The Value of Anthropology to Tech Investors
Anthropological perspectives are underutilized by people who invest in cultural change
Business anthropology involves the application of anthropological theories and methods to the study of culture in the context of businesses and their customers. In the US, it can be traced back to the Hawthorne Studies, which began in the 1920s when American anthropology was in its infancy. Today, anthropologists are uniquely positioned to understand human behavior and cultural change. But it's also important to consider how well the work of anthropologists fits the culture of businesses that hire them. For example, collaborations between anthropologists and advertising professionals are probably not too surprising. The advertising industry is known for its creativity and anthropologists like Robert Morais, Tim Malefyt, Bob Deutsch, and Tom Maschio, have been instrumental in crafting successful advertising strategies as consultants, account planners, and executives. Adjacent industries have also embraced anthropology, evidenced by Dori Tunstall’s work in design and Grant McCracken’s work with the entertainment industry. It seems fitting that leaders who work closely with advertising, design, and entertainment creatives would turn to anthropologists to help them understand what drives human behavior and cultural change. Financial services, on the other hand, could seem as though it's the complete opposite. This is only part of the story because, while anthropology is used across the sector today, private equity has been an early adopter of business anthropology.
Despite the wealth of quantitative data that private equity professionals usually have when making investment decisions, they continue to hire anthropologists to help them understand what numbers alone can't:
Behavioral patterns related to industry sectors: For example, examining what the growing popularity of organic pet food says about how people feel about their pets and what it means for the types of pet food companies a firm should acquire
Behavioral patterns related to individual companies: Such as going to a resort that's under consideration for an acquisition to understand why business is going the way it is by observing what customers do there
Cultural due diligence: For example, revealing the risks and opportunities that result from the culture at a company that's being considered for an acquisition, such as when two rival companies could end up having to collaborate or even merge their cultures
Private equity firms have hired anthropologists as consultants to improve their due diligence and investment processes since the 1990s. However, venture capital has yet to catch up. Anthropology, alongside other human science fields, has the greatest potential for investors in companies that rely on more difficult-to-quantify cultural changes to succeed. For example, a major question within the tech community today is how artificial intelligence will change human behavior. Anthropologists have already developed a massive body of work on how technology shapes culture and some anthropologists, like Genevieve Bell, have specific expertise in AI.
Cultural change can be quantified in various ways, such as by showing the growth of smartphone and ride share use over the last decade. However, understanding why cultural changes occur is challenging because they are typically the result of numerous systems acting on each other. For instance, Apple's $3,000,000,000,000 ($3 trillion) market cap is attributable to economic factors but also the symbolic value of owning Apple products and even the colors used in its messaging software (including the blue and green bubbles in iMessage). Anthropologists have developed methods and models to understand what drives cultural changes and their perspectives can help investors move from thinking about culture in terms of vibes to understanding how socio-technical systems impact it. In the context of how Apple has become the world's most valuable company by harnessing symbols, semiotics (the science of signs) and symbolic anthropology are particularly useful.
Gillian Tett is best known for bringing her background in cultural anthropology to bear in predicting the financial crisis of 2007-2008. In her most recent book, Anthro-Vision, she discusses the value of anthropological intelligence, another kind of AI, in business—particularly in the era of Environmental, Social, and Governance (ESG) concerns. Anthropologists have historically thought about capital more holistically than economists and financial professionals because they spend as much time considering the value of environmental and social capital as they do studying financial capital. And, while this perspective is still novel in venture capital, ESG has already helped introduce this aspect of anthropological intelligence to the world of finance. In some ways, venture capitalists already do work that's similar to that of business anthropologists, which may be one reason they often discuss and write about culture.
The business community often talks about culture in the context of behavioral norms and values within companies. The popular phrase "culture trumps strategy" usually refers to the critical importance of companies having the right culture among the staff, leadership, and other corporate stakeholders. But angel investors and VCs also tend to capitalize on cultural change happening around their portfolio companies, across society, when they're successful. Anthropology is a field that is designed for the study of culture and has produced a critical mass of professionals who can help investors keep up with the ever-increasing pace of cultural change. And early tech investors are instrumental in driving cultural change through the companies they support. As a result, it's imperative for them to understand how culture is changing as well as how it could change as a result of their investments. Change is already happening, evidenced by VCs beginning to seek out experts on culture and tech ethics for subject matter interviews.
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