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The Dark Side of Tech Entrepreneurship

The tech world has traditionally been seen in a positive light. A kid makes a website in a dorm room, it experiences exponential growth and eventually becomes one of the most profitable, powerful companies in the world. There’s something appealing about the possibility of rags-to-riches enshrined within the public’s perception of innovation and entrepreneurship; a perception that gives people the sense that the ‘good guy’ can make it too. You don’t need millions of dollars or connections in high places. You just need a good idea!

That perception, however, has come under considerable strain. Greater scrutiny in how the world’s most valuable brands have achieved their preeminent positions has revealed shady practices, cutthroat attitudes and betrayal. The tech world, often vaunted for its disruptive and world-changing innovations, has been mired in controversy year after year, to the point that once-prestigious lists of precocious individuals such as Forbes 30 Under 30 is increasingly looked upon as meaningless. Alumni of Forbes’ accolades include Elizabeth Holmes and Sam Bankman-Fried, respectively responsible for running a fraudulent $9 billion blood-testing company and conducting one of the biggest financial frauds in history. Holmes was often touted as the next Steve Jobs and Bankman-Fried was hailed as the next Warren Buffet. Both are behind bars.

When Steve Jobs passed away in 2011, he was revered as a hero that had changed the world. Fired from Apple in 1985, the company he founded, he returned in 1997 to make it the world’s most valuable brand. But as more articles were published on blogs and websites, comments posted on social media, books and films released about his life, it became clear that his ascent to the echelon of revered entrepreneurs had a dark side. In the memoir of his daughter, Small Fry by Lisa Brennan-Jobs, Steve Jobs’ imperfections as a family man are laid bare. Steve Wozniak, Co-Founder of Apple, expressed hurt at learning that Jobs had lied to him about the money earned in developing the arcade video game Breakout.

And Jobs was willing to push the boundaries of legality to ensure Apple remained competitive. A story that is a part of tech folklore is the email exchange in 2007 between Steve Jobs and Eric Schmidt, the respective CEOs of Apple and Google at the time. Big tech’s war of talent acquisition is far from new. 2007 was the year of the first iPhone release. It was the year that Microsoft purchased a 1.6% stake in Facebook for $240 million, valuing the social network at $15 billion. And it was the year that Google announced its Android plans.

Poaching from other tech companies was a powerful strategy to gain a competitive advantage in what was an extremely competitive sector, as it is today. It got so bad in the 2000s that Apple and Google agreed not to hire each other’s staff. Although Apple and Google bosses thought this was a good idea, it stifled the careers of staff at these companies because their progression opportunities were hampered. This caused a lot of anger because it meant that Big Tech was looking out for itself at the expense of the growth of its staff.

Steve Jobs would have known that an anti-poaching agreement wasn’t the right thing to do. When he suggested the idea to Ed Colligan, the CEO of now-defunct Palm Inc, Colligan replied with the following email: “Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.

This didn’t stop Jobs from conspiring with Google. As the story goes, a recruiter from Google cold-called an engineer working at Apple, tempting them to make a move to the “Don’t be evil” company. When Jobs found out, he wrote to Schmidt: “Eric, I would be very pleased if your recruiting department would stop doing this. Thanks, Steve”. Schmidt quickly sent an email to Google’s HR department to find out what had happened. The HR team replied that “the sourcer who contacted this Apple employee should not have and will be terminated within the hour.” Upon hearing that the Google recruiter had been fired, Jobs reacted with a simple smiley, “:)” Years later, Apple, Google, Intel and Adobe settled an anti-poaching civil lawsuit for $415 million.

An email exchange between Steve Jobs and Eric Schmidt on March 9, 2007.
An email exchange between Steve Jobs and Eric Schmidt in March, 2007.

And while Jobs and Schmidt were emailing each other about staff, Mark Zuckerberg’s Facebook was making waves. Here was an example of the potential of entrepreneurship. You didn’t need millions of dollars. You could build a start-up in a dorm room or garage, and it had the possibility of taking off. A nice message, but one in which some key elements were left out. As depicted in the biographical drama film, The Social Network, Facebook’s conception is forever associated with ConnectU, the social networking site Zuckerberg was hired to work on, the idea of which Zuckerberg was accused of stealing.

In an IM exchange with a friend in 2004 after Zuckerberg had launched thefacebook.com, he boasted that he had over 4,000 pictures and emails of students at Harvard. When the friend asked how he did it, Zuckerberg replied that they trusted him and he called them “Dumb f***s” for doing so – a presage of what was to come in later years. His famous words, “yea I’m going to f*** them”, when asked about competing websites is an attitude he would keep as new competitors such as Instagram and Snapchat entered the scene.

Facebook was about growth at all costs and crushing competitors. When Adam D’Angelo left Facebook in 2008 as its Chief Technology Officer and started the Q&A site Quora a year later, Facebook launched its Facebook Questions app. When Mark Zuckerberg met with Evan Spiegel, CEO of Snapchat, he told him Facebook could crush Snapchat and that the only way they would survive is if they worked together. Facebook would monitor what other apps were on your mobile and how much time you spent on them. If people were spending time on another app to the exclusion of Facebook, staff would be alerted and the course of action would be to crush the competition as soon as possible. Or buy the competition if crushing it didn’t work. The company’s performance policy was just as revealing. Facebook’s code wasn’t some highly guarded secret. Instead it was highly accessible and could be altered without too much oversight. There was one condition. The alteration had to achieve growth. Staff performance reviews were centred on an employee’s contribution to Facebook’s growth. Did your contribution get more users onto Facebook or increase the time spent on Facebook by existing users? If so, then you’d get a good performance review.

The cutthroat nature of Facebook’s success revealed as much about the company as it did about the culture of Silicon Valley; an ecosystem in which founders of start-ups have lofty visions and are willing to go to great lengths to make them a reality. One of these founders was Elizabeth Holmes, founder of the blood testing start-up Theranos that was once valued at $9 billion. While she was being hailed as someone who’d change the world, sharing audiences with Jack Ma and Bill Clinton, those working within her company were subjected to a culture of intimidation and brutal working hours.

Bill Clinton, Elizabeth Holmes and Jack Ma at 2015 Clinton Global Initiative Annual Meeting.
Elizabeth Holmes (middle) on stage with Bill Clinton (left) and Jack Ma (right).

In 2008 the Theranos board agreed to remove Elizabeth Holmes as CEO after she had made some unrealistic revenue projections. The board concluded that she was too young and inexperienced to be running a company of Theranos’ size. When they revealed their decision to Elizabeth, she went on a charm offensive that made them change their minds and preserved her spot at the helm of the company. Tyler Shultz, the grandson of board member George Shultz and later a whistleblower, has spoken about how when Elizabeth Holmes spoke to you, she made you feel like you were the most important person in the world. As he mentions in his book, Thicker Than Water, when Tyler would have some doubts about the tech, Holmes would speak to him and he would be supercharged with motivation, ready to change the world.

Holmes would often use the passing of her uncle to convey the importance of early testing, and she would do this with sadness and tears in her eyes. She sounded very genuine and could turn sceptics into believers of the Theranos vision. It would also be hard not to get swept along in the wave of enthusiasm as Elizabeth instilled among her own staff that Theranos was the next big thing. Holmes’ persuasive abilities and charm were so powerful that it became a running joke in the Theranos office. Tyler Shultz recounts a story about staff seeing her walking in the office with an older man. One staff member remarked, “There goes someone’s inheritance”.

Once Tyler had become sceptical of Theranos’ technology, had noticed discrepancies in their results and had even been berated by Chief Operating Officer, Sunny Balwani, Tyler’s experiences were revealing of the lengths Elizabeth Holmes would go to ensure Theranos and she became a global success. Tyler slept with a knife by his bed and considered buying a gun. He knew he was being followed and sometimes thought he heard footsteps by his window in the middle of the night. He was truly concerned about how far Theranos would go to silence him. He eventually decided not to buy a gun because he was afraid that he might use it on himself.

Eventually Theranos would shut down and the world renowned self-made billionaire Elizabeth Holmes would have a net worth of zero. The intent behind more efficient blood testing technology was noble. The process by which to achieve it, however, was not. Some argue that Elizabeth Holmes, who is now serving an 11-year prison sentence, was a victim of her own success. Feted to be the next Steve Jobs and sharing audiences with successful entrepreneurs such as Jack Ma meant she had to make Theranos work. There was no other option. Silicon Valley and the wider world of tech entrepreneurship have many similar stories. Founders are willing to do whatever it takes to make their company a success, even if it means crossing ethical boundaries. Following scandal after scandal, the public’s perception of entrepreneurship is changing. Once viewed as an expression of innovation that results in positive disruption, there now exists a great deal of scepticism, with people wondering if that unicorn company that earned a billion dollar valuation in record time has a dark side.

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