Entrepreneurial chickens are coming home to roost. What’s going on?

Elizabeth Holmes, the disgraced founder of Theranos, is on her way to jail. Sam Bankman Fried lives back at mum and dad’s with an ankle monitor for company while he waits for his trial. And more than a smattering of others are under indictment, headed to jail or kicked out of the companies they founded.

Everywhere it seems entrepreneurial chickens are coming home to roost. What’s going on? At the core of their woes lies a common practice — overpromising and puffery, which can all too quickly flip into a mosh pit of self-delusion and fraud.

A recent article in the New York Times neatly summaries the situation, 

“Faking it is over. That’s the feeling in Silicon Valley, along with some schadenfreude and a pinch of paranoia.

Not only has funding dried up for cash-burning start-ups over the last year, but now, fraud is also in the air, as investors scrutinize start-up claims more closely and a tech downturn reveals who has been taking the industry’s “fake it till you make it” ethos too far.”

The temptation to push promises to breakpoint is not new nor limited to startup founders, with thousands of lesser slights emerging weekly. Fraud aside, marketing puffery — clearly over-exaggerating the attributes or characteristics of something, provides ample wriggle room for setting overblown expectations about what an organisation’s products and services do. 

However, it seems that the previously soft line is becoming far less fuzzy with regulators stepping up their scrutiny. Recently Australian company Tlou Energy was fined by ASIC for overstating its green credentials. And airline Emirates was forced to compensate a New Zealand customer for misleading him about its business class experience.

From startups to entrenched players, increasingly crowded markets and tightening investor sentiment make fertile ground for people and organisations stretching the truth. Throw a little hype on the fire, and before you can say viral, you are the next big thing in whatever echo chamber you inhabit.

Still, misrepresenting products, hype and hubris will only get you so far. Much harder and less enticing is to do the work and make products people want to talk about, invest in and buy. You need more than fancy talking to achieve the genuine value of a brand that sticks.

I don’t think it’s too much to expect an entrepreneur or organisation to make clear if something is only a glint on the horizon and stick to promising what they have reasonable evidence and ability to back up.

Jail terms, fines, and bad-press are canaries of declining confidence, and when everyone becomes overly wary the whole system suffers. In a TED talk, Cradle-to-Cradle author William McDonough said, “We don’t trade if we don’t trust”, and every time we buy something — a product, service, idea or company, it is an act of trust which lubricates commerce. So, while pieces of puffery and hubris given a megaphone might feel harmless, they’re not.

Michel Hogan is an independent brand counsel.