Investing in Vices and Virtues
Lessons from the first internet age
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This essay was first published by the Knight Foundation
Technology businesses create massive benefits for society. But when I started angel investing in the dot-com era and paying closer attention to why some websites grow quickly while others never really catch on, I soon realized that many of the most popular websites leveraged humanity’s less virtuous impulses.
Now, I’m not talking about porn or gambling websites, or multilevel marketing operations offering shady, get-rich-quick schemes. I mean mainstream consumer internet websites and platforms attracting hundreds of millions of users. As I later put it to the Wall Street Journal, in 2011, “Social networks do best when they tap into one of the Seven Deadly Sins. Facebook is [pride]. Zynga is sloth. LinkedIn is greed.”
The internet is hardly unique in this regard. At the same time the consumer internet was really starting to take off in the late 1990s, Fox News was learning how profitable it could be to not just cater to its viewers’ wrath and envy, but to inflame those passions methodically and persistently. HBO was relying heavily on sex and violence, via shows like Sex and the City and The Sopranos, to ensure its original programming appealed to its subscribers. Local TV news stations had been employing an “If it Bleeds, It Leads” ethos for decades.
What intrigued me about the new internet platforms emerging in the Web 2.0 era, however, was not just how they tapped into humanity’s innate and enduring appetites for the Seven Deadly Sins, but rather how these platforms could productively harness those appetites and transform them into more aspirational behaviors that could improve both individual lives and society as a whole.
In this regard, I was operating under the influence of Adam Smith. In The Theory of Moral Sentiments, Smith observed how human beings convert inward-directed impulses, like self-preservation and self-interest, into behaviors like sympathy, kindness and generosity, which ultimately advance the interests of society. In The Wealth of Nations, he explained how free enterprise creates structures and incentives that transform individual self-interest into widespread abundance, prosperity and other social goods.
So, apply that kind of thinking to LinkedIn. My theory was that greed could quickly attract enough users for us to develop revenue streams that would ensure long-term sustainability. But the real purpose of the platform was to inspire users to be more intentional about building the professional networks that positively impact both daily work life and long-term career development. This, in turn, would provide them with more economic security and autonomy while simultaneously enabling companies, industries and even entire geographic regions to operate more effectively. Ultimately, both individual users and society at large would benefit.
Twenty years later, I still strongly believe that internet social platforms can and should function in this way. But I also learned along the way that it’s a much, much harder and more complex proposition than I initially envisioned. In the early days of the Web 2.0 era, we may have aspired to the wisdom of the crowd. But the way things played out, we often simply got the madness of the masses. Learning how to effectively counteract such outcomes has been a learning process that continues even today.
The Challenges of Angel “Sinvesting”
Had I simply sought to profit from human weakness, I could have invested in casinos or cigarette companies. Instead, my intention was the opposite. I wanted to create something that could help humanity progress at scale.
As a graduate student in philosophy in the early 1990s, my plan was to pursue a career in academia and writing scholarly books about human nature and how we communicate with one another. But I eventually realized I could reach far more people through internet software platforms, in more substantive and enduring ways. A book that attracts a million readers, after all, is a rare breakout phenomenon. And most of that book’s readers will likely engage with it for only a week or two before putting it down forever.
In contrast, an internet software platform can attract hundreds of millions of people. Many of them will use it on a daily basis. For years. And because of its participatory nature, and how it connects users to other people, it becomes a more essential part of people’s lives compared to newspapers or TV shows.
It was this unprecedented capacity for scale – to impact huge numbers of people, in deeply engaged ways, over time – that made me believe internet social platforms had massive potential for improving humanity. And it was the same for virtually every other founder I knew in that era. Wild idealism was the lingua franca of Web 2.0. The general belief was that fewer gatekeepers, freer information flows, and peer-to-peer connectivity would inevitably create positive outcomes for individuals and society alike.
What we tended to overlook, however, was the role that basic human nature would end up playing in this process. Now, I certainly recognized that the fundamental drives and desires codified for centuries as the Seven Deadly Sins played a key role in how quickly users would adopt a given website or not. I even used them as one criterion for my investing decisions. In retrospect, though, what I didn’t sufficiently factor into my Seven Deadly Sins heuristic is that the Seven Deadly Sins are an enduring index of human behavior precisely because there’s so much gravity in the behaviors they encapsulate