10 ms·

So a company that blatantly cheated will pay some fines and still be worth billions. The founders and early employees will all be rich, or richer than they were

by GavinB 10y ago

So a company that blatantly cheated will pay some fines and still be worth billions. The founders and early employees will all be rich, or richer than they were when they started. The investors will get a very healthy return. The lesson: break the rules and grow so fast that by the time regulators catch up, you can put on a show of reforming and still keep most of the value that you created. Admirable disruption or horrible cheating? I don't know how to feel about it.

eudox 10y ago
I suppose it depends on the context. Considering America's oppressive regulatory environment, and that occupational licensing is bad, I'm usually inclined to call it 'admirable disruption'.
- mc32 10y ago
  Oppressive regulatory environment? Relative to where, countries which have limited resources and can't enforce regulations to protect consumers?
  - eudox 10y ago
    Compared to the first ten countries here: http://www.heritage.org/index/ranking http://www.heritage.org/index/ranking
    - mc32 10y ago
      How much separates them? Other than NZ which tries hard to bring investment. I don't think there is significant daylight between those at the top. And I don't think it's a good idea to relax the rules in this area of commerce.
    - RobAtticus 10y ago
      So, 90+th percentile for freedom makes the US oppressive?
      - jessaustin 10y ago
        In fairness, I haven't seen this objection when people complain about USA health care.
        deleted 10y ago
        [deleted]
        Dylan16807 10y ago
        Because the complaint there is closer to "wow, we're paying the most and we're not even close to the top" rather than saying the quality of care is objectively bad. And we're a good bit worse than 11th there.
    - sbov 10y ago
      I'm guessing you have done zero research as to whether Zenefits would have been violating similar regulatory law in any of those 10 other countries.
    - humanrebar 10y ago
      It's worth noting that the index there accounts for "business freedom" and "labor freedom" but doesn't really account for what is on topic here: "startup freedom". Occupational licensing has some overlap, but regulations are often very good for very big businesses since they impede competition from small challengers. Anyway, I'm mostly sympathetic to your points, but it's important to distinguish between being 'business friendly' and being 'friendly to status quo corporations'.
- Kurtz79 10y ago
  So, being 11th (of 178) in the ranking of the "Economic Freedom" you list below makes the American regulatory environment "oppressive" ? From the viewpoint of most countries in Europe it would be considered "very liberal". (EDIT: Also the source you mention is clearly politically biased. https://en.wikipedia.org/wiki/The_Heritage_Foundation https://en.wikipedia.org/wiki/The_Heritage_Foundation )
  - icebraining 10y ago
    All sources are politically biased. Some are just more honest about it.
    - humanrebar 10y ago
      Right. See the recent news about Facebook's curation 'algorithm'.
    - sammydavis 10y ago
      Just making a generic statement like that without qualifying it serves only to excuse that one source. Are the government of China's comments on Tibet equal in weight to Amnesty International? No. Is the Heritage Fund pushing an agenda equal in trustworthiness to an academic international ranking? Probably not. However, academic studies from two accredited institutions that don't have a particular ax to grind are probably equally credible.
      - icebraining 10y ago
        "Heritage is biased" is the unqualified generic statement, and it serves only to reinforce the dangerous idea that some organizations are unbiased and can be blindly trusted. Of course Heritage is biased. But their Index has a well defined methodology and provides the data that informs the final score for each country; it can stand on its own, and should be criticized as such.
- serge2k 10y ago
  Occupational Licensing is not universally bad. Licensed hairdresser? Fuckoff. Licensed doctor? Sounds reasonable. Lawyer? yeah. Engineer? Probably. etc... Insurance salesperson? maybe. Really depends on what the license is intended to protect. if it's just a silly barrier to entry that's one thing. If it is to ensure that a person has a minimal level of competence so as to prevent real harm to their customers that's a different thing. A lot will claim to meet the latter standard, I'm skeptical how many do. Insurance sales licensing I would guess to be mostly the former. That being said, you spend 2 weeks getting licenses sorted out when someone starts and you avoid this whole mess.
api 10y ago
According to my brother in law who lived there for 10 years this is how nearly all business is done in China. The variation is that you hope to get big enough to bribe or otherwise purchase influence.
- emodendroket 10y ago
  Surely an example we all aspire to.
DougN7 10y ago
Trying to outgrow regulators is one approach. Trying to outgrow competition in a business with low barriers to entry is another. See Groupon for example. My bet is AirBnB is probably next.
- sjg007 10y ago
  What would be interesting would be a lawsuit from renters arguing that Airbnb has reduced supply otherwise available and caused rent to go up.
pkaye 10y ago
Actually this how many successful people do it. It is better to break the rules and profit from it and if caught, pay a small fine and keep your ill gotten gains. I've learned this long time ago (watching coworkers, family, etc) but will probably never do it myself because I'm just not that kind of person.
- tsunamifury 10y ago
  I think there is a stage where a genuine innovation is in a regulatory grey state because society simply hasn't processed its effects yet. That wasn't the case here... but it is in many other situations. Sometimes ex-post-facto the innovation is ruled against regulation and sometimes not. Take Tesla as an example -- a company who has tried to sell cars online. Since many states hadn't seen that before, they tried to rule that it was illegal due to dealer-sales regulation. Do you fault Musk for hacking this (bad) regulation by trying to work around it? Is he not proving its spuriousness by innovating in this manner? In some cases its considered hero's work, and in other's villainous greed.
  - icebraining 10y ago
    Since many states hadn't seen that before, they tried to rule that it was illegal due to dealer-sales regulation. I don't see what being online has anything to do with it; the spirit of the rule - preventing the manufacturers from competing with dealerships - is valid anyway. I personally disagree with this rule, but the "online" part is just Tesla trying to get off on a technicality.
    - msandford 10y ago
      I'm all for manufacturers being prevented from going back on the deals they struck with dealers; the capital they raised from selling dealership franchises was very important for the growth of the manufacturers. But if a manufacturer never setup a dealer program? Fair game to them, IMO.
      - csours 10y ago
smokeyj 10y ago
Anyone afraid of breaking a few rules isn't a founder. The lesson: create something people want. The rest will work itself out.
- LargeWu 10y ago
  Right. And what about the people you hurt on the way to the top?
  - smokeyj 10y ago
    Some rules are victimless. Or downright nonsensical. I don't like this tone of moralizing regulation. As if being non-compliant is inherently unjust.
    - TheOtherHobbes 10y ago
      It balances the moralising promotion of the idea that profit is inherently admirable no matter the consequences.
      - smokeyj 10y ago
        So we're counteracting the immorality of profits with morally sound regulatory code? What if I don't like your religion?
    - cookiecaper 10y ago
      Being non-compliant with the law is unjust in a society where people value rule of law. You can't just ignore laws that you disagree with. If you don't like a law, you should write your representative and try to fix it. That's a farce now of course, but we should fix the process so that it's not any more.
      - JoshTriplett 10y ago
        It's a lot harder to change a regulation when nobody has any idea what the landscape looks like without it, or how people could function without the incumbents that benefit from that regulation. Someone building a service people genuinely want, creating something useful that didn't exist before, and not doing any harm to people by doing so, may choose to go ahead and build it to prove that it's possible and sensible to do so. Sometimes that's the right thing to do; sometimes it's the wrong thing to do. But I'm not going to automatically assume that because there's a regulation on the books that that has anything to do with morality; there's far too many bought-and-paid-for regulations to believe that.
BinaryIdiot 10y ago
You sir are correct. I'm curious though; are there any really good solutions to this type of problem? You can't rewind time and go back and taking away all assets gained in such a manner, while doable, would pretty much put the company out of business even if they're willing to comply. Seems like there isn't really a good way to prevent companies from breaking the law. Well unless you do some sort of regular inspection / auditing but that is time consuming and insanely expensive. So it seems advantageous to me that, as long as you're not directly putting someone into harm's way or trying to screw with the IRS, you should always break the law to get ahead.
- maxerickson 10y ago
  What's wrong with putting companies out of business? I understand that it ends up having impacts on people that aren't necessarily involved in the misbehavior, but it provides officers and investors a significant incentive to avoid wrongdoing.
  - nostrademons 10y ago
    The complication is that "wrongdoing" is in the eye of the beholder. Is Uber committing wrongdoing? The taxi companies certainly think so. Many municipalities think so. A lot of folks on Hacker News think so. But the folks who had a few too many beers and missed the last Caltrain and would otherwise drive home drunk if Uber didn't exist? The innocent folks that would otherwise have been killed by a drunk driver if Uber didn't exist? The folks who drive for Uber to pick up some spare cash in their spare time, or the ones who do it because they can't find any other income and would otherwise be destitute? The folks who drive for Uber to meet interesting new people? The Uberpreneurs who pitch their wares to a captive market for the duration of a ride? They all benefit significantly from Uber's existence. That's why this "get big fast and then hope you can avoid the consequences for your wrongdoing" strategy exists. The consequences will oftentimes not be known at the time an idea is conceived. Sometimes they will be much, much worse than is apparent at the time (look at the environmental pollution and global warming caused by heavy industry), while sometimes they will be a lot better (look at the liberalization and toppling of many totalitarian regimes since Facebook and Twitter came out). Oftentimes they will be both worse and better at the same time; someone killed in a revolution has clearly suffered, while someone who can open up a business that would previously have been shuttered by the government has benefitted.
simonebrunozzi 10y ago
Uber took your advice very seriously.
jrbapna 10y ago
The banks did exactly this before the financial crisis, and most of them came out of it just fine. The reason this works in practice is because when a company becomes that big, it's impossible to place blame. Any repercussions against the company as a whole will mostly impact the honest and innocent folks.
- SilasX 10y ago
  I would think it's less about diffusion of blame and more about your last sentence there -- that the big guy can play the game of mutually-assured destruction. They warn of all the collateral damage from having to pay for what they did, and the public is too willing to believe it and/or too unwilling to endure the short-term pain of enforcing the rules.
- slantedview 10y ago
  It is certainly not impossible to place blame on indivudals. After the savings and loan crisis, hundreds of execs were rightly blamed, indicted, convicted, and went to prison. This time around, the criminals have bought off the watchdogs - nobody went to prison. Instead they get off with a fine and no admission of wrongdoing, and they live to do it again another day.
jobu 10y ago
Breaking rules to set up a sham business that scams and steals is one thing (and often the reason the rules exist). Breaking rules to create a product that most people like and find better than the alternative is completely different. Unfortunately many of the laws created in the name of "consumer protection" do little to protect anything but the entrenched interests that lobbied for the laws.
- Macsenour 10y ago
  An example might be Tesla and some states law requiring a dealership in the state. If I am recalling that correctly...
  - bskap 10y ago
    In Tesla's case, the laws were created specifically to block them. They didn't exist when Tesla started. The previous laws on the books were more along the lines of "if you have dealers, you can't sell direct" rather than a general "you must sell through dealers"
    - Macsenour 10y ago
      Thanks for the clarification.
- mbesto 10y ago
  How precisely do you determine which rules are breakable for a product/service that is "better than the alternative"? I'd love to stay in a hotel and not pay hotel taxes, as would Marriott, so I use AirBnb instead. I'd also like to present fake receipts for reimbursement to my employer so I can make more money. Both are "alternative products" that are better for me, but someone else suffers. EDIT: Grammar.
  - stale2002 10y ago
    You determine it on a case by case basis. There is no need to have a perfect system for handling all situations with bad laws and which should be broken. Humans have brains, we should use them to determine that question for ourselves.
vasilipupkin 10y ago
Founders and early employees own common stock, so they won't get paid until all the investors got at least their money back, which means founders and early employees could easily end up with little
gricardo99 10y ago
Reminds me of a saying (paraphrasing): Sometimes it's easier to ask forgiveness than for permission.
cloudjacker 10y ago
I've struggled with this in the past as well, having been raised differently. I was able to unlearn these less effective set of rules by studying different schools of ethics.
willholloway 10y ago
This is a high risk gambit inside an already high risk wealth creation strategy, see Aereo or Naptser for happy endings, or Bitinstant's Charlie Shrem or Liberty Reserve for tragic ones. Not that Aereo or Napster were cheaters, or even doing anything wrong, but they were engaged in technological efforts to bypass the intent of the laws on the books, and it didn't pay off.
yummyfajitas 10y ago
To be fair, the cheating was quite minor. They used a macro to click through a powerpoint. Employees were still tested on the content of the powerpoint and not permitted to sell insurance without passing the test. In short, the law they broke was learning the material too rapidly. I'd happily call this admirable disruption. The real failure lies with the California regulators who made it a crime to click through a powerpoint too fast - unfortunately, unlike the CEO of zenefits, they kept their job.
- paganel 10y ago
  The article contains an example of a person who had failed to pass the insurance brokers' licensing exam for several months but who was still selling insurance policies to clients. I reckon he/she wasn't the only one in that situation inside the company.
carsongross 10y ago
You know how to feel about it. But you rightly recognize that there is a prisoners dilemma when it comes to moral behavior. Your stomach is tempting you to defect. Your heart is telling you not to. And your head is wondering how the game could be structured to favor your heart over your stomach.
- ci5er 10y ago
  That's really good. I'd normally just up-vote and move on, but I've gotta ask: Is that original or did that come from somewhere? If the latter -- I'd appreciate a reference because I'd like to read more.
  - carsongross 10y ago
    I was thinking of the C.S. Lewis quote from The Abolition of Man: "The head rules the belly through the chest."
    - ci5er 10y ago
      Thank you. Makes sense. I'm more of a G.K. Chesterton man myself, but maybe I'll come around! :-)
      - deleted 10y ago
        [deleted]
- kafkaesq 10y ago
  Your stomach is tempting you to defect. Your heart is telling you not to. And then, thankfully, your brain chimes in, and reminds you that while short-term PD-like scenarios seem to reward defection, in iterative scenarios -- more comparable to PD-like situations we encounter in real life -- it is cooperation (or at least, not fucking your neighbor over for the sake of short-term gain) that is very strongly incentivized.
  - carsongross 10y ago
basch 10y ago
isnt this the same battleplan youtube, buzzfeed, and imgur used to get big? blatantly lift copywritten material, displace other content aggregates, and by the time you have enough traction and money you can fund some original content or pay the appropriate licenses. (albeit imgur isnt to step 3 yet, still stuck on profit.)
johndoez 10y ago
Well they did pass the YC "Nice" test. So Admirable Disruption, of course!
jayess 10y ago
In the mean time, who was harmed?
- snappy173 10y ago
  The reason you require licensing for insurance sales is because it's very difficult to track all of the individual instances of malfeasance. So, the answer to your question is, "I don't know." But just because I don't have particular instances of harm, doesn't mean this isn't an problem. If you let anybody sell health insurance, you end up with con artists selling sham insurance, and by the time you track down the conman, real people are hurt. Sure you can fine the shysters, or maybe even put them in jail (but probably not), but in the meantime, families savings are wiped out to pay the medical bills, or worse, people get sick and die because they can't get treatment.
  - jayess 10y ago
    Is Zenefits a con artist wiping out people's savings?
    - angelbob 10y ago
      An interesting question. They're licensing highly dodgy insurance agents who can still misinform, break the law and cost people money. That's not as bad as selling full-on fake insurance, though.
  - aianus 10y ago
    > The reason you require licensing for insurance sales is because it's very difficult to track all of the individual instances of malfeasance. And what's the reason for handing out these licenses based on butt-in-seat study time instead of a proctored exam and/or interview?
    - verticalize 10y ago
      There is an exam. Many agents didn't pass, they still sold insurance.
forgotmysn 10y ago
its easier to ask for forgiveness than permission.
__derek__ 10y ago
This isn't unique to the start-up world. The banking sector[1] and automakers[2][3] provide some prominent recent examples of similar behavior. [1]: http://www.sec.gov/spotlight/enf-actions-fc.shtml http://www.sec.gov/spotlight/enf-actions-fc.shtml [2]: http://www.nbcnews.com/news/us-news/gm-justice-department-reach-settlement-over-faulty-ignition-switches-n428541 http://www.nbcnews.com/news/us-news/gm-justice-department-re... [3]: http://www.nytimes.com/2014/03/20/business/toyota-reaches-1-2-billion-settlement-in-criminal-inquiry.html http://www.nytimes.com/2014/03/20/business/toyota-reaches-1-...
paganel 10y ago
> The investors will get a very healthy return. From the company's wiki page: > In July 2013, Zenefits announced the completion of a seed round led by Venrock and Maverick Capital, with investors including Andreessen Horowitz, Yuri Milner, General Catalyst Partners, Garry Tan, Justin Kan and Alexis Ohanian. The round also included angel investments from Box co-founder and CEO Aaron Levie, Quora co-founder Charlie Cheever, former Googler and Twitter VP of Corporate Strategy Elad Gil, Weebly co-founder David Rusenko, former Googler and Badoo COO Ben Ling, Google’s Head of Spam Slamming Matt Cutts, BuildZoom co-founder and CEO David Petersen, and Inkling co-founder and CEO, Matt MacInnis. (...) Including the company's initial US$372,000 raised from Y Combinator, Sad to see people like Alexis Ohanian and Matt Cutts in there, people that I personally respect. It's also interesting that Y Combinator and their founders haven't said anything of interest regarding this whole mess since it started, or maybe they're all waiting for it to calm down and for business to proceed as usual.
gjolund 10y ago
Exactly what Uber is doing.
deleted 10y ago
[deleted]

by GavinB 10y ago

eudox 10y ago

I suppose it depends on the context. Considering America's oppressive regulatory environment, and that occupational licensing is bad, I'm usually inclined to call it 'admirable disruption'.

mc32 10y ago
Oppressive regulatory environment? Relative to where, countries which have limited resources and can't enforce regulations to protect consumers?
- eudox 10y ago
  Compared to the first ten countries here: http://www.heritage.org/index/ranking http://www.heritage.org/index/ranking
  - mc32 10y ago
    How much separates them? Other than NZ which tries hard to bring investment. I don't think there is significant daylight between those at the top. And I don't think it's a good idea to relax the rules in this area of commerce.
  - RobAtticus 10y ago
    So, 90+th percentile for freedom makes the US oppressive?
    - jessaustin 10y ago
      In fairness, I haven't seen this objection when people complain about USA health care.
      - deleted 10y ago
        [deleted]
      - Dylan16807 10y ago
        Because the complaint there is closer to "wow, we're paying the most and we're not even close to the top" rather than saying the quality of care is objectively bad. And we're a good bit worse than 11th there.
  - sbov 10y ago
    I'm guessing you have done zero research as to whether Zenefits would have been violating similar regulatory law in any of those 10 other countries.
  - humanrebar 10y ago
    It's worth noting that the index there accounts for "business freedom" and "labor freedom" but doesn't really account for what is on topic here: "startup freedom". Occupational licensing has some overlap, but regulations are often very good for very big businesses since they impede competition from small challengers. Anyway, I'm mostly sympathetic to your points, but it's important to distinguish between being 'business friendly' and being 'friendly to status quo corporations'.
Kurtz79 10y ago
So, being 11th (of 178) in the ranking of the "Economic Freedom" you list below makes the American regulatory environment "oppressive" ? From the viewpoint of most countries in Europe it would be considered "very liberal". (EDIT: Also the source you mention is clearly politically biased. https://en.wikipedia.org/wiki/The_Heritage_Foundation https://en.wikipedia.org/wiki/The_Heritage_Foundation )
- icebraining 10y ago
  All sources are politically biased. Some are just more honest about it.
  - humanrebar 10y ago
    Right. See the recent news about Facebook's curation 'algorithm'.
  - sammydavis 10y ago
    Just making a generic statement like that without qualifying it serves only to excuse that one source. Are the government of China's comments on Tibet equal in weight to Amnesty International? No. Is the Heritage Fund pushing an agenda equal in trustworthiness to an academic international ranking? Probably not. However, academic studies from two accredited institutions that don't have a particular ax to grind are probably equally credible.
    - icebraining 10y ago
      "Heritage is biased" is the unqualified generic statement, and it serves only to reinforce the dangerous idea that some organizations are unbiased and can be blindly trusted. Of course Heritage is biased. But their Index has a well defined methodology and provides the data that informs the final score for each country; it can stand on its own, and should be criticized as such.
serge2k 10y ago
Occupational Licensing is not universally bad. Licensed hairdresser? Fuckoff. Licensed doctor? Sounds reasonable. Lawyer? yeah. Engineer? Probably. etc... Insurance salesperson? maybe. Really depends on what the license is intended to protect. if it's just a silly barrier to entry that's one thing. If it is to ensure that a person has a minimal level of competence so as to prevent real harm to their customers that's a different thing. A lot will claim to meet the latter standard, I'm skeptical how many do. Insurance sales licensing I would guess to be mostly the former. That being said, you spend 2 weeks getting licenses sorted out when someone starts and you avoid this whole mess.

api 10y ago

According to my brother in law who lived there for 10 years this is how nearly all business is done in China. The variation is that you hope to get big enough to bribe or otherwise purchase influence.

emodendroket 10y ago
Surely an example we all aspire to.

DougN7 10y ago

Trying to outgrow regulators is one approach. Trying to outgrow competition in a business with low barriers to entry is another. See Groupon for example. My bet is AirBnB is probably next.

sjg007 10y ago
What would be interesting would be a lawsuit from renters arguing that Airbnb has reduced supply otherwise available and caused rent to go up.

pkaye 10y ago

Actually this how many successful people do it. It is better to break the rules and profit from it and if caught, pay a small fine and keep your ill gotten gains. I've learned this long time ago (watching coworkers, family, etc) but will probably never do it myself because I'm just not that kind of person.

tsunamifury 10y ago
I think there is a stage where a genuine innovation is in a regulatory grey state because society simply hasn't processed its effects yet. That wasn't the case here... but it is in many other situations. Sometimes ex-post-facto the innovation is ruled against regulation and sometimes not. Take Tesla as an example -- a company who has tried to sell cars online. Since many states hadn't seen that before, they tried to rule that it was illegal due to dealer-sales regulation. Do you fault Musk for hacking this (bad) regulation by trying to work around it? Is he not proving its spuriousness by innovating in this manner? In some cases its considered hero's work, and in other's villainous greed.
- icebraining 10y ago
  Since many states hadn't seen that before, they tried to rule that it was illegal due to dealer-sales regulation. I don't see what being online has anything to do with it; the spirit of the rule - preventing the manufacturers from competing with dealerships - is valid anyway. I personally disagree with this rule, but the "online" part is just Tesla trying to get off on a technicality.
  - msandford 10y ago
    I'm all for manufacturers being prevented from going back on the deals they struck with dealers; the capital they raised from selling dealership franchises was very important for the growth of the manufacturers. But if a manufacturer never setup a dealer program? Fair game to them, IMO.
    - csours 10y ago

smokeyj 10y ago

Anyone afraid of breaking a few rules isn't a founder. The lesson: create something people want. The rest will work itself out.

LargeWu 10y ago
Right. And what about the people you hurt on the way to the top?
- smokeyj 10y ago
  Some rules are victimless. Or downright nonsensical. I don't like this tone of moralizing regulation. As if being non-compliant is inherently unjust.
  - TheOtherHobbes 10y ago
    It balances the moralising promotion of the idea that profit is inherently admirable no matter the consequences.
    - smokeyj 10y ago
      So we're counteracting the immorality of profits with morally sound regulatory code? What if I don't like your religion?
  - cookiecaper 10y ago
    Being non-compliant with the law is unjust in a society where people value rule of law. You can't just ignore laws that you disagree with. If you don't like a law, you should write your representative and try to fix it. That's a farce now of course, but we should fix the process so that it's not any more.
    - JoshTriplett 10y ago
      It's a lot harder to change a regulation when nobody has any idea what the landscape looks like without it, or how people could function without the incumbents that benefit from that regulation. Someone building a service people genuinely want, creating something useful that didn't exist before, and not doing any harm to people by doing so, may choose to go ahead and build it to prove that it's possible and sensible to do so. Sometimes that's the right thing to do; sometimes it's the wrong thing to do. But I'm not going to automatically assume that because there's a regulation on the books that that has anything to do with morality; there's far too many bought-and-paid-for regulations to believe that.

BinaryIdiot 10y ago

You sir are correct. I'm curious though; are there any really good solutions to this type of problem? You can't rewind time and go back and taking away all assets gained in such a manner, while doable, would pretty much put the company out of business even if they're willing to comply. Seems like there isn't really a good way to prevent companies from breaking the law. Well unless you do some sort of regular inspection / auditing but that is time consuming and insanely expensive. So it seems advantageous to me that, as long as you're not directly putting someone into harm's way or trying to screw with the IRS, you should always break the law to get ahead.

maxerickson 10y ago
What's wrong with putting companies out of business? I understand that it ends up having impacts on people that aren't necessarily involved in the misbehavior, but it provides officers and investors a significant incentive to avoid wrongdoing.
- nostrademons 10y ago
  The complication is that "wrongdoing" is in the eye of the beholder. Is Uber committing wrongdoing? The taxi companies certainly think so. Many municipalities think so. A lot of folks on Hacker News think so. But the folks who had a few too many beers and missed the last Caltrain and would otherwise drive home drunk if Uber didn't exist? The innocent folks that would otherwise have been killed by a drunk driver if Uber didn't exist? The folks who drive for Uber to pick up some spare cash in their spare time, or the ones who do it because they can't find any other income and would otherwise be destitute? The folks who drive for Uber to meet interesting new people? The Uberpreneurs who pitch their wares to a captive market for the duration of a ride? They all benefit significantly from Uber's existence. That's why this "get big fast and then hope you can avoid the consequences for your wrongdoing" strategy exists. The consequences will oftentimes not be known at the time an idea is conceived. Sometimes they will be much, much worse than is apparent at the time (look at the environmental pollution and global warming caused by heavy industry), while sometimes they will be a lot better (look at the liberalization and toppling of many totalitarian regimes since Facebook and Twitter came out). Oftentimes they will be both worse and better at the same time; someone killed in a revolution has clearly suffered, while someone who can open up a business that would previously have been shuttered by the government has benefitted.

simonebrunozzi 10y ago

Uber took your advice very seriously.

jrbapna 10y ago

The banks did exactly this before the financial crisis, and most of them came out of it just fine. The reason this works in practice is because when a company becomes that big, it's impossible to place blame. Any repercussions against the company as a whole will mostly impact the honest and innocent folks.

SilasX 10y ago
I would think it's less about diffusion of blame and more about your last sentence there -- that the big guy can play the game of mutually-assured destruction. They warn of all the collateral damage from having to pay for what they did, and the public is too willing to believe it and/or too unwilling to endure the short-term pain of enforcing the rules.
slantedview 10y ago
It is certainly not impossible to place blame on indivudals. After the savings and loan crisis, hundreds of execs were rightly blamed, indicted, convicted, and went to prison. This time around, the criminals have bought off the watchdogs - nobody went to prison. Instead they get off with a fine and no admission of wrongdoing, and they live to do it again another day.

jobu 10y ago

Breaking rules to set up a sham business that scams and steals is one thing (and often the reason the rules exist). Breaking rules to create a product that most people like and find better than the alternative is completely different. Unfortunately many of the laws created in the name of "consumer protection" do little to protect anything but the entrenched interests that lobbied for the laws.

Macsenour 10y ago
An example might be Tesla and some states law requiring a dealership in the state. If I am recalling that correctly...
- bskap 10y ago
  In Tesla's case, the laws were created specifically to block them. They didn't exist when Tesla started. The previous laws on the books were more along the lines of "if you have dealers, you can't sell direct" rather than a general "you must sell through dealers"
  - Macsenour 10y ago
    Thanks for the clarification.
mbesto 10y ago
How precisely do you determine which rules are breakable for a product/service that is "better than the alternative"? I'd love to stay in a hotel and not pay hotel taxes, as would Marriott, so I use AirBnb instead. I'd also like to present fake receipts for reimbursement to my employer so I can make more money. Both are "alternative products" that are better for me, but someone else suffers. EDIT: Grammar.
- stale2002 10y ago
  You determine it on a case by case basis. There is no need to have a perfect system for handling all situations with bad laws and which should be broken. Humans have brains, we should use them to determine that question for ourselves.

vasilipupkin 10y ago

Founders and early employees own common stock, so they won't get paid until all the investors got at least their money back, which means founders and early employees could easily end up with little

gricardo99 10y ago

Reminds me of a saying (paraphrasing): Sometimes it's easier to ask forgiveness than for permission.

cloudjacker 10y ago

I've struggled with this in the past as well, having been raised differently. I was able to unlearn these less effective set of rules by studying different schools of ethics.

willholloway 10y ago

This is a high risk gambit inside an already high risk wealth creation strategy, see Aereo or Naptser for happy endings, or Bitinstant's Charlie Shrem or Liberty Reserve for tragic ones. Not that Aereo or Napster were cheaters, or even doing anything wrong, but they were engaged in technological efforts to bypass the intent of the laws on the books, and it didn't pay off.

yummyfajitas 10y ago

To be fair, the cheating was quite minor. They used a macro to click through a powerpoint. Employees were still tested on the content of the powerpoint and not permitted to sell insurance without passing the test. In short, the law they broke was learning the material too rapidly. I'd happily call this admirable disruption. The real failure lies with the California regulators who made it a crime to click through a powerpoint too fast - unfortunately, unlike the CEO of zenefits, they kept their job.

paganel 10y ago
The article contains an example of a person who had failed to pass the insurance brokers' licensing exam for several months but who was still selling insurance policies to clients. I reckon he/she wasn't the only one in that situation inside the company.

carsongross 10y ago

You know how to feel about it. But you rightly recognize that there is a prisoners dilemma when it comes to moral behavior. Your stomach is tempting you to defect. Your heart is telling you not to. And your head is wondering how the game could be structured to favor your heart over your stomach.

ci5er 10y ago
That's really good. I'd normally just up-vote and move on, but I've gotta ask: Is that original or did that come from somewhere? If the latter -- I'd appreciate a reference because I'd like to read more.
- carsongross 10y ago
  I was thinking of the C.S. Lewis quote from The Abolition of Man: "The head rules the belly through the chest."
  - ci5er 10y ago
    Thank you. Makes sense. I'm more of a G.K. Chesterton man myself, but maybe I'll come around! :-)
    - deleted 10y ago
      [deleted]
kafkaesq 10y ago
Your stomach is tempting you to defect. Your heart is telling you not to. And then, thankfully, your brain chimes in, and reminds you that while short-term PD-like scenarios seem to reward defection, in iterative scenarios -- more comparable to PD-like situations we encounter in real life -- it is cooperation (or at least, not fucking your neighbor over for the sake of short-term gain) that is very strongly incentivized.
- carsongross 10y ago

basch 10y ago

isnt this the same battleplan youtube, buzzfeed, and imgur used to get big? blatantly lift copywritten material, displace other content aggregates, and by the time you have enough traction and money you can fund some original content or pay the appropriate licenses. (albeit imgur isnt to step 3 yet, still stuck on profit.)

johndoez 10y ago

Well they did pass the YC "Nice" test. So Admirable Disruption, of course!

jayess 10y ago

In the mean time, who was harmed?

snappy173 10y ago
The reason you require licensing for insurance sales is because it's very difficult to track all of the individual instances of malfeasance. So, the answer to your question is, "I don't know." But just because I don't have particular instances of harm, doesn't mean this isn't an problem. If you let anybody sell health insurance, you end up with con artists selling sham insurance, and by the time you track down the conman, real people are hurt. Sure you can fine the shysters, or maybe even put them in jail (but probably not), but in the meantime, families savings are wiped out to pay the medical bills, or worse, people get sick and die because they can't get treatment.
- jayess 10y ago
  Is Zenefits a con artist wiping out people's savings?
  - angelbob 10y ago
    An interesting question. They're licensing highly dodgy insurance agents who can still misinform, break the law and cost people money. That's not as bad as selling full-on fake insurance, though.
- aianus 10y ago
  > The reason you require licensing for insurance sales is because it's very difficult to track all of the individual instances of malfeasance. And what's the reason for handing out these licenses based on butt-in-seat study time instead of a proctored exam and/or interview?
  - verticalize 10y ago
    There is an exam. Many agents didn't pass, they still sold insurance.

forgotmysn 10y ago

its easier to ask for forgiveness than permission.

__derek__ 10y ago

This isn't unique to the start-up world. The banking sector[1] and automakers[2][3] provide some prominent recent examples of similar behavior. [1]: http://www.sec.gov/spotlight/enf-actions-fc.shtml http://www.sec.gov/spotlight/enf-actions-fc.shtml [2]: http://www.nbcnews.com/news/us-news/gm-justice-department-reach-settlement-over-faulty-ignition-switches-n428541 http://www.nbcnews.com/news/us-news/gm-justice-department-re... [3]: http://www.nytimes.com/2014/03/20/business/toyota-reaches-1-2-billion-settlement-in-criminal-inquiry.html http://www.nytimes.com/2014/03/20/business/toyota-reaches-1-...

paganel 10y ago

> The investors will get a very healthy return. From the company's wiki page: > In July 2013, Zenefits announced the completion of a seed round led by Venrock and Maverick Capital, with investors including Andreessen Horowitz, Yuri Milner, General Catalyst Partners, Garry Tan, Justin Kan and Alexis Ohanian. The round also included angel investments from Box co-founder and CEO Aaron Levie, Quora co-founder Charlie Cheever, former Googler and Twitter VP of Corporate Strategy Elad Gil, Weebly co-founder David Rusenko, former Googler and Badoo COO Ben Ling, Google’s Head of Spam Slamming Matt Cutts, BuildZoom co-founder and CEO David Petersen, and Inkling co-founder and CEO, Matt MacInnis. (...) Including the company's initial US$372,000 raised from Y Combinator, Sad to see people like Alexis Ohanian and Matt Cutts in there, people that I personally respect. It's also interesting that Y Combinator and their founders haven't said anything of interest regarding this whole mess since it started, or maybe they're all waiting for it to calm down and for business to proceed as usual.

gjolund 10y ago

Exactly what Uber is doing.

deleted 10y ago

[deleted]