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A Historical Sociology of US Venture Capitalism, 1946-1968

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A Historical Sociology of US Venture Capitalism, 1946-1968 The London School of Economics and Political Science Heuristics of Capital: A Historical Sociology of US Venture Capitalism, 1946-1968 Dmitrii M. Zhikharevich A thesis submitted to the Department of Accounting of the London School of Economics for the degree of Doctor of Philosophy London, September 2019 Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 93,863 words. 2 ABSTRACT This thesis examines the emergence and early history of venture capitalism in the US as a project of capitalization. As theorized in recent literatures on valuation studies and the “new” history of capitalism, capitalization is a collective activity, simultaneously cognitive and socio-technical, of “turning things into assets.” As such, it requires the capitalizing subject to “think as an investor.” The history of capitalism can be reconstructed as a history of successive “regimes of investment,” differing in terms of which assets get capitalized and under what terms. Before stabilizing as a “regime,” however, capitalization begins as a project that is logically and historically anterior to the institutions and technologies that will later hold it together. Rather, projects of capitalization emerge as ways of imagining certain objects as investments, or capital assets. In the early history of venture capital in the US, this imagination was targeted at young, small, technology-based firms. Prospective investors — who eventually became early venture capitalists — deployed a set of informal heuristics adopting some of the categories from the classifications used by the applied financial and managerial disciplines. This thesis follows the sequence of episodes through which these heuristics increasingly became centered on “people,” eventually helping create a novel action under a description and, to put it in Ian Hacking’s terms, a corresponding human kind — technical entrepreneurs. Accordingly, the analytical approach is nominalist: no claim is made as to whether the heuristics deployed by the actors featuring on the pages to follow could serve as a substitute for probabilistic calculation or any other formal calculative device. Yet however “effective” these heuristics might have been, they did have certain dynamic effects, applying and creating new classifications of investment opportunities, companies, and, eventually, people. As a result, in the early 1970s, venture capitalists defined themselves as being engaged in the “people business.” Rather than effectively “turning engineers into entrepreneurs” through coercive or performative effects, they created the category of “technical entrepreneurs” as a human kind, that is, as an open possibility for being a certain kind of person, without necessarily becoming one. 3 Acknowledgments I am grateful to my supervisors, Peter Miller and Martin Giraudeau, for their trust, encouragement and tolerance to my perennially failed timing. Andrea Mennicken has been tremendously helpful throughout all stages of my studies, and especially in the very last moments before the submission. Mike Power made many incisive and useful comments during my presentations and the progress meeting, suggesting, inter alia, that the argument could be framed as a “Hackingesque story.” It took me too long to absorb this, but I did my best. The Department of Accounting at LSE has been a comfortable home, both intellectually and socially. I am grateful to the Department, and specifically to Wim Van der Stede, for endorsing my application for a period of study abroad in the final year, which enabled me to become part of another “epistemic community” at Harvard Kennedy School’s STS Program. Sheila Jasanoff was generous to accept me and offer valuable guidance, in addition to the opportunity to be part of an ongoing and highly stimulating conversation with the other Fellows, as well as distinguished speakers at Harvard STS Circle. Archivists and librarians at Harvard Business School helped me navigate the relevant archives, Artem Gureev and Daria Savchenko saved me from homelessness during the first few weeks, and Barry Cohen suggested a few good ideas that I am hoping to explore in the near future. Nancy Hogan has been a great host for me and my wife Dasha. Back in London, Vassily Pigounides has been a helpful friend and an involved listener all the way through. Participants of the AC500 seminars generously listened to my chaotic presentations and offered many valuable comments. At LSE, I have also enormously benefited from the courses by Mary Morgan and David Graeber taken in my first year. Vincent Lepinay and Mario Biagioli supported my PhD application back in 2014. I hope they were not wrong. Colleagues and friends from across Russia helped in innumerable ways. I am grateful to Andrey V. Rezaev for teaching me how to “work hard, really hard,” colleagues and friends from the TANDEM Lab at St. Petersburg State University and the European University in St. Petersburg for valuable lessons and long conversations. Last but not least, the works of Georgi Derluguian remain a distant but constant source of inspiration. And the list could go on. I am most grateful to my family — for helping me survive as much as for surviving my doubts, remorse and chaotic lifestyle. Whatever good comes out of this, they deserve it much more than I do. As a good heir of the great Russian romantic tradition, I won’t trust my love to the printed word, but, Dasha, you get the point. Finally, a mandatory bit of self-irony: to rephrase a Russian proverb, the one who harnesses slowly has to ride fast. Readers will understand. 4 CONTENTS ABSTRACT ............................................................................................................................................. 3 Acknowledgments ............................................................................................................................ 4 Introduction ......................................................................................................................................... 7 Elements of Theory .................................................................................................................... 14 The Archive .................................................................................................................................... 23 Overview of the Chapters ....................................................................................................... 23 Chapter II. Frames of Life ............................................................................................................ 26 Introduction .................................................................................................................................. 26 A Fordist Career .......................................................................................................................... 30 Business Schools and the Rise of Fordism..................................................................... 32 The “Science of Administration” and the Case Method at Harvard in the 1920s ................................................................................................................................................. 35 Doriot’s Manufacturing Course ........................................................................................... 38 Looking into the Future ........................................................................................................... 45 Turning Selves into Assets ..................................................................................................... 48 Conclusion ...................................................................................................................................... 54 Chapter III. Foot Soldiers of Capitalism............................................................................... 56 Introduction .................................................................................................................................. 56 Generations and Social Trajectories ................................................................................ 61 Rising Tides ................................................................................................................................... 66 Defiant Careerists ....................................................................................................................... 70 Transplanted Networks .......................................................................................................... 74 Conclusion ...................................................................................................................................... 79 Chapter IV. Financial Singularities ........................................................................................ 81 Introduction .................................................................................................................................
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