The Founding Murder and the Final Boss

We have to talk about WeWork again!

So I guess they’re postponing the IPO after all, now that we’ve spun the roulette wheel and landed on “too toxic to handle” rather than “trillion dollar market opportunity for community enlightenment”. I guess we’ll have to wait and see what happens to WeWork. But in the meantime there’s something fascinating going on: how the rest of the tech community is spinning its wheels overtime in order to make sure that WeWork’s failure to IPO does not inflict any collateral damage on the rest of the ecosystem. It’s a great excuse to dive into one of my favourite topics: the norms and rituals and beliefs that make up the Silicon Valley Kayfabe, and what happens when we face a credible threat that our belief system might fall apart.

First, let’s go on a little journey. Longtime Snippets readers may remember one of my absolute favourite ideas: the sociological concept of the Founding Murder. The idea in a nutshell is that any group or society that is stable over the long run probably owes its origin story to a distinct moment of shocking violence. The memory of that violence, at some subconscious level, helps to hold the community together. No one wants it to happen again.

Communities without that kind of collective memory, the thinking goes, will inevitably slip into the kind of rivalrous and destructive behaviour that inevitably causes collapse. Therefore, the longer a community has been stably and peacefully together, the more likely it is that there’s some strong, collective memory and fear keeping things in line.

Why does this make sense? Well, here’s where we get back into René Girard territory, on the nature of human conflict. The Girardian view of conflict it that real fighting most often arises out of similarity between participants, not differences: “We do not fight because we’re different; we fight because we’re the same.” (I’m not going to rehash all of this right now because if you actually care about the topic you should go read this Girard primer I wrote.)

The key takeaway you need from it is that communities reach a boiling point when their participants become too similar, and their desires become too mimetic. Peace is regained by restoring differentiation, and the clearest way by which that happens is for one side of the mirror-image conflict to kill the other side. Think of Rome, for instance, which was legendarily founded by two quarrelling brothers, Romulus and Remus, at the moment of violence where one killed the other. (Or, if you prefer, the match between Nature Boy and Lou Thesz that prompted a furious divorce between the NWA and CWC and birthed the World Wide Wrestling Foundation in 1963). The memory of that act of violence (which clears space for differentiation and stability, albeit violently) continually reminds people that it’s differentiation itself that’s keeping the peace. 

More practically speaking, if you prefer examples that aren’t the founding of Rome or pro wrestling, there’s a fairly well-documented effect where investors who saw major stock market crashes in their early careers are more conservative with their investments, usually to a fault, in their later careers. People retain a strong memory of whatever big threat they faced early on: as Helene Meisler offered in the piece above, ““I have often thought that we are all products of when we ‘grew up’ in the market. So, for example, folks who grew up in the ’70s are always looking for inflation. Those who grew up in the ’80s are always on alert for a crash.”

Now, let’s bring this back to present day for a second just to anchor this idea in our own experience. When would you say the modern tech industry, with its norms and rituals and social structures, was really “founded”? I certainly know my answer. The founding murder of Silicon Valley was the dot com crash. 

Bubbles like 1999 are moments of extreme undifferentiation. The moment where the crazy, unhinged mimetic energy of the dot com bubble came crashing down was a modern-day act of nearly literal violence (no one was killed, I don’t think, but a whole lot of businesses and 401-Ks were!). In the bubble, everyone lost their minds in the exact same way. In the crash, stability was violently restored.

In the aftermath of the crash, we evolved this whole social contract around making sure that the tech community could stave off a crash like that from happening again. (Outsiders love to ask how Silicon Valley got so wild and crazy; insiders quietly wonder how it is that things stay so orderly.) We treat this period as an almost sacred time in tech history. You want to hear what real reverence in Silicon Valley sounds like? Talk to any older VC about how “oh yeah, it was in the dark days after the crash where the real entrepreneurs, the tough ones, built the good stuff.” It is an essential part of the tech industry narrative. 

As tech heated back up and we started to all care about the same things again, the idea of another collapse became worrisome. There’s no doubt that we’ve been doing a better job of building real businesses this time around, but nonetheless, Silicon Valley is an ecosystem built on FOMO and speculative finance. If enough people got spooked and ran for the exits, it could all come crashing down. We can’t let that happen. 

But on the other hand, we learned in the bubble that mimetic pressure, FOMO, and irrational exuberance are great assets if you’re trying to build the future. An environment where everyone is afraid of failure might be stable, but it isn’t all that conducive to innovation and risk-taking. We needed some way to have our cake and eat it too: to get the good parts of the bubble, but socially engineer away the bad parts.

So what do we do? We evolved a series of rituals and customs designed for a specific purpose: to make sure that the struggle or failure of any one company would never be interpreted by the community as a warning sign that the whole undifferentiated bubble could collapse. Instead, we perform an elaborate set of rituals to make sure that failure is interpreted as good, because it restores differentiation. “Silicon Valley is a place where we celebrate failure” is truer than most of us realize. 

I wrote earlier this year about how whenever a notable startup struggles publicly or shuts down, we go through a predictable ritual that’s step-by-step analogous to many primitive societies’ ritualistic human sacrifice practices:

First, we talk about how it’s so brutally competitive being a venture-backed startup; “another promising company bites the dust to the brutal reality of venture-backed competition”, acknowledging undifferentiation itself as the source of rivalry, problems, and ultimately, of the death of many promising companies. Then, we do something really interesting: over the course of the day, the dead company gets stripped away of many of its distinguishing factors, histories, and even products. They’re then commemorated specifically in terms of how much money they raised and spent: a perfect representation of undifferentiated competition if there ever was one. It becomes eulogized, almost without fail, as “Company, who raised X million dollars, has shut down.” There is almost no character assassination; very little personal criticism of the founder, not like you’d see in other industries in a notable bankruptcy; instead, we congratulate them and give them EIR positions. Blame is shifted away from company specifics and into the idea of the rat race itself.

The whole process is a ritualistic portrayal of undifferentiated competition as the source of our problems. Internally, we quietly reflect: “Well, they died so that the remaining companies can now live, as profitable businesses that have exited the crucible of competition.” The problem of competition itself has not actually been vanquished in any way whatsoever, but we pretend it has, at least for a little while. Publicly, in contrast, we go through a period of performatively condemning undifferentiated conflict: “Is raising so much money good for startups? Does VC kill good companies?” Then, finally, we perform the last rite of the ritual: we announce, to no one in particular, that Silicon Valley is ‘a place where we celebrate failure’. 

The specifics vary from situation to situation, but the overall goal of the ritual is always the same: to make sure that this particular failure is not interpreted by the community as a warning sign of greater collapse. Small failures are ritualized into tiny, symbolic “re-founding murders” that help stave off a huge, actual act of violence like the dot com crash. It’s a remarkable performance exercise, and it works.

As a community, we’ve gotten impressively good at collectively interpreting these failures in the healthiest way possible: founders are rarely demonized; there’s just the right amount of performative fretting, but no serious fear. For small failures, anyway, we’ve gotten really good at ritualizing them into the highest level of “failure interpretation”: not by panicking (the lowest, most dangerous level) or by isolating it as an ignorable one-time thing (the intermediate level, which works when used sparingly), but in an active form of kayfabe where failure is good! 

The collective memory of the real founding murder (the dot com crash) is an essential part of keeping kayfabe. The stronger that memory, the more effectively we can say “up is down, black is white, failure is great” with a straight face, mean it, and actually perpetuate a desired outcome that is useful. It’s an remarkable conjuring trick, really; if enough of us believe that failure is good, then it becomes good. 

But now, we’ve gotten good enough at this game that we’ve unlocked harder levels. The present-day “Is Silicon Valley a bubble” question is dominated by one firm: Masayoshi Son’s Softbank Vision Fund, and its bold attempt at executing a capital-as-a-moat strategy. Businesses like Uber and Doordash are burning Softbank money at a rate that’s making a lot of people worried: can Silicon Valley stay healthy if the speed of the treadmill and the relative undifferentiation between these businesses keeps getting ratcheted up? How will we interpret the failure of one or more of these businesses? 

The biggest one of all right now is the incredible saga of WeWork over the last few weeks. To me, the really fascinating part of all of this is watching the gears spin into motion as the Silicon Valley collective mindset begins to do its thing: making sure that the failure of WeWork, should it ultimately follow through, is not interpreted as a sign of danger to the community as a whole

This is an entirely different challenge than, say, a food delivery company going under due to too much competition. That’s like an easy level of the game. Now we’re at a hard level: if the community is able to spin the collapse of WeWork, and beyond that the failure of Softbank’s Vision Fund strategy to work, as a good thing, that’s more like beating boss mode. It’s not going to be easy.

We’re off to a bad start. As WeWork flounders, Adam Neumann has become a highly public face of the operation, and he’s earned a lot of vilification and scapegoating. But that’s dangerous: the whole sacrificial ritual we perform around companies dying is supposed to be a healing ritual that keeps kayfabe by condemning competition and undifferentiation in the abstract, as opposed to creating real heroes and villains and therefore creating real sides. 

Normally, when a company goes under, we have a smooth and confidently rehearsed pattern where we basically absolve the company and the founder of any blame and keep everything in Kayfabe Level. But with WeWork we’re not going that: when you hear “They’re a uniquely reckless company”, “Adam Neumann is a fraud”, or even “They’re  not even from here, they’re from New York”, these are all signs that this challenge is harder than we’re used to processing. We’re struggling a little bit under the sheer difficulty of keeping up kayfabe, so instead fall back on an easier but more dangerous tactic which is trying to isolate and contain the damage. We resort to Containment Level, which isn’t something we like to do.

I, for one, have a great deal of faith in the Silicon Valley social contract that keeps the ecosystem humming even in the face of bad news like this. But watch the discourse. My instinct tells me that we’ve effectively sequestered WeWork in Containment Level for the time being, but things could change! 

Here’s a possibility I’ll leave you with. If things actually get really bad, my hunch is that we’ll look back on this period of time as a crucial moment where the New York City tech scene gets truly divorced from the San Francisco tech scene. They’ve been drifting apart for a while now anyway, and it’s honestly about time for some big traumatic event to serve as a founding murder-type event for something new. 

The seeds for something like this to happen are totally there, because for a long time the NYC tech scene was like a cool, less-known scene that got overshadowed by its mentors out west. But now NYC tech is emerging as a genuine peer to the Bay Area, and we’re seeing all kinds of interesting resentments and rivalries start to pop up all over the place. This probably deserves its own post so I’m going to leave it at that, but stay tuned for this storyline to develop. 

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