VC's and the Economics of Polygamy: Is that a PowerPoint in your pocket or are you just happy to see me?

Tyler Cowen has a post on Marginal Revolution about the economics of polygamy, in which he examines the trade-offs:

How about the trade-off between quality and quantity of children?  A genetically talented father with many wives will likely maximize the quantity of children rather than their quality.  This has a long-run negative externality, especially if you believe in the Lucas-Uzawa models of economic growth, or some approximation thereof.  You would rather be in a society with fewer but more talented people.  Switzerland rather than India.  The loser is not the wives but rather the next generation of children.  A piece in the February JPE also notes that the children may substitute for savings and thus polygamy can stunt capital formation; I take this as another version of the same argument.

The bottom line?  We should encourage family structures that spur human capital formation.  Polygamy does not do the trick.

This set me to wondering if this same model applies to the behavior of venture capitalists and/or angel investors. Is our capital structure fostering quantity over quality? It seems that despite the PowerPoint mating ritual and all the subsequent due diligence striptease, the point is still to broadcast seed to lots of sexy little startups, hoping to knock a percentage of them up. VCs invest in companies you couldn't take home to your mother all the time, and we both know it.

To echo Cowen: The bottom line? We should encourage investment structures that spur human capital formation. For an example of just such an alternative model, see this post by Fleck's Patrick de Laive on Funding a (European) Startup.

Tags: polygamy, economics, VC, capital, investing, Cowen, Fleck

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Comments

[Jim Thio]

Why not let the women decide? What about if some wome prefer to share one alpha male than being the only one for a loser?