The Power Law: Venture Capital and the Art of Disruption

"This is by Sebastian Mallaby who’s had a lot of success in reaching the shortlist and indeed winning the FT book prize. In 2016 he won for The Man Who Knew , which was his biography of Alan Greenspan. This book has been in the offing for a while, it’s his big study of the roots of venture capitalism, mainly in the US, and what lies behind the success of a lot of the Silicon Valley technology companies. He’s taken the history and retold it in a rather wonderful way. All the stories in the book are great, right back to Gordon Moore and those who became part of Intel. Mallaby favors the idea that venture capital has been a force for good. Ordinary finance was backing the probability of beating the market by a point or two. Venture capital, right from the beginning, was about backing 10 horses, nine of whom you know are going to fall before the final hurdle, but one is going to strike enormously rich. It was originally called ‘adventure’ capital. It’s about taking these huge risks, in the hope that at least one of them will do exceptionally well. So it requires, as he makes clear, a particular type of person, with a particular mindset, in order to make this happen. It’s a pro-venture capital book. The subtitle is ‘the art of disruption’ and there has been a lot of criticism about whether disruption is really what we want. But in the case of some of the companies backed by the venture capitalists, he’s saying it was the necessary spark for wider capitalism. It’s a very nicely told story, I think. It’s not Pollyannaish about venture capital. He points out flaws and areas for improvement. In the US, venture capital remains very male dominated; it’s got that clubbiness, to some extent. There are flaws in the model. It’d be interesting to have Gary Gerstle debate Sebastian Mallaby about how this links into the worst excesses of neoliberalism. It’s a pro-business book and that’s great to have on the shortlist, because a lot of the business books that we see are essentially about scandals, like Dead in the Water . That’s what journalists in particular like to write about. So somebody who’s done a deep analysis of what is essentially a net positive for capitalism deserves to be there."