A pure creature of venture capital
The story that the Silicon Valley investors who call themselves "venture capitalists" like to tell about themselves is that for decades they've been the engine of America's economic vitality. Blessed, they say, are the financiers, for without their investments in Apple way back when there would be no iPhone. Entrepreneurs who arrive in Silicon Valley are warned early on that while these investors are mouthing platitudes about innovation, they will also be rifling through your pockets. Most entrepreneurs try to keep them at arm's length, valuing their money more than their advice.
Silicon Valley's investors usually have impressive technical degrees, but their stock-in-trade is ultimately not technological innovation but financial engineering. This is why Silicon Valley loves "crypto," or digital currencies, so much. All the innovation was done for free; the only work left was taking in the profits. Those, of course, should come in what the crypto world liked to dismiss as "fiat" currency, also known as dollars.
That crypto edifice seems to be crumbling, speeded along by the implosion of the high-profile crypto exchange FTX and the humiliation of its wunderkind chieftain, Sam Bankman-Fried. Just one week after FTX declared bankruptcy, with billions in customer funds apparently gone, it so happens that Theranos founder Elizabeth Holmes was sentenced to 11 years in prison. That was also a black mark for Silicon Valley, but at least many of the highest-profile venture investors had quietly steered clear of the blood-testing company.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Not so with Bankman-Fried. He and his posse might have lived in a group house in the Bahamas, but he was a pure creature of Sand Hill Road, venture capital's epicenter. The investors saw a man after their own hearts, and jumped into what now looks like every other Ponzi scheme (Bankman-Fried even promised depositors 12 percent returns, same as Bernie Madoff). As with just about any high-class con, Sam Bankman-Fried's key selling point was "He's so smart. He doesn't need to rip anyone off." Not coincidentally, that's what Silicon Valley's financial engineers would have you believe about them, too.
This is the editor's letter in the current issue of The Week magazine.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Mark Gimein is a managing editor at the print edition of The Week. His work on business and culture has appeared in Bloomberg, The New Yorker, The New York Times and other outlets. A Russian immigrant, and has lived in the United States since the age of five, and now lives in Brooklyn with his wife and son.
-
A growing iodine deficiency could bring back America's goiter
Under the Radar Ailment is back thanks to complacency, changing diets and a lack of public-health education
By Harriet Marsden, The Week UK Published
-
Today's political cartoons - November 10, 2024
Cartoons Sunday's cartoons - civic duty, uncertain waters, and more
By The Week US Published
-
5 ladylike cartoons about women's role in the election
Cartoons Artists take on the political gender gap, Lady Liberty, and more
By The Week US Published
-
Network states: the tech bros who want to create new countries
Under The Radar Concept would allow you to 'choose your nationality like you choose your broadband provider'
By Chas Newkey-Burden, The Week UK Published
-
Paraguay's dangerous dalliance with cryptocurrency
Under The Radar Overheating Paraguayans are pushing back over power outages caused by illegal miners
By Chas Newkey-Burden, The Week UK Published
-
2023: the year of crypto instability
The Explainer Crypto reached peaks — and valleys — throughout 2023
By Justin Klawans, The Week US Published
-
Sam Bankman-Fried found guilty: where does crypto go from here?
Today's Big Question Conviction of the 'tousle-haired mogul' confirms sector's 'Wild West' and 'rogue' image, say experts
By Chas Newkey-Burden, The Week UK Published
-
FTX founder Sam Bankman-Fried arrested in the Bahamas
Speed Read
By Catherine Garcia Published
-
iPod creator launches new crypto wallet as industry fallout continues
Speed Read
By Justin Klawans Published
-
Is cryptocurrency still a good investment?
opinion The sharpest opinions on the debate from around the web
By Justin Klawans Published
-
In the FTX crypto collapse, echoes of recent history
Speed Read The 21st century has been one financial scandal after another
By Joel Mathis Published