Ambiguity and alignment

My last few posts have been very much “inside the world of vc and high tech” and I wanted to get back to the broader theme that underpins this blog – meaningful failure and what you can learn from failure.

I had one of those wonderful experiences last week where a friend connected me to a friend, and I subsequently found myself deep into a conversation I hadn’t expected.  In this case, I was on the phone with a former technology executive who left his career to pursue his passion for poetry.  There we were, getting to know each other, locating some common ground in our shared interests of startups and writing.

One of the subjects we lingered on was how whether you’re at work or at home, you’re the same person deep inside.  And that the converse is perhaps more interesting: what happens when you’re a different person at work than you are at home?  I was thinking alignment of values and areas of ambiguity.  This sent me in an interesting arc.

When I first started thinking about this I thought the issue was more about decency and less about ethics. 

Except people can be incredibly decent, treat others well, communicate compassionately and still be unethical.  They can define “truth” in a way that is not true at all, and exploit this ambiguity motivated by fear, or greed, or insecurity, you name it.  But it means who they are on the outside (defined truth) is different from who they are on the inside (actual truth) 

Which made me think of Entellium.  This is old news, but offers a rich example.

Entellium was a high flying venture capital backed startup in Seattle, where the CEO and CFO created a second set of financial statements that overstated revenue and presented these to their employees, board, and investors. Only these two executives knew about it, and they compartmentalized the truth, keeping it deep inside.  For a long time. 

John Cook of TechFlash summed it up well:  “More than $50 million in venture capital down the drain. Over 200 people out of work. And two Internet executives — both fathers — going to federal prison.”

They didn’t do it because of greed – they didn’t even profit from this deception.  In fact they ended up spurning a $100million offer from Intuit, knowing the fraud would come to light during the accounting review.  

One of the executives admitted the fraud was driven by the fear of failure.  A missed sales objective one quarter and the fear of confronting that caused them to overstate actual revenue.  And then the next quarter of course they were even further behind, and well you know the way these things play out.  So, they lied to their board and employees.

And to their families too, who were blindsided by the fraud.  The police showed up at their houses and took the execs away in handcuffs in front of their wives and children.  Imagine what was going through their heads, and the heads of their families in those moments.   And the comment I kept hearing from people who knew both men was “they were such decent people.”

So I guess you can be decent and have a very ambiguous ethical foundation.  In fact, the belief that your your ethical foundation has ambiguity is the tell-tale that you are no longer behaving ethically.  Entellium was all about the difference between what was true and what could be gotten away with.  There’s plenty of ambiguity to go around in those last six words. 

But deception is a whole number, there are no fractions of it.  There is no ambiguity.  So it’s really not about being a different person at work or home, it’s about always being the same person inside and outside.  Having truth be the connective tissue between the two.

David Foster Wallace said this well in his 2005 commencement speech at Kenyon College “The trick is keeping the truth up front in daily consciousness.”

If it’s up front, then it’s there for everyone to see.  A nice alignment between who you are inside and who you are outside.

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9 Responses to “Ambiguity and alignment”

  1. Matthew Trifiro Says:

    Brilliant post Peter. Trust — earning it and being worthy of it — is one of the most important tools in running a business. Thoughtfulness and alignment with your thoughts (integrity) begets trust. Your David Foster Wallace quote hits the nail on the head. The important point is to be conscious. Even in minor areas, where consequences are not substantial it is the process that is important. Do you exceed the speed limit? ? Do you report the $75 of miscellaneous income from the garage sale? Why? or Why not? How do you arrive at your choice of action, how do you explain it to others, and do you act on your conclusion consistently?

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    • Peter Zaballos Says:

      Thanks for the compliment Matt, and your followup questions also hit to the center of the issue. It is about being deliberate and conscious about your decision making and mapping those transparently to your ethics. It’s about being able to explain your actions and motivations in a clear and consistent manner.

      I worked for a wonderful boss at RealNetworks who summed this up well by saying “I can’t not tell the truth and behave transparently because I don’t want to have to keep track of what I’ve told people, if I tell the truth the whole time, there’s no version control issue.”

      And from there, you can build a very solid and durable foundation of trust.

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  2. Alyson Button Stone Says:

    My husband and I have this conversation all the time. I believe in accepting my failures and stepping into the pain; my husband will do almost anything to postpone that pain, which inevitably prolongs it. I find it baffling to contemplate stories like Entellium and the actions of Bernie Madoff. How can they take such wrong thinking to the next level and into the real world?

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    • Peter Zaballos Says:

      I think they do it by creating compartments within themselves where they can keep this information hidden from view. Compartmentalization in itself isn’t bad, it’s what enables you to process complex decisions and orchestrate activities within and across an organization. Not all information is needed or useful to all people, but taking this to the extreme of having information that you know will materially harm another party, and keeping that information from them, or worse, causing them to believe the “truth” is in fact the opposite of what is in fact true, that’s when compartmentalization becomes harmful and unethical.

      Back to your first point, I wrote a post earlier on why bad news should travel faster than good news is so important to good decision making. Postponing the pain also postpones your ability to make the most productive use of information, bad or good, and will cause you to miss out on the opportunity that might come from facing bad news and finding something good in the process.

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  3. The collateral damage of a missed opportunity « Open Ambition Says:

    […] Open Ambition The juncture of success and meaningful failure « Ambiguity and alignment […]

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  4. Jennifer Drobac Says:

    Pete—
    I am just catching up with your wonderful posts and could not let this one pass…. in part because I have taught professional ethics to law students. (And no, legal ethics is not an oxymoron. 😉 I tell my students that there are at least three standard gradations that guide behavior. The lowest level is law. One must conform to the law or risk imprisonment. Entellium executive fraud landed those officers in jail because they violated state and federal laws. Lawyers (and I presume entrepreneurs) also have state codes of professional ethics or conduct. A state bar commission can yank a lawyer’s license to practice if she violates that code. I don’t know of a professional code for entrepreneurs but I imagine that if it is not published, it is implied. One will not get VC funding if one violates the start-up “code.” The Entellium officers certainly violated that code. Finally, I tell my law students that every human being has a personal moral code. We may not reflect consciously upon our moral beliefs often (but I encourage all my students to take the time in law school to do so) but chances are, one day, that personal code will become extremely important. We each come to a crossroads (ironic that I teach in Indianapolis—the crossroads of America) and must make a moral choice. I suspect we come to many such crossroads in our lives but some are more important choices than others. I describe for my students the day that they look themselves in the mirror at age 40 or 50. They better like the person looking back because changing that person may prove difficult (especially from a prison cell!).

    So, you could say that the code involves truth but truth is relative and changes with perspective (unless you are Plato). Let’s say that my Entelligent client tells me that he intends to dump toxic waste into a nearby stream as a cost saving measure and wants to know the legal ramifications. He also mentions that there is a summer camp for kids directly down stream but he does not know what the waste hazard impact might be for those children. The law may not address what I must do. I can try to dissuade my client but I have committed no crime by not revealing his proposed, unexecuted plan. My professional ethics mandate that I keep our conversation confidential. My *moral code* directs me to investigate the hazard for those children and insist that my client refrain. I will report him to safeguard those children if he cannot assure me that he will refrain. I know that I risk disbarment. I can also look myself in the mirror at almost 50. And where is the truth in all of that?

    We want to believe that people are decent. They are generally. However, as you have noted before in this blog, we all make mistakes. People make bad mistakes (including hate speech in the boys’ bathroom—but that is another blog post). Mistakes do not necessarily make bad people. In fact, mistakes properly analyzed can produce better people. What we see in the friends who say, “He was so decent,” I think is compassion combined with fear. That statement is the expression of the understanding that good people can make poor choices at the crossroads. It also carries an implied confusion about how the Entellium officer arrived at such a poor choice, combined with fear that but for the grace of God…. and a good bathroom mirror…. there we might each go.

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    • Peter Zaballos Says:

      Thank you for this Jennifer. Very thoughtful comments and observations, indeed.

      It all seems to come down to the person you see in the mirror, and your relationship with that person, as you point out. Perhaps that’s where the greatest source of ambiguity originates, because I wonder how many people have clarity of principles when gazing in that mirror, have the necessary honesty requisite for the kind of conversation that needs to be had. I think more people struggle there than they would like to admit.

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  5. Truth is relative and changes with perspective « Open Ambition Says:

    […] is relative and changes with perspective By Peter Zaballos My post about ambiguity and alignment provoked some really interesting comments, which I wanted to circle back to.  One comment in […]

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  6. Quora Says:

    What is the all-time greatest failed Internet startup?…

    In terms of sheer magnitude of shameful waste, the all-time-greatest failed Internet startup has to be Entellium. John Cook of TechFlash summed it up well:  “More than $50 million in venture capital down the drain. Over 200 people out of work. And two …

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