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It's a tiny minority with a higher-order impact:

* A small subset of the startup ecosystem is implicitly/explicitly biased.

* A larger subset of the startup ecosystem recognizes that fact, and won't invest in diverse founders (all things being equal) because of the additional hurdles we have to clear.

* Everyone else knows that some people are cautious about funding diversity because some people are biased.

That first tiny percentage has the devil's own leverage.




I have also heard roughly the opposite model, namely:

1. A small subset of the startup ecosystem wants to fund diverse founders, and is willing to compromise on startup quality to do so.

2. A larger subset of the startup ecosystem recognizes that fact, and won't invest in diverse founders (all things being equal) because they are worse due to group #1 funding worse companies.

3. Everyone else knows about #1 and #2, and so are cautious about funding diversity.

I'm curious if you have considered this way of looking at the world, and know of any data that would let me conclude it was less accurate than the version you outlined above.


In my personal experience people are far more eager to pay lip service to diversity than dollars.

Though since both hypotheses support the same conclusion I'm not sure it matters which is correct.


There are other conclusions and interpretations you can draw from the two lines of reasoning. Much of the effectiveness of dog-whistle politics is that most of what's said remain non-explicit, so let me pop that:

The reasoning that there is a small group who would refuse to fund nonwhites/women, and that has an knock-on effect on everybody else suggests:

-that there is a 'culture of racism/mysogyny'

-that we need more diversity training

-that we need to move the overton window to exclude those people with the unacceptable views (and we should do so via diversity training)

-that we need to spend money to fund the people to make the above happen.

OTOH, the reasoning that many startups lead by nonwhites and/or women got seed-funding via affirmative action despite not being strong enough to get funded on a level playground, leading to lower average quality, leading to warier investors and difficulty attracting further funding suggests:

- that there is no 'culture of racism/mysogyny', just people being rational with their money.

- that we need to wind back the irrational AA money that is distorting the market and wasting its investors' money

- that 'diversity training' is not the answer and possibly counterproductive.

-that the overton window is either fine where it is, or could be moved a bit the other way.

It is unfortunate that there is so much attached here, and I'm fairly sure most of those things are not the intended interpretations by the posters, but you can see how this is a very baggage laiden discussion. Partially it's because it echoes many, many similar discussions elsewhere, and many of those previous discussions made many people very angry at each other.


The business case for diversity is not that "it would be nice to have it", it's the McKinsey study that diverse companies consistently outperform homogenous ones.

So in the end investors who resist diversity miss out on some runaway successes.


From Peter Thiel (http://www.businessinsider.com/peter-thiel-google-monopoly-2...):

> Google's motto — "Don't be evil" — is in part a branding play, but it's also characteristic of a kind of business that's successful enough to take ethics seriously without jeopardizing its own existence.

> Monopolists can afford to think about things other than making money; non-monopolists can't. In perfect competition, a business is so focused on today's margins that it can't possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.

The McKinsey study (at least to my reading[1]) establishes correlation, not causation. It could well be the other way around, ie: basically everyone agrees that diversity is an ethically good thing... so perhaps profitable companies are more diverse because they can afford to be, rather than being more profitable because they're diverse.

This seems falsifiable btw... we could brainstorm perks that companies offer when they're doing well, and see how closely the correlation there matches McKinsey's observed 35% overperformance.

[1] From the summary at http://www.mckinsey.com/business-functions/organization/our-... - The pdf is behind a paywall, sadly.


You make a very good point, and my problem with McKinsey study was its bundling of various industries without subsequent breakdown by field. While it seems natural that customer-facing enterprises benefit from diversity (sales people, nurses, customer support), where a customer might seek out a familiar face, the analogy seems to stretch when you stretch it to other areas (tractor manufacturing, winemaking, etc.)

P.S. The McKinsey article is behind a wall, not paywall, just a registered account with mckinsey.com


I'm not a native speaker. What does "devil's own leverage" mean in this context? I don't think it's an idiom. Do you mean that their behaviour is what drives everybody else's?


In this context, it just means "very strong". The idea is that biased investors have a lot of leverage, despite being a minority, because of the environment they're in. So yes, it's that their behavior is driving everyone else's.




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