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As new tales emerge of the high-tech world's toxic masculinity, Tamsin McMahon reports on the men behind the machismo, the women fighting back, and what it all may mean for the economy, and the workplace, of the future

Illustrations by Kagan McLeod for The Globe and Mail

As a woman working in venture capital and technology in Asia, including launching the Japanese operations for Meitu, a popular Chinese photo-editing app that went public in December, Yumi Alyssa Kimura faced her fair share of bullying and discrimination.

But Ms. Kimura, who was raised in China and Japan, was still surprised at the level of sexual harassment she encountered when she moved to Silicon Valley. During a business meeting last year, a venture capitalist asked Ms. Kimura back to his San Francisco office so that, he said, she could study its decor and make sure it would appeal to the Asian investors he was trying to court. As the meeting wound up, he opened a bottle of champagne. Then, he tried to kiss her.

"I said, 'I thought we were in a business meeting,'" she recalls, declining to name the investor. "He said, 'Yes, but that just finished. We want to work together, so let's build a relationship.'" She later met him at a business event in Japan, but he barely recalled their previous encounter. "He was doing that to every woman, which is why he didn't remember," she says.

It was not the first – or the last – time that Ms. Kimura would face such behaviour. A few years ago, she successfully went to court in San Francisco to get a restraining order against an acquaintance who had assaulted her. More recently, an entrepreneur located her on LinkedIn, asked for a business meeting, and, when they met, proceeded to proposition her for a date.

Ms. Kimura's story is hardly unique. This past February, former Uber engineer Susan Fowler publicly described the ride-hailing company's discriminatory workplace culture, detailing how she had been propositioned by a manager and was subsequently undermined by the company's human-resources department. Her exposé proved to be the tipping point that forced the resignation of Uber CEO Travis Kalanick, who was already under scrutiny for his role in fostering the company's aggressive, frat-like culture.

Soon after that, several women came forward with stories of being groped and propositioned for sex by venture capitalist Justin Caldbeck, whose firm, Binary Capital, has since shut down. A little more than a week later, angel investor Dave McClure stepped down from the business accelerator 500 Startups after a female entrepreneur said he had pressured her for sex and kissed her without her consent during a business trip in Malaysia.

Allegations of sexual harassment and discrimination have dogged Silicon Valley for years. But many women in the industry see the current discussion as a watershed moment in a debate that began with Facebook CEO Sheryl Sandberg's 2013 book on women in leadership, Lean In, and gathered steam with Ellen Pao's highly publicized sexual-harassment lawsuit against her former employer, Silicon Valley venture-capital firm Kleiner Perkins Caufield & Byers, which she lost in 2015.

The most recent scandals have also ignited debate within the tech community north of the border, says Michelle McBane, managing director of StandUp Ventures, which invests in companies with at least one female founder and is run by Toronto's MaRS Investment Accelerator Fund. The sheer scale of the money flowing into Silicon Valley startups has fuelled excessive behaviour beyond anything commonly seen in Canada's technology and venture-capital industries. But the Canadian industry's small, tight-knit nature, says Ms. McBane, also makes it even harder for women to come forward.

"There are some very, very brave women in the U.S. who stood up," she says, adding that, in Canada "I think it is a lot harder to do because there are fewer companies, there are fewer funds, so if you actually do speak out, it's a little bit more challenging."

The accusations of Silicon Valley's widespread culture of toxic masculinity have cut deeply across an industry that prides itself on being a meritocracy where intelligence and enthusiasm matter more than gender, skin colour or pedigree. They have also exposed the ways that, in building the economy of the future, Silicon Valley has somehow managed to replicate the boys'-club trappings of the old economy: tight networks of white males who have graduated from elite universities, untouchable executives and investors, and a cutthroat competitive spirit that rewards companies who place unstoppable growth ahead of ethical considerations.

That Silicon Valley may have much in common with many of the staid old professions that it is trying to disrupt is all the more remarkable because of the shift from the industry's origins as a female-dominated work force, in which computer programming was considered secretarial work, to the hypermale culture that dominates today. It is one of the only disciplines that has actually seen the proportion of women entering the field shrink over the years, even as women's opportunities for education and career advancement across society have expanded.

Meanwhile, the industry's potential to upend all sectors of the economy – from taxicabs, to the global monetary system – has attracted an influx of wealth looking to grab a piece of the latest in cutting-edge technology.

That poses major issues for how the culture of Silicon Valley will shape the future of the workplace far beyond a few thousand square miles of Northern California.

PayPal's 'Stanford Mafia'

To understand how Silicon Valley's origins as an aspirational meritocracy bent on changing the world have managed to breed a culture of aggressive masculinity, it's helpful to look back at one of the most successful startups of the dot-com era: PayPal. The company, which revolutionized online payments, was one of the few to emerge unscathed from the bursting of the Internet bubble of the early 2000s. Its initial public offering, followed shortly by a $1.5-billion (U.S.) sale to online auction house eBay in 2002, made its founders and early employees enormously rich.

Now dubbed the PayPal Mafia, several of the company's former employees constitute a veritable who's who of today's most powerful and connected entrepreneurs and investors. The list includes venture capitalist and Donald Trump supporter Peter Thiel, Tesla chief executive Elon Musk, LinkedIn co-founder and venture capitalist Reid Hoffman, as well as the disgraced Mr. McClure of 500 Startups.

Many have gone on to have an outsized influence over the current generation of Internet startups – founding or investing in such companies as Facebook, YouTube, Airbnb, Yelp and Pinterest. PayPal's wild ride has become a template for success among many of the newest crop of Silicon Valley entrepreneurs.

An early inkling of how some of PayPal's founders saw the world came in 1996, when Mr. Thiel and another early PayPal employee, David Sacks, published a book called The Diversity Myth. Inspired by their time as students at Stanford University, where they helped run the conservative student newspaper, The Stanford Review, which Mr. Thiel co-founded, the book was a blistering takedown of political correctness and the multicultural policies the authors feared were destroying colleges across America. It excoriated the "radical feminist agenda," criticized preferential admissions for underrepresented minorities, and took issue with seminars on diversity, including one on the history and culture of African-American hair.

But The Diversity Myth's main thesis was that, by promoting diversity and multiculturalism, colleges were instead breeding a dangerous intellectual conformity. A diversity of ideas, they argued, was more important than a diversity of people. "You do not have real diversity when you have a group of people who look different, but think alike," Mr. Thiel said, during a television interview to promote the book.

The Diversity Myth is hardly Silicon Valley's defining playbook on how to build a successful tech startup – and both Mr. Thiel and Mr. Sacks have since apologized for some of the more controversial notions they expressed as young men. But many of the libertarian beliefs that underpin the book remain widely accepted in the industry even today.

The 'paradox of the meritocracy'

The most prominent of these is the idea that Silicon Valley should aspire to be a meritocracy, where intelligence, passion and hard work are rewarded and where money does not discriminate based on race, gender or economic status. Belief that the tech industry really is such a meritocracy has been fuelled in large part by the fact that Silicon Valley has become a mecca for talent from around the world, that a significant portion of the industry's work force is of Asian descent, and that a number of successful tech entrepreneurs – including several members of the PayPal Mafia – are immigrants to the United States.

In 2010, researchers at the Massachusetts Institute of Technology and Indiana University published an analysis of what they dubbed the "paradox of the meritocracy." They conducted an experiment that asked MBA students to pretend to be managers and to rate the performance of the employees of fictional companies, dividing the students into those working for firms that had meritocratic cultures, and those that didn't. The results were striking: Managers who were told they worked at meritocratic organizations nonetheless consistently favoured male employees, awarding them significantly higher bonuses than what they offered to women.

When major tech firms such as Google, Facebook, Apple and Microsoft finally gave in to calls to release statistics about the diversity of their work forces in 2014, they offered a real-world equivalent of that experiment. Silicon Valley turned out to be even less of a meritocracy than many of its critics had anticipated: Fully 70 per cent of its work force was male, and 60 per cent was white. In a state where more than 30 per cent of the work force and an estimated 18 per cent of students graduating from four-year colleges are Latino, major California tech firms reported that just 3 per cent of their employees were Hispanic.

Yet even after several years in which similar statistics have come to light, the needle has barely budged. "Diversity numbers have been constantly published," says Angie Chang, co-founder of Women 2.0, which organizes events for women working in technology in the San Francisco Bay Area. "And that hasn't seemed to be able to effect any change."

Beer, yes. Hoops, no

When it came time to start hiring employees for their nascent startup in 1998, PayPal co-founders Max Levchin and Peter Thiel recruited heavily from their alumni networks. Mr. Levchin favoured engineering friends from his alma mater, the University of Illinois at Urbana-Champaign. Mr. Thiel looked chiefly to his network of college friends, hiring several of those who had written for The Stanford Review, including his Diversity Myth co-author.

Ensuring that the early team was as un-diverse as possible was one of the keys to PayPal's success, Mr. Levchin has said. The comment was intended to highlight the importance of ensuring that employees have similar technical backgrounds, rather than physical attributes, but the notion reflected itself in the company's culture. One idea drawn from PayPal's origins that has become startup gospel is that of "culture fit" – the belief that, for a company to be successful, employees must be similar to one another. New hires, so the conventional wisdom goes, should be people that employees would "want to have a beer with."

In subsequent retellings of the company's history, Mr. Levchin has described how PayPal founders disqualified an engineering candidate because he said he liked to play "hoops" in his spare time, an instant red flag that he wouldn't fit in with the techies. The company, Mr. Levchin said, also had trouble attracting women who could mesh with a culture that was a mix of "nerdiness and alpha-maleness." Among the distinctively macho PayPal traditions: Disputes between employees were often settled by way of wrestling matches on the floor.

"All of this is about self-selecting for people just like you," Mr. Levchin was quoted as saying in a Forbes profile on the PayPal Mafia in 2007. "He thinks like me, he's just as geeky, and he doesn't get laid very often. Great hire! We'll get along perfectly."

Culture fit is often held out as an important factor when firms are starting out. Disagreements between founders and early employees can tear apart fragile new companies. But not all the titans of high tech would agree. In their 2014 book How Google Works, that company's executive chairman, Eric Schmidt, and former senior vice-president Jonathan Rosenberg lay out just how easily certain ideas around culture fit can become a problem.

"You often hear people say they only want to work with (or elect as president) someone they would want to have a beer with," they wrote. "Truth be told, some of our most effective colleagues are people we definitely would not want to have a beer with." Work forces full of best friends tend to be homogenous, they warned, and "homogeneity in an organization breeds failure."

Former Uber CEO Travis Kalanick and PayPal co-founder Peter Thiel.

From house party to startup

In recent years, an unprecedented amount of outside money has flooded into Silicon Valley. That has only helped to amplify some of the industry's shortcomings. As interest rates plunged in the aftermath of the 2008 financial crisis, global investors rushed to cut cheques to U.S. venture-capital firms in search of higher returns and the chance to get in on the ground floor of what could become the next Google or Facebook.

Last year, venture-capital firms invested $73-billion in U.S. startups, well above $45-billion invested at the peak of the dot-com bubble. More than half of that was destined for California. Angel investors – wealthy individuals who are often corporate executives or entrepreneurs themselves – have also flocked to the tech sector, pouring $24-billion into startups in 2015. According to multiple estimates, men make up between 80 and 90 per cent of both venture capitalists and angels.

The torrent of cash had made it easier for even relatively inexperienced venture-capital firms, as well as young new entrepreneurs, to raise a lot of money very quickly. Two of the founders of GoAhead Ventures, which bills itself as working with "young entrepreneurs at the earliest stages of their company," are under the age of 25. They formed the company while still students at Stanford. Less than two years after graduating, they have raised $55-million.

The money has only reinforced some of the ingrained biases about what a successful startup should look like. It can be difficult for even the savviest of investors to evaluate the potential of brand-new technologies, making them far more likely to rely on gut instincts about the entrepreneurs themselves. "You're really taking a bet on a founder," says StandUp Ventures' Ms. McBane. "If a founder is a first-time founder and doesn't have a successful track record, there is absolutely an unconscious bias that's built in."

The influx of money desperate to invest in Silicon Valley startups might seem like an opportunity for female entrepreneurs. Instead, critics say, the heady mix of money and youth has exacerbated the problems of sexual harassment. "It's easy to note that in places like Silicon Valley – where there's a lot of capital and there's a lot of growth and there's a lot of success – comes a certain amount of arrogance," says Kate Mitchell, co-founder of the Bay Area venture-capital firm Scale Venture Partners. "Couple that with people who maybe have never worked in a large company. For some people, their startup or their venture firm may be their first job out of college."

One result is that the predominantly male investment industry has a tendency to support entrepreneurs who closely resemble themselves. In 2013, Reuters studied 88 startups that had been funded by the top five venture-capital firms. Seventy of them fit a typical Silicon Valley mould: They had held senior positions at large companies, been entrepreneurs in the past, or had graduated from Harvard, Stanford or MIT.

Angel investors' decisions were similarly skewed. Female entrepreneurs made up 30 per cent of startups pitching investors last year, but just 14 per cent of companies that received funding, a figure that has remained stubbornly unmoved in recent years, according to the Center for Venture Research at the University of New Hampshire.

Despite the influx of money into the sector, venture capital remains a niche industry of predominantly small firms consisting of a handful of friends. That has made it difficult to impose the kind of formal policies commonly found in larger organizations. "We're best designed and we're most profitable over many years, decades, as this cottage industry," says Ms. Mitchell. "Our industry doesn't scale in the way an Apple, or a Facebook, or a Google does."

With a $335-million fund and 20 employees, Ms. Mitchell's firm is larger than average, but it is not big enough to have a formal human-resources department. The average venture-capital fund is closer to $50-million, and those companies might not even be large enough to justify having a full-time chief financial officer, she says, let alone formal HR policies.

Even then, relationships between investors and entrepreneurs are typically not covered by employee-employer guidelines. Venture capitalists still tend to source many of their deals informally, through recommendations from their social network and in casual meetings over drinks. "A lot of people meet investors not in conference rooms, but at a house party, or maybe a wedding, or maybe even a bar," says Yumi Alyssa Kimura. "So the way they meet each other is not that formal, and then later, when you start to talk about business, people say, 'Hey, we are friends, I just happen to be an investor.'"

Founder-friendly structures

The rush of money into tech startups has also swung the balance of power in favour of the most sought-after founders, who have been able to negotiate terms that give them exceptional control over company decisions, including those involving hiring, promotions and overall culture.

One such tool is the growing popularity of dual-class shares – a structure that gives a regular investor one vote per share, while reserving a "supervoting" class of shares for company insiders. The structure has allowed the founders of companies such as Google, Facebook and Uber to maintain control over their firms even as they've diluted their overall ownership by going public or raising large sums of cash.

Mr. Thiel's venture firm, Founders Fund, is among those that have supported founder-friendly structures that limit investor control. "Companies can be mismanaged, not just by their founders, but by VCs who kick out or overly control founders in an attempt to impose 'adult supervision,'" reads the company's website, which emphasizes that the firm "has never removed a single founder."

Dual-class shares are not unique to the tech industry, but some critics complain that founder-friendly policies have made it difficult for investors to push for changes or remove a problem executive. Despite being ousted as chief executive of Uber, for instance, Mr. Kalanick remains on the company's board of directors, alongside two of his close allies and early Uber employees, who each hold "supervoting" shares.

Companies such as Uber are also staying private for longer because the deluge of private money makes it less necessary to tap public markets. In Silicon Valley, which prizes moving quickly and breaking rules, that has created an intoxicating level of freedom. "It's like giving a mischievous toddler a bag of sugar instead of a time out," long-time Silicon Valley journalist Sarah Lacy told Montreal's StartUpFest conference last week.

Far-reaching implications

But while all that freedom may be good for those in charge, the lack of diversity it invites in Silicon Valley has profound and far-reaching real-world implications, particularly as technology continues to upend traditional industries – from retail to medicine – where the preferences and biases of software developers can easily become embedded in the products themselves.

"Every industry is becoming a tech industry, every company is becoming a technology company," says Alaina Percival, chief executive of the San Francisco-based non-profit Women Who Code. "If this emerging industry isn't pushing toward gender balance, there's a risk that, at the executive level, across all industries, there will be even fewer women represented."

That is particularly true when it comes to artificial intelligence and machine learning, an industry in which Canada is working to carve out an important role. Last year, Microsoft unveiled an experimental chatbot that was meant to learn how to speak like a teenager by interacting with users on Twitter. It was shut down only days later – after it began spouting racist, sexist and anti-Semitic musings. Researchers from Carnegie Mellon University, meanwhile, have determined that Google's algorithms were six times more likely to display ads for senior executive jobs to men than to women.

"Who's going to be taking care of our elderly two generations from now? It's going to be AI," Melinda Gates told Wired magazine last year. "But do you want all males in their early 20s and 30s creating the AI that's going to take care of you when you're older?"

A turning tide?

Despite the obstacles, many women in Silicon Valley believe that the current conversation around sexual harassment may begin to tip the balance in their favour, in part by inspiring more women to become angel investors or venture capitalists.

Ms. Chang, the co-founder of Women 2.0, sees potential in crowdsourcing and other sources of financing that can help female entrepreneurs build businesses without being forced to rely on the traditional venture-capital industry: "There's a lot of ways we can encourage more people to invest in women so it's not just 'Let's change the VC game (which we can and we will eventually), but how can we enable all of us to invest in these women-led businesses?"

Research from the University of Pennsylvania and New York University provides support for such optimism. In a study published last year, researchers found that projects created by women on the crowdfunding website Kickstarter tended to be more successful at raising money than were projects created by men. That was largely due to a small group of female activist investors who felt strongly about backing women as a way to combat discrimination.

The intensifying spotlight on sexual harassment might also open new opportunities for women to start companies that use technology to tackle the problem of institutionalized sexism. Ms. Chang points to Joonko, co-founded by a woman, which has developed programs that plug into a company's existing software, analyze its data for signs of unconscious bias, and then make suggestions, such as giving female employees more tasks that can demonstrate their capabilities.

Ms. Kimura is among those whose experience with sexual harassment has inspired her to start a new business. Earlier this year, she launched Lead, an online platform that uses artificial intelligence to help women connect for networking and mentorship. Her male business partner, a Web developer she met at an English-language school in Berkeley, was initially skeptical that sexual harassment was enough of a problem in the industry to warrant much demand for an app to help combat it. She suggested he take 10 days and talk to his female friends and relatives and then see how he felt. "He came back and said, 'I want to be your co-founder,'" she says.

This month, their company was formally accepted into TechCode, a network of startup incubators in China, Israel and Germany that recently launched an accelerator for artificial-intelligence technology firms in Silicon Valley. "Now, companies are trying to make a change," says Ms. Kimura. "They want to have something to solve the problem within the organization before these things happen."

Tamsin McMahon is a U.S. correspondent for The Globe and Mail in its recently opened California bureau.