
The Ugly Unethical Underside of Silicon Valley - mef
http://fortune.com/silicon-valley-startups-fraud-venture-capital/
======
objectivistbrit
I have definitely met my share of sleazy characters in the startup world.
However...

 _No industry is immune to fraud, and the hotter the business, the more
hucksters flock to it. But Silicon Valley has always seen itself as the
virtuous outlier, a place where altruistic nerds tolerate capitalism in order
to make the world a better place. Suddenly the Valley looks as crooked and
greedy as the rest of the business world._

...I strongly disagree with the implication that unethical behaviour is due to
capitalism, or to be expected in the business world. _In the long run,
screwing people over never works_. Building a successful business requires
building win-win, non-zero-sum relationships. Good people prefer to work with
good people. Cutting corners, breaking contracts, fiddling numbers - anyone
who does these things will eventually be found out, and no-one decent will
want to deal with them.

 _And the growing roster of scandal-tainted startups share a theme. Faking it,
from marketing exaggerations to outright fraud, feels more prevalent than
ever—so much so that it’s time to ask whether startup culture itself is
becoming a problem._

This is closer to the real root cause. Today's startup culture (and the nature
of the VC game) incentivises "faking it", delusional over-confidence, and
pseudo-idealism that crashes into reality in an ugly fashion.

Amy Hoy and some others wrote about startup narcissism which is a big part of
this: [https://hackpad.com/Startup-Narcissism-
sy2u5j2aTbE](https://hackpad.com/Startup-Narcissism-sy2u5j2aTbE)

~~~
ThrustVectoring
There's actually interesting game theoretic and population dynamics going on
here. There's three strategies - play nice with people who play nice, playing
nice with everyone, and taking advantage of folks. If everyone spends the
effort vetting people, then taking advantage of folks doesn't work, and we're
in the state you suggest. But, if the vast majority of people play nice
anyways, you can cheap out on enforcement/vetting and still do fine, since
everyone else makes sure that exploiting people doesn't work as a strategy.
But if too many people do that, that makes exploiting folks a viable strategy
again...

The exact game-theoretic equilibrium depends on how expensive it is to vet
people and the payoffs for cooperation and exploitation. If you want to argue
that screwing people over doesn't work, you need to argue for a short-run
deviation in these factors from long-term trends. This is actually pretty easy
- the internet is a relatively new phenomenon, and your reputation is more
easily accessed and checked than ever.

~~~
objectivistbrit
Game theory is a useful tool, but applying it to reality often over-simplifies
things.

There are suckers born every minute and, yes, you might be able to screw them
over. If you do, there are two options, 1: you screw them out of enough money
that you never have to work again, or 2: you eventually need to make more
money. If 2, you can either A: pursue a career in screwing people over, or B:
start pursuing an honest career.

Not many people can make 1 work. (If you pull off some huge heist, enough that
you can retire for life, you'll probably have to spend the rest of your days
worrying about Interpol tracking you down).

If you follow 2A, you are creating an ever-growing number of enemies, any one
of whom might decide to sue you, publicly destroy your reputation, press
criminal charges, etc, etc. Again, your stress and insecurity increase over
time.

If you follow 2B, you're in the position of someone who decided to play in
straight from the start, but lacking in genuine experience and with years of
poor references.

In practice, unscrupulous people try and follow a middle road where they're
honest and responsible enough to hold down respectable jobs, but try to lie,
cheat, and play the system wherever they can get away with it. They're still
risking being caught and they'd have an easier time if they focused on playing
it straight and developing valuable skills.

The fundamental principle here is that dishonesty requires faking reality, but
reality is everywhere and potentially visible to anyone, so once you choose
dishonesty as a basic strategy you're in constant danger.

~~~
ThrustVectoring
Yeah, this is a simplified model. Screwing folks over and protecting yourself
from retaliation is hard work that requires a specific set of skills - if you
don't have the skill-set to engage in sociopathic behavior, trying anyways is
a great way to ruin your life.

>In practice, unscrupulous people try and follow a middle road where they're
honest and responsible enough to hold down respectable jobs, but try to lie,
cheat, and play the system wherever they can get away with it. They're still
risking being caught and they'd have an easier time if they focused on playing
it straight and developing valuable skills.

The unscrupulous role requires balancing two competing needs - to meet your
needs through unscrupulous behavior, and to make it difficult for others to
punish you for it. This tradeoff is why these folks follow a middle road: it
grants them access to places where they can get more stuff for their exposure
risk. If your strategy is to have an abusive relationship where you
systematically extract resources while classically conditioning your partner
to not fight back, you get much better access to targets if you're a
respectable-looking lawyer.

And overall, this is more of a continuum of strategies than a binary choice.
How much exposure are you willing to endure per unit of payoff? How much
effort are you willing to put in to convince people to not push back? How much
work do you put into vetting people before letting them into your affairs? How
willing are you to cut ties versus putting in work to repair relationships?
All these questions will shape what sorts of personal and professional
relationships you have, what sort of skills you build, how much personal
success you have, and how you affect the people you interact with.

(As an aside, I'm pretty much on board with what you're saying. If you're not
good at the skills required to be unethical - and if you've wound up in
engineering and reading HN, I pretty much guarantee you're way better at other
stuff - then obvious honesty and scrupulosity is your best strategy.)

------
alex-
Not sure startups are seeing more scandals than other areas?

Also seems strange to point to start up culture i.e. When a sportsman is
caught doping we don't attack the sport.

We see ethical issues in large companies e.g. Like VWs emission scandal (
[https://en.wikipedia.org/wiki/Volkswagen_emissions_scandal](https://en.wikipedia.org/wiki/Volkswagen_emissions_scandal)
) or Wells Fargo opening phony accounts (
[http://money.cnn.com/2016/09/08/investing/wells-fargo-
create...](http://money.cnn.com/2016/09/08/investing/wells-fargo-created-
phony-accounts-bank-fees/) ). It is not hard to find stories of insider
trading in banks, or corruption in oil and gas or mis-handling of private
data. Arguably these larger abuses effect more peoples lives.

Unscrupulous people are a fact of life. I am not sure a solution really
exists, and if it does it may well be worse than the problem.

~~~
bootload
_" Also seems strange to point to start up culture i.e. When a sportsman is
caught doping we don't attack the sport."_

Cycling? Looking at the history of doping in cycling you see individuals
doping, then look closer and you see teams at the centre of doping. So yes,
culture needs to be questioned. [0]

[0]
[https://en.wikipedia.org/wiki/Doping_at_the_Tour_de_France](https://en.wikipedia.org/wiki/Doping_at_the_Tour_de_France)

------
kafkaesq
These vignettes aren't about the "underside" of SV. Rather, they go to the
very core of what the industry is about.

------
squozzer
We probably should remove our rose-colored shades and assume SV - like
Hollywood and Wall Street -- are a bunch of hucksters.

~~~
FloNeu
Well - all the money thrown at startups without business-models does sure have
a part in attracting those... i often think - even the most so called
'unicorns' are only gigantic bubbles waiting to burst. Most of them are eating
up millions and fail to present a glimps on how they actually want to earn
back this money someday. I sometimes think investors and startups haven't
learned anything from the .com-bubble.

