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.
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.
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.
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.)
"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."
Does it? Theranos has been running for 13 years, raised more than $400 mn, and has a multi-billion dollar valuation. While it may be crashing now, I know a few hucksters who managed to raise huge amounts of funding and then blew the company out while taking generous salaries for themselves. Maybe the scandal at Theranos permanently taints Elizabeth Holmes' name, but from the point of view of a huckster, she made out like a bandit, and maybe the only mistake she made was not filing for IPO and completely cashing out.
"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]
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.
I don't think it's fair to say all tech startups are fraudulent, but I agree that like Wall Street, where large amounts of money meet large numbers of fraud cases, we need to improve regulations.
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