Misrepresenting material facts or omitting to disclose something major (like the loss of your major customer the day before a funding) constitutes securities fraud and can get you in a heap of trouble, notwithstanding how it may have worked out in a particular case such as that cited in this piece.

There are also limits to hyping if it amounts to misrepresenting material facts. I was once approached by an entrepreneur whom I turned down as a client and who later got busted for securities fraud for having done a demo claiming that certain of his company's whiz-bang technology was in fact doing something stupendous when it was in reality just a rigged demonstration designed to simulate what he claimed his technology could already achieve. Having raised $7 million based on such demonstrations, mostly from gullible investors, he went to jail for his "over-hyping" of his product.

When it comes to issues such as lying, there are moral issues and there are legal ones. If you are an entrepreneur who wants to avoid serious problems, the rule should always be: never lie in a way that amounts to fraud or misrepresentation (legally speaking), no matter what the supposed benefit. It is not worth it.

Concerning moral issues, the issue for me is one of integrity. Just as we all can stretch something when it helps us, and just as we all do so to some degree, so we can stretch it to the point where it amounts to a pure fabrication. Mild stretching might be considered a gray area. Fabrication is a character issue that can reflect badly on the entrepreneur. Of course, this depends on context as well. If it is clear you are speculating (such as about growth rates), that is one thing. If you are knowingly misrepresenting facts, the natural thought that occurs to people you are dealing with is, "If he will do that once, how can I trust him not to do it again." You might think it is innocent in your mind, but crooks make a living off such misrepresentations. And there is no percentage in aligning yourself with that which is unseemly. I have repeatedly seen the consequences of such activity in courts of law, and they are not pretty in cases when things do blow up.

The sharpest people can back up everything they say. Avoid making ridiculous claims and you appear smarter.

Lying is often an indicator of laziness and a lack of the right kind of creativity.

One thing that I think is true of technical people is that we are comfortable disclosing difficult things. We tend to view them as just bugs to work out and expect that everyone involved will have enough belief in the end goal to find workarounds to any challenges. So, perhaps naively, I told the investor what was going on and how I planned to proceed.

He (being a certain type of investor) took this as an opportunity to try to completely change the terms of the deal we had agreed upon. So, I ended the talks without taking any money.

I wondered for a few months afterwards if I had made the right decision in being so honest and came to the realization that some investors do expect you to only paint a rosy picture.

At the end of the day though, I realized that I don't to work with that kind of investor and, as things turned out, it was a very good thing to not take money from him. Since then, some unbelievably good things have happened and couldn't have taken place if I was tied to some investor in Japan who didn't believe in me.

So, the lesson for me was, be honest and be yourself. The people who believe in you as an entrepreneur will be there through the ups and downs. And the truth is a great way to weed out those of little faith.

You had the opportunity to find out about this man's character that he wanted to take advantage of you. Better to find this out sooner rather than later.

"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.

That sounds naive, and maybe it is. But psychological and neurological research all points in the same direction: that people perceive the same situation radically differently, and even remember the same incident differently. There are even physiological artifacts that accompany or cause these divergences. So most of the time when people are 'lying' to me they probably believe what they're saying.

That doesn't answer the original question, but it challenges the assumptions in the article, that lying is commonplace and a constant temptation. It also changes the way I (and I think others) should respond to a 'liar'. Assume the person isn't lying, even if you think they're wrong and should know it. Accept the data, evaluate, verify, and move on. Ascribing motives or morality might be satisfying, but it's unhelpful. Worse, emerging science suggests it may be a mistake.

One one level yes, this is true. More than true, it's wise. The problem is that we can deceive ourselves into holding self-serving beliefs... sincerely. Upton Sinclair said it best: "It is very hard to make a man understand something, when his job depends on his not understanding it."

And such people aren't lying or dissembling. It's just much cheaper, in terms of mental effort, to develop beliefs that the world is the way you would like it to be.

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.

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 <X> and made a lot of money, and haven't had any need to go back". Is anyone hurt by this lie? Absolutely not.

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.

It depends. Transgressions that reflect immature judgment and make for funny stories you can tell, especially if they're more than a few years old. Failures that reflect on you as a person of low status you cannot. If you have a rocky past, you want to paint your past self as someone who hadn't settled down yet and decided what he wanted from life, not as a hapless loser who got rolled over by others.

In order to be taken seriously, you have to create a fiction of self that is congruent with the standing conception of a high-status person. This is not what anyone likes to hear; it's naked, bitter realism.

I am not such an asshole as I might sound in this thread. I hate deceiving people, and so I generally don't. It's not that I would consider it wrong-- some people can't be trusted with the truth, and it's necessary to lie to them. I just don't like mixing with people in the "can't be trusted with the truth" category at all and so I will avoid them even if they could benefit me... but I also realize that people who are more materially ambitious than I am will have to do so.

This is disgusting. You need to learn to respect yourself; this in turn will help you respect others.

I respect myself. However, I'm aware of human nature as it actually is. Most people don't even like the truth. They despise the reality around them and need to be fed a fiction in order to function. The facts-- that good people often fail for varying reasons, that life is inherently unfair and often dark-- are so disquieting to them that they shut them out. This is why people tend to personalize past success and failure beyond what is reasonable; they want to believe they live in a just world.

Imagine interviewing a candidate who says this: "I'm interested in working for you because you have great people and I want to learn from them. As long as you have interesting assignments for me to do, and my superiors make my advancement and education a top priority, I'll do an excellent job of them. If I feel that this is not the case, or become isolated, I'll jump ship on a dime. Also, if I'm ever passed over for a plum assignment that is within my capability, I'll launch my resumes that afternoon.

This is the truth for any ambitious person, but you'd be absolutely nuts to say that sort of thing on an interview. You might be thrown out the door immediately for that kind of renegade honesty. You're expected to maintain a fiction of self that is otherwise.

I said almost exactly that when interviewing for my first job out of college. They hired me anyway. They appreciated my honesty and believed they had enough great people and interesting assignments to keep me engaged.

(As it turned out, they were wrong, and I left about two years later. But I did two products for them in the meantime, and learned a bunch for myself, so it wasn't exactly a loss for either party.)

Actually, a bunch of people at my current employer - my boss, my tech leads - know that if there comes a time where I believe I can accomplish more within a startup than in my job, I'll jump ship in a heartbeat and found another company. That simply keeps the bar high for ensuring that I can accomplish significant things within my job.

"If I feel that this is not the case, or become isolated, I'll jump ship on a dime. Also, if I'm ever passed over for a plum assignment that is within my capability, I'll launch my resumes that afternoon."

is not that you will leave if your needs aren't being met; that is expected in any relationship. The reason why that raises a red flag is that it implies that you won't take action to educate yourself, and to create new interesting projects for the company if they aren't fed to you, to go and make contact with other team members if you feel isolated.

Seriously, I don't want to hire someone who wants to be a passive vessel. I ain't your daddy. I want people who will go out and get cool shit done. Sure, I'm okay hiring someone who has potential but not experience, and helping them get that experience, but I want them to be an /active participant/ in the exercise, not some passive vessel.

Also, some people prefer to not deal with 'business stuff' at all.

Obviously there is a continuum between 'only does exactly what he is told' and 'runs the business without me' and most people are somewhere between that. I'm just saying; people who quickly return to idle after a task is done rather than seeking out more work are significantly less useful.

Also, people who can't tell me when they are ready for a new challenge (or that they are being shoved into water that is too deep) are significantly less useful than those who can.

I disagree completely. The universe is benevolent by default because it has absolutely no supernatural character, and no inherent conciousness to make it anything else. Without this, science would not be possible (according to my biochemistry professor, who said "Nature does not play tricks.") I go one step further say that this applies to morality; that life is what you make of it in the vast preponderance of cases.

The universe is benevolent by default because it has absolutely no supernatural character,

Wouldn't this make it utterly neutral?

What I meant to say, and didn't articulate very well, is that human societies have egregious failures that often undermine progress. Most people are good, but most of the people who get power and status (at least in the short-term, first-order senses of these words) are the despicable, evil ones.

However, if you are bootstrapping, this is definitely not correct. Your customers don't care that you don't have a 'high status' background or how 'alpha' you are.

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.

That's the danger: getting scumbagged behind your back.

How is that "fraud"? Claiming you have customers you do not is fraud. Promising to deliver a project that you cannot or will not is a fraud. Claiming that other VCs are interested in you is not fraud; it's just the kind of thing you have to do if you weren't born into connections.

The only people who have a problem with that are silver-spoon assholes who want to keep doors shut to people who didn't hang out with them in high school.

Just how many people does Steve Jobs hire because he knew them from school? Zero, because his way of doing business is to hire the best. To the extent that people are like Jobs in this regard, their businesses are successful. People that hire friends, regardless of their ability will never rise to great heights in business (or any endeavor).

Do you want to work for someone mediocre, or someone great? Even if you were successful in your lie, lying would only get you the mediocre job. A great employer (someone of high caliber) would figure it out, or would be principled enough to fire you when they figured it out.

I never said this. Obviously, it is not true.

I said that the people who'd consider it some kind of moral transgression, rather than a strategic move, to tell a VC that you have other VC interest are the kinds of people who want to keep "the doors" closed to the hoipolloi, because their worst nightmare is outsiders getting into their club, so they have to throw into place a moral "consensus" that judges such moves to be wrong.

In other words, the investor should have known better than to listen to you. I agree on that part.

A truthful man is the hard to compromise. A man who is not greedy is the hardest to scam.

Context: assuming that you are dealing with civilized situations in which neither party has initiated or threatened the use of force against anyone.

If being honest with your VC means losing funding, it may still lead to funding of another, more viable idea.

I think it's important for the Entrepreneur to understand that VCs lie all the time however, it is just their nature, despite how open they look, they're especially good at lies of omission and manipulation of fund performance.

So, by all means, go ahead and lie to them. They'll know right away, while everyone else will only know eventually.


I personally stay away as far as possible on stretching the truth because of a simple fact. When you start it you have to remember, what you said to whom, how much you said and so forth. At some point it starts to catch up on you and people start to remember it. Despite all the thinking it just gets messy and integrity in business in the long run is key. Therefore I stick with facts and truth which keeps it simple. That might sometimes mean that I do not get the deals I wish, but I have a good sleep and no headache and for sure I will survive.

(Of course, if you expect to encounter each customer once and only once, and if you don't expect your customers to talk to potential customers, the rules are clearly different, and you are mostly back to the ethical question I glossed over.)

Legal analysis aside, it's risk -vs- reward decision.

Best outcome - you Lie for strategic reasons, nobody ever finds out, and your company is a success, everyone makes lots of money, everyone is happy, and even if they find out you lied, they may not care if you've demonstrated nothing but good behavior since. Maybe.

Lie, and then fail, and get found out - that may follow you around forever doing untold damage to your credibility for the rest of your life. Trust is an easy thing to lose and a hard thing to gain.

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.

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.)

Humility is knowing you're not smart enough to know when other people are better off being lied to. Once you start justifying your lies as being helpful to the victims, you've crossed from malice to delusion.

Further, you've just admitted on a public forum read by many with deep connections in the startup world (and others bright enough to crack whatever anonymity you think you have), that you're okay with lying to investors. This doesn't bode well for your career as a master fraud.

With skills like these, the Dark Side doesn't have much to offer you. Please consider switching teams.

Most people live in a world of fiction and react horribly to having that fiction refuted, which the truth often does. If you're willing to piss them off and have them hate or reject you (which I often am, because it's endlessly amusing to me) tell the truth to them. If you want smooth relationships with them, offer up a story.

One of those fictions is "Society"; many people have a deep desire to believe that they're among an exclusive elite-- and those who are powerful have the means to persist in this semi-delusion-- and that this elite encompasses all people who are of any value-- this part is obviously ridiculous. If you ape their values and manners (spin a story; uphold the fiction) these people may let you into their club and you may benefit from their resources; if you upset their story with the truth (that most people of talent are not like them and have different values and backgrounds) they will either reject you or (if you pierce their shield of self-deception) become very angry. The former is more likely, but neither benefits you.

If I were to be in a relationship with you and I found out you were lying about this sort of thing I would be highly pissed.