Should Entrepreneurs Lie?
blogs.hbr.org
Should Entrepreneurs Lie?
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Re: Should Entrepreneurs Lie?
#2No.
Especially if you're a software entrepreneur.
Even more so if you're an internet entrepreneur.
We don't make products that our customers can touch and feel. We make ones and zeros. All our customers have is trust and implicit promises from us.
Lie and we have nothing.
Re: Should Entrepreneurs Lie?
#3Tough call, but here's the reality of business: everyone ends up "lying", even the people who do their best to be honest (those tend to fall into the overconfidence camp). Some people are just overconfident or have sunny reflections on the past, but everyone lies, and mostly about things of no consequence-- why they left their last job, who they know, their relative rank and responsibility in previous companies.
I generally assume that it's okay to lie if it doesn't lead the other person into a decision that will bring them harm, so lies to inflate one's social standing are generally okay, but promises to deliver a product that one cannot I'd consider very unethical, because the other person is going to get burned when it doesn't come through.
An obvious example is engaging in "creative career repair" with respect to previous job changes. Anyone who has spent 28 minutes in the professional world knows that most people do this and that it's generally innocuous. Everyone has a certain degree of the right to reinvent his or her own history. General rule: it's unethical to claim skills you don't have-- and it's also terrible for you because it means you're likely to fail at your next job; it's fine to upgrade titles, relative performance, terms of leaving, status within the group, and compensation to a reasonable degree (up to the maximum given to someone of your standing and seniority, e.g. claiming top bonus).
Also, although I think it could be a tactical mistake, I'd have no problem with someone lying about having more VC interest in a venture than there actually is, in order to get better terms. This "lie" makes a good deal more attention-getting, but it's not going to make a bad deal look like a good one, except to a VC who doesn't do his own homework. (The danger is that the VC will scumbag you and, behind your back, call up the VC you said was interested.)
Re: Should Entrepreneurs Lie?
#4No, but look at YC's bio page at http://ycombinator.com/people.html
"Robert Morris is an associate professor of computer science at MIT, where he is a member of the PDOS group. He has published extensively on wireless networks, distributed operating systems, and peer-to-peer applications. In 1988 his discovery of buffer overflow first brought the Internet to the attention of the general public. He has an AB and PhD in Computer Science from Harvard."
Emphasize the positive.
But it only works if you have a lot of positive to emphasize, and if whatever you're downplaying really isn't important.
Re: Should Entrepreneurs Lie?
#5No. Especially if you're a software entrepreneur. Even more so if you're an internet entrepreneur. We don't make products that our customers can touch and feel. We make ones and zeros. All our customers have is trust and implicit promises from us. Lie and we have nothing.
What about this scenario? VC wants to know how much interest there is in your company. You claim to have 3 leads from other VCs although you have none.
IMO there is nothing wrong with this lie, because it doesn't lead anyone to make a bad decision. If you're a good investment, you get funding faster and on better terms. If you're a bad investment and the VC is any good, you'll get rejected even if you have 1000 leads.
Or another example... you're 30 and have a successful track record but you failed out of college at age 21. A VC is sizing you up and wants to know why you didn't finish. You're a different person at 30 than you are at 21, so it shouldn't matter, but you fear admitting the truth will kill the deal; VC's a bit of an Ivy snob. You say, "I ran out of money, 6 months later had an opportunity to do and made a lot of money, and haven't had any need to go back". Is anyone hurt by this lie? Absolutely not.
Re: Should Entrepreneurs Lie?
#6I think his point about holding startups to the same standards of truth that we do "the most mature public companies" is actually a good one. We expect a lot of lying from the marketing departments of mature public companies.
But we feel worse about it when there are so few people that lying means it's Bob and Frank lying to us, not fifteen faceless people in a large department who we'll never meet, and never assign blame to.
Re: Should Entrepreneurs Lie?
#7No. Dishonesty (not limited simply to lying) is as impractical with your customers and investors as it is with family and friends.
Context: assuming that you are dealing with civilized situations in which neither party has initiated or threatened the use of force against anyone.
Re: Should Entrepreneurs Lie?
#8No. Especially if you're a software entrepreneur. Even more so if you're an internet entrepreneur. We don't make products that our customers can touch and feel. We make ones and zeros. All our customers have is trust and implicit promises from us. Lie and we have nothing.
What about this scenario? VC wants to know how much interest there is in your company. You claim to have 3 leads from other VCs although you have none. IMO there is nothing wrong with this lie, because it doesn't lead anyone to make a bad decision. If you're a good investment, you get funding faster and on better terms. If you're a bad investment and the VC is any good, you'll get rejected even if you have 1000 leads…
Smart people realize that everyone has issues of one kind or another. Just tell the truth.
Most of your past transgressions will get you a free pass. Lieing about them won't.
IMO there is nothing wrong with this lie
You've just self-identified yourself as a person to avoid doing business with.
Re: Should Entrepreneurs Lie?
#9No. Especially if you're a software entrepreneur. Even more so if you're an internet entrepreneur. We don't make products that our customers can touch and feel. We make ones and zeros. All our customers have is trust and implicit promises from us. Lie and we have nothing.
What about this scenario? VC wants to know how much interest there is in your company. You claim to have 3 leads from other VCs although you have none. IMO there is nothing wrong with this lie, because it doesn't lead anyone to make a bad decision. If you're a good investment, you get funding faster and on better terms. If you're a bad investment and the VC is any good, you'll get rejected even if you have 1000 leads…
VCs can just talk to each other and figure out that you're a fraud, which alone is a great reason to not deal with you.
Don't lie! Morality is not just some arbitrary thing that you can make up as you go along if you want to achieve anything. The proper standard of morality for you and me and everyone else is not what will help or hurt the other party, it's what will help or hurt you and your long-term rational self-interest. Lying will necessarily prevent you from succeeding; see chapter 4 of Tara Smith's book, "Ayn Rand's Normative Ethics", which is on honesty.
Re: Should Entrepreneurs Lie?
#10No. Especially if you're a software entrepreneur. Even more so if you're an internet entrepreneur. We don't make products that our customers can touch and feel. We make ones and zeros. All our customers have is trust and implicit promises from us. Lie and we have nothing.
What about this scenario? VC wants to know how much interest there is in your company. You claim to have 3 leads from other VCs although you have none. IMO there is nothing wrong with this lie, because it doesn't lead anyone to make a bad decision. If you're a good investment, you get funding faster and on better terms. If you're a bad investment and the VC is any good, you'll get rejected even if you have 1000 leads…
"If you're a good investment, you get funding faster and on better terms. If you're a bad investment and the VC is any good, you'll get rejected even if you have 1000 leads."
In other words, the investor should have known better than to listen to you. I agree on that part.