Business leaders who foster a culture of gray areas are not great role models. In this Tough Things First podcast, Ray Zinn discusses the dangerous game of compromising your values.

Ray Zinn: Hello there, Rob.

Rob Artigo: Ray, leaders often face intense pressure to compromise on core values like integrity or honesty. Whether it’s inflating metrics for investors, or overlooking ethical lapses for growth, or bending principles to close a deal, in your experience, what are the most common scenarios in high stakes environments like Silicon Valley where the temptation arises, and why do well-intentioned leaders rationalize these short-term trade-offs?

Ray Zinn: Because there’s a lot of pressure on the outside, either your board of directors or your investors. They tend to push you in a direction which benefits them, but won’t necessarily benefit you. And when you do that, you tend to compromise your values. I remember several years ago, now more than that, a couple of decades ago, that a company, in order to bolster their bottom line, they put bricks in their shipping boxes, the product shipping box, so that when they did the audit or when they counted the inventory, they would count those bricks that were in those boxes. And it just about folded the company when they discovered that they had done that. Now, I’m not sure if it was a whistleblower, or how they found out, but the auditors did find out that there were just bricks in those boxes, not product, because they were trying to bolster their bottom line.

See, that’s just flat out dishonest. Granted, they didn’t ship the bricks to the customer, but they just tried to fool the auditors to make them think that they had more inventory than they really did. And that’s one of the more famous ones, those that have lived as long as I have. And back in ’80s and early ’90s in Silicon Valley, that was one of the big stories that was out there is that this company, a very well-known company actually, that put those bricks in those shipping boxes. We find this a lot.

I mean, there’s this one, for example, on CES recently, there’s this battery, this solid state battery that was being touted as being 10 years ahead of its time as you would. And they were saying that how fantastic this battery is and they’re promoting it. It was the hottest item at CES this year. It was called a solid state battery. Probably a super capacitor is what it really is, but they wouldn’t disclose… They didn’t have any units that were actually functioning. They were just containers looking like batteries. There was nothing in them, of course. It was just false. And the same thing with the motorcycle they had, electric motorcycle.

Whether or not they really have that technology is debatable because they didn’t have any research and development backup on it. They didn’t, no disclosure with regard to a third party analysis of it, a UL type thing. Now they’re looked at as being as a skeptical company. They were out there trying to raise money. They managed to raise some money, by the way, but it’s in a dishonest way. It’s kind of like that woman, now her name escapes me, but she had that Theranos, that blood machine that would analyze your blood, and it was just a box with nothing in it. Of course, she’s serving time now in prison for being dishonest.

And we see that a lot. We see that companies try to deceive others. And deception only lasts a short time. You can fool the people some of the time, but you can’t fool all the people all the time. It will come back to bite you. Yeah, you may get a temporary bump in it, but in the long run, it’s going to come back to bite you.

Rob Artigo: That was Elizabeth Holmes. I had to look it up too, because she’s been out of the headlines for so long. It’s easy to forget people’s names. And that’s kind of really a sad commentary on her. It’s like she thought that I’m a billionaire and I’m doing great. And the next thing you know, she’s forgotten.

Ray Zinn: Yep. Well, again, you can fool some of the people some of the time, but you can’t fool all the people all the time. And that’s what we got to remember. And what will come back to haunt us is when you’re dishonest, and dishonesty breeds dishonesty. In other words, it’s just like success breeds success, dishonesty breeds dishonesty. And so you may get away with it sometimes, but not all the time.

Rob Artigo: So going back to the battery situation. They had empty boxes and they had that presentation. If they had handled it a different way, and been more upfront, for example, just saying, “Hey, look, we’ve got this great technology. Here’s what we’re working on. We’ve tested it. We feel like it’s going to work, but we didn’t want to come here and give you something that wasn’t perfect and blow the opportunity. Come here and ask us questions about it. Let us tell you all about it.” Maybe they could have done a better job, reinforced with people like you that they have some integrity and they’re upfront about the situation.

Ray Zinn: Well, the problem is, Rob, is that you’re either ready or you’re not ready. It’s kind of like you’re coming to an Olympic game, and they got the race set up, and your event’s ready to go and you say, “Well, I’m not quite ready yet, but let me tell you what I can do. I can get in the blocks and you can fire the gun and just pretend I’m running.” That’s not going to work.

When you’re at an event like CES, you have to be ready. They expect you that you’re going to demonstrate your product that’s going to be real. If you’re not ready, then you’re going to have to wait till next year. Jumping the gun or misleading people only increases the lack of trust of people. Especially if you’re talking about something that doesn’t sound realistic. For example, if you’re running a 100 yard dash and the world record is like, let’s say, eight, nine seconds or something, and you say you can run it in five, people are not going to believe you. And so if you can’t prove you can do it in five, you best not even say you’re going to do it. Don’t present something where you’re not ready to present it.

That’s what Elizabeth Holmes did is she presented her product to these investors as though it were really working. If you tell your investor that I have this product here, but it’s not working and I’m not sure when I’ll get it working, that doesn’t sound good to an investor. And I’ve listened to enough investor presentations to know that you can tell when it’s phony, when there’s not really meat behind the gravy, as you would. Don’t even attempt it. If you’re not ready, don’t say you’re ready to go.

Rob Artigo: Yeah. I see that with politicians as well a lot these days is that they say, “Oh, we have proof of this,” or, “We’re going to go after so and-so because of this.” And I’m like, don’t tell me until you show me the proof. Don’t just tell me that you’ve got all this evidence. Don’t just tell me that you have it. Show me the proof or shut up. And I think that that’s important. We had the company that had the electric truck, and when they demonstrated it was just plugged in because they really didn’t have a working product.

Ray Zinn: I know.

Rob Artigo: Remember they had that demonstration-

Ray Zinn: Yeah, they rolled down the hill.

Rob Artigo: … where they rolled the truck down the mountain? They’ll go a long way to pretend they got something that they don’t have. And like you said, if you walk in and you say, “Look, look at the size of my legs. I can run that 100 yard dash in five minutes.” I mean, five seconds. For me, it would be five minutes. But if it’s going to be five seconds, you just know that it’s not going to work. I have a rocket that’s going to go to Mars in three hours. Then you just-

Ray Zinn: Not realistic.

Rob Artigo: … roll your eyes and go, “Come on, come on. Give me a break. You’re wasting my time.”

Ray Zinn: Right.

Rob Artigo: Ray, I appreciate the podcast, and I really want the listeners to go to their favorite platform, wherever they listen to this podcast, and make sure they follow it. Follow the podcast and rate it because we want to build our reputation here and our reach at Tough Things First. We know it’s a top rated podcast in Silicon Valley. We’d like to make it a go to for everyone out there, not just people in Silicon Valley, but people in the world of business and business students.

Come on out, check it out, toughthingsfirst.com. You can start there, listen to the podcast and share it. Go to your platform. If you’re on X, Facebook, and LinkedIn, like Ray is, go to your platform, and share it with your friends there too as well. Check out Ray’s books, Tough Things First, the Zen of Zinn series also, one, two, and three. And upcoming, going into print right now, the Zen of Zinn Daily Reader, and that’s going to be great, and you’re going to love it. So I hope you’re ready to check that out. Also, The Essential Leader is on sale. That’s the 10 skills, attributes, and fundamentals that make up the essential leader. It’s essential reading for everybody. Thank you, Ray.

Ray Zinn: Thanks, Rob. Good to be with you.