Cult of the founder

Hi, it’s Max in New York. What do the failures of Sam Bankman-Fried, Mark Zuckerberg, Adam Neumann and Andy Rubin have in common? But first… [View in browser]( [Bloomberg]( Hi, it’s Max in New York. What do the failures of Sam Bankman-Fried, Mark Zuckerberg, Adam Neumann and Andy Rubin have in common? But first… Today’s must-reads: • FTX customers [fear their money is gone]( • Apple [limits an iPhone tool]( used for protests in China • Amazon’s CEO [embarked on a cost-cutting review]( God complex Mark Zuckerberg appeared on his employees’ computer screens this week and said, with an expression that seemed calibrated to convey the [deepest possible pain](, that he was sorry for laying off 11,000 of them. “I just want to say up front that I take full responsibility for this decision,” said the co-founder and chief executive officer of Meta Platforms Inc. On one hand, this was pretty upstanding of him. We’ve gotten so used to our tech overlords acting like overfed babies, whose only motivation is their own misplaced [sense]( [of]( [victimhood](, that it was refreshing to see Zuckerberg just say sorry. On the other, it was a reflection of just how compromised the Facebook company has become — and the extent to which its struggles come down to a single point of failure: the blind faith investors put in the abilities of founder-CEOs. Over the past three years, Zuckerberg’s company has lost close to $30 billion on metaverse initiatives based on the possibly misguided belief that the future of socialization involves something like Zoom but with worse graphics. Investors might not like this, but they’ve had no recourse to do anything (other than sell the stock) because Facebook was set up to ensure that Zuckerberg is the sole decision maker. At a traditional company, disgruntled shareholders might force change by waging a proxy battle. At Facebook, they’re reduced to asking nicely, via [open letters](. A similar dynamic seems to have been at play at FTX.com, the cryptocurrency exchange that looked like a safe bet in an otherwise volatile industry until it collapsed this week. We don’t quite know what happened, but it seems that FTX lent huge sums of money to a trading firm owned by its founder and CEO, Sam Bankman-Fried. One reason we don’t know is that FTX had, as far as anyone can tell, zero oversight. Investors, including Sequoia Capital, handed Bankman-Fried billions of dollars, even though as [Axios reported](, “it's unclear if FTX even has a board of directors, audit committee, CFO or chief compliance officer.” One assumes the VCs reserved the right to ask nicely. This phenomenon is sometimes called the “cult of the founder,” and it’s the belief that entrepreneurs should be given maximum leeway to run their companies as they see fit. The idea has been floating around since at least the 1970s, but it really took off in the late 2000s as Steve Jobs’s founder-led turnaround of Apple Inc. picked up steam and Facebook’s success under Zuckerbergian control became undeniable. Peter Thiel turned it into a business model, starting a venture capital firm predicated [on the idea that he would never fire a founder](. (It’s literally called Founders Fund.) Thanks largely to Thiel, the belief that founders know best turned into a full-blown religion. In his book, Zero to One, Thiel compared entrepreneurs to gods and argued that they were not only special but that founders who behaved badly — either by ignoring laws or breaking norms — were extra special. It sounds crazy to say, but this became conventional wisdom within wide swaths of startup finance. And thus we see Adam Neumann, whose air-headed profligacy at WeWork Inc. caused the company to vaporize more than $15 billion in investor capital. Neumann got $350 million this summer from a top venture capitalist, Marc Andreessen, based on little more than a hazily sketched-out business model, some apartment buildings and [his questionable track record](. We see Andy Rubin, who departed two of his past three employers after being accused of sexual misconduct, which he denied, [also getting a “second chance”]( ([or is it a third?]() from Andreessen. At Sequoia, Bankman-Fried’s callous irresponsibility wasn’t seen as a red flag but as proof of his genius. The founder was apparently playing League of Legends while he pitched the firm on a major investment; Sequoia thought [this was so cool](, the firm bragged about the fact in its (now-deleted but still glorious) [piece of sponcon](. VCs love to buck convention — or at least to be seen as doing so. They now bear some responsibility for the customers who lost money and workers who lost jobs to founder misjudgments. They could at least say sorry. —[Max Chafkin](mailto:mchafkin@bloomberg.net) Today in Twitter The exodus of senior executives from Twitter continued, this time with [the top privacy and security officials](. The paid blue check mark program quickly allowed imposters to flourish. Staff [played whack-a-mole with fake accounts]( posing as Nintendo and the pharma brand Eli Lilly. Elon Musk told employees an eventual bankruptcy isn’t out of question [if they don’t get the business back on track](. He borrowed a lot of money to do the deal, and the debt is currently being [shopped at a steep discount](. Here’s a comparison you probably haven’t heard: Musk is [a bit like GE’s Jack Welch](. Get fully charged Amazon showed off a new delivery drone that’s small and [can fly in light rain](. It also unveiled a [warehouse robot that can identify and handle objects](, possibly replacing human workers one day. The chip crunch is subsiding, a key industry metric shows. Chip delivery times experienced [their biggest drop since 2016](. Here’s something to watch: [Future computer chips]( will be super-fast and use significantly less power. Paris opened an air-taxi hub targeting flights [in time for 2024 Olympics](. Bloomberg Technology’s Emily Chang hosted her last daily show after 12 years. [Watch her highlight reel]( as she goes to work on new projects for the network. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights.​​​​​​​ You received this message because you are subscribed to Bloomberg's Tech Daily newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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