Fake It Til You Make It

In the world of technology, it's not unusual for startups to make big promises and then scramble to try and keep them. In this episode, we look at some big examples of this philosophy and how it can go wrong.

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Episode Transcript

Speaker 1 (00:04):
Welcome to Tech Stuff, a production of I Heart Radios
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
I Heart Radio and I love all things tech, and
today I thought I would explore something that's kind of
related to technology and that you see it in tons

(00:26):
of like tech startups and Silicon Valley. But if we're
being honest, this topic actually goes well beyond tech. It's
just that tech is one of those more visible places
where it shows up. And it's the concept of fake
it until you make it, which is a philosophy I
personally find particularly distressing because it frequently does not turn

(00:48):
out well for everybody involved. And I realized that this
episode poses a very real danger of diving into grouchy
old man complains about those young people terror worry. But
believe me, that's not what I intend. And I don't
even necessarily think it's the fault of young people, because,
for one thing, folks like me and older we can

(01:09):
fall prey to this type of thinking, and we do
all the time. And for another, the very concept has
been taking root for decades, so back when I was
a young person. We were really starting to see this
come to fruition already, So you can't blame it on
the millennials, is what I'm really getting at. So what
the heck am I talking about? Well, basically, you probably

(01:33):
are familiar with the concept. The fake it until you
make it strategy goes something like this. You come up
with an idea and it's a really compelling idea. Maybe
it's for a product or a service, maybe it's for
an event you want to throw, but whatever it is,
you think of it as really awesome idea and an
idea for him, it is pretty darn cool. People agree

(01:54):
with you, that's a great idea. But then to go
beyond an idea, you're gonna need to take some big
steps to actually create the product or the service or
to throw the event or whatever it is. It's going
to take a lot of effort, and it might require
innovation and development in the tech sector, So if you're
developing a product, a brand new product, or an underlying

(02:17):
infrastructure to support a service or event, you're gonna have
to innovate in that space, and it's going to take time,
and it's going to take resources, and it might end
up being really expensive, and of course we all know
there's never a guarantee that an idea will actually work
as you transition from the world of ideas to the
world of reality, so that means that ideas also represent risk.

(02:42):
There's a real risk that things are not going to
work out. So maybe your idea is great on paper,
but it turns out it's not practical in reality. Or
maybe it turns out it's just a bit too fanciful
and there's no real way to pull it off in
the real world. Maybe your idea, you know, it sounds
more like wishful thinking than a realistic idea, a realistic concept,

(03:06):
or maybe it's possible, but it turns out it's going
to take way longer to get to a point where
you can actually make it happen, and it takes way
longer than you had initially anticipated or projected. Now you
won't know any of this for sure until you take
on the challenge of making your idea a reality. But
it's really impossible to estimate how big of an investment

(03:29):
of your time, talent, and money it's going to require,
or how much you might waste if it all goes
belly up. It might be that you finally achieve your idea,
but by the time you get there, the results you
have don't justify the amount of effort it took to
get to that point. We've seen tons of this sort
of thing on crowdfunding campaigns where the concept was something

(03:53):
that people really identified with, It resonated with the audience,
and there was a huge support system thrown in, lots
of money pouring in to make this idea reality. And
then in the cases where something actually was made, sometimes
it falls far short of where people expected, and in
that case you could say, like, well, technically the idea

(04:15):
became a reality, but it wasn't worth all the effort
and money that went into making it happen in the
first place. In worst case scenarios, you don't get anything
at all. It all fails before you ever get anything.
So chances are, unless you have direct access to considerable
wealth and you don't mind the possibility of losing a

(04:36):
good deal of it, you'll want to find other people
to help make your idea become a reality. You're gonna
need investors, and investors can be great. They can pour
money into your project and fund your work to bring
your idea to life. And when your idea is a
smashing success, you can pay back your investors, which is
totally cool because you'll continue to make money as your

(04:58):
idea continues to kick but or maybe the idea doesn't
pan out, and that's a bummer. But with investment comes risk.
People understand that generally speaking, and so you've kind of
mitigated the risk to yourself by spreading it among all
your investors. And maybe you'll have to liquidate everything related
to your idea in the worst case scenario, right, maybe

(05:20):
you've created a little company to bring your idea to
reality and it doesn't work out and you have to
liquidate all your assets and give all that to your investors.
But even then, really you're probably no worse off than
you were before you got started, assuming you haven't done
anything criminal like defraud investors and then got caught. So

(05:41):
assuming everything was on the up and up, you're probably
you know, back to square one, but you're not set
back further than that. Now. Investors do expect results, but
at times they can be pretty darn patient about it,
and many might essentially be speculators. Right they're looking for
a big payout and that could come in the form

(06:02):
of a smashing success an idea that is truly remarkable
and innovative and compelling, or it might come to fruition
if some bigger fish out there sees you and your
project and then offers to buy it up from you.
A lot of startups actually operate in this way. They
aren't trying to make a successful business so much as

(06:22):
generate a ton of interest. Even if they don't have
a means of generating revenue, they'll still try to generate interest,
and the goal is to have some bigger entity like
an Apple or an Amazon, or a Google or a Facebook,
to have them come around and gobble up this smaller
company for a princely sum. For a lot of folks,

(06:42):
that is the dream. It's it's not necessarily making something
that works. It's making an idea that some other company
finds really really interesting and they'll pay you for it.
And that means that you don't even necessarily have to
make a thing that works. You just have to convince
people that you know it's something they want to work.
It's tricky, and this gets down to what I want

(07:04):
to talk about today. A lot of people operate in
a sort of holding pattern. They have come up with
their idea, and it's possible that they sincerely believe they
can bring it into reality if they have the right
resources at their disposal. Maybe they realize right away that
their idea is untenable. That can happen to You can

(07:25):
have people who say, you know what, I don't think
I can do this, but if I can convince other
people that I can do it, that's good enough. Or
you sometimes get people who from the very beginning they
intended to fleece investors out of money. But whether their
intentions are pure or otherwise, they tend to engage in

(07:45):
the fake it until you make it strategy. And if
it sounds like you are passionate and smart, people will
give you way more slack and credit, then you'll have
more opportunities to keep all the plates spinning at least
a little while longer. So in the best case scenario,
with sincere people, they can keep this process alive long

(08:06):
enough to actually achieve their goal of bringing whatever their
idea was to life. In a worst case scenario, people
get caught in a disastrous situation in which they hurriedly
seek out a way to get out of one catastrophe,
typically by jumping into a different catastrophe um sort of
the robbing Peter to pay Paul principle, This idea of

(08:26):
you're constantly trying to hustle to get money to cover
your last round of expenses, and that's what you're doing
over and over again, rinse and repeat. You're never actually
establishing a reliable way to generate revenue. You're just constantly
trying to stay ahead of the creditors. Now, a big
problem is that we've sort of mythologized the concept of

(08:50):
a genius entrepreneur. In fact, this is something, especially in
the United States, that has become iconic. Right Like, the
United States has a history full of these mythological tales
of various entrepreneurs and inventors, people like Thomas Edison or
Tesla or Westinghouse, you know, people who who genuinely were

(09:15):
very intelligent and very uh innovative and in the case
of Westinghouse and Edison, particularly good at business. But we
have since kind of elevated them to iconic status beyond
what we would typically think of for a regular human being. Right. Well,
that's a problem because we have created this sort of

(09:37):
mythological ideal to aspire to that maybe doesn't really exist.
But the whole concept is that we have an innovative,
disruptive mind who comes into some existing industry and shakes
everything up with a great idea that is in some
way superior over the existing models. A lot of these
thinkers tend to target specific industries with which we have

(09:59):
a lot of for stration. So I'm going to give
you an example with Uber. All right, So let's let's
flash back a couple of decades. Let's say that you're
visiting a place like New York City and you need
to get around, and you're not familiar with the city.
You're not familiar with the subway system, and that looks
pretty intimidating to you. You don't know, like going down
one says stairs, if you're going to be heading in

(10:19):
the right direction or not. You definitely don't want to
drive in the city because that looks like a heart
attack on four wheels. So you take taxis to get around.
But that experience might be less than ideal in some situations.
So maybe you're dealing with rude drivers, or maybe you're
left wondering if the driver was taking a long roundabout

(10:40):
way to your destination in an effort to drive up
the fair a few bucks. Maybe the driver spends a
lot of time trying to discourage you from using a
credit card and instead that you should pay with cash.
That has happened to me on numerous occasions in taxi
cabs in New York City. Maybe you just didn't feel
safe with the person for whatever reason. But on the

(11:01):
other hand, the taxis are pretty much the only game
in town at that point. You definitely wouldn't want to
jump into the car of some random driver who's offering rides.
A cab at least provides you with a feeling that
someone out there is managing all this stuff. There's some
overriding authority that has authorized this person to drive a cab,
and therefore things probably won't go too wrong. You know,

(11:23):
there's some comfort that there's a body that is regulating
this kind of stuff. Right. It's not necessarily a great experience,
but that's what you have to work with. But then
someone comes up with the idea of using a mobile
app on phones to connect riders with drivers, and the
app can search for all available drivers who are registered

(11:44):
with the service within a certain area. It can calculate
which of those drivers would be most likely to get
to the passenger. First, it could contact a small group
of them with the prospect of a ride. The drivers
could accept that job request and then header on over
your way to pick you up. The premise is that
this cuts down on wait times, particularly for people who

(12:04):
otherwise would just be standing on the side of the
street waiting for the next cab to pass by and
try to hail that cab with no guarantee that the
cab is actually gonna stop. Like you're you're limited to
which cabs you can see in the traditional cab hailing situation.
That has since changed, by the way, but we're comparing
the app version to the traditional taxi cabs situation or experience.

(12:28):
So this app also goes a step further. It facilitates
payment from the rider to the service, and then the
service pays a percentage of the fair out to the driver.
The service access is sort of dispatch and a cashier
all at once. Money need never needs to change hands
directly between the passenger and the driver. What's more, the

(12:49):
app can display a map for both the driver and
the passenger, so the person riding in the car can
be certain that the driver isn't going on some sort
of wild goose chase that can actually allow along. Moreover,
the service allows people to become drivers without having to
overcome the hurdles that taxi cab drivers must manage in
order to operate a cab legally. So in New York City,

(13:11):
there are a limited number of taxi licenses, so there's
always a cap on how many people can actually operate
a taxi cab legally in the city. These licenses are
called medallions, and medallions can be bought and sold, and
new ones can be issued by the city and then
auctioned off by regional authorities to potential taxi cab operators.

(13:33):
But the limited number means there's a hard cap on
the number of cars that are licensed to operate as
taxi cabs. This is a model that a lot of
other cities have followed. This makes it easier to regulate
the taxi industry and to try and affect other connected
issues like traffic congestion or pollution and more. Means that
if you limit the number of cars that can be taxis,

(13:56):
then you don't have to worry as much about taxis
fluttering up city streets and generating a lot of pollution.
But it also means people who might be fully qualified
and who might be genuinely awesome. Taxi cab drivers, if
they got the chance, can't break into the system because
they can't get a medallion. Now, there are other requirements
that some cities have that make it even harder to

(14:17):
become a driver. So, for instance, to drive a black
cab in London, a driver must first show that they
possess the knowledge. That's an actual term. The knowledge means
that they know the layout of all the city streets
in London and essentially that they can get anywhere from
anywhere without the use of a GPS. So that's impressive

(14:38):
and it usually takes a couple of years and it's
another big barrier to entry. But see here the app
version side steps all that right because you have a
GPS with the app, And in addition, passengers can assign
a rating to their driver, which can let future passengers
know if that driver is someone they want to ride with.
You can also tell the service if a driver is

(14:59):
being a problem and that person can be removed from
the loop entirely. Drivers can also rate passengers, which has
a similar effect, but behind the scenes. So in other words,
the promise of the service is to eliminate many of
the frustrations and concerns associated with the entrenched taxi industry.
It disrupts it. The company positions the app to be disruptive.

(15:22):
It's taking aim and an antiquated system by the argument
of the app that a lot of people find inconvenient
or irritating or maybe even predatory. It democratizes the service
across a wide range of drivers. So what's not to love. Well,
the taxi drivers don't love it. They've gone through the

(15:43):
processes and overcome the hurdles to operate a cab legally,
and to get undercut by a quote unquote disruptive service
is a pretty big blow. On the positive side for customers,
it is meant that a lot of taxi companies have
adopted many of the features found in apps like Uber,
such as using an app to hail a ride and

(16:03):
seeing where a driver is in relation to where you
are on the app, and tracking your trip in real
time in the vehicle, things that make people feel better
about taking a taxi. You could argue a lot of
those things only exist because the competition from services like
Uber forced the hands of taxi companies to adopt them,
and we should also remember that some of the regulations

(16:24):
in place, they aren't just red tape. That's not just
bureaucracy for bureaucracy's sake. Some are genuinely intended to ensure
passenger safety and to act as a control mechanism for
traffic congestion and pollution and stuff. The entry of an
unregulated fleet of drivers behaving like taxi cab operators throws
all of that into the garbage. But more germaine to

(16:47):
this discussion is that the revenue model just isn't working.
Uber loses money, a lot of money. In the second
quarter of two thousand nineteen, Uber reported revenues of three
point one seven billion dollars. That's billion with a B. Now,
that's most assuredly a princely sum. Heck might bump that

(17:11):
up to an imperial sum. However, it's not as much
money as the company lost in that same quarter. So
while they made three billion bucks, the company posted losses
to the tune of five point two four billion dollars. Yawsa.
So they are losing money way faster than they are

(17:32):
making money now. To be fair, according to Uber, part
of what made the losses so big that quarter was
that the company was buying backstocks from employees as part
of a compensation plan after Uber went public with an
I p O. But analysts said, even if you took
that out of consideration, the company still lost one point
three billion dollars that quarter, and that it was a

(17:53):
thirty percent increase in losses from the quarter before. That's
not a great story. It's a downding amount of money. Now,
speaking of money, we need to earn a little ourselves.
So we're going to take a quick break. When I
come back, I'll talk more about uber strategy and the
challenges the company faces. Right, I'm back. So, how the

(18:24):
heck can Uber stay in business if it costs more
to operate then the company can generate in revenue. Well,
I'm glad you asked, because this is where we get
into some really messed up stuff about fake it until
you make it. So Uber has managed to keep going
mainly through getting investments into the company. More money gets

(18:44):
poured into Uber by people who are hoping to receive
a big payout in the future, or there are people
who hope to guide the company by essentially purchasing enough
voting shares to make a big impact. A question that
naturally arises with this revelation is how long can at
keep going on? How long will it be before investors
worry that the money they're putting into the company is

(19:06):
never going to come back to them. Because if that
day should come and Uber still can't operate as a
profitable business, the company is doomed because it will eventually
burn through all the money it has and it will
have to fold. And by the way, while I'm talking
specifically about Uber, no right hailing service out there has
proven to be profitable yet it's just Uber has been

(19:27):
spectacularly unprofitable. So one path Uber might try and take
is to dominate the market right swoop into a region,
undercut competitors, gain customers, build customer loyalty, and then when
competition has been starved out because Uber is undercutting everybody else,
then you can hike up prices so that the company

(19:50):
is making money on a per ride basis instead of
losing money. That might be what has guided some pretty
darn cutthroat maneuvers on Uber's part in the past, but
really it's a race against the threat of bankruptcy, whether
or not you can do enough to defeat your competition
and become the only game in town before you run

(20:10):
out of money. Another path is for Uber to get
involved in a lot more segments of the transportation sector,
which is stuff we've been seeing recently, and stuff with
like a food delivery. But there are a ton of
competing companies in those spaces too, which makes it really
hard for any one company to dominate the market, let
alone and industry. So while we're left with is a

(20:32):
company that's trying to stay ahead of existential threats while
establishing a profitable business model. And the technology side works.
The apps function as they are meant to, They match
up drivers and writers, they facilitate payments, but the business
model underneath it is flawed. I don't think anyone is
questioning how services like Uber can be useful to the

(20:54):
end customer, but the other issues stuff like underpaid drivers
who struggled to be wreck ignized as employees at all,
traffic pollution, safety concerns, or there was a recent story
about Uber in London about how customers had been matched
up with a driver only to have a totally different
driver be the one to pick them up fourteen thousand times.

(21:18):
That ain't great if you're hoping to be sure that
the person who's picking you up has a good rating. Anyway,
these things raise a lot of red flags. Meanwhile, Uber
and other ride hailing companies keep making aggressive moves in
an effort to build a sturdy foundation, and no one's
totally sure if they can actually do it, so they're
faking it until they make it or until it breaks them.

(21:42):
So how about we transition over to a quick rundown
of a different event, a true event in that it
was eventful. I'm talking about the Fire Festival, which made
headlines in two thousand seventeen. So again, depending upon the
account you believe, the Fire Festival was they're a sincere
attempt to throw a really luxurious music festival on an

(22:05):
island in the Bahamas, or it was a total money
making scam from the beginning. Now, the pitch was that
attendees would get a truly first rate experience with astounding
accommodations like the stuff you would see in travel magazines,
and the festival would feature top notch talent and enough
Instagram were the experiences to propel even the most modest

(22:28):
social media socialite into total influencer status, or again, it
was just a scam from the very beginning. Now, personally,
I'm more inclined to think that it was something that
a few folks were convinced they would be able to
do because they had no appreciation of their own limitations
nor of the magnitude of the task they had set
out for themselves. So they overestimated their own abilities and

(22:51):
they underestimated how much work it would take to pull
something like this off. Now, there are a couple of
documentaries about the whole fiasco, and they're well worth watching.
And I'm not going to go through all of it here,
because they did a great job of it. You should
go see those documentaries. But basically, a guy named Billy
McFarland and some of his associates came up with this

(23:12):
concept and they identified things that young, affluent people would
find really appealing. They really knew which buttons to push
to get people excited. Uh. Namely, they aimed at stuff
that millennials tend to value. And yes, these are gross generalizations,
and I do not mean to suggest that everyone who

(23:32):
falls into the age range of millennial feels the same way.
And to be more precise, these guys were specifically targeting
wealthy millennials in particular, So here are some of the
things they identified as being important. These young people really
value experiences, so crafting and experience would tap into this

(23:53):
millennial desire to be part of something unique or special.
So not only did it have to be an experience,
but exclusivity was an important concept. Millennials that they were
targeting really like to feel that they're part of an
exclusive group that get to experience something that not everyone
else gets to do. And on top of that, these
millennials valued the appearance of having an amazing experience. In fact,

(24:17):
you could argue the appearance of having an amazing experience
is the most important part of it, not the experience itself.
And here's where we get on a Jonathan rant. So
what I mean by the appearance of an experience is
that there's a lot of value placed in the perception
of a person as framed by their social media presence.

(24:39):
And hey, I'm subject to this too, I'm not immune.
If I take five selfies of me standing in front
of like a statue or something, I'm gonna pick the
one that I think is the best to share with
social I'll probably skip the ones where I'm in the
middle of a sneeze. Or something. Though honestly, that sounds
like it's way more on brand for me, So maybe
I would, and I'll why I hate using the phrase

(25:01):
on brand for me. It's terrible anyway. In this sense,
an experience becomes more like a backdrop for an amazing
video or an amazing selfie. The goal is to convey
that the millennial is in the middle of something truly
special and incredible. It doesn't necessarily have to be incredible,
it just has to look incredible. And there have been

(25:24):
a ton of folks who have created installations like pop
up experiences just for this purpose. This is stuff that's
all meant to be a backdrop for selfies. These installations
aren't necessarily an experience in of themselves, as in, there'd
be little point in going through them if you weren't
taking a camera with yourself and taking photos every three feet.

(25:47):
They offer nothing more than that. And so really, what
is happening is that the millennials are creating a visual
record of them going through an overall empty and meaningless
experience in order to give off the appearance of something more.
I don't know, more and more, you know, I see
these pop up museums that cater to this all the time,

(26:09):
and hey, I'm not saying there's anything wrong with taking
a pretty photograph or an amazing selfie. I think that's
pretty awesome. But there's no real differentiation in these pop
up things between artificial photography backdrops and actual real experiences.
They're equating the two, so that kind of cheapens the

(26:29):
value of a real experience. To me, at least, most
of these pop up museums would be entirely forgettable if
not for the images and video captured in the place.
So in other words, if you were to walk through
one without a camera, you would walk out having felt
no real impact of that, and within a couple of
days you probably wouldn't even think about it ever. Again,
compare that to an experience where you develop a deep

(26:51):
emotional or intellectual connection with something and experience that you
might talk about for years to come because the way
it affected you. That's a big difference. But in the
world of social media, they end up being treated the same. Okay, So,
knowing that these rich kids are super image conscious and
experience oriented and really eager to be part of exclusive

(27:16):
clubs and groups, McFarland and his partners began to make
some grandiose promises. Now my guess is they figured they'd
make enough money to actually pull off the event. They
were describing that if you just wanted it badly enough right,
things would just fall into place. It was kind of
like the secret you put it on the universe, it's
going to come back to you. Well, that's sort of

(27:36):
wishful thinking can really set you up for massive problems,
and McFarland found that out the hard way. McFarland starts
getting massive interest in his festival and that he says
he's going to throw and orders start pouring in, people
start buying up tickets and booking up flights. But it
seems as though no one had actually done a real

(27:58):
honest assessment of what would take to actually put this
event together. Heck, even something as important as selecting the
site didn't really happen until after the pitch had already
gone out. The initial site that McFarland had selected didn't
work out. The story about why varies from person to person,
but it didn't work out. So for a while, the

(28:20):
festival was being promoted, but there wasn't actually a place
for it to happen yet. So they were scrambling to
find a suitable location for it. This is like saying,
wouldn't it be cool to have a big music festival
with huge stars performing in front of crystal blue ocean
water on white sand beaches, and you've got a luxury
villa to go back to after you're done partying for

(28:40):
the night. Well, the answer to that would be heck, yeah,
I'd be amazing. But just because something would be amazing
doesn't make mean that it's a possibility. That's the important part.
So where's the tech angle in this story? Why am
I even bringing up Well, part of the reason for
the Fire Festival was to serve as a big advertising
camp pain for an app that McFarland's company was working on.

(29:03):
It was also called Fire. The app was meant to
help people book entertainment for events, like big name entertainers.
So in theory, if you were organizing an event, you
could choose a few different entertainers that who had registered
with this app, and you would pitch it to them
and see if they had any interest in being part
of it. Then the entertainers could use the app and

(29:25):
look at the various pitches coming in and decide whether
or not they wanted to go any further. Presumably Fire
would make money once the two parties came together in
some form of agreement. Now, I guess you could think
of it as tender, but for booking bands to play
bar Mitzvah's or whatever. More importantly, the story illustrates that

(29:45):
fake it until you make it can be truly destructive.
McFarland and his associates were playing a shell game. They
were moving money around like crazy in an effort to
just stay ahead of total disaster. But unlike a company
like Uber, McFarland had an actual deadline where stuff either
had to come together or the whole thing was gonna

(30:06):
go bust. Uber's deadline is undefined. It's just whenever the
money runs out. If it ever does run out, McFarland
had a date associated with the festival and things did
not come together. This was I fake it until you
break it situation. So in case you didn't know, the
entire festival was a total disaster. Musical artists who were

(30:28):
announced for the festival canceled. At least one act claimed
that there never was an agreement to actually appear at
the festival in the first place, that nothing was ever
signed and that they were being promoted as being part
of this festival without an actual signed agreement in place.
The site wasn't prepared for the arrival of hundreds of attendees.
There were inadequate toilet facilities, the food situation was dire,

(30:52):
and a lot of folks tried to head right back
to the airport to get a flight out as soon
as they learned about the conditions. It was beyond a
huge mess. Now, I think that actually ties back into
my rant about real experiences versus the appearance of experiences.
There's a strong impulse that we have to present a
particular vision of ourselves to the world through our social

(31:14):
media right because in real life, people can see us
for both our virtues and our flaws. They can see
us at our best, they can see us at our worst.
It's a raw feed, that's what real life is. But
with social media, we can craft that experience, we can
cultivate it. We can present to the world an image
of ourselves that reflects part of who we are, but

(31:36):
leaves out all the stuff we'd rather folks not notice.
We can be the person we want to be as
opposed to the person we actually are, so it allows
us to create a fantasy and present it as reality.
Fake it until you make it follows a similar line
of thought. You present the fantasy, in this case, your idea,
as if it were a reality. And sure, there may

(31:57):
be some hurdles between you and your goal, but those
aren't insurmountable. You'll you'll be able to get over them
right without too much trouble. Then you'll be sitting pretty
and more importantly, to your investors, they all get filthy
rich because man, it's such a good idea. Now, personally,
I find that to be a pretty toxic way of
looking at the world. It definitely doesn't set you up

(32:18):
for success. It creates an incredibly stressful environment, assuming you're
at all sincere with your wish to create something real.
I mean, I guess if you're on the prowl for
a mark, the only stress you have is that you
want to avoid getting caught out for as long as
you can. So if you're the dishonest type, you might
not sweat the pressure too much because you're never intended

(32:39):
to deliver upon your promise in the first place. But
if you are on the verge of getting into serious
legal trouble, you know, like McFarland did. You might start
feeling the pressure then, but wait, it gets worse. I'll
explain more after we take a quick break. All right,

(33:03):
So I talked about fake it until you make it
strategies with stuff like ride hailing companies and social events,
but it also applies to stuff like the dot com
bubble of two thousand and two thousand one. This is
what I was saying earlier about how this fake it
until you make it philosophy. It's not new, and it's
certainly not new in tech. We've seen it for a
long time, and I've covered the bubble in previous episodes.

(33:27):
But here's the really quick version. As more people became
aware that the Internet was a thing like the general
public that started to happen in the early to mid nineties.
People also recognize that there could be some legitimate use
cases for business online. The Internet would enable an unprecedented
explosion and goods and services. Online shopping was poised to

(33:50):
become the new norm, replacing old brick and mortar experiences entirely,
and tons of people wanted in on what appeared to
be a cash cow. The Internet was essentially the gold
Rush for the nineties. Everyone felt they needed to stake
acclaim there. Companies that were directly tied to the Internet,
like Netscape Communications Corporation would go public and they would

(34:12):
see their share prices skyrocket, and that made early investors
a ton of money. That just encouraged a lot of
people to take big risks and invest in various Internet
related companies because the payolts were so potentially huge that
it seemed like you would be missing out if you
didn't get in on the ground floor and invest in
some of these startups. And looking at some companies, you

(34:35):
could see how there was a very compelling motivation behind that.
I mean, if you had bought Apple stock when it
was at its lowest, you'd be a you know you
you'd see a truly massive return on that investment if
you had held onto it till today. And greed is
a very powerful motivator. So you had a ton of
entrepreneurs starting up dot com businesses, You had a bunch

(34:56):
of investors eager to back the horse that would pull
in those law shot odds. That set the ground for
rampant speculation as people just poured way too much money
into these startup companies. Many of these companies had not
yet formulated a business plan that could lead to profitable operation.
In fact, I suspect more than a few of them

(35:17):
didn't have any real business plan to speak of. They
just had an idea of how to use the Internet,
which may or may not have had any merit. Some
were geared towards a compelling idea, but had no real
way to monetize that idea. Much of the dot com
industry was firmly in the fake it until you make
it camp. I think, generally speaking, that most of the

(35:38):
entrepreneurs really believed that those initial investments would propel the
start up with such momentum that it would overcome any
challenges in the way and then establish itself as a
legitimate business. Of course, some others were more concerned with
spending that sweet venture capital on stuff like swanky offices
and luxuries. Again, it was like it was the appearance

(36:00):
of running a business was good enough to you know,
run a business like. It didn't matter if you actually
knew how to do it. You just had to look
like you knew how to do it, and then everything
would work itself out. A very naive approach. Now, since
many of these companies had big overhead costs and a
limited means of generating revenue. I mean a lot of
these companies would end up having warehouse space, which is

(36:24):
an ongoing expense you have to pay to stay in business,
but would have a very poor revenue model. Well that's
not something you can sustain forever. They were burning through
money really fast. Now, it wasn't uncommon around this time
for employees to get a lot of their compensation in
the form of company shares. The idea was that the
company would establish itself and become successful and the people

(36:46):
responsible for doing the work would get rewarded, which sounds great,
but that premise depends upon the company being successful. If
it's not, then you have employees who are left with
stock that isn't worth the paper it's printed on, or
the storage space it occupies if it's all digital. A
combination of factors led to a failure in confidence among investors,

(37:08):
and soon the dot com industry was in free fall
as everyone was pulling their money out, Some companies, like
Amazon were able to survive through good luck and good timing.
Amazon had managed to secure a very large investment not
long before the market tanked, and through that investment they
were able to ride it out, but a lot of
companies withered away entirely and the economy overall suffered as

(37:30):
a result. For a more recent example of fake it
until you make it, we can look at Thoranos, the
company that Elizabeth Holmes founded, or Thoropness. I guess I
should say, because it's therapy, so it's thoroughness. Her goal
was to build a machine of running a battery of
more than one hundred different blood tests using a single
small blood sample. And you would just use a tiny

(37:53):
little drop of blood and this device would run tests
and you could screen yourself for potentially hundreds of diseases.
Homes stated that it was going to democratize medicine. It
would give people more power over their own health information.
It would inform them so they could have better discussions
with their doctors about their health. And the blood testing
market was essentially dominated by just a pair of companies,

(38:17):
just two companies. And that gets back to that narrative
that a lot of investors really love the idea of
a new player coming into disrupt and otherwise established system.
Combined that with the promise of a device that could
in a matter of hours tell you more information than
either of those companies could do over the course of
weeks and using a much smaller blood sample to boot,

(38:39):
you had a really compelling pitch. Of course, you'd want
a machine that could do all these things, because who
wouldn't It would be an amazing benefit to all of humanity.
You could save lives, you could extend accessibility to people
who otherwise would be unserved by the health care industry.
It was the biggest pot of gold at the end
of the sparkliest rainbow. But of course, to do it

(39:03):
first you would have to develop the technology and then
prove that it works. And as it turns out, that
was a pretty darn big request and much harder than
Holmes seemed to believe it was. By the way, to
this day, I am not sure if she was sincere
in her beliefs that she could pull this off, or
if she was deceiving everyone, perhaps even including herself, or

(39:27):
what the situation was now. On the one hand, I
can forgive some naivete when it comes to technology, because
technology can do some pretty amazing things. When we talk
about concepts like Moore's law, and we're essentially saying, hey,
every two years, computers are gonna be twice as powerful
as they were two years earlier. Because that's the way

(39:48):
it is, and that's the way it always has been.
It's the way it's always going to be. Well, we
set the stage for us to believe stuff that might
be a little further out on the fringes, and there
are a lot of people would argue that even Moore's
law is coming to its end, but then that's an
argument that's been made numerous times. So I'm able to
walk around the world right with what amounts to a

(40:09):
computer in my pocket. I can access enormous libraries of
information in an instant through a touch interface. If I
don't know how to do something, I can pull up
a video explaining it to me in a heartbeat. Technology
can transform what used to be impossible into a mundane experience.
Like the things I'm telling you right now, they aren't special.

(40:29):
We can all do them with a smartphone or a
computer or a tablet. It's not like I have some
magical ability. This is something that we all do every day.
So I definitely can understand how some people would say, well,
of course, of course, this is a technological challenge we
can overcome. We can obviously make some sort of device
that can do hundreds of blood tests on a single
drop of blood. That's how investors saw it. The promise

(40:54):
was so compelling, the benefits would be so enormous to humanity,
and the profitability of such a technology would be incalculable.
Investors would inject the startup with around seven hundred million
dollars in cash. But as anyone who has followed the
story of of uh Paraos knows, it was a challenge

(41:15):
that the team could not overcome. Stories broke that the
company was actually relying upon the very same testing equipment
created by the competitors that Paraos was meant to disrupt.
That their team of engineers were working really hard, but
they had not yet figured out how they could actually
deliver upon the promise that Holmes had made to her investors. Heck,

(41:36):
they weren't even sure if it would ever be possible
based on those parameters. The technology they had developed was
limited and had issues, and never received FDA approval for
the majority of the tests it was supposed to be
able to do, which is probably a good thing, since
it reportedly could not do most of them. What may
have happened is that Holmes set her goal based on

(42:00):
wishful thinking, and that her hope was to use investment
money to bootstrap the technology and the company so they
could actually deliver upon the promises being made, that the
money would give them the security they need to actually
develop the technology they they wanted to make. Unfortunately, for her,
and for all the people working for Sarah Nous and

(42:21):
for all the patients who are dependent upon the company
providing results to them that were reliable, none of it
panned out. Now, I've only picked a few examples to
kind of talk about this fake it until you make
it trend in the tech business, but trust me, there
are countless others. There are cases where the technology works

(42:42):
just fine, like with Uber, but the underlying business model doesn't,
and in there are cases like Tharohns, where the tech
itself falls far short of where it needs to be.
The unifying factor is that these entrepreneurs have to keep
things moving, or at least appearing to move, in order
to keep the money coming in to support the overall

(43:03):
organization until it can actually deliver upon its promise, and
sometimes that just never happens. Honestly, what this reminds me
most of out of every experience I've ever had in
my life is theater. And I don't just mean putting
on a performance for an audience. I mean theater in
the sense that if you go to a theatrical production,
you're looking at a set, and the set looks a

(43:25):
very specific way, dependent upon the set designer and their
talents and the people they had, you know, at their disposal.
So let's say you're going to see a really elaborate set.
It looks amazing, looks incredible to your eyes. Chances are
that from the other side, from backstage, that set looks
like nothing. It looks like cardboard and wood and nails
and screws poking out at odd angles that you've got

(43:48):
to watch out for. If you're crossing behind the stage.
It doesn't look like anything because it doesn't need to.
The audience doesn't see that part. The only part that
matters is the part the audience sees. Well, I feel like,
fake it till you make it is the same thing.
The only thing that matters is what the investors see.
And it can be fine for the backstage stuff to

(44:09):
be messy, because as long as you can keep things
going long enough so that you can deliver something that
looks like the set that all the investors were watching
during the whole production. You're good to go. The problem
is when you can't do that. Now. I'm all for innovation,
I'm even for disruption in many cases, but I'm also

(44:29):
an advocate for critical thinking. Anyone who's listened to this
show for a long time knows that far too many
big decisions seem to be based upon people wanting a
certain idea to be real and practical without any real
evidence that those ideas can stand up in the real world.
And while for some people, misplaced trust might mean you
lose some money, like you know what, that's a that's

(44:52):
an inconvenient it's terrible, but you can always make more money, right,
But for other people the consequences can be much more
life death oriented. So once again I appeal to you guys,
my listeners, to develop critical thinking skills and to exercise
them whenever you can. Now, one other thing I want
to mention if you want to go out there and

(45:12):
do uh pop up experience to take selfies, go and
do it, you know, just do it. If it makes
you happy, that's awesome. If you're going with friends and
you're all having laughs and you're all enjoying yourselves. That's
great and the world can use more joy. So go
do that thing. I'm not trying to shame you. If
it's something you genuinely have fun doing, you should do it.

(45:33):
I know I've criticized the whole trend in this episode,
but that's because I see so many people elevating it
beyond what it actually is. I don't think there's anything
inherently wrong about wanting to take a good selfie. I
just don't think anyone should consider that as an experience
in of itself. To do so means you're missing out

(45:53):
on some legitimate experiences out there, and some of them
are pretty incredible. All right, I'm done. I'm ready to
go outside. Yell at a passing cloud y'all take care.
If you have any suggestions for future episodes of tech Stuff,
you can send me an email the addresses tech stuff
at how stuff works dot com, or drop me a

(46:14):
line on Facebook or Twitter. That's text stuff h s
W can started off by saying, hey, they're grouchy pants
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can go to our website that's tech Stuff podcast dot com.
That's where you're gonna find an archive of every episode
we've ever published. You also find a link to our
online store, where every purchase you make goes to help

(46:34):
the show, and we greatly appreciate it, and I'll talk
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