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- Hacker News
- "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 think this is accurate and a reflection of the pathological insecurity that leads someone to want to start a startup.
- If this was applied to all of commercial organizations equivalently, the entirety of our society would probably grind to a halt
- Absolutely not. Silicon Valley powers its own unique type of reality distortion field.by RetroTechie
- I see the title was changed; I agree with the new title (it’s much clearer and less inflammatory). I tend to use the original title by default, if it fits length requirements.
My thinking is that the post-ZIRP era, with its more limited funding, will probably require a lot more honesty, transparency, and vetting from founders. “Casting a wide net” makes more sense when funding comes cheap and easy.
by iamnothere - Isn't venture capital just playing along too, though? They also benefit from all the myth making and hype storms, even if they are technically getting defrauded while funding it.
They could actually audit the companies they invest in, and go after the frauds. The Nikola example is a great one--if anyone had looked carefully behind the marketing the fraud should have been obvious. But by and large they don't, really. Seems to be a tacit endorsement of the behavior.
by 27183 - ZIRP made it unprofitable to chase down fraud; money was too cheap and attention too scarce. We’ve been in a tightening cycle for a while now, but many still held out hope for another drop in interest rates. Now that rates are going crazy, I suspect we’ll see a shift to much tighter vetting and ongoing monitoring.by iamnothere
- "Entrepreneurs construct, perform, and protect illusory appearances (façades) that externally project high-growth performance to audiences while masking ventures’ actual underperformance."
This would accurately describe a some of the startups I've worked at. ;-P
by sohrob - This is literally the American way.
Everyone does this at every level, from Execs down to middle managers, for every possible metric.
by timacles - This is what Stanford kids do. Read "How to Rule the World: An Education in Power at Stanford University" by the theo guy.by sudo_cowsay
- Great suggestion. Thank you.by rootsudo
- > including the extension of U.S. Securities and Exchange Commission surveillance and whistleblower program, investor due diligence reform, and dedicated entrepreneurship education interventions
Wasn't the SEC essentially gutted to the point it's basically toothless right now?
by bilekas - The SpaceX IPO is perhaps the latest and most damning outcome of that gutting.by bogzz
- 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.
by jdw64 - 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.
by neya - Seems they use the nickname 'ScaleX' to discuss Theranosby firasd
- 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
by firasd - > Like if someone says we have this many users as a statement you have no idea what they are actually calculating
I think that's BS. User metrics are usually very explicitly defined (e.g. monthly or daily active users have always been clearly defined wherever I've worked, even if just for the sole reason that people collecting those numbers need to know what to count). User quality is definitely a gray area and estimating bot percentage has become increasingly difficult, but user metrics are not some ill-defined, fuzzy math notion.
- In the current environment I doubt Elizabeth Holmes would go to prison. She would be saying the machine would work by early next year. After all a drop of blood is just a smaller quantity. Making the machine work is just an engineering problem.
If she were really clever she would recruit a social media army of all the weird conspiracy theorists who think "medbeds" are real.
Of course now we know that a drop of capillary blood containing interstitial fluid and a random mix of venous and arterial blood is unsuitable for most blood tests. At least you will have googled that if you're an Elon stan preparing to tell me how they're not comparable.
by Zigurd - Internet being full of bots, I usually do the s/users/bots/ automatically in my mind.
Even some users are just bots... (At least their behavior is/are)
by pvtmert - And then she started paying for facials and stuff as part of her necessary legal fees or something.
"But your honor! I need to look presentable to the jury when they're convicting me of rampant fraud!"
by giwook - The oh so celebrated "Fake it till you make it"by 7373737373
- Not just users, but number of companies. So many startups list out all the companies using their products, who also happen to be an army of startups. I doubt they're all using each others products, just doing what they can to juice each companies perceived metrics.by mindtricks
- >"A lot of 'numbers' startups cite are basically fake I think."
I like Ed Zitron's reporting on the AI industry (though I disagree with him on AI's potential capabilities).
I wonder how much of AI-related revenue are because of accounting fiction rather than actual cash.
Either way, I think the stock market is as disconnected as it has ever been with actually ground reality of the US economy and industry.
by abixb - “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.
by aliasxneo - Good on you for saying no to committing fraud! It really sucks that this is unusual enough that it warrants a bit of positive feedback!
- What is nontraditional? Seems like it could be even more rife with fraud with lower oversight.by satvikpendem
- My understanding so far is that as humans we get bounded by our emotions, morals, incentives and fears. On the other hand you are competing against capitalism that tries to use any possible means to make profits. It treads along every possible path of whats not completely illegal. What benefits it is that either the laws are not yet defined to cover those situations or they are hazy enough that there is an escape hatch. You name any big company and they have gone through the path of doing something that was illegal or questioned. Just like critical mass or escape velocity, if you are big enough you get through the hurdles or otherwise you get stuck and make a good topic in some ones paper like this.by sandeepkd
- I'm guessing investors understand that there's high probability of the numbers being 'optimistic'.by pcurve
- I spent a few years hanging around the VC-adjacent scene in a major city, met quite a few of them (because I'm that way. elevator docent during events... priceless).
There is publicly performed theater around VCs which is pretty consistent, taught in incubators, etc., etc. So that's how they manage set and setting (grooming) for the marks. Internally there are certain tells, that they must act a certain way. There are arbitrary character tests and whatnot which provoke a "culture" if you will, similarly to how computer languages and tech stacks form distinctive cultures if left unchecked; there could be self-selecting pressures (for these behaviors) as well. This is unsurprising to me as someone who analyzed voting patterns, and was asked numerous times variations on the question "is it something in the water or 'new car smell'?" (I don't have an answer for that question.)
However VCs are much more stovepiped and cliquish concerning their actual selection process than people realize, I've heard it publicly described as "mafia like" by someone who I worked for and whose name many would recognize. I don't understand why this person, like so many others, invested so much effort... enough to get some serious butthurt IMO.
It's a distraction, it effectively destroyed a different company I was working for.
by m3047