Boitshoko Shoke
Ah, love. The emotion which drives the sales of overpriced chocolates, inflatable heart-shaped decorations and self-help books. The ‘love’ industry of romantic getaways, diamond rings and dating apps such as Tinder, Bumble and Grindr, has become a multibillion-dollar empire. And as we, or rather I, reluctantly approach the annual festival of grand romantic gestures, I have been thinking about how relationships, not just the ones engineered for entertainment, shape our world in ways that go far beyond seasonal romance-driven sales of Valentine’s Day.
The politics and commerce of relationships are far more influential than we care to admit. Who we love, who we marry, and who we align ourselves with has consequences that extend far beyond our personal lives.
For centuries, marriages have cemented political and economic alliances, shaping the course of history. Friendships have dismantled oppressive systems, such as the close ties among anti-apartheid activists that helped bring down apartheid in South Africa, while others have ignited wars, like the explosive tensions between Kaiser Wilhelm II of Germany and his British and Russian relatives, which contributed to the outbreak of World War I. Even casual acquaintances, when in the right rooms, have influenced policies, swayed elections, and reshaped global economies. The budding and increasingly bizarre ‘bromance’ between Elon Musk and Donald Trump is a case in point.
The world’s richest man and America’s president have found themselves in a relationship as chaotic as a reality TV couple. This relationship has sent shockwaves through global politics just weeks into Trump’s return to power. But love influencing power isn’t new. History has taught us otherwise. Take into consideration one of the most famous political love affairs between Julius Caesar and Cleopatra. What started as a romantic rendezvous between Rome’s most powerful general and Egypt’s brilliant queen ended up reshaping the geopolitical landscape of the ancient world. Cleopatra sought Rome's backing to secure her throne, while Caesar saw Egypt as a critical economic and military ally. Their entanglement not only impacted Rome’s economy but also fuelled political rivalries that led to war, assassinations and, eventually, the fall of the Roman Empire.
This continuous pattern of love entangled in politics, and its often-disastrous consequences repeated itself throughout history. Henry VIII’s infamous divorces not only led to the creation of the Church of England but also wrecked England’s economy, as the king plundered monasteries to finance his whims. Similarly, Marie Antoinette’s disastrous marriage to Louis XVI ignited the French Revolution which was fuelled by royal extravagance during an economic crisis.
But beyond politics, relationships hold immense power in business, particularly in the world of venture capital. The startup ecosystem thrives on connections. Love in this sense isn’t just about romance; it’s about trust, credibility, and access. Investors tend to fund entrepreneurs within their existing networks. A warm introduction from a trusted contact often determines whether a startup secures funding or fades into obscurity. In fact, nearly 30% of venture capital (VC) investments are derived from referrals within investor networks, underscoring the critical role of social connections in funding decisions.
Research by Paul Gompers and colleagues in the Journal of Financial Economics in 2005 further supports this notion, revealing that VC firms with stronger professional networks tend to make more successful investments, as these networks facilitate access to valuable information and resources.
Trust and familiarity are pivotal in the decision-making process for investors. They often engage in informal due diligence through their social circles, verifying the backgrounds and business potential of founders. In a study conducted by Lerner & Schoar in 2018, it was established that the influence of social proof is significant; a startup that receives endorsements from well-connected advisers or angel investors becomes markedly more attractive to other potential investors. Their study highlights that angel investors are more inclined to consider startups that are introduced through shared connections, as these relationships help mitigate perceived risks associated with investment.
However, this reliance on social networks can create substantial disadvantages for under-represented founders. An American private non-profit organisation, The National Bureau of Economic Research (NBER) reported in 2020 that entrepreneurs hailing from elite universities or major tech hubs receive a disproportionate amount of VC attention.
Similarly, in 2021 the Brookings Institution has emphasised that Black and women entrepreneurs secure only a fraction of VC funding, largely due to their limited access to investor networks. Affinity bias plays a significant role in this dynamic, as investors tend to favour founders who share similar social or educational backgrounds, thereby erecting formidable barriers for those outside these established circles.
So, while love continues to be a thriving business, let’s not forget that relationships, romantic or otherwise, are at the heart of governance and commerce. Whether it’s a political marriage of convenience, a strategic alliance, or an unexpected bromance shaking up geopolitics, love isn’t just an industry; it’s a tool of power. And as we’ve seen in the last month, some relationships can make an even bigger mess than a bad Valentine’s Day date.
Boitshoko Shoke is the Research and Impact Manager of 22 On Sloane, Africa’s largest entrepreneurship campus.
BUSINESS REPORT