Court of Versailles Vs. The Wild West
Ten years ago, I went to go work for a secretive Swiss commodity trading firm.
This particular firm played a vital role in the global economy and had minted several billionaires among its small work force. This firm had their tentacles everywhere and in every country and yet few knew who they were. I was one of only a handful of Americans to get a shot at being on the inside of this firm.
It didn’t last long. Within a relatively short stint living in Switzerland, I was sent packing back to America to look for a new job.
So what happened?
I made many mistakes but the principle one was a failure to recognize the operating paradigm.
Every work environment operates along an axis with two opposing paradigms.
On the one end, is the “Wild West” and on the other end is “The Court of Versailles”. Your success or failure depends on knowing which of the two operating paradigms dominate.
The “Wild West” paradigm is the one that built America.
In the Wild West of yore, there was no central authority to appeal to – you ate what you killed. It was meritocratic. If you didn’t work for the wealth, the wealth didn’t get created. It didn’t matter if you were uncouth, so long as you got the job done.
“The Court of Versailles” paradigm is very different.
In The Court of Versailles, the wealth already exists. There is a barrier to entry to this wealth but the barrier to entry is not talent or hard work – it is access to the controlling entity. In 17th century France, that was the King.
Your relative success or failure was determined by whether you were in the Court of Versailles and furthermore what King Louis thought of you within the court.
Did you make the right comment to his mistress regarding her new dress or show the proper attention during a long speech? If you were good at playing those social/political games, you were rewarded with great wealth.
Now back to my experience at this Swiss commodity firm.
I had arrived thinking that this place was a Wild West type of environment.
It turned out that that had been the case in the past when the firm was starting out but as the wealth was created and assured, the firm had transitioned to the Court of Versailles paradigm.
Once you were inside the firm, what mattered was not how smart or hardworking you were but rather whether the top traders liked you personally and whether they thought you were useful for their own political ends. There really wasn’t much talent to being a trader at this stage in the growth cycle – you sat atop of continuous revenue streams created by prior generations of traders. The talent was in navigating the court politics to replace an older trader who retired. If you waited your turn and played the game of “Survivor” well, you were able to make +$10mm a year with little incremental effort.
Now, when nebulous things determine your outcome, you shed good people, which is what happened.
This shift in culture didn’t immediately impact the company but over time it did and good people left. The company’s stock price would crater in the ensuing years.
At the time I was floundering, another friend of mine was moving up the ranks of Facebook. He described a much more aggressive corporate culture, one where employees pulled all-nighters to get things done.
If you sucked at your job, you got fired. If you were good, you were promoted and paid. It was still the Wild West.
A lot has changed in the last ten years.
Large US tech firms now sit atop of monopolistic revenue streams that gush cash with little incremental effort.
Guaranteed of success, employees of these firms could shift their focus away from product and toward peacocking. Over the last five years, Silicon Valley has entered its Court of Versailles epoch.
This new Court is being built around progressive politics.
Whereas the French courtiers wore elaborate wigs to demarcate their status, the millionaire employees of these firms flex their social status through solidarity with various social justice causes.
You used to prove your mettle at Facebook by participating in an all-nighter hackathon, now you did so by participating in a diversity seminar. It doesn’t matter if you fly private, so long as you post about how global warming is the most important threat facing mankind.
If you rebel against some of the precepts of this new ideology by espousing a contrary view as James Demore did at Google when he offered an alternative explanation on female representation, you are professionally executed (see here).
But Court of Versailles can only last as long as the easy money is flowing and this new Court of Versailles peaked in the summer of 2021.
You can see that clearly in their investor transcripts.
“Diversity” is mentioned a record 19 times in Google’s June 2nd, 2021 Analyst call and a record 6 times in META’s May 24th, 2021 Analyst call. Mid-2021 was when these large cap tech stocks hit their all-time highs with META reaching $385 that summer and GOOG reaching $150 that fall.
Since then these companies have seen their share prices collapse by over 50% and 35% respectively.
In a sign of the changed times facing these firms, diversity has not been mentioned by either company since their Q2 2021 earnings call.
While these firms shifted their focus from doing something real to signaling something artificial, threats begin to emerge.
Google has been caught flat footed by OpenAI, which could completely upend the economics of search. Meta has been caught off guard by TikTok and to the changes in Apple’s privacy policies.
Whether these threats like the angry French peasants in the French revolution end up overthrowing these tech titans will depend on the degree to which these companies pivot and shed their indulgent Court of Versailles.
Andy Grove, the former CEO of Intel, once said that “Only the paranoid survive.” He was right.
The problem with these large tech firms is that the employees have been paranoid about the wrong things for the last few years.
Perhaps, this return to the Wild West operating paradigm will bring back the right paranoia.
