What does meritocracy really mean in Silicon Valley?

Max Levchin of HVF attends Day 2 of TechCrunch Disrupt SF 2013 at San Francisco Design Center on September 10, 2013 in San Francisco, Calif.

Sarah Lacy in the “igloo” meeting space at the PandoDaily office in San Francisco.

Where can you find a decent meritocracy these days? A favorite answer in Silicon Valley is: Silicon Valley.

Meritocracy has become part of Silicon Valley's unofficial brand.  People wear hoodies and sneakers, not stuffy suits. Office decor is meticulously unpretentious -- like that garage where Steves Jobs and Wozniak did all their tinkering, only shinier.

The casual dress code, the open warehouse spaces and the bean-bag-chair-dotted meeting rooms all seem to be trying to remind you that you are in a place of Irreverence and Opposition to Hierarchy. And those values have made Silicon Valley one of the most meritocratic industries on Earth, says Sarah Lacy, founder of PandoDaily, a media start-up that covers the tech sector.

“I would challenge anyone to find an economic ecosystem that's more of a meritocracy than Silicon Valley,” Lacy told me from her office in a downtown San Francisco start-up incubator, a space fully tricked out in meritocracy-chic. (Communal Razor scooters in the hallway and a conference room in the shape of an igloo.)

“Let’s go down the list,” she said, and then rattled one off. “PayPal, Intel, eBay, YouTube. I know so many entrepreneurs who've come over to this country with nothing and have built huge companies.”

This conviction about Silicon Valley's meritocracy credentials is practically gospel by now.

Peter Bell, a prominent venture capitalist, has said “what's really special about the Valley is the optimism -- that no matter where you come from you can start a company, you can join a start up, you can change the world.”

Michael Arrington, angel investor and founder of the website Tech Crunch told CNN a few years ago that in Silicon Valley “generally speaking, it doesn't matter what your education is. It doesn't matter who your parents are here.  You can become very successful based purely on your brain size and how you use it.”

A favorite example of the anyone-can-make-it-here narrative is the story of Max Levchin, co-founder of PayPal. Lacy knows his origin story by heart.

“Moved from the Soviet Union when he was 16,” she’ll tell you.  “His family had $300 in their pocket and he had to learn English by watching an old television set that he pulled out of a dumpster and repaired. Ten years later or so, he sold a company for $1.5 billion. Ask someone like Max Levchin ‘do you consider this place a meritocracy?’”

So I did.

But first, I wanted to make sure the story that gets told about him was right.

“Yeah, that's remarkably accurate,” Levchin said after I repeated the biography Lacy had told me. “The only thing I'm not sure is precise is the amount of dollars we had in our pocket. It might have been $200 or $400, I can't quite remember,” he laughed.  “But everything else is pretty much correct, including the TV story.”

Then I cut to the chase. Does he think Silicon Valley is a meritocracy?

First, he cautioned that it was hard for him to compare it to anything else, since it’s the only place he’s ever really worked. That said, “on the absolute scale, it seems quite meritocratic,” he told me.  “I've met lots of people that have succeeded independent of their humble or otherwise origins.”

But Levchin also cautioned there are certain details of his story that often get left out. “I was very lucky,” he said.

Luck came in many forms. Even though his parents couldn't afford a TV, they did scrape up enough money to buy him a computer.

“My family was very supportive of the idea that having access to a personal computer would do something good for me, and within a few weeks of landing in the U.S., they gave me a PC to work on, to play with and to explore,” he told me.

And the importance Levchin’s family gave to computer access was no accident.  His mother had been a computer programmer in the Ukraine. His father, grandfather and grandmother were physicists -- prominent ones.

In fact, if you go down the often-cited list of big tech companies with immigrant founder success stories -- PayPal, Intel, eBay, YouTube -- you'll find many of those immigrant founders had a parent who was a scientist or academic.

“I actually ponder this a lot,” Max Levchin told me of the relationship between entrepreneurship and his family’s history in pursuing higher education. “Especially in the context of interviewing people to come work for companies that I help start.”

Levchin explained that in his mind a big part of entrepreneurial success involves confidence and knowing how to work hard for a faraway goal. “The academic background that my family had I think had a big influence on that in my case,” he reflected. “They basically told me ‘Look, you need to spend a lot of time chiseling skills that will pay off in a big way.’ When I try to interview young people, I look for that family ethic of extraordinarily hard work without immediate payoff.”

And though it may sound strange to hear one of the heroes of Silicon Valley meritocracy  explain that when he interviews someone for a job, he thinks about their family background, it also makes some sense, says Eric Ries*, a Silicon Valley entrepreneur and author of "The Lean Start-Up." (He happens to come from a long line of doctors.)

“In the venture world, in the investing world, they call it the ability to have good pattern recognition,” Ries said. “To see things that have worked in the past and to try to find those same combination of factors in the future.”

Ries told me pattern recognition can be useful, but it has risks.  As an example, he pointed to that saying in Silicon Valley that everyone is looking for the “next” Mark Zuckerberg.

“Sometimes you end up looking for a guy  who looks like Mark Zuckerberg, physically,” Ries lamented. “And talks like him, and wears the same clothes he wears.  One of our famous investors recently told a story about investing in someone who turned out to be not very good, and then thinking to themselves ‘How could I have been fooled by this guy?  Oh, because he looked like Mark Zuckerberg.’”

That’s not merit-based selection, said Ries.  Instead, he argues, it is the kind of unconscious bias that could help explain why just a tiny fraction of the start-ups that get major funding in Silicon Valley are founded by women or African-Americans.

Ries said there’s also what he calls a “pipeline issue.” That PC that Max Levchin's parents scraped up money to buy him when he was a teenager is the kind of story you hear all the time from Silicon Valley entrepreneurs, Reis told me.

“All the nerds that made right in Silicon Valley -- bullied, not popular kids in school or whatever -- what we all had in common, or almost all of us, we had a computer  at home.  We could kind of go home, on our own, tinker with it, fall in love with it, learn how to program it.  I think about this all the time. What would have happened if I didn’t have that access?  If I didn't have that outlet? Would I have been as successful as I am today?  I don't know.”

Ries said it’s important to remember that today many American teenagers do not have their own computers. (According to a 2012 Pew Research study, 20 percent of teens age 12-17 do not.) And though creating a perfect meritocracy in any industry is complicated, Reis says “making sure every nerd kid in America has a computer at home? Not that hard.”

Follow the Wealth and Poverty Desk on Twitter @MPWealthPoverty

CORRECTION: The original version of this story incorrectly spelled author Eric Ries' name. The text has been corrected.

About the author

Krissy Clark is the senior reporter for Marketplace’s Wealth & Poverty Desk.

Sarah Lacy in the “igloo” meeting space at the PandoDaily office in San Francisco.

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Either you can program or you can't, either you can build or design hardware or software or you can't. Theres no working around "merit" in these cases, your work works, or the company you work for is in serious trouble.

Perhaps theres less meritocracy in soft skill jobs like HR, but in actual tech, you either have the chops or you don't.

Lets not get into privilege and other excuses. At this point computers have been cheap and accessible for quite some time now. Whether your kid has a computer has very little to do with whether they want to learn programming or math, most use their computers for what? Yea..facebook, youtube etc. Whats most computing power actually used for by kids? Video games. Its been a world with video game consoles which cost quite a bit for decades now, so lets not pretend people have been too poor to buy their kids computers all this time.

As for the comments above about "geeks lacking compassion", sorry no. They just lack the ability to swallow the bs many normal people just accept. Your womens studies degree doesn't qualify you for a tech job, and that's not lack of compassion, its just logic. You call them ugly and cruel but that's the point, they aren't people who had the world handed to them, so you resent them for clawing their way to success even when society never encouraged or helped them because it says something about you, and your lack of will or ability.

Meritocracy in Silicon Valley. No such thing. Come to think of it, after college, where it may be tied to grades, it no longer exists. Beyond that, for the millions of people out there with drive and the requisite acumen and execution, it's mostly about who you know and how you go about engaging those contacts. Cronyism and a bunch of other isms are alive and thriving in corporate America and Silicon Valley. And Silicon Valley may take the cake. Luck, for the few who come out of the blue, produces only the exception.

We've almost written off getting SV venture capital. They won't even entertain speaking with you if you don't know someone in the circle. Our funding has been bootstrapped and we have even started to turn to crowdfunding. Check out our recently launched crowdfunding page at http://fortydollarangels.com. Bottom line, if you manage to build it, you better go out there and start schmoozing, or forget about it. And if you don't look the part, you may need to hire a Hollywood makeup artist. Come to think of it.... That's not a bad idea. Kidding. But that's life in 2013. :-)

Now, we wouldn't mind a story by Marketplace about LoyalBe.com and other startups on the proverbial "other side of the tracks." That would really help to even the journalistic playing field a tad. The story may not "convert" as well as yet another story about same old, but then, maybe it just might. Just maybe. :-)

Founder, LoyalBe

("Let's make it easier for you to be loyal to the places and things you love.")

One more thing.
This smiling bozo was babbling about the amount of money they had, but forgot to stress that his parents as physicists/programers probably had jobs from the start and could AFFORD a computer, unlike some much better educated individuals in other fields.

BTW, is it me or we have new promoters of negative eugenics. We did so well the first time. Sure.

Little Bird started her comment the way I wanted yesterday , but failed to post.
Since I am still fuming, I am back.
This reporting was bad on so many levels and in so many ways. Yes, it's unacceptable that this self-promotional mythology wasn't challenged. So many geeks strike me as primitive, lacking of compassion and understanding of human nature. It isn't then surprising that most neo-Nazi camps in California and elsewhere are staffed with these "geniuses."
Among other things, so many of geniuses come from ugly, very ugly countries where it takes much more than being "gifted" to be prominent. This fellow with idiotic smirk somehow forgot to mention that so many genuine geniuses perished in Gulag and so many geniuses were not allowed to study for a simple reason - they were Jewish. It usually took something else to succeed in the former Soviet Union than just math/physics abilities. Notice that he is interested in similar qualities in people he hires - total ruthlessness, lack of ethics, opportunism.
Similarly, I usually get irritated when overfed "geniuses from India or some Arab countries praise their "genes" and forget to mention centuries of exploitation in cast societies and total corruption which allowed these braindead geniuses to succeed.
I can imagine a wonderful world without their products, I think with horror about the world these barbaric bozos are preparing for us.

I was very disappointed in this one-sided and inaccurate story. The reporting is way beneath what I expect from NPR and Marketplace. The idea that Silicon Valley is a "meritocracy" is ludicrous. Oh, I suppose it's a meritocracy if you're a white male under the age of 40, but if you're not, you're out of luck. "Success" in Silicon Valley is based on cronyism and nepotism, and everyone here knows it. Ms. Clark would do well to interview a few recently-laid-off workers (of which I am one) who have been canned in "restructurings" or "reductions in force" to make way for younger replacements.

I also appalled that the last quote went completely unchallenged. Ms. Clark might want to talk to a few local school districts before allowing someone as privileged as Eric Reis make a statement claiming that “making sure every nerd kid in America has a computer at home? Not that hard.” Mr. Reis, believe it or not, it IS that hard; people have been trying to do it for decades. I live in an excellent school district, and we have ONE IT guy to support 7 schools.

Next time, please put more than 20 minutes of research into your stories.

I hope this was Part 1 with Part 2, which was introduced at the end of this story, as the real truth behind Silicon Valley's "meritocracy" culture. I have lived in Silicon Valley off and on for a large portion of my 55 years and have experienced the economic disparities of the SF Bay Area that are very well hidden by the glitz. It is important to understand the an equal playing field would require that education was also a level playing field, but Silicon Valley could not be further from level opportunities. East Palo Alto, just across the freeway from Steve Jobs Palo Alto, has suffered from educational and economic disparities for decades. I lived there as a child and not much has changed. The public housing communities of San Francisco are another example of deep, deep educational and economic disparities that, like in the example of EPA, have not allowed children to thrive. For those that may argue, I would like to see them send their kids to the schools in these communities and see if they have a chance and if they make it out alive. The privileged of Silicon Valley & the SF Bay Area are the well-educated, as a rule and have come to this country or were raised in this country with the economic opportunity that provided the best education for their children. Educational privilege is the backbone of "meritocracy;" and it is still a result of economic privilege. I challenge the millionaires and billionaires of Silicon Valley to invest in the underfunded schools and neighborhoods of disadvantaged SF Peninsula communities, so these children, who are primarily African American and Latino can have the support they need to rise above decades and centuries of racism & racial profiling resulting in the deep education and economic disparities we see today. And for the last person that may think the disadvantage of racism in not a viable argument, as recently as 2008, the Palo Alto police chief asked her officers to stop every African American they saw in Palo Alto. Daily messages of worth or mistrust affect all outcomes. We have a lot of work to do before every child grows up with the true opportunities to succeed that your inspiring story alluded to.

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