The End of the Cult of the Founder

The startup slump and associated decline in IPOs, co-evolving with - or resulting from - concentration among the FAANG tech behemoths, is raising questions about what qualities are necessary to successfully launch a new company.

And just as the cult of the 'Imperial Corporate CEO' faded as their companies' performance did, so, too are vaunted coder geniuses giving way to different leadership skills required to build value in this economy. JL


Scott Rosenberg reports in Wired:

We know that tech is changing the world, and we’re beginning to suspect that a one-item resume reading “founded my startup at 17” may not equip you with the tools to change it carefully and well.Entrepreneurial energy can work wonders, but it can also lead to quick-fix thinking and arrogant mistakes.We could replace the cult of the founder with the cult of the cross-disciplinary team. It doesn’t have the same ring to it—but it might get better results.
When future historians look back on the cult of the Silicon Valley founder, they will set its starting point in the early 2000s. Its end point could be right about now.
But wait—aren’t we living through the greatest explosion of entrepreneurial energy in human history, spearheaded by tech companies? Software is eating the world! The internet is connecting all of us and all our things. AI is rewiring every workplace. And new companies led by visionary founders are driving each of these trends. Yet the numbers tell a different story: We think it’s a golden age for starting companies, but we are actually in a long-term “startup slump” that goes back decades in much of the US economy. Since around 2000, this slump has spread even to sectors like tech. “Startups have gone down a lot since 2000, especially in the high-tech sectors,” one economic expert told the New York Times in September. We read about teeming startup incubators and torrents of angel investments, but the statistics don’t match the headlines.
The explanation may be demographic, with the graying of the Baby Boomer bulge. It could be that global trade and the rise of China have taken a chunk out of small-business growth in the US. The more recent, tech-specific slowdown may have to do with increasing monopoly (or oligopoly) power wielded by industry giants to discourage competitors. The big story in the US economy—in tech and everywhere else—isn’t entrepreneurship, but rather concentration of power.
Whatever the reason for the slump, there's a puzzling disconnect between the expansive rhetoric of the startup sector and the real economy numbers. It’s almost as if the mythology of the startup and the cult of the founder came along not to explain a boom but rather to mask a decline. Today, the rhetoric is starting to feel ragged, and the founders are under the gun in ways they never expected.
I have an idea how this disconnect happened: even as startups slumped, a mystique developed around the people who began them. (For more on the positive dimension of that, see what Karen Wickre has to say.) Startups may have driven the US tech industry from its birth, but it wasn’t until recently, in the early 2000s, that the set of ideas and practices we recognize today as startup thinking got codified. The dot-com collapse had incinerated fortunes and taken the wind out of the tech industry’s triumphal narrative. The IPO-or-bust mentality of the 1990s was finished. Tech needed a better rationale for starting companies in new realms like social networking, cloud services, and mobile devices.Paul Graham and Jessica Livingston provided that rationale. Graham, a software developer who’d sold his dotcom-era startup to Yahoo in 1998, started writing essays online around 2001, first about the glories of the LISP programming language and later, as the Y Combinator incubator he cofounded in 2005 took off, about the philosophy of startups. Livingston interviewed dozens of founders and collected the transcripts in a 2007 book, Founders at Work, that became a bible for the startup movement.
Graham and Livingston took a set of ideas that had been bouncing around the industry and turned them into a playbook for would-be founders: The team is more important than the product. Don’t give up control for fat investment rounds. “Makers”—people who write code and design products—make better founders than MBAs or salespeople.
This playbook was one that young founders at burgeoning giants like Google and Facebook—as well as those at also-rans like MySpace and Friendster—took to heart. Being told that founders know best built confidence. The idea of bringing in “adult supervision” fell out of fashion, and as long as founders made growth happen, they were forgiven for many failings and sins. (Though not all, as the downfall of Uber’s Travis Kalanick shows.)
But today, tech companies are trying to cope with thorny and stubborn social and political problems, and they are bungling much of the job. We’re dissatisfied with explanations like “technology is just a neutral tool” or “we’re an open platform and not responsible for what users do.” We know that tech is changing the world, and we’re beginning to suspect that a one-item resume reading “founded my startup at 17” may not equip you with the tools to change it carefully and well.
Entrepreneurial energy can work wonders, but it can also lead to quick-fix thinking and arrogant mistakes. Too often, founders are simply oblivious to the broader social/political/legal/economic context in which their work is embedded. If your startup is just conducting a small-scale market experiment, then that hardly matters. But when companies that are born with this kind of blinder on then scale up to global proportions a la Facebook and Twitter, things can get messy fast.
The US and the rest of the world are beginning to ask hard questions about whether tech platforms are weakening democracy, promoting ignorance, and fostering a new wave of authoritarian nationalism. Anyone would have a hard time answering these questions. But the Silicon Valley founder is uniquely ill prepared. Many founders begin their careers embracing high-minded ideals: freedom of speech, tolerance of difference, equality of opportunity, support for the underdog, respect for the law, and more. They believe, ardently and innocently, that they are doing good in the world, and they see their companies as levers for world-changing improvements. But they spend all their time building products, raising money, and hiring talent, and the ideals usually end up on autopilot.
When such founders find themselves running global empires, they realize that choosing ideals was the easy part. Dealing with all the ways those ideals conflict with one another is what’s hard. And they have no experience with that—unlike, say, people who’ve devoted their lives to education and government, philosophy and religion. Such people are rarely found on the startup roster.
Maybe that will change as our love affair with the heroic founder fades. We could replace the cult of the founder with the cult of the cross-disciplinary team. Sure, it doesn’t have the same ring to it—but it might get better results.