Let’s have a conversation about rules, ethics, and morals in startup.
I like to think I’ve run a clean ship my entire entrepreneurial career, and yet I still very much live by the entrepreneur’s motto: “It’s easier to ask forgiveness than to get permission.” It’s a balance, an almost constant struggle to end up on the right side of right.
But the line between good and evil isn’t as fine as others would have you believe. And it pisses me off when that line gets crossed so cavalierly. I’m looking at you Elizabeth Holmes and Billy McFarland and the hundreds more who have excused their unethical behavior by invoking the fact that, hey, entrepreneurs have to break the rules.
They’re right, but they’re also very wrong. It actually matters what you’re going to ask permission or beg forgiveness for.
Startup was built on the breaking of rules. See, rules are usually set by incumbents, those entities that have a vested interest in the status quo remaining the status quo.
Rules are the fertile soil in which old boys networks grow — and I use that term because it’s colloquial — there are definitely networks of old and young, men and women — in fact insert any demographic you want into that equation.
But come on, it’s usually old men.
The awesome thing is, when those networks exist, they are ripe for disruption, and that disruption starts by questioning the rules of the incumbents, then breaking them. We’re seeing this in cable television right now, we’ve seen it produce the gig economy in several other industries.
The downside is when the incumbents get too entrenched, you get quagmires like the American political system. But even there, eventually someone will find a way to get around those rules, which usually starts with finding a back door into a room surrounded by walls made out of money. We thought that might happen with the Internet, but that’s not working out. Thanks, Facebook.
So as I like to do, let me use a simple example to explain the difference between rules and ethics. I’ll use the incumbent cable television example.
Calling our cable provider and threatening to quit until they lower our rates is technically breaking the rules. Unless, of course, we’re honestly ready and willing to cut the cord every time we make the call. Semantics, right? And who can blame us? There’s no competition so those rates are fair game.
Stealing cable? That’s unethical.
Ethics are what we expect of each other in an effort to do our best to make sure nobody gets hurt — physically, financially, even emotionally.
Let’s say we have to go back to our investors to ask for more money because things are going bad. How bad? We don’t know. Maybe 30–70% bad. But what’s 70% bad? And what does 70% bad mean to our investors?
We need that money. Of course we tell them it’s 30–70% bad but we know they’re reading our body language too. Everyone will lose their jobs if we don’t get that money. Do we give off more of a 70% vibe? We know they need some kind of confidence before they write that check, right? Do we exude that? How?
That’s ethics. It can get tricky.
Now, here’s the difference between ethics and morals.
“Hey, investors! Everything is 100% great!”
Lying is wrong. And while there’s potentially a lot of subjectivity between right and wrong, most of us can agree on what’s right and what’s wrong when we have all the facts.
When entrepreneurs break rules that serve as protections for people with no other recourse, that’s immoral. Cheating the system may be unethical, but cheating a customer, employee, partner, investor, even a competitor, that’s immoral.
So here’s my ethics advice to entrepreneurs: Break all the rules, make the most ethical decisions, don’t do anything immoral.
That said, it’s that moral subjectivity that can get entrepreneurs into hot water in a completely different way. Maybe not even with the law, but it can definitely drive a wedge into our business and into our brains.
To illustrate moral subjectivity, I’ll bring up the old brainteaser of whether or not it’s immoral to steal bread to feed our starving family.
We can argue about this for hours, but here’s the thing: No entrepreneur is stealing bread to feed their starving family, and any entrepreneur who comes off like a hoodie-wearing Robin Hood is probably lying to us.
As entrepreneurs — hell — as people, we should be in business to do good. But that should be a given, it should be a core value, not a business strategy.
I’ve always been skeptical of movements like social entrepreneurism because, while we live in a society that is increasingly focused on making the world around us a better place (American politics notwithstanding), there are dozens of ways to do this that don’t have to be constantly focused on revenue, margins, market share, and profits.
Being good and being profitable go together like peanut butter and sriracha. When you just throw those two things between slices of white bread, it’s awful. But if you do it right you get Thai food. Delicious. Have you ever tried to make Thai food? I have. Almost burned down the kitchen. Twice.
What I’m saying is that it takes a constant effort for good and profitable to coexist.
The first distinction between being good and being profitable is right there in the name itself: Non-profit. Or Not-for-profit. Or Dot-org. Or 501(c)(3). An entrepreneur should decide up front what the motives of their company are.
Even then, and this might just be me, but I can’t get past those things that seem to be the fuel of non-profits: Either getting rich people to write checks or raising awareness to bang against government policy. Nothing at all wrong with that, just not a ton of room for innovation in either case. And I know there’s nuance and I’ll take heat from my friends in the not-for-profit game, but I’m down with that, because I want readers to understand the next distinction.
Innovation for the common good is awesome, and like I said it should be a core value of every company. But the machine doing the innovation for the common good also has a responsibility to sustain itself. And in startup, if we’re not growing, we’re dying.
That equation needs to be reconciled before we turn into Theranos. So how does an entrepreneur do that?
Running a clean ship has cost me, but those were losses I’ve been willing to eat in order to be able to sleep at night. I’ve learned that’s where I need to draw the line between being good and being profitable.
We entrepreneurs should be in startup to change the world, but we shouldn’t be in startup to save the world. Don’t get me wrong. We still, all of us, have an obligation to save the world, but we’re going to have a much easier time doing both the changing and the saving if we compartmentalize each and attack them individually.
I like to talk about separation of church and state in startup. Business is business, personal is personal. It’s the only way to survive. Whether an entrepreneur chooses to stand on high moral ground has nothing to do with that split. I’m not saying be good in life and be evil in startup (or the other way around).
But I am saying this:
As entrepreneurs, our morals are ours to construct and protect, our decisions define our ethics, and we have a propensity to want to break the rules. That’s fine. When we can disconnect our working life from our personal life, we’ll have a cleaner idea of what our moral compass tells us, when our decisions border on unethical, and then we can break as many rules as we want in both.
And as an added bonus, we’ll be better at both.