Societal Cost

10 Feb, 2025

Societal cost is something I think deserves more attention. The way I'll define it here, societal cost is

The collective cost a society pays (whether that be monetary, emotional, mental) for an event.

For example, a very straightforward example of societal cost is the societal cost of roads. In most places, citizens pay taxes to the government who then builds roads. In this case, the societal cost is monetary -- it's the amount in taxes collectively paid by a society in exchange for the maintenance and upkeep of the roads. Perhaps there is also an implicit emotional cost associated with road building -- if a society build too many car-roads and doesn't build enough human-roads or bike-roads, that society will first shift towards a more car-oriented mode of transportation and second (as a result) there will be less human-to-human interaction and more car-to-car interaction which can probably be linked to sadder human beings. As a result, excessive road-building or mindless car-road-building can have both a monetary cost (more obvious) and a (less obvious) emotional societal cost.¹

Now obviously I wouldn't be writing a post on societal cost if I didn't have some thesis to set out to convince you of. In this case, I first claim that society as a whole doesn't recognize societal cost enough, and secondly that VCs have a far greater societal cost than most of us realize.

On the first point, I don't think the policymakers these days think of the total cost to everyone enough -- rather, policymakers focus either on profits or on constituents, which although are both noble groups, fail to capture the total impact that a policy choice has on society. For example, if (hypothetically) a department store is taken down in favor of an apartment complex, sure this progression makes economic sense, but socially, it usually makes no sense -- a department store, although not really economic is the area in which individuals gather -- whether for the holidays, to meet up with friends, or simply to shop and thus the department store is² a collective space. Similarly, an apartment is just a building that houses people which makes it on the whole, municipally boring -- it's not like the average person goes to apartment complexes for fun -- really, if you're there, you have business to do (whether that be going to your own apartment, negotiating a lease, visiting a friend, etc.), which makes an apartment complex not a social space. Unless for example there are 2 other department stores really close to this one that is closing, closing a department store to build an apartment usually results in a hard social societal cost as one of the major shared spaces in the area has just closed.

On to my second point on VCs -- I believe that we as a society under-value the societal detriment that VC firms bring to local areas. On the whole, VCs can be seen as economically net-positive -- they bring in money, they (sometimes) find the 'next big thing,' and by pumping money into businesses and start-ups (usually tech-related), it can be argued that they provide jobs and attract smart people. However, I believe there is a tremendous societal cost associated with VCs -- namely, the startups that don't become the 'next big thing' and provide 1000000% returns to the VC investment. For those companies, especially if they focus on a physical product (e-scooters for example), the "destruction" left in the wake of the VCs can literally be seen -- products get thrown away, product quality potentially gets neglected, and the product, however good it is, eventually becomes unviable due to a lack of customer support and/or new features. In the case of E-scooters (which you might remember from like 6 years ago), in urban places, those scooters were left everywhere and were a nuisance to see and walk by.

As a result, although there is no tremendous economic societal cost to a VC, there is tremendous social cost -- people get laid off when the majority of startups backed by VC money fail, startup failures can lead resources to simply be squandered and destroyed instead of being used for a better purpose, and overall, I think the 'vibe' of a business is killed when the profit-seekers come in and just start burning all bridges in the search for a few gold coins.

In sum, I don't really like VC firms. They can do good and sometimes they do come out and sponsor a breakout product but taken as a whole, with all their failed startups, VCs drain part of the human part of society in the search for profits.