Why Tech Companies Lie

Customers, investors, regulators, and yes, journalists rely on what companies officially tell us about their businesses, their products, and their future prospects. Sure, we all have our own sources and experiences to help us decide if we believe what we’ve been told. But those aren’t always enough to prevent people from planning on or even buying products that never ship, investing in companies that never deliver, or writing glowingly about some new technology that eventually dead-ends or is massively delayed.

It’s tempting to lump those misstatements into the broad category of “lies.” From the outside, it’s easy to assume that company executives have perfect knowledge of the truth and that when they over-promise or under-deliver it’s with intent and possibly malice. The reality is a lot more complex than that. So let’s take a look at some of the reasons companies, perhaps especially in high-tech, say things that turn out not to be true. With the help of many of my tech executive and venture capitalist friends, and my experiences in and with a variety of high-tech companies, we’ve compiled a list of the most common reasons tech companies tell lies.

Optimism and Arrogance

Sure, everyone makes contingency plans. But no one plans to fail. So it’s likely that those rosy projections that didn’t come true were ones that everyone involved believed when they made them. Tesla gets called on this a lot, and may, in fact, be under criminal investigation for continuing to make rosy Model 3 production projections after they may have known they were substantially off.

For many tech executives, that’s all part of selling. One of my first bosses at Sun Microsystems was fond of reminding us to “Never confuse selling with installing.” I suspect many high-flying startups would never have succeeded without exaggerating their capabilities. Some tech executives, though, go beyond natural optimism and are arrogant enough to believe they can make anything work, or that they can get away with making extreme statements if they eventually deliver something.

This can sometimes lead to outrageous promises, fake demos, and even fake product reveals. There are times when it makes sense to hedge a demo–executing a demo locally to avoid traditionally abysmal tradeshow Wi-Fi is often cited as a reason, although transparency is also important. But it is pushing things to wave a board around on stage and say it’s a new product when it isn’t. Nvidia CEO Jen-Hsun Huang has been called on this more than once, starting with a mockup Fermi graphics card, that it has become something of an inside joke. Most of the press doesn’t really worry one way or another whether he’s holding a working product, a prototype, or just something that looks cool. We rely on follow-up interviews and live demos to figure out where the reality lies.

Employees Fib to Their Management

Anyone who has ever been a tech executive knows the feeling of getting blind-sided by finding out that a project or product you’ve been repeatedly told is doing fine is actually in a lot of trouble. Sure, Management by Walking Around and other tactics can help minimize how often that happens, but it still does. In many companies, it is very hard to be the person who shouts “The Emporer Has No Clothes” when it’s clear a project is delayed or falling apart.

The Japanese famously pioneered the notion that any assembly line worker could stop the line if they saw a problem. That is far from the culture that permeates a typical high-powered, high-tech, company.

“See No Evil, Hear No Evil”

I’ve worked with many tech executives who seem to simply not hear bad news. I suppose a psychologist might call it denial, or a belief that a miracle will occur in the near future. The result is often statements and even actions that are based on fantasies. Several executives and engineers I spoke with said that at their companies the culture was to set the bar for success extremely high as a motivator to make what might seem impossible possible. Those companies believe that being conservative will lead to mediocre results.

In many cases, that’s worked out very well. But it can be easy to keep pushing on what only seemed impossible long after it has, in fact, become impossible, resulting in misstatements and broken commitments to deliver. Those companies are betting that on average reaching for the sky and persisting will pay off more often than not and that (to use another Silicon Valley aphorism): “Our job is to be around long enough to clean up our mistakes.”

To Buy Time by Stalling

Often this results in what one industry friend defines as “lies of omission.” Positive developments and good news continue to be released, while negative news like product delays are kept quiet until the last possible moment. Many of us have had the sinking feeling of impending doom when a Kickstarter project we have backed or are following goes from posting detailed status updates to kitten-video-populated, feel-good items (well, okay, maybe not kittens, but harmless photos of company offices and picnics for sure).

Sometimes the stalling works. In the case of Tesla’s overly-optimistic 2017 production projections for the Model 3, it was able to stay in business, keep working on its assembly line, and is now, in fact, delivering a large number of cars — just quite a bit later than initially promised, and without the promised $35K entry-level price tag.

Oops! We Do What?

Last week, for example, Facebook assured everyone that its new Portal video conferencing device doesn’t collect data for targeting ads. They had to walk that back almost immediately (necessitating a wave of press retractions after covering the initial launch). According to the company, because the Portal itself doesn’t show ads, the Portal team assumed it didn’t collect usage data for that purpose. However, because it uses Messenger, the data is automatically collected and could be used to target ads on other devices. Whether you think the deceptive claim during the product launch was deliberate or not, it was stressed, and covered heavily, before being retracted.

The Whole Is Less Than the Sum of the Parts

It is typical when doing corporate financial forecasts to roll up the forecasts of all the business units, sprinkle some financial fairy dust on them, and come up with an overall forecast. Unfortunately, sometimes there are hidden assumptions that mean the forecast is broken before it’s even published. For example, multiple divisions might all need access to a specific scarce resource to achieve their goals. In one company I worked for, each product division painted a rosy revenue picture, but each assumed that it would command the bulk of attention from the sales force. They couldn’t all be right, of course.

Stretching the Truth to Hurt Competitors

It’s a slippery slope from fudging a bit on a product’s exact shipment date to deliberately setting out to harm a competitor, either by misstating your capabilities or theirs. But it’s a frequent tactic, with many long-term dominant companies having made something of a career out of it. This takes many forms, including misleading benchmarks (which we see all the time at wfoojjaec), comparisons with a competitor’s older products, or cost-of-ownership studies that deliberately ignore or hide important assumptions. My colleague Joel called Intel out on a recent such incident where it commissioned a competitive benchmark versus AMD where the AMD configurations were obviously sub-optimal.

Actual Fraud

Despite frequent complaints that companies are “lying through their teeth” about products and projects for nefarious reasons, I think this happens a lot less than people think. But it does. We’re all familiar with the tragedy of Theranos by now, for example. The cryptocurrency industry and the ICO market, in particular, has also been plagued with fraudulent schemes that have made it much harder for legitimate efforts to succeed.

Once the story started to break, things got worse and worse for Theranos and its management.

Legal Hedging

While not usually outright lies, an inability or unwillingness to talk about confidential projects, items that might affect the stock price, or human resource issues often result in misleading statements–or at least statements that lead people to inappropriate conclusions. National security side-stepping fits in this category also.

“Spying the Lie”

Part of our job as journalists is to do our best to verify claims made by companies before we pass them along in articles. We all have companies we trust more than others to be giving us the “straight scoop” when they tell us something — on or off the record. And we have our own experiences in tech to use as a basis for deciding whether claims about a new product or invention pass the “sniff test” and are plausible.

In many cases, if something seems too good to be true, we’ll push back and try to get more information on how the company expects to do it. Over the years we’ve become much more skeptical about covering Kickstarter projects, for example, as many of them just don’t deliver. But, for all the reasons we’ve listed here, and more, misstatements ranging from over-optimistic projections through sins of omissions to white lies and even fraud are a permanent part of the high-tech industry, unfortunately.