The Dark Side of Entrepreneurship

Entrepreneurship is widely celebrated for its transformative impact on society, introducing groundbreaking technologies and innovative products. However, it's crucial to recognize that there's a darker aspect to entrepreneurship that's often overlooked. This section explores the negative implications entrepreneurship can have on individuals and society, and suggests ways to mitigate these effects.

The Inequities of Entrepreneurship

Startups can perpetuate existing societal inequalities and even create new ones. For instance, all-female teams often struggle to secure venture funding, and ethnic diversity within startups remains a challenge. In tech-centric regions like Silicon Valley, we see high levels of economic disparity, with minimal benefits trickling down to service workers, leading to a bifurcation of society.

Organizational and Economic Transformation

Startups have transformed organizational infrastructures. Companies like Apple operate with significantly fewer employees compared to legacy corporations like AT&T in the past (AT&T in 1962 had 564 thousand, now Apple has 76 thousand). This trend has deep implications for workforce dynamics. Employee number has drastically reduced even though workforce has increased.

The Culture of Hype and Fiction

Entrepreneurship sometimes fosters a culture detached from reality, creating hype around unproven ideas and glorifying risky behaviors such as dropping out of school. It can also shift responsibilities traditionally held by the state onto individuals, leading to a privatization of public services. Take the Cyber-truck's - Elon Musk's pretotyping had a lot of people signing up for something that didn't exist. This also leads to the the production of 'vaporware' - selling hot air.

The Prevalence of Organizational Wrongdoing

Wrongdoing in startups is often seen as an anomaly, but in reality, it is a frequent occurrence. Startups, especially in their early stages, lack formal rules and oversight mechanisms, making them particularly susceptible to unethical behaviors. The blurring of lines between right and wrong can lead to misconduct, which, in the absence of internal policing, goes unchecked.

We tend to think that wrong doing is an abnormality, that it happens to a few, occasionally but definitely not to us. This isn't exactly true. We also can't turn back time to fix things. In retrospect fraud is obvious. In the heat of the moment though, it's often ambiguous what's right and wrong.

We need to acknowledge that wrong-doing is a normal phenomenon. (scientific fraud, investor fraud, deception, performance misrepresentation, harassment, abuse etc.).

Take Theranos as a case study. From Tyler Schultz' story, the most prevalent take-home message is that doing the right thing isn't always an easy thing to follow through with; with threats of lawsuits, being followed by private investigators and a family rift caused by the issue, it is easy to see that whistleblowing requires a high level of moral integrity. Additionally, it became obvious from the article that the denial of responsibility was baked into the culture of the company; as seen through the aggressive emails written to Tyler and the outright denial by his grandfather of any wrong-doing despite a clear significant breach of industry standard ethical conduct.

So, why are start-ups particularly prone to wrong doing? Start-ups tend to have few rules and regulations that distinguish acceptable from unacceptable behavior. At the start, it may just be a couple friends hiring a couple employees; everything is informal at this stage, so the line between right and wrong remains blurred.

Start-ups tend also not to have sub-units that are in charge of policing employee misconduct, therefore there is no consequences for wrong-doers. In addition, like with Theranos, a denial of responsibility culture baked in from a fail fast, fail early, fail often approach can, even though it is beneficial at the beginning, lead to a culture of denial of responsibility and a lack of accountability.

In terms of financials, the time and emotional investment by founders, friends and others make it often impossible to unsay the promised. There is a self-reinforcing loop of promises & commitment with no exit, so a lot of pressure to deliver. This can lead to a culture of misrepresentation and misconduct.

Strain Theory

High aspirations coupled with immense pressure from investors can drive entrepreneurs toward misrepresentation and misconduct. When actors have high aspirations and they cannot fulfil those aspirations through legitimate means, they tend to pursue those aspirations through illegitimate means.Entrepreneurs who suffer from high aspirations and fictitious visions are endemic.

This is exacerbated by the "fail fast" culture, where early failures are expected to be balanced by later successes. Start-ups also fail at a high rate, and investors create immense pressure for exponential success; to be that 20X return company. Failure to fulfil self-proclaimed aspirations constitute strain. The outcome is that Entrepreneurs often mis-represent their start-up's substance & performance, or non-realised performance, as seen in the Theranos case.

Burnout

Not often talked about by entrepreneurs. The "Burnout Manifesto" (opens in a new tab) by Gabriel Parisi-Amon, a talk he at Stanford about his experience and progression to burnout, summarized these points well:

1. Excessive Compulsion to Prove Oneself (show that you are worthy)
2. Working Hard (inability to switch off)
3. Neglecting Basic Needs (erratic sleep, disrupted eating, lack of social interaction)
4. The role of the entrepreneur becomes the ONLY role (no more private life)
5. Denial of personal problems & unreachable to family & friends (problems viewed as caused by work and not by the way life changed; intolerant with close ties; concern from others is dismissed)
6. Feeling empty inside (lost, unsure, exhausted, bleak and dark, total mental and physical collapse; full medical attention)
7. Recovery (life starts to become infused with meaning again)

In addition, as strain increases, you tend to lean more towards illicit means.