂律分布”回报的风险投资模式与追求稳健增长的模式是完全对立的。本书旨在展示风险投资忽视的机遇，而非简单地批判风险投资。本书旨在展示更多创新和创业的机会。当前的风险投资模式是新自由主义经济秩序的产物，这种秩序正在终结。未来的经济秩序将需要一种新的方法来资助技术突破。
Ryan: 我认为风险投资对创新至关重要，即使大多数公司失败了，也能带来经验教训。
Isaiah: 我认为大多数风险投资公司都希望改变世界，并非只追求回报。
Michael: 养老基金是最大的有限合伙人之一，它们的目标是获得最高的投资回报。风险投资公司需要为养老基金提供尽可能快的回报。
Srivan: 风险投资的问题是资本主义更大问题的一个症状，即资本主义的目标只是为了最大化投资者的回报。
supporting_evidences
Alexis Madrigal: 'The venture capital business, which has deep roots in Silicon Valley, has become a massive engine of not just startup growth, but many of the socially destructive behaviors that tech critics have pointed out over the years.'
Alexis Madrigal: 'In a new book, World Eaters, How Venture Capital is Cannibalizing the Economy, Catherine Bracey provides a compelling history of the industry's growth and transformation, highlighting the ways that venture-backed companies don't just wreak havoc themselves, but warp entrepreneurs' plans and crowd out other businesses that might work better in the long term.'
Alexis Madrigal: 'So having read this book, you're making an argument that's super interesting to me that it's not just tech per se or entrepreneurs as a group who are responsible for some of the problems created by the tech industry, but this VC funding model.'
Catherine Bracey: 'And really, to make a long story short, you know, along the last eight years of building tech equity and working on those issues, it became clear to me that something else was going on here. It wasn't just about the technology, that actually the technology itself was valueless. And the thing that made it either helpful to somebody's life or harmful to it was really the business model that was wrapped around it. And that business model is defined by the economic system itself. that creates the tech industry, which is VC. And it just doesn't get enough attention when it comes to how we think about the way that technology impacts our lives.'
Catherine Bracey: 'Well, I think it actually might be helpful to talk about what happened before venture capital, because VC, which originated sort of in the middle of the 20th century, came about to solve a real problem, which was that there wasn't capital for sort of risky startups that were mostly building breakthrough technologies, trying to commercialize them, bring them to market. And a set of sort of civic and business leaders saw that need and decided,
Catherine Bracey: 'And they settled on a model that is sort of the portfolio approach where VC funds spread money around across a few dozen companies in order to hedge their bets. Right. So this is high risk, high reward business. They know that because they're so risky, most of them will fail. A small number will succeed in those small numbers will exceed a lot. Right. More than making up for the most. And that's a concept known as the power law. Yeah. And that's really like the fundamental principle of VC.'
Catherine Bracey: 'And that means or that means they are pushing the risk factor. Like if there's a bunch of dials on how you might grow a business, they kind of, as you said, it's a high risk, high reward business, but they want the highest risk. And therefore the highest reward too. Yeah. And over time, there was sort of a subtle mindset shift from... the investors pursuing these breakthrough technologies and realizing that as a result of that, they would achieve power law distributions to now it being about the power law distribution, starting from that point and trying to reverse engineer power.'
Catherine Bracey: 'And so then when they're making these bets, they are not really looking at, is this a breakthrough technology? They're looking at, can this help me achieve the financial return that I want to achieve? And so then they start pushing every company they invest in, since they're not sure which of those companies will be the outsized winners at the end. to follow the same path that would make them as big as possible, even if they don't have a natural ability to become that big.'
Catherine Bracey: 'to follow the same path that would make them as big as possible, even if they don't have a natural ability to become that big. And when those companies are, you know, that kind of pressure is put on those companies, they start cutting corners and skirting regulations and exploiting workers and pushing the burden and the risk onto customers and society. And there are, you know, myriad stories, you'
Catherine Bracey: 'It's actually the first company I thought of when I started thinking about not just the big sort of VC flameouts like Theranos or WeWork or FTX, but really the companies that I felt like could have been really great businesses but for.'
Catherine Bracey: 'What we were trying to do was take this methodology and apply it to just any problem without thinking about whether that was the right tool to solve that problem. And instead, we should have been either focusing on the problem that we were trying to solve and evaluating what the right tool was to address it, or if what we wanted to build was software, then finding a problem that had a software-sized solution. solution hole that could have addressed it. And instead, and that I think is really gets to the crux of what's wrong with VC is like, it's not the solution. Software is not the solution to everything. And it doesn't scale in every industry the way it does in the software industry.'
Catherine Bracey: 'And scaling really is the thing that I feel like at least I most associate with venture-backed companies that they're – particularly in the era of the last, you know, say 10 or 15 years, just like get as big as you can as fast as you can regardless of – even whether you're making money, whether like the business is good for the city or the nation or the world.'
Catherine Bracey: 'So there are many. The thing about VCs is they like to talk about their work in public a lot. So there are many different playbooks that different VCs have written about how you should approach trying to build a venture scale company. And one of the most famous is called Blitzscaling by Reid Hoffman. who is, of course, a very successful entrepreneur and investor. And I mean, you know, it's called blitzscaling. So a lot of what you need to know about it. Right there on the tin. Yeah. Yeah. Yeah. I mean, it's quite something to name a growth strategy after a Nazi military technique. But, you know, here we are. Yeah. You know, it's basically the idea of VC, to get the scale that VC companies need in order to achieve that power law distribution, you really need to like attack whole markets. And it is, you know, sort of the goal is to create monopolies by taking over markets as quickly as possible and vanquishing your competition. I mean, it's very sort of domination coded. And blitzscaling really is... is a handbook in order to do that. Like, how do you become as big as possible as quickly as you can in order not to give any competition a foothold to challenge you so you can just like stake out your ground and like gain as much of the profit that's available here as possible. And it really highlights like hammer, not scalpel approach to doing this. And there's sort of like the negative externalities or the collateral damage is all feature, not bug. You know, those things are a sign that you're doing it the right way. It's really about like intentional thoughtlessness. And he says like you want... To hire good enough people and let fires burn and like treat customers poorly. And he calls workers growth limiters. So like, you know, get to as big as you can as quickly as you can with as few people on the payroll as possible.'
Catherine Bracey: 'which honestly I think is at the root of a lot of the labor exploitation that happens in VC-backed companies. And that, you know, I don't necessarily want to pick on that one methodology. It just happens to be very evocative, but it's the way they all do it.'
Catherine Bracey: 'which honestly I think is at the root of a lot of the labor exploitation that happens in VC-backed companies. And that, you know, I don't necessarily want to pick on that one methodology. It just happens to be very evocative, but it's the way they all do it. Yeah, and it was really easy to throw money at the problem in the zero interest rate range. realm of the pre-inflation period, right? Because you could just literally spend as much money as possible trying to take market share without ever having to turn a profit, right?'
Catherine Bracey: 'Yeah. I mean, if you think about the way that Uber grew, it was blitzscaling. I mean, in the book, it's held up as sort of the prime example of how to do this right. And I think we all know the Uber story pretty well at this point. You know, they obviously saw the taxi business and Lyft and other sort of rideshare companies as the competition that needed to be vanquished. And they took'
Catherine Bracey: 'what kind of business it could have been. But there's no question that the people who invested in Uber early made a lot of money, right? So they didn't have to be responsible for any of those bad actions. They didn't pay a price for it. There was no cost to them. So there's really a moral hazard here too in venture capital, which is that the short-termism allows the people who are in early to make a lot of money and not have to pay the price.'
Ryan: 'I guess I'm calling in support of venture capital. So I moved to San Francisco from Florida and I pursued a very ambitious idea of putting a satellite in orbit to stream back to VR headsets around the world. And so I raised about $2.5 million in venture capital for that. And I never would have been able to do that. And anywhere else in the world. And so I think venture capital is a great thing. And even the nine of the 10 that fail, I mean, we learn so much in this sort of scientific experimentation process. And even Theranos, the example everyone likes to use is a bad VC. I mean, her goal was to do a blood scan and detect 10,000 diseases in every person, which if she would have succeeded, is a beautiful thing to have in the world. And there should be a hundred other companies pursuing that goal.'
Catherine Bracey: 'Yeah. I mean, so a couple of things. First, you know, I don't know that. Well, I don't know if Theranos is a good, great example here or the bad example, but like she did commit fraud. Right. And I do think that, you know, regardless of what her intention was for the actual technology, right. She committed fraud. She broke the law and she defrauded investors.'
Catherine Bracey: 'And so this is a place that it's a kind of world that attracts people who are grifters and charlatans and frauds. I mean, it just does. I don't think that's the majority of people.'
Catherine Bracey: 'I don't want to leave people the impression that I think venture capital is a bad thing full stop. I think the way that venture capital has come to be practiced in part fueled by this extremely long period of zero interest rates is is the thing that is causing harm.'
Catherine Bracey: 'And for a company like Ryan's that is doing something that is a breakthrough technology, then yes, that is what the original intention of VC was supposed to be. And I think VC should come back to that and be that. But it doesn't need to be funding fast casual restaurants like Kava. It doesn't need to be funding sneakers stores. It doesn't need to be funding mattress sellers. I mean, these are all the things that feel like it doesn't need to be funding grocery stores that are trying to fix the food ecosystem or housing companies.'
Catherine Bracey: 'These are places where, you know, the problem is that VC has become a monoculture and crowded out every other kind of capital that could fund those other businesses. And that's, you know, the bigger harm here is not what VC has funded. It's what it's not funding or what it's what it's funding and then forcing to shift away from its true market potential and the cost to the economy, you'
Catherine Bracey: 'for the rest of us. Like I have really come to believe that VC is killing more value than it creates by avoiding those, you know, other kinds of markets or in innovating itself on the methodology it uses to fund companies or in how it pulls entrepreneurs away from solving the problem that they really wanted to solve in the first place.'
Catherine Bracey: 'Well, that's the... Yeah, that's what I think this person meant when they said that they asked us to lie to them in very specific ways. Like, you're going into... dozens of pitch meetings and every pitch meeting you go in and do your pitch and you're going to get a little bit of feedback, you know, from that no or, you know, that then shifts you subtly towards actually shaping this to be something that will get you VC funding. And then all of a sudden you're doing something completely different.'
Catherine Bracey: 'I feel like this is highly underrated because if you're competing against companies that can pour in all this cash to scale and you're trying to be a normal business that has to turn a profit so that you can pay your employees and keep the lights on, it actually erodes the ability for all kinds of businesses to work.'
Catherine Bracey: 'And because Chef had a story to tell about scale, they raised tens of millions of more dollars, right, than Food Gnome or Josephine could. And just by having a competitor that had tens of millions of more dollars than them, there was no way. I mean, like before Food Gnome and Josephine could even really get out of the gate, it was... They were already dead in the water because they couldn't compete with Chef.'
Catherine Bracey: 'Yeah. I mean, if I'm apportioning the pie of blame here, I mean, the vast majority of it goes to limited partners who are actually the investors who put money into venture capital funds. So it's not even really... the VCs all the time that I blame the most, they're responding to a set of incentives that institutional investors create for them.'
Catherine Bracey: 'it's doled out in these sort of rounds. You have this kind of seed round, A round, B round, C round. And people think, oh, well, okay, I'll get to the A or the B and I'll be profitable. I can pay back the investors and then I'm free of this, right? But actually oftentimes it's rarer than they think.'
Catherine Bracey: 'Then they're in a place where they've got all these costs and they can't get to the next stage without another capital infusion. And, you know, the investor's interest is not in proving that this is actually a good business. Their interest is improving to the next round of investors that this thing is a more valuable company than it was when they invested in it so that the next round of investors can put a higher price tag on it. And then that the first round of investors can go back to their limited partners and say, see,
Catherine Bracey: 'You know, I don't actually know that much about hedge funds. I can say... They hold a bunch of different kinds of investments, right? I mean, they're not just investing in startup companies. They may have timber. They may hold publicly traded stocks. They may hold all the... But venture capital funds, right, tend to focus just on these kind of early stage companies.'
Michael: 'Their role is to get the highest return on our retirement funds, and a percentage of that portfolio is venture firms to have some level of risk to produce a higher return and a higher overall percentage.'
Michael: 'And you take that backwards. And you look at what venture firms need to do for the pension funds, which is what they need to do for us, which is the flip side of how do you produce the fastest return possible is what if you don't?'
Catherine Bracey: 'Yeah, I think I described it as like the salt in a meal. You're going to know if it's not in there, right? It's a very important component, but you don't pay a lot of attention to it, like sourcing it in the way that you might source your meat or your produce, right? So you just kind of throw it in there. It's salt and don't think much about it, but it's a really important component to the meal. But that means since, you know, these... big LPs are not thinking that much about venture capital. They haven't questioned the methodology in a very long time.'
Catherine Bracey: 'And, you know, there are some of the big funds. I mean, the VC industry is power law distributed as well, whereas like the vast majority of the profits from VC comes from like you know, the top 1% of the firms.'
Catherine Bracey: 'And maybe there's another reason to keep it in the fund. My argument is like, fine, keep sending your money there. It's not that much. But like, maybe you also want to add a a few other spices besides just salt to the mix and see if that changes the flavor.'
Catherine Bracey: 'Like, I think that there are different approaches to funding innovation that can produce... results that are at least on par with average venture capital results, if not outperform the average venture capital fund, if they are given the oxygen to really go out and prove that there are new methodologies, new innovative approaches to funding innovative startups that don't need to be push everybody to achieve a power law return in order to succeed.'
Isaiah: 'And I think that San Francisco is one of the last places you can show up and sleep on floors and end up becoming someone who can build something amazing. And venture capital is a pretty small blip in the world of finance. And I think to take that opportunity away would actually be to harm the innovators and the people that want to build the future at a massive scale. And that's not to say there's not bad people in venture capital. There is, but I do think it is one of the last places where truly the American dream can be found and built.'
Catherine Bracey: 'I don't want to leave anybody with the impression that I think he sort of said something about like getting rid of venture capital. That is not at all what I'm suggesting. I'm suggesting that VC play the role that it should play and needs to play that we need it to play in the economy, which is to pursue the technological breakthroughs.'
Catherine Bracey: 'when Genentech got its investment back, you know, I don't know, 30, 40 years ago now, that money made the world a better place. I mean, they produced mass scale insulin. And, you know, before they were sort of like harvesting it from pigs. That's a huge technological breakthrough that is hard science. We need investors who are willing to take this big invest. Celebrated by pigs everywhere. Yeah. We do not need venture capital to fund mattress companies or, you know, good eggs.'
Catherine Bracey: 'And it's not actually impact investing to like use the baseball metaphor that is very popular to describe VC. I mean, if what if what the power law return is seeking out are grand slams and that's what they say, like this is a grand slam business. What I'm suggesting is that we need like you can also win a baseball game by hitting doubles and triples. Right. Or single home runs. You know, you don't always need a grand slam. Right. And, you know, the odds are better with doubles and triples as well.'
Catherine Bracey: 'That's just worth noting that is completely antithetical to the current VC world. Right. I mean, they think about it essentially in the opposite way. It is definitionally like if you are trying to do that, hit doubles and triples, you are not a venture capitalist.'
Catherine Bracey: 'Well, funny you should mention, Patrick. Yeah. You do try and bring people who are trying to do it a different way, right? And that's what I start with. I mean, I start by saying, like, I started out with the idea that this was going to be a book about everything that was wrong with VC and, you know, and the... the bad outcomes from these companies that it had invested in and what it turned into was a book about what we were missing by VC not investing in all of these other companies. Right.'
Catherine Bracey: 'And so many of them I talked to had ideas that were really great ideas that don't exist in the world now. And we will never know the scale of that loss. And I try in the book to pull those stories out as much as possible. But ultimately, this is a story about how we can have more innovation and entrepreneurship in the world. Not less.'
Catherine Bracey: 'Right. Because there's all these big like Hollywood studios kind of doing this stuff over here that sure, they're going to spend $100 million. They might make $120 million or something. But what if you spend $2 million and you make 10? That's still a pretty good business.'
Catherine Bracey: 'And if it's just VC pursuing the power law returns and they're raising, you know, $5 billion funds where they need their outcomes to be, you know, double, you know, double the amount of money they need to be able to do that. digit billion dollar outcomes in order to achieve their returns, then you're going to miss all of that really cool stuff that's further down the line.'
Srivan: 'The problem with VC funding is just a symptom of a larger problem, which is capitalism, where we are in AI, we frequently talk about the alignment problem. I think capitalism also has an alignment problem where the only goal is to maximize return for investors.'
Catherine Bracey: 'And before the 2024 election, it was fair enough. Like, yeah, you're right. I don't mean this is a more concentrated version of capitalism. But yes, you see this kind of behavior across capitalism after the election, though, and in the wake of like Silicon Valley moving to the right and seeing a lot of venture capitalists sort of run to Trump. My sense is actually what we're seeing is like the death of like the free market economic era. And it's sort of in order to sort of bring in, I don't know, more populist era and what those VCs are doing. sort of signaling with their, I think, sort of desperate move to MAGA is that they know that's ending. And their approach to investing was so closely aligned with the sort of, I guess, neoliberal economic order, if you will, to be wonky about it, but like this free market era of VC is like the perfect representation. It's the mascot of that era of capitalism.'
Catherine Bracey: 'And I hope that like what comes next, I don't know when it's coming or what the world is going to look like when it gets here, but it's like, it's a different kind of capitalism that, appreciates different types of value. And whatever that economic order is when we get there, we're going to need a methodology for funding technological breakthroughs. That's still going to be true.'
Deep Dive
Catherine Bracy's book, "World Eaters," argues that venture capital's focus on rapid growth and short-term gains is harming the economy. The current VC model prioritizes scale over sustainable business practices, leading to negative consequences for workers, customers, and society.
- Venture capital's focus on short-term results and rapid growth at any cost is harmful.
- The VC model prioritizes scale, leading to negative consequences.
- VCs push companies to grow as quickly as possible, regardless of profitability or ethical considerations.
Shownotes Transcript