Why we should be more obsessed with idea meritocracies than with gender, socio economic or ethnic diversity - and how the two are intertwined.

It's no secret that european tech - and VC specifically - has a diversity problem. Common debates circle around academic backgrounds, nationalities, living standards, age or gender inequalities in the light of fairness and equality of opportunity. And rightfully so! All of these aspects are important drivers of a healthy, open and flourishing civil society. But do we look at this problem in the right context, from the right angle? As an ecosystem, is it our social responsibility to regulate gender and immigration quotas or is our primary responsibility to innovate? This post explores why these questions are closely intertwined and and how we could address them.

Source: https://unsplash.com/photos/ICFXCD0VBvI

Is 'diversity' really the problem?

Let's first define what we are actually talking about. Wikipedia defines diversity (politics) as follows

the degree of differences in identifying features among the members of a purposefully defined group, such as any group differences in racial or ethnic classifications, age, gender, religion, philosophy, physical abilities, socioeconomic background, sexual orientation, gender identity, intelligence, mental health, physical health, genetic attributes, personality, behavior or attractiveness.

I'd argue that it depends on context. In the context of social justice and equal opportunity the features listed above are probably defining the core of 'social diversity'. In the context of technology and innovation what we actually intend to achieve is a diversity of thought. A diversity of mental models. A diversity of ideas and experiments.

We tend to imply that ethnic and socio-economic diversity underpins the diversity of ideas. If we optimise our industry to build on and finance more diverse ideas we will automatically end up with broader gender, ethnic and socio-economic diversity in teams. Why? Because innovation happens at the edges, not at the center. More below.

Should we really care about where break through ideas are coming from in the first place? Does it matter if it's a 40 year old male from Pakistan or a 25 year old woman from Sweden contributing to solving the climate crisis? What comfort do we gain if we ask founders (or VCs) where they went to school or where they grew up? Shouldn't we rather ask about what they want to build, why and how? For finding answers on these questions we probably need into the founder’s individual vitas. Being a VC with a working class family background makes me part of a minority as well - I'm very much pro diversity, don't get me wrong - but putting people into boxes and working with quotas doesn’t solve the diversity challenge sustainably.

Hence, the question of 'what' to build (and finance) might be more interesting to look at. To that regard I see homogeneity everywhere in Europe with very few exceptions. Founders are building the next payment app, the next productivity app, the next marketplace for old economy goods, the next viral video sharing app. And VCs are financing it.

Why? What is preventing us from building and financing transformative innovation?

Aversion to dissidence

Disruptive innovation doesn't come from going to expensive schools and implementing existing business models in another geography. It derives from creative, destructive chaos. The people with transformative visions and the capabilities of executing on those often appear weird to their peers.

“Here's to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They're not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can't do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do."

Apple Ad 1997

Historicially, exceptional and progressive ideas have always been ridiculed, marginalized or worse. Think of Galileo, Martin Luther, Siegmund Freud, the Wright Brothers or Henry Ford as examples. Aversion to dissent is part of human nature as we intuitively seek for confirmation of our world views - confirmation bias. We are paralysed by group think.

Our culture is increasingly embedding such biases rooting back to an educational system that has been created in the industrial age with the goal of training obedient factory factors. A corset of norms, curriculums and grades kills every form individualism, creativity and outside the box thinking early on. Universities mostly continue on this path. In science everything is peer reviewed what often equals 'peer pressure' preventing dissident systemically (remember Freud again).

Incentives play an important role too. European venture is mostly driven by public money sources which have strong limitations in terms of fund structures, investment strategies and asset exposure (I'm running a micro fund with an international LP base and exposure to digital assets - red flag over red flag for these types of organisations). Also, large scale capital allocators (endowments etc.) don't invest into progressive managers to avoid career risks - they are incentivised to capture some upside while avoiding down side risks. They mostly don't benefit from risky things going well.

Similarly, administrative bodies are don't consider upside potential of a laissez faire approach for the same reasons. If something goes wrong they are punished (individually and collectively) but they don't get punished if they miss out innovating. Accountability in the public sector is a huge problem.

Media is incentivised for clicks and eyeballs (advertising) and nobody wants to read about radical ideas outside the norm. A great example is the Covid19 crisis. Li Wenliang was sileced by China's political establishment after discovering and writing about the new virus. A well respected entrepreneur with a background in statistics and biology tweeted about an upcoming pandemic in early February 2020 but he was ignored and ridiculed publicly. Social media platforms suffer from the same tweaked incentives by the way, filter bubbles.

Consequently, cultural barriers and incentives are the main drivers of our consensus seeking. It's not our democratic political system which actually provides a platform for minority protection and dissident thinkers, at leat theoretically.

Great, we talked about the problem. What can we do about it?

Weird challenges, weird solutions proposed by weird people

A first step could be to discard our fear of being wrong. Our fear of being perceived as a weirdo. Our fear of looking stupid. To find transformative ideas we have to accept to be wrong a hundred times.

What if we could engineer life in the same way we engineer software? What if we could live forever? What if we could nourish humanity with gene edited plants and synthetic food?

What if we don't succeed in surviving the climate crisis as a species? Could we populate other planets? Could we transcend into a new, more resilient species by merging our minds and bodies with machines?

Don't nation states feel like an industrial age phenomenon bringing us nothing but large scale terror and war? Could we decouple money and the financial system from states? Couldn't we build more data driven, algorithmic governance models?

We could start to break our filter bubbles by proactively engaging with niche, fringey communities challenging our views. Just check out reddit. Don't fall for conspiracy theorists though.

We could institutionalise and formalise our thought and decision making processes to avoid group think and confirmation bias. There is tons of content online on that topic, especially for people working in finance.

We could establish a safe haven environment to let people with minority opinions speak up and connect them with other innovators organising around similar problem spaces and ideas. Events? Open forums? Media formats? Fellowship programs?

As you can tell, I'm just brainstorming here. I don't have the answers. But maybe you have some? I'd be keen to work on those topics regularly as I believe they are essential. Don't hesitate to reach out.