Classroom Cartels, Revisited: When a Startup Scene Trusts Familiarity Over Proof

More than two years ago, Leigh McKiernon asked an awkward question about Jakarta’s startup scene.

McKiernon, an executive-search advisor who runs the consultancy StratEx and writes the Career Candour newsletter, published a deliberately provocative essay called “Classroom Cartels.” Why, he wondered, did so many of Indonesia’s founders, executives and investors seem to come from the same small handful of elite schools — people who had met one another long before any of them knew what a cap table was?

This week he returned to it, in a follow-up pointedly titled “Was I Wrong?” His answer: right instinct, wrong target.

The schools, he now thinks, were a red herring. There is no secret elective in raising a Series A taught somewhere between Year 10 economics and football practice. Schools were simply the most visible part of the pattern. What actually travels is the network that first formed inside them — and the real question is whether an ecosystem starts confusing selection with proof.

From schools to networks

His sharpest illustration is a thought experiment. Take two students with identical intelligence, ambition and work ethic.

One grows up among classmates whose parents run companies, banks and ministries. The school fete doubles as a networking event; business is absorbed at the dinner table as much as in the syllabus. The other learns exactly the same mathematics.

Only one of them also learns the geography of power.

The advantage is almost invisible, McKiernon argues, because it arrives disguised as ordinary friendship. The reunion becomes the investor dinner. The debating partner becomes the co-founder. The person already copied into the email knows half the room.

None of this, he is careful to say, is corruption — nor is it meritocracy. And it is hardly unique to Indonesia. Silicon Valley has Stanford, Britain has Oxbridge, France its grandes écoles. Every society grows institutions that quietly sort future elites. What he finds distinctive about Jakarta is that the sorting seems to happen unusually early — before anyone has demonstrated the capability that later justifies the confidence placed in them.

Why the timing matters

The sequel lands harder than the original, and the reason has little to do with schools and everything to do with money.

Across Southeast Asia, the era of cheap, abundant venture capital has given way to something more sober. Growth-at-all-costs has been replaced by an interest in margins; launch parties by layoffs. When capital was plentiful, familiarity could stand in for verification at no visible cost. When it is scarce, the market starts asking why customer acquisition keeps getting more expensive.

Strip away the satire and McKiernon is really describing decision-making under uncertainty — and there the argument rests on firm ground.

Economists have studied these shortcuts for half a century: George Akerlof on how information gaps push buyers to judge quality by proxy, and Michael Spence on how credentials work as signals when ability cannot be observed directly. Sociologists file the same behaviour under social capital, the body of work associated with Pierre Bourdieu and, on how opportunities actually travel, Mark Granovetter. Inferring competence from confidence, or quality from prestige, is rational for any one investor. It is only in aggregate that it distorts.

The cost of concentrated trust

The distortion McKiernon cares about is this: an ecosystem can become better at reproducing itself than at renewing itself.

People who resemble yesterday’s winners are easier to fund than people who might be tomorrow’s. Experience earned outside the familiar circles gets discounted for arriving without familiar references. A different perspective reads as risk rather than edge.

So the insider is assumed competent until proven otherwise, while the outsider must prove competence before it is even considered. That gap compounds across a career — through who gets the mentorship, who gets the introduction, and who quietly comes to believe the opportunities belong to them in the first place.

He frames this not as injustice so much as waste. Every role handed to someone who merely looked like leadership is one withheld from someone who might have grown into it. And markets, unlike social circles, are unsentimental. They wait until optimism has become habitual, then remove the conditions that let it pass for strategy. “Booms flatter. Corrections educate,” as he puts it.

The question for the rest of the region

McKiernon writes about Jakarta, but nothing in the argument is peculiarly Indonesian. Singapore, Kuala Lumpur, Manila and Bangkok each run on some version of trusted networks, and each now faces the same test as capital turns disciplined again.

The uncomfortable exercise he proposes is one any investment committee could run on itself: would we make exactly the same decision if we were meeting this person, cold, for the first time today?

The honest answer sits between the comforting myth of pure meritocracy and the cynical determinism of its critics. Talent matters, and so do networks. Hard work matters, and so does being invited into the room where work is first given a chance.

Healthy ecosystems hold both truths at once and stay curious about outsiders. Less healthy ones settle into reproducing the familiar and call it judgement. The real danger, McKiernon concludes, was never that Jakarta’s startup scene had too many alumni of particular schools. It was the belief that a familiar background could stand in for hard judgement — that confidence, wrapped in enough social proof, becomes indistinguishable from competence.

Leigh McKiernon’s original essay, “Classroom Cartels,” and its sequel, “Classroom Cartels, Pt. II: Was I Wrong?”, are published via his Career Candour newsletter, and both are worth reading in full. This analysis engages with McKiernon’s argument; InsideASEAN verified its factual claims independently, and the framing and any errors are our own. See also our companion piece on how the same anxiety about trust is playing out in Indonesia’s capital markets: “Indonesia’s ‘Wait and See’ Moment.”