In Venture Capital, Birds of a Feather Lose Money Together

It seems there are a few different versions of the mentioned "The Cost of Friendship" paper. The article links to a paywalled version from 2012, but two updated drafts (April 2013 and April 2014) exist, and are freely available:

Draft April 2013:

https://businessdev.drupal.ku.edu/sites/businessdev.drupal.k...

Draft April 2014:

http://people.hbs.edu/yxuan/gompersmukharlyamovxuancostoffri...

A VC may win by maximising profit but a VC employee has to protect his reputation."We made a mistake but so did everyone else" is an unfortunately successful defence.

“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” Keynes