Hollywood seems to be obsessed lately with famous start-up scammers. Browse through your Netflix and you’ll see that Billy McFarland, Bernie Madoff, Elizabeth Holmes, and Anna Delvey have documentaries or TV series about how they defrauded investors out of millions and even billions of dollars.
I admit it, I’ve seen them all. At first, I thought it was just a guilty pleasure. But upon reflection, I think these shows are teaching the wrong lessons and drawing the wrong conclusions. In each case, the moral of the story is always something like, “Sure, what [the fraudster] did was bad, but are they really that much different from anyone else in Silicon Valley? Doesn’t everyone fake it til they make it?”
Actually, no. “Fake it till you make it” is not a business strategy. Maybe it’s helpful advice to someone trying to make personal behavioral improvements; e.g., a naturally shy person might want to “fake” being an outgoing person for a while until they build up some self-confidence. I used it myself when I first became a business executive – I “faked” being a boss until I eventually started acting like one on my own accord.
However, “fake it till you make it” does not mean that you should be dishonest when running a start-up. In fact, “faking it” in business is just a euphemism. What you’re really doing is lying, and lying about a material fact in order to mislead customers or investors is a crime. Furthermore, lies have a way of leading to bigger lies, until eventually the whole facade comes crashing down.
This is the pattern that I see happening with all of the aforementioned frauds. None of them initially set out to become criminals. What happened is that, one day they were put into a position where they had to make a choice – tell the client/investor what they want to hear, or tell the truth and risk losing the deal.
What would you do in that situation? Would you be honest and risk going out of business? Or would you “fake it” and try to find a way to fill in the gaps before anyone finds out about it? After all, isn’t this what everyone else is doing?
Every entrepreneur is faced with this decision at least once. Here at CodeStringers, we’ve been put into that position a few times. For example, during the darkest days of the pandemic, we lost a few outsourcing deals because we were honest about costs while our competitors were playing games by lowballing their bids and hitting the client later with change orders (see blog post for more on this).
After losing one particularly competitive bid, my partner and I had a soul-searching discussion about whether we should start playing this game. We were certainly tempted. After all, everyone else is doing it, right? Should we have to go bankrupt because we’re playing by the “old rules”?
Ultimately, however, we decided that we would stick with our integrity and let the chips fall where they may. Yes, we ended up losing that bid, and our commitment to honesty continues to lose us bids sometimes. But on the flip side, our business thrives on referrals from former clients, and the referrals that come to us tend to be the kind of people that we like doing business with.
What it comes down to is that “faking it” may solve some short-term problems, but choosing integrity makes for a much more harmonious life in the long term. What would you rather be doing in 3 years, covering up bigger and bigger lies while facing criminal charges? Or getting referrals and working with honest people?
There is an old parable about a man who’s lost in the woods and runs across a child, whom he asks for directions. The child asks him “do you want to take the shortcut slow or the long way fast? The man chooses the shortcut, which is covered in so many thorns and poison oak plants that he has to turn around and come back. He then takes the long road, which turns out to be flat, paved, and shaded.
Which path will you choose?