The Unintended Consequences of Tech Startups

San Francisco

Why do tech startups all look the same? That’s a question The Economist asks and partially answers in a story that details what it calls “The Dark Side of Tech Startups,” a topic seldom discussed by those involved with them.

Startup communities, though very international, are made up largely of youngish white males who are not so much entrepreneurs as new kinds of workers. A further worry is that software — and hence startups — are eating not just the world but jobs, too.

In San Francisco, startups, long welcomed, are now being accused of hurting the city because their highly-paid workers have distorted real estate markets, written blogs making fun of longtime residents and take private buses to their jobs in Silicon Valley.

While tech startup workers occasionally get rich, that’s the exception. More often, startups bring in people – mostly young white and Asian males – who work long hours, dream of riches and ultimately fail to collect when the company sinks. Even startup founders aren’t immune, often working long hours and investing personal funds and money raised from family and friends with little to show for it in the end.

“Attitudes to failure vary by culture, though it is always a personal disaster when, after years of hard slog, a founder realizes that the dream is over,” The Economist observes.

“But many still want to give it another try,” the magazine writes. “‘It’s part of the game. You have to ask yourself what you have learned and move on,” said Gaith Kawar, a Jordanian serial entrepreneur who is on his seventh startup.”

Gender and ethnic diversity is another dark side. The Economist says that in 2013 less than 5 percent of investments were made in tech firms founded by women. And most of those getting money, it says, “may come from all over the world, but most of them are white or pale.”

Unintended Consequences

The dark side of startups doesn’t just impact people who work for them. It also touches people whose jobs get cancelled out. For example, at its height Kodak employed nearly 150,000 workers. Its arguable replacement, Instagram, had 130 million customers at the time of its $1 billion sale to Facebook, but counted only 16 employees. Kodak, meanwhile, filed for bankruptcy shortly before Instagram sold in 2012.

Meanwhile, in San Francisco, the migration of young techies into the city has created social change that has left some longtime residents fuming. “Rents in some of San Francisco’s most desirable neighborhoods have doubled in a year. Apartment construction has exploded in order to absorb the new residents. The city is developing so rapidly that Google’s streetview photos from 2011 are already well outdated,” noted Susie Cagle in Grist.

“The local government has embraced the disruption. Longtime residents, meanwhile, talk about fleeing or saving their city as though a hurricane is coming. But the hurricane has landed,” she wrote.

One flashpoint is the fleet of private buses that whisk upwards of 35,000 workers each day between San Francisco and Silicon Valley, 40-50 miles to the south.

“They may use the city’s public bus stops, but these are no ordinary buses,” Cagle wrote. “They are pure, gleaming white, unsigned and completely anonymous. Riders flash their work IDs to gain access to these luxury shuttles, each outfitted with Wi-Fi, of course.”

The buses are controversial, in part, because of the problems they cause passengers of the city’s own bus system, largely by blocking bus stops during commuting hours. The city has recently adopted new rules intended to ease the congestion.

Image: ventdusud/

7 Responses to “The Unintended Consequences of Tech Startups”

  1. To blame (even partially) Instagram for Kodak’s downfall is like cursing automobile for horse carriage industry’s fall. Technology grows, changes; to survive one has to innovate or be ready to change the way it works. Kodak failed to get on the digital wagon, this was bound to happen.


    • There was no blame written or implied. They were using the scope of the company to contrast Kodak. 16 employees do what 8000 used too. It isn’t a stretch to understand there are consequences of displacing workers with technology, especially workers who cannot easily acquire new skills.

  2. Raymond Voigt

    Better to have SFO-South Bay transportation rail links electrified and rebuilt to be separated from street traffic. Tax the buses for their share of the improvement costs and add a transportation income tax for high income residents to pay for the rest.
    Once the high-speed link is up and running, ban the intercity buses and use local collector routes to take tech employees from the train stations to and from work and home. This is an opportunity to expand transportation infrastructure for all, if only the right policies are devised.

  3. Why is this article relevant?

    This article basically repeats what everyone on the internet has already known for 3 years. Startups, SV buses, rising rents, displaced residents. Where’s the news here??? I feel like this article is composed of several articles that were posted years ago.