The Pitfalls of Entrepreneurial Storytelling: How the Desire to Impress Can Lead to Deception

In recent years, there has been a surge in high-profile cases of fraudulent behavior within the entrepreneurial sphere. From the notorious Theranos scandal to the astonishing downfall of the Fyre Festival, it appears that the world of entrepreneurship has become a fertile ground for deception and false assurances. However, a recent paper by Yuliya Snihur, Llewellyn D.W. Thomas, Raghu Garud, and Nelson Phillips of IESE Business School suggests that the art of weaving these intricate tales is not exclusive to narcissists and con artists, but rather a process that can spiral out of control, even for those with the best of intentions.

According to the authors, entrepreneurial deception often implicates various stakeholders, including investors, business partners, and employees, all of whom play a role in perpetuating the falsehood. The process begins with entrepreneurs crafting a compelling narrative to garner the support of early-stage investors. They must present an inspiring and persuasive vision of their revolutionary new idea while downplaying the associated risks.

However, as the venture progresses and reality fails to meet the grand expectations set by the initial storytelling, entrepreneurs may be tempted to obfuscate the truth. This can lead to a slippery slope of deception, where founders resort to omitting, embellishing, or fabricating the truth in an attempt to maintain the facade of success. In some cases, the desire to meet expectations can lead to the escalation of promises in an effort to mask the original deceit.

The consequences of such deception can be severe, as seen in the case of Theranos, where false blood tests put hundreds of patients at risk of misdiagnosis. Employees and investors may inadvertently support or enable these fabrications, while turning a blind eye to warning signs and hard questions.

When the truth eventually comes to light, entrepreneurs often attempt to differentiate between failure and fraud, claiming that their intentions were not malicious. However, the responsibility for maintaining a culture of honesty and integrity in entrepreneurship falls on everyone involved.

The paper proposes a new theoretical model for understanding the process of entrepreneurial deception, drawing on the literature around framing endeavors and temporal construal. By shedding light on the mechanisms that drive this behaviour, the authors hope to encourage a revaluation of the culture of overambitious claims and deceptive practices in entrepreneurship.

In conclusion, while entrepreneurship has the potential to bring about positive economic and social change, it also has a dark side where deceit and manipulation can thrive. It is essential for all stakeholders, including investors, business partners, and employees, to remain vigilant, ask the hard questions, and uphold ethical standards to foster a cleaner and more transparent entrepreneurial culture.

Disclaimer: This article has been reproduced with permission from IESE Business School. Views expressed are personal. For more information, visit www.iese.edu.