Part II: Is Silicon Valley Immoral?

Max Anderson

This is the second half of a piece republished with permission from Medium.comFind the first installment here.

Is Silicon Valley Immoral?

Second verse, same as the first.

If you think Harvard is an immoral place you probably think Silicon Valley is too, given the preponderance of HBS alumni in positions of leadership. The valley’s self-image is the nerdy coder, the valley is full of MBAs. Alex Taussig of Lightspeed Venture Partners points to a study that finds MBAs are very regularly founders of “unicorn” companies and that HBS has more unicorn founders than any other school.

Recent years have provided plenty of examples to back up the view that Silicon Valley is rife with fraud. Erin Griffith’s reporting on the “ugly, unethical underside” of Silicon Valley — from Zenefits to Hampton Creek to Lending Club to Skully — is compelling. And the story of Theranos, as told by Nick Bilton in Vanity Fair, is a fascinating case study in the cycle of hype. Bilton describes it like this:

“In Silicon Valley, every company has an origin story — a fable, often slightly embellished, that humanizes its mission for the purpose of winning over investors, the press, and, if it ever gets to that point, customers, too. These origin stories can provide a unique, and uniquely powerful, lubricant in the Valley.

After all, while Silicon Valley is responsible for some truly astounding companies, its business dealings can also replicate one big confidence game in which entrepreneurs, venture capitalists, and the tech media pretend to vet one another while, in reality, functioning as cogs in a machine that is designed to not question anything — and buoy one another all along the way.”

I reached out to a friend who has been a long-time VC investor in the valley to ask what he thought. Does the startup game of pitching and embellishing corrupt founders and lead to a disproportionately unethical culture in tech? He wrote back that these dramatic snippets make for good stories in the tech press but when considered against the overall landscape of the valley, they are few and far between. I’ve not seen evidence to show that the tech sector is any more unethical than any other industry. Like with HBS, Silicon Valley is a powerful cultural force. Any narrative that promises to knock it off the pedestal is going to attract attention.

But I’m not an apologist for Silicon Valley either. The leaders of some of these startups do have enormous influence and power — leading hundreds of employees and spending tens of millions of dollars — sometimes before they are 25 years old. How wise were you at 25? How responsibly would you have spent a check for $10 million? Might you have slipped into having a little too much fun at the company's expense, like Rothenberg Ventures did? This system is designed to enable ego-building and incentives hype. It’s worth thinking about a better way.

Is it possible to teach ethics?

We expect business schools to educate students to lead effectively and ethically. But is this a reasonable expectation? Can ethics be taught? And what about all those entrepreneurs in Silicon Valley, like Elizabeth Holmes of Theranos, who dropped out of Stanford at age 19 before getting much of an education at all?

First of all, if we are waiting until business school to teach ethics, we are waiting too long. Students aged 25–30 have had their values and habits well-formed before matriculating. Virtue begins at home and families will always have the greatest role in forming the character of children.

And yet there are important lessons every young man or women must learn on their own, apart from their families. Enlightened educators, like Kentucky’s teacher of the year, Ashley Lamb-Sinclair, make it their business to educate their students holistically — not just imparting information, but giving them experiences that influence how they view the world and treat other people.

The opportunity for character formation exists for every educator in every classroom. The question is whether they (are willing to) recognize it. At HBS, I remember discussing a case about the strategy and operations of a company that sourced its textile products from India. I brought up the idea that the company might want to investigate its supply chain to ensure there was not child labor involved. The professor told me that was a concern for our Leadership and Corporate Accountability (ethics) class, not for strategy and operations. That kind of narrow compartmentalizing of ethics misses the whole point. Ethics isn’t something you schedule time for — it is what underlies every strategic and operational decision.

I had another professor, David Garvin, who took a more holistic approach. The most popular definition of business ethics is maybe Warren Buffet’s counsel to never do anything you wouldn’t want to see published on the cover of The Wall Street Journal. That’s not a bad rule of thumb but it’s not bulletproof. In situations where the rewards for unethical behavior are high and the chances of being caught are low, it’s awfully tempting to compromise.

Professor Garvin used his semester with our class to force us to confront our inner values when put to the test. He often had us role play CEOs caught in difficult circumstances and would force us to make a choice. He wouldn’t let us off the hook easy if we made the “right” decision. He’d press us, question us, grill us, really, to make us see that in the real world, it would never be so easy to just do the right thing.

One day he made me play the role Niels L. Hoyvald the day we studied the Beech-Nut baby apple juice case. The story is crazy — Beech-Nut switched apple juice suppliers when they were offered a 25% discount by a new producer. Then they looked the other way when some began questioning whether the product wasn’t pure apple juice. When the product was finally tested, they found that it was nothing more than water and corn syrup. At that point, Hoyvald didn’t come clean but tried to sell through the inventory as quickly as possible.

If the baby food business is an unexpected source for corporate fraud, it just goes to show how easy it is to slip into behavior you’d never condone in the light of day. Instead of letting us neatly label Hoyvald and his associates “the bad guys,” Professor Garvin made me and my classmates put ourselves in their shoes and imagine our way through their rationalizations to see how they could have ended up making the choices they did.

Even today, years later, I still remember that case. I am grateful that Professor Garvin didn’t just go through the motions, but took the time to make an important lesson stick. It is that kind of teaching that elevated him to lead the school’s Christensen Center for Teaching and Learning, where faculty at HBS learn how to teach.

David Garvin passed away this month, after a long battle with cancer. He was not only a great teacher. He became a mentor and a friend. And I miss him. I hope his words will continue his legacy.


Max Anderson

Max Anderson is an entrepreneur and author. He founded Saturn Five ventures, writes The Weekend Reader, a deep thinker’s guide to modern culture, and authored Modern Meditations: Reflections from the Mid-Point of the Second Decade of the Twenty-first Century.

Max co-founded the MBA Oath upon graduating with honors from Harvard Business School and the Harvard Kennedy School in 2009. He co-authored a book of the same title, The MBA Oath (Penguin Portfolio) with Peter Escher in 2010. Max has spoken at universities, companies, and not-for-profit organizations across the United States and Europe. His work has been profiled by The New York Times, The Wall Street Journal, The Economist, The Daily Show with Jon Stewart, NPR’s Weekend Edition, and dozens of other media outlets.

He began his career at McKinsey & Co. in New York City, followed by work with leading organizations across the for-profit and non-profit world including Google, The Charlie Rose Show, Redeemer Presbyterian Church and, most recently, Bridgewater Associates — where he served in a number of leadership capacities as a member of the firm’s senior management cohort and as director of the firm’s Investment Associate leadership program.