> she bragged to her lead engineer she wouldn't go to prison
So... obviously she was wrong. But the line between "just cutting a few corners" and prosecutable criminality isn't nearly as bright as we in the peanut gallery like to think. Lots of very successful startup launches (Uber and AirBnB are famous examples) were kinda/sorta/prettymuch illegal by the plain language of the laws they were (not) operating under. And they got stinking rich! PG himself has an example in one of the very early essays about how Viaweb kinda just skipped most of the early bureaucracy and accounting they were supposed to have been doing, figuring it would all just work out. And it did.
Kids see those examples and figure that a little cheating here or there probably isn't going to send them to jail. And it usually doesn't. Except when it does. And the distinction, for a lot of people in this community and right here on this forum, is very much a "There but for the grace of God go I" phenomenon.
Startup culture tells you to cheat, basically. Knowing how not to cheat isn't in the instruction manual.
> But the line between "just cutting a few corners" and prosecutable criminality isn't nearly as bright as we in the peanut gallery like to think
The line maybe isn't bright, but faking data to a potential buyer to make it appear like you have 15x your actual number of users is clearly way past the line you cannot see.
That would be like saying it's hard to know if noon is during the day or night because the exact moment that qualify as "dawn" is hard to discern.
I think the difference is PG faked it until he could make it work at some future endpoint, Charlie Javice gave up on trying to make it work and instead faked it at the endpoint
But my point upthread is that that "difference" is a post hoc rationalization. She needed to close that deal to save the company, in which she presumably believed. The money would change everything, right? She probably did picture this as "faking until they made it".
PG "got caught" at a moment when Yahoo (the acquirer, I think?) had already decided on a deal it valued and was willing to deal with some accounting mess to close it. Javice got caught by an investment bank with rather different ideas about value who perceived the "accounting mess" as active fraud.
In a culture (this culture!) where everyone cheats, the actors lose sight of how to judge what cheating is acceptable.
> But the line between "just cutting a few corners" and prosecutable criminality isn't nearly as bright as we in the peanut gallery like to think. Lots of very successful startup launches (Uber and AirBnB are famous examples) were kinda/sorta/prettymuch illegal by the plain language of the laws they were (not) operating under.
Not prosecuted, and not prosecutable, are two different things.
> And they got stinking rich!
Which in no way validates their actions, ethically nor legally.
The takeaway here is that you can defraud people and you can defraud the state, and will likely get away with it with a slap on the wrist (unless you steal a crazy big amount like FTX did). If you defraud rich and powerful investors, well that's a different story.
I guess it all depends on how you're cheating. Are you defrauding others in your cheating? Or are you just bypassing bureaucracy like not having a Taxi service license?
Potato/potatoe. Existing taxi medallion holders were absolutely harmed by Uber. Existing licensed hotel operators were absolutely harmed by AirBnB. And we all celebrated that to great effect here. But it was breaking the rules. We just think THOSE rules were bad but THESE rules are good.
Well, it's not our call to make, it's the prosecutors'. And you (yes, you personally) aren't nearly as insulated from this kind of risk as you think.
> Existing taxi medallion holders were absolutely harmed by Uber. Existing licensed hotel operators were absolutely harmed by AirBnB.
Then they should have sued and sought a judgment if they had a claim.
This is the NIMBY argument in a different market: Can't let anyone else build anything because it might reduce the value of what I have, thereby harming me.
It's not the same as materially misrepresenting a financial investment.
No, your logic doesn't hold. The distinction being drawn here is between civil and criminal liability. Operating an unlicensed taxi service in most municipalities (maybe all of them) is a civil infraction, not a crime.
The founder in the linked article thought that she was on the right side of the line. She wasn't. You personally might think you're too smart to[1] fall afoul of this kind of thing and that all your cheating[2] will be non-prosecutable.
But quite frankly most "criminally liable" misrepresentations to investors aren't prosecuted (basically none of them are), so the fact that this one was is more a statement about the influence of JP Morgan and the mind of this one prosecutor. And blanket statements that absolutely none of Uber's shenanigans were prosecutable seem laughable. Crimes abound.
The point wasn't to nitpick about crimes and penalties. It was that this crime happened in the context of a culture that structurally encouraged it, and we would all do well to recognize that instead of nitpicking fake reasons why it would never happen to us.
[1] The ironic analogy to hubris in security analysis isn't lost on me
[2] Because again in this world All Founders Cheat a Little Bit. We all know it.
> We just think THOSE rules were bad but THESE rules are good
That's kind of how society evolves isn't it? Rules are always changing and that's generally a good thing. Some rules are pretty set in stone throughout history - eg. murder and fraud are generally bad. Other rules around free speech, slavery, energy usage/production, social safety nets, etc., have changed for the better.
You could argue that Uber and Airbnb are worse but I think the fact that they've stuck around despite allegedly breaking rules means that most people prefer the new state of affairs that they resulted in. If something else comes up that breaks rules set by Uber and results in something better (eg. autonomous vehicles?) then I'm sure people will gravitate to that new thing as well.
What was the fraud? Limo services were always allowed in NYC, and didn't have to abide by the medallion system. All Uber did was make it more efficient to find and book a Limo.
Material misrepresentation of a business is blatant financial fraud.
If you sell someone a yellow-painted piece of metal but you tell them it's solid gold, you're not bending the rules a little bit. You're just defrauding them.
> But the line between "just cutting a few corners" and prosecutable criminality isn't nearly as bright as we in the peanut gallery like to think. Lots of very successful startup launches (Uber and AirBnB are famous examples) were kinda/sorta/prettymuch illegal by the plain language of the laws they were (not) operating under. And they got stinking rich!
I, for one, would hope "don't commit crimes!" is taught in business school ethics. (LMAO as if an MBA has ethics)
So... obviously she was wrong. But the line between "just cutting a few corners" and prosecutable criminality isn't nearly as bright as we in the peanut gallery like to think. Lots of very successful startup launches (Uber and AirBnB are famous examples) were kinda/sorta/prettymuch illegal by the plain language of the laws they were (not) operating under. And they got stinking rich! PG himself has an example in one of the very early essays about how Viaweb kinda just skipped most of the early bureaucracy and accounting they were supposed to have been doing, figuring it would all just work out. And it did.
Kids see those examples and figure that a little cheating here or there probably isn't going to send them to jail. And it usually doesn't. Except when it does. And the distinction, for a lot of people in this community and right here on this forum, is very much a "There but for the grace of God go I" phenomenon.
Startup culture tells you to cheat, basically. Knowing how not to cheat isn't in the instruction manual.