Actually, there's a competitive advantage to being dishonest if you're close to insolvency. If you admit that you only have 2 months of runway left, your employees will start shopping around. You'll lose your best employees first. If you keep it a secret, two things can happen: 1. You raise more money, problem solved! (or market conditions change) 2. In 2 months, you lay off everyone. Sucks to be them, but you got 2…
fsk, thanks for voicing what may be an "unpopular" opinion. for the sake of debate, let me provide rebuttal. in game theory terms, I think you're arguing that the founder's assume all parties will act only in their self interests, and if they disclose their financial difficulties, the result will be "Option A", as a result, they choose to go the "Option B" route, where the founder gets off "free" and the employees ge…
Consider the payoff matrix for the employee:
Employee finds a new job, old employer fails: +5
Employee finds a new job, old employer succeeds: +5
Employee stays, old employer fails: +0
Employee stays, old employer succeeds: +6 (+10?, +20?)
I wouldn't say finding a new job is equivalent to "defecting".
A better analogy is if the employer really put together an awesome team, and he hopes to work with them again in the future. In that case, honesty is better. But that's iterated game theory rather than a single game.
If you play Prisoner's Dilemma once with a complete stranger, you could argue that the Nash equilibrium is to defect. When you play with the same people over and over again, then defectors can be punished.
Unfortunately, the modern economy is more like a group of strangers playing with each other for one game. If you defect, you can always find someone else gullible to play with next time.