Here is a possible defense of pre-truth. I’m not sure if I believe it, but it seems like one of several theories that fit the available evidence.
Willingness to lie is a generally useful business skill. Businesses that lie to regulators will spend less time on regulatory compliance, businesses that lie to customers will get more sales, etc. The optimal amount of lying is not zero.
The purpose of the pre-truth game is to allow investors to assess the founder’s skill at lying, because you wouldn’t want to fund some chump who can’t or won’t lie to regulators. Think of it as an initiation ritual: if you run a criminal gang it might be useful to make sure all your new members are able to kill a man, and if you run a venture capital firm it might be useful to make sure all the businessmen you invest in are skilled liars. The process generates value in the same way as any other skill-assessing job interview. There’s a conflict which features lying, but it’s a coalition of founders and investors against regulators and customers.
So why keep the game secret? Well it would probably be bad for the startup scene if it became widely known that everyone’s hoping startups will lie to regulators and customers. Also, by keeping the game secret you make “figure out what game we’re playing” a part of the interview process, and you’d probably prefer to invest in people savvy enough to figure that out on their own.
Your comment seems like an expansion on who is the party being fooled and it also points out another purpose for the obfuscation. A defense of pre-truth would be a theory that shows how it’s not deceptive and not a way to cover up a conflict. That being said I agree that an investor that plays pre-truth does want founders to lie, and it seems very plausible that they orient to their language game as a “figure it out” initiation ritual.
Depending on exactly where the boundaries of the pre-truth game are, I think I could argue no one is being deceived (I mean realistically there will be at least a couple naive investors who think founders are speaking literal truth, but there could be few enough that hoodwinking them isn’t the point).
When founders present a slide deck full of pre-truths about how great their product is, that slide deck is aimed solely at investors. The founder usually doesn’t publish the slide deck, and if they did they wouldn’t expect Joe Average to care much. The purpose of the pre-truths isn’t to make anyone believe that their product is great (because all the investors know that this is an audition for lying, so none of them are going to take the claims literally), rather it is to demonstrate to investors that the founder is good at exaggerating the greatness of their product. This establishes that a few years later when they go to market, they will be good at telling different lies to regulators, customers, etc.
The pre-truth game could be a trial run for deceiving people, rather than itself being deceptive.
This still creates another problem for founders who aren’t part of the good-ol-boys network and don’t know they are supposed to “pre-truth.” Their companies will be evaluated worse than they “should” by VCs because VCs downgrade their actually currently true claims as if they were pre-truths. Nobody is being “deceived” per se, but these founders are being harmed.
If you believe strongly enough in the Great Man theory of startups then it’s actually working as intended. If startups are more about selling the founder rather than the product, if the pitch is “I am the kind of guy who can do cool business stuff” rather than “Look at this cool stuff I made”, then penalizing founders who don’t pre-truth is correctly downranking them for being some kind of chump. A better founder would have figured out that he was supposed to pre-truth and it is significant information about his competence that he did not.
Realistically it is surely at least a little bit about the product itself, and honest founders must be “unfairly” losing points on the perceived merits of their product, but one could argue that identifying people savvy enough to play the game creates more value than is lost by underestimating the merits of honest product pitches.
Although to the extent that the founder’s savvy is used for the purpose of taking the company public even though their product is not as good as they “pre-truthed” it, then the ultimate purpose is that the founder and the early investors are essentially colluding to defraud less-savvy IPO investors. Seems not great.
SQZ Biotech is possibly a good example of this (I live nearby so have followed the story but don’t have any inside info about this company).
Here is a possible defense of pre-truth. I’m not sure if I believe it, but it seems like one of several theories that fit the available evidence.
Willingness to lie is a generally useful business skill. Businesses that lie to regulators will spend less time on regulatory compliance, businesses that lie to customers will get more sales, etc. The optimal amount of lying is not zero.
The purpose of the pre-truth game is to allow investors to assess the founder’s skill at lying, because you wouldn’t want to fund some chump who can’t or won’t lie to regulators. Think of it as an initiation ritual: if you run a criminal gang it might be useful to make sure all your new members are able to kill a man, and if you run a venture capital firm it might be useful to make sure all the businessmen you invest in are skilled liars. The process generates value in the same way as any other skill-assessing job interview. There’s a conflict which features lying, but it’s a coalition of founders and investors against regulators and customers.
So why keep the game secret? Well it would probably be bad for the startup scene if it became widely known that everyone’s hoping startups will lie to regulators and customers. Also, by keeping the game secret you make “figure out what game we’re playing” a part of the interview process, and you’d probably prefer to invest in people savvy enough to figure that out on their own.
Your comment seems like an expansion on who is the party being fooled and it also points out another purpose for the obfuscation. A defense of pre-truth would be a theory that shows how it’s not deceptive and not a way to cover up a conflict. That being said I agree that an investor that plays pre-truth does want founders to lie, and it seems very plausible that they orient to their language game as a “figure it out” initiation ritual.
Depending on exactly where the boundaries of the pre-truth game are, I think I could argue no one is being deceived (I mean realistically there will be at least a couple naive investors who think founders are speaking literal truth, but there could be few enough that hoodwinking them isn’t the point).
When founders present a slide deck full of pre-truths about how great their product is, that slide deck is aimed solely at investors. The founder usually doesn’t publish the slide deck, and if they did they wouldn’t expect Joe Average to care much. The purpose of the pre-truths isn’t to make anyone believe that their product is great (because all the investors know that this is an audition for lying, so none of them are going to take the claims literally), rather it is to demonstrate to investors that the founder is good at exaggerating the greatness of their product. This establishes that a few years later when they go to market, they will be good at telling different lies to regulators, customers, etc.
The pre-truth game could be a trial run for deceiving people, rather than itself being deceptive.
This still creates another problem for founders who aren’t part of the good-ol-boys network and don’t know they are supposed to “pre-truth.” Their companies will be evaluated worse than they “should” by VCs because VCs downgrade their actually currently true claims as if they were pre-truths. Nobody is being “deceived” per se, but these founders are being harmed.
If you believe strongly enough in the Great Man theory of startups then it’s actually working as intended. If startups are more about selling the founder rather than the product, if the pitch is “I am the kind of guy who can do cool business stuff” rather than “Look at this cool stuff I made”, then penalizing founders who don’t pre-truth is correctly downranking them for being some kind of chump. A better founder would have figured out that he was supposed to pre-truth and it is significant information about his competence that he did not.
Realistically it is surely at least a little bit about the product itself, and honest founders must be “unfairly” losing points on the perceived merits of their product, but one could argue that identifying people savvy enough to play the game creates more value than is lost by underestimating the merits of honest product pitches.
Although to the extent that the founder’s savvy is used for the purpose of taking the company public even though their product is not as good as they “pre-truthed” it, then the ultimate purpose is that the founder and the early investors are essentially colluding to defraud less-savvy IPO investors. Seems not great.
SQZ Biotech is possibly a good example of this (I live nearby so have followed the story but don’t have any inside info about this company).