Criminal Deception in Silicon Valley

“Our theoretical framework captures how entrepreneurs facing minor, wide, and extreme expectation-reality gaps engage in evermore sophisticated efforts to detach the venture’s externally projected appearance from its actual operational reality.”

Look, I’m not promoting fraud at all, but having been doing seed raising for the last eight months, there have been many times where I thought the only way to compete was by fudging the numbers (because everyone else is, basically). It’s one of several reasons I left this game and am pursuing non-traditional means of funding now.

A lot of 'numbers' startups cite are basically fake I think. Like if someone says we have this many users as a statement to TechCrunch you have no idea what they are actually calculating

But there is a clear line that gets crossed if you start actually making a database of millions of synthetic users and that's what happened with 'Frank' that sold to JP Morgan and eventually the founder was prosecuted

I'm surprised there was no mention of Elizabeth Holmes. Whenever there is mention of criminal deception of any sort, she's like the poster child for it in my eyes. And I remember her accomplice who instead of admitting he was on the wrong side, kept blaming the journalist who tried to uncover the fraud, instead. He said (something along the lines of) "He (the journalist) kept coming at her.." as if she would've been able to magically solve the problem if she had enough time.

That was all I needed to know about what was wrong about valley culture.

Fine line between articulating a vision well or marketing vs just lying.

"Facading" is a term that just uses more letters to call someone a liar or thief.

There's no need to beat around any bushes.

When your business culture rewards lying or theft then you have a real ethical problem that signals the need for strong regulatory reform and severe criminal penalties. These sanctions should be retroactively applied for all those who assumed they would be able to dance away scot-free. Asset confiscation, prison time, large financial fines should be distributed to all those liars and thieves, especially the ones who constructed the systems that used algorithmic adjustments to help destroy society or create surveillance operations that could be used against ordinary citizens in violation of privacy.

I'm thrilled someone has attempted to quantify the lies, fraud and deception that has been the norm here in Silicon Valley for decades. I've worked at startups, have friends who are entrepreneurs, everyone in my family has worked at startups, and there's no question that lying and deception are normal and expected here.

If this was applied to all of commercial organizations equivalently, the entirety of our society would probably grind to a halt

The more you force unrealistic expectations of exponential growth, the more founders engage in 'façading.' This feels a lot like multi-level marketing and a game of hot potato—keeping the early investors' returns safe by bringing in new capital.

The paper's concept of 'deep façading' follows the same pattern. When a product fails to generate sustainable value or revenue in the market, founders create fake metrics to protect the book returns of early investors and attract the next round of funding. Instead of being driven by real customer value, the company's valuation is inflated by the next investor's money—creating a multi-level pyramid.

The successful hot potato is WeWork, handed off to SoftBank and public market retail investors. The failed one is Theranos.

façading has made Elon Musk very rich.

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