The current crop of VCs fancy themselves masters of the universe. They speak in a Substack fermented patois of CACs and LTVs, hockey stick growth and 10x returns. But far too many of these self-proclaimed startup wizards have only the faintest grasp on macroeconomic concepts.
They can build a discounted cash flow model in their sleep and recite the latest SaaS revenue multiples at the drop of a hat. But ask them about the drivers of inflation, or the implications of a steepening yield curve, and you’ll be met with a blank stare.
Youʼd be hard pressed to find VCs capable of correctly defining nominal GD-Fucking-P — a basic macroeconomic indicator.
Fewer still could explain the mandates of the Federal Reserve beyond “they set interest rates or something.
This knowledge gap might be forgivable if VCs confined themselves to the minutiae of product roadmaps and go-to-market strategies.
But increasingly, the VC class holds outsized sway over the allocation of capital and talent in our economy. The startups they anoint with their capital go on to shape entire industries, from transportation to healthcare to education.
When “software is eating everythingˮ (wank) the repercussions of macro- illiteracy among VCs are profound and far-reaching.
They donate billions to political campaigns, they write high-minded manifestos, and they get their hands dirty in everyone and anyone elseĘĽs gardens.
Meanwhile, their own are overrun with weeds.
Remember CloudKitchens? No? A bunch of tech messiahs decide they’re going to “disrupt” the restaurant industry. Their big idea? Ghost kitchens. These geniuses thought they’d revolutionize food delivery by cramming a bunch of cooks into windowless boxes, churning out meals like some dystopian food factory.
The VCs, always on the lookout for the next big thing to throw their money at, gargled this idea like it was free Soylent.
They were high on the promise of endless growth in app-driven food delivery. Tragically, these masterminds forgot that the real world isn’t a fucking Excel spreadsheet. They underestimated the shit-storm of macroeconomic factors that can turn a “sure thing” into a dumpster fire faster than you can say “pivot.”
Sure, COVID initially made their idea look genius. Everyone was stuck at home, ordering food like their lives depended on it. CloudKitchens was riding high, probably planning which superyacht to buy.
Then reality decided to crash the party.
Inflation reared its ugly head, making people think twice about dropping $25 on delivered Pad Thai. Suddenly, everyone remembered they had a kitchen and knew how to boil water.
But wait, there’s more!
The labor market went nuts. Kitchen staff and delivery drivers realized they were worth more than peanuts, and wages shot up. CloudKitchens found itself caught between a rock and a hard place — or more accurately, between rising costs and belt-tightening customers.
Throw in some cut-throat competition and a maze of regulations, and you’ve got a recipe for disaster. CloudKitchens’ restaurant partners saw their margins get thinner than the slice of cheese on a McDonald’s burger.
Now, I’m not saying anyone could’ve predicted all this shit. VCs and founders aren’t fortune-tellers, no matter how much they like to stroke their egos and call themselves “visionaries.” But come on, some of this wasn’t exactly rocket science.
Sure, COVID was a black swan event — the kind of thing you can’t plan for unless you’re a doomsday prepper with a tinfoil hat. But building your entire business model around the assumption that people will never leave their homes again? That’s not visionary; that’s just stupid. Throwing massive chunks of money into a high-risk startup that was entirely dependent on the macroeconomic climate that gave it birth and had no contingency plans for a macro shift speaks to a degree of economic myopia that is, frankly, fucking alarming.
And it’s hardly an isolated example.
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It’s 2021, and Zillow decides to play real estate mogul on steroids. They cooked up this brilliant plan called “iBuying” — because slapping an “i” in front of anything makes it sound smart and techy, right?
Their big idea?
Use algorithms to buy and flip houses.
The VC sugar daddies threw money at Zillow like it was free, convinced that Big Data would be the magic wand to tame the batshit crazy housing market.
But here’s the thing: these geniuses forgot that the real world doesn’t give a flying fuck about your fancy algorithms. While Zillow was jerking off to its data models, the Fed was pumping the mortgage market full of monetary steroids to keep the economy from face-planting during the pandemic. It was like trying to predict the weather while someone’s hosing down the thermometer.
Then, surprise surprise, interest rates did what interest rates always do when they’ve been artificially low: they went up. Housing demand cooled faster than a skinny dipper in arctic waters. And there was Zillow, stuck with 7,000 homes it couldn’t offload, hemorrhaging money like a trust fund kid in Vegas.
The price tag for this spectacular clusterfuck? A cool $500 million. That’s right, half a billion dollars down the toilet because some tech bros thought they could reduce the housing market to a bunch of ones and zeros.
Now, nobody saw COVID coming. Fair enough. But you didn’t need to be a modern-day Nostradamus to realize that betting the farm on real estate during uncertain economic times was about as smart as using your life savings as toilet paper.
Time and again, we see VCs chasing the shiny object — the latest AI breakthrough, the hottest DTC brand, Theranos, Juicero, WeWork, FTX, and so on, and so on, in an endless cycle of wannabe-Jobsian horsefuckery — while neglecting to grapple with the complex macroeconomic realities that will ultimately make or break their investments, or arrogantly assuming they can reshape those realities by pure force of will or weight of capital.
The problem is the VC incentive structure, which rewards outsized bets and fast exits over patient, holistic analysis. In a business where you’re only as good as your last unicorn, there’s little appetite for nuanced discussions of fiscal multipliers or the output gap.
Add to that, the existence of the VC echo chamber as a powerful force. When your days are spent hopscotching from one pitch meeting to another, it’s all too easy to mistake the consensus of the Valley for the truth about the wider world. If everyone in your circle is buzzing about the latest fintech play, it’s tempting to overlook the economic storm clouds gathering on the horizon.
And so capital chases hype chases capital in an endless feedback loop, heedless of the risks and the human costs.
We’ve seen glimpses of this dystopia in the wreckage of WeWork, the inflation of the AI funding bubble etc. Each of these episodes was fuelled, at least in part, by a VC class that prized growth at all costs, while ignoring macroeconomic fundamentals.
The macroeconomic myopia among VCs takes on an even more sinister dimension when you look at the political state of play: a bunch of high-profile VCs, the kind who wipe their asses with hundred-dollar bills while laying claim to populist man-of-the-people sovereignty, are lining up to back Donald Trump’s potential return to the White House.
Yeah, you heard that right. The same guys who couldn’t predict a housing market crash if it danced naked in front of them wearing nothing but a sign saying “I’m a fucking housing market crash” are now playing political kingmakers.
Now, there are three possibilities here, and I honestly can’t decide which one is more terrifying:
Option 1: The VCs have their heads so far up their own asses that they can’t see the economic shitstorm that was the Trump administration. We’re talking trade wars, ballooning deficits, and a tax policy that basically amounted to “fuck you, I got mine” — the ultimate expression of the VC bubble fuckbro mentality. Just as they convinced themselves that WeWork’s losses were a sign of visionary disruption or that crypto would remake the global financial system, perhaps they truly believe that Trumponomics 2.0 will usher in an era of unprecedented growth and innovation. It’s a delusion, but one that aligns perfectly with the VC worldview of “move fast and break things” — even if the thing being broken is the global economy itself.
Option 2: These money-humping geniuses know exactly what they’re doing, and they’re making a calculated bet against the very foundations of economic stability. They’re playing economic Jenga, and they’ve decided that the best move is to take a sledgehammer to the whole fucking tower. It’s a bet on chaos. After all, economic turmoil can create opportunities for those with deep pockets and fewer scruples. In a landscape of crumbling institutions and weakened regulations, those with capital and connections stand to profit handsomely. It’s disaster capitalism writ large, with VCs positioning themselves as the vultures circling overhead.
Option 3 (far more likely): These VCs are willing to sacrifice macroeconomic stability on the altar of their own edge-lord, dorm-wanking, libertarian-cliff-notes authoritarian power fantasies. The allure of being kingmakers in a more centralized, less democratic system outweighs any concerns about long-term economic health. After all, in a world where capital is increasingly concentrated in the hands of a few, why bother with the messiness of a functioning democracy?
No matter which way you cut it, we’re looking at a group of people with more influence than sense, treating the global economy like it’s a game of Monopoly they can flip over when they’re losing.
And these are the same people who lecture us about “disruption” and “innovation.” Apparently, their idea of innovation is to back a guy whose economic policy is about as sophisticated as a toddler’s understanding of sharing.
This brings us full circle to the fundamental problem: a VC class that wields enormous influence over our economy and society, yet lacks the basic macroeconomic literacy, common sense or responsibility to wield that power. Whether through ignorance or cynical self-interest, their actions threaten to undermine the very foundations of economic stability and democratic governance.
We don’t need a VC ecosystem.
It’s not even a nice to have.
But if we’re going to have one, we need it to value long-term thinking and robust economic understanding over quick exits and hyped-up unicorns. We need investors who understand that true innovation and progress require a stable macroeconomic foundation, not a race to the bottom in pursuit of deregulation and tax cuts.
We need to challenge the notion that VCs should be the primary architects of our economic future. Their outsized influence on capital allocation, technological development, and now, increasingly, on politics, needs to be balanced by other voices — economists, policymakers, labor representatives, and ordinary citizens.
We can ill afford a financial elite.
But thatĘĽs exactly what weĘĽve got.
And far worse, we have an elite that is entirely disconnected from macroeconomic reality.
The stakes are too high to leave our economic fate in the hands of those who can’t see beyond their next big exit. It’s time for a VC reckoning, before their myopia leads us all off a cliff.
