# 5 minute analysis on why founders turn into frauds.

By [Bendystraw 🤷](https://paragraph.com/@bendystraw) · 2022-12-02

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> “If you look at the ecosystem, entrepreneurs as a class have gotten younger, younger, and younger. They also as a class have become less and less and less experienced.”
> 
> _\- Chamath Palihapitiya_

What turns a founder into a con artist?
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It’s always shocking when someone is found to be making false claims. But it’s hard to know exactly when the fraud started and if that was the intention the whole time.

I've been following the Elizabeth Holmes story for years.

I'm interested in her story because I know what it's like to be young and ambitious. I see exactly how she got caught up in the hype that surrounded her.

The problem is, there are lots of people like Elizabeth who want to build something great but don't necessarily have any idea how to operate a company or even where they're going wrong.

And they lack the secret ingredient required in the business world;

_Ethics._

### What were SBF and Elizabeth Holmes thinking?

Along with ethics, I would argue that fear of failure, over-commitment, and pride play a role in these founders’ downfall.

If you pour your entire sense of self into your startup, startup failure also means personal failure.

Failure is what you don’t want to think about.

So, no matter how deep in debt you are or how impossible it becomes to create your product, shutting down isn’t an option.

Even if Sam Bankman Fried was willing to consider shutting down, he couldn’t.

He had dug himself so deep that he had almost no choice but to push forward.

Imagine being so over-leveraged that you begin printing your currency in an attempt to hedge yourself against the cluster-fuck you created.

That’s what the federal reserve SBF decided was his way out. Which is a bad idea.

But it shows us his mindset. He was probably blind with optimism when he decided to create FTT token. In his head, he was playing out an impossible scenario where it all worked out.

### Why is tech riddled with fraud?

Consumer software is one of those industries that require young people and lots of capital.

That could be good or bad depending on the kind of people the founder surrounds themselves with.

_Fomo is another reason._

Although not taken as seriously. The driving force that can make a veteran investor throw cash into a 25-year-olds lap is fear of losing out.

And if you’re a VC who does no diligence, because the market is naturally obscure, you earned your negative return.

### The takeaway for everyone working in tech

I love tech and young founders because we’re dreamers who build things. I say we continue to dream big, buidl, and push boundaries.

But at the same time, we have to hold the highest standard of ethics possible.

Because right now, funding is stagnating.

Which is good.

Because I’d rather see less money go to waste than see the industry as a whole become harder to break into.

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*Originally published on [Bendystraw 🤷](https://paragraph.com/@bendystraw/5-minute-analysis-on-why-founders-turn-into-frauds)*