Undercover At the Bullshit Factory

Before he became a writer on HBO’s Silicon Valley, Dan Lyons spent over two decades as a tech journalist at Newsweek. But journalism is dead, and in 2012, the 51-year old Lyons found himself laid off, his prospects dim. With jobs for middle-aged magazine editors all but nonexistent, Lyons decided to switch industries and try his hand at being the oldest person at a Cambridge, MA tech startup called HubSpot. Lyons’ bewildering experiences at HubSpot would form the basis of his bestselling book Disrupted: My Misadventure in the Startup Bubble. Lyons is now a popular writer and speaker about the tech economy, and we turned to him to discuss the world of startups, and whether companies like HubSpot really are just a lot of hot air…

CA: I guess the cliché about Silicon Valley and tech at the moment is that it’s mostly gobs of money being thrown around or apps that do nothing made by people who insist they’re changing the world. How much of the cliché is true, based on what you saw during your time in this bizarre world?

DL: I think it’s too easy to say it’s all like that. There’s a whole spectrum. Some companies are trying to make really interesting things. And even where I was working, we made a real product. It’s just kind of a thing that sends out email spam. I’m not sure it makes the world a better place. But it did automate some of the work people in the marketing departments do. There’s some value there. Yeah, though, I’d say the rhetoric was disproportionate to what we were actually doing….

CA: As I understand it, the difference between tech culture and the ordinary corporate world is the sense of almost divine mission or a sense that is out of proportion to the nature of what you do, even if it’s useful. How does that actually manifest itself in the workplace culture?

DL: Well, I think they lean on that idea of “mission” a lot more patently, say, then traditional companies might do. And I think it’s essentially a way of proving they matter. Where I worked there was the idea that millennials really wanted to do meaningful work. They wanted to do important work that was changing the world. What I found striking was that you could tell people that it was, and they would just believe it. They wanted to be doing something unique or valuable, and if you came at them with a straight face and say “you are changing the world” they would go along with it. I was surprised that people fell for it. But they did.

CA: Do you think on the part of founders and CEOs it’s cynical, or are they legitimately true believers? Is it a manipulative way of getting people to work for lower wages with no benefits? Or do they really feel that everyone at every level believes in this?

DL: I don’t know if I can make a blanket statement about everybody. I think the people I was working for were completely cynical. It was absolutely a ploy, a stratagem. There are I think CEOs who truly do believe, they’ve drunk their own Kool-Aid. But I think at HubSpot it was just a way to get cheap labor.

CA: It’s kind of amazing to me that a young person coming out of college, 22-23, doesn’t see very quickly that they’re working on spam. Is this just a reflection of how desperate a time it is for millennials seeking employment?

DL: It may be. I think a lot of people did see through it even at HubSpot. But then what happened was they would just get churned out very quickly. They would either leave on their own or they would get fired. If you didn’t buy into it, you would not last long. Fitting in was the most important key to success. Since my book came out I’ve had so many people write to me, clearly young people, saying, “Oh my God, I was in this world, and I realized the same thing.” They become very disillusioned. A couple I knew at the time became really depressed by it, thinking, “was there anything better?” So I think you’re right. They’re being handed a raw deal, the new generation of people entering the workforce now. They’re being handed in many ways a bad deal, and I think some of them do know that.

CA: It’s got to be a very bizarre workplace environment where there is this disjunction between rhetoric and the reality. You’ve spent so much time there in the startup marketing company, does it actually seem cult-like? What does it feel like to be at one of these workplaces?

DL: It’s very much like a cult. In fact, when I was just starting at HubSpot I was also reading Lawrence Wright’s book about Scientology, and the parallel was freaking me out. It was sort of like you go to a room and people tell you about their faith and they’re telling you things that are obviously untrue, blatantly untrue. A dictionary word that had been invented or twisted or means different things. And you have to accept it and nod your head and say, “Ok, I’m on board with that.” It was very much like being in a cult. People regularly referred to the company as “The Cult.”

CA: So could you give me an example of that kind of manipulation of language, the way that words mean different things there than they actually mean in the real world?

DL: They had a made-up word called delightion.

CA: What was that, sorry?

DL: Delightion. You take the word delight and add ion on the end. Delightion. I think one of the co-founders came up with the idea that “we aren’t really in the software business, we’re in the business of creating moments of delightion.” And delightion meant any moment when you delighted the customer. Someone using our software would have this magical reverie, this moment where their life would just transform. And we were in that business. We were in the business of creating moments of pure joy for people. And they called it delightion. And people used this term not with air-quotes or rolling their eyes. People talked about it seriously. They didn’t think it was funny at all to say this. When you got fired they called it graduation. You’d get this cheery email saying “so-and-so just graduated, we’re so happy for them.” There was “1+1=3” which was this weird old billionaire thing.

There was spam. So what we did was essentially enable people to send out bulk email. Thousands of people could get an email all at once. And you could train a system so that if you send an email to a thousand people and based on how they responded to it— if they killed it without looking at it, they would get a certain kind of second email. If they opened it but didn’t do anything, they would get a different second email. You could create this tree structure of emails based on the responses to the first one, and you could stack up a whole bunch of these. And so you’d write the opening gambit and they you’d write several versions of the second gambit, and several versions of the third gambit. At the end, just keep poking at people until they do something you wanted them to do. So essentially it’s spam, but they would say “No, this isn’t spam because we got their names from asking them to fill out a form, so they want these emails. They’re signed up for this. They love it. This is lovable content. We’re helping them because by persistently coming back to them until they buy something, we’re trying to learn what they want. So we’re not bothering people, we’re helping them. In fact, we hate spam!” It’s ultimately the sort of Trumpian Orwellian thing of, “We actually are against spam. We are anti-spam. We’re stamping out spam.” They had t-shirts made that said “no spam.” It’s crazy. We’re in the spam business. It’s hilarious.

CA: There’s kind of an incentive for everyone to have the will to believe because nobody wants to believe that they’re in a spam company. The reality is kind of depressing and horrible. So you can create a myth to hide that, as long as everyone buys it forever…

DL: You’re right. For example, there are other companies that do the same stuff, more or less. Most of them are sort of grubby businesses, they’re sort of like the online version of direct mail marketing, or people who send those shitty fliers in the mail, or telemarketers who call you at dinnertime and try to sell you solar panels. Basically, it’s one step up above Internet porn. It’s a very grubby business. There’s money to be made. But you can’t tell a bunch of happy quirky millennials who are so earnest and so hyped that what they do is basically evil. So you just tell them it isn’t, you tell them it’s great. I don’t know how old you are, but you might remember a group called “Up With People.”

CA: Oh yeah! From the 70s.

DL: Very peppy song, “Up, Up with people/You meet ‘em wherever you go.” Really stupid shit, right? This was like that. They were very, very happy about what they did. At one point, they made tracksuits, like cheerleader costumes. Track pants and matching tracksuits in bright orange. All going to a conference together and they had pom-poms and cheered. And they went insane.

CA: But when you see those videos of the original “Up With People,” it’s unclear whether it’s really fun to be in “Up With People” or whether it was kind of like a nightmare.

DL: Well, I don’t know. I think the people in “Up With People” probably thought it was great. I had someone tell me about the tracksuit thing. The cheerleading thing had happened before I was there, but just before, and someone who did it told me, and she was not 22. She was a woman probably at least 40 who said to me, “Oh, it was so awesome, we just totally rocked this conference, everybody loved us.” I said, “No, no, no, they were laughing at you.” And she said, “No, it was so much greater, we loved it.” I said, “What happened if you don’t put on the tracksuit? Did you get fired?” I don’t know, I don’t think she was lying. Because I’ve done things where I said I’m ashamed of myself for having done it, I needed the job. But no.

CA: There must have been times where you felt like you were the only human being in the room. Looking around to see if anyone was feeling…

DL: It was again also like being in a cult. Sometimes you’d get a moment alone with people and go “You realize this is crazy, right?” And then they’d be like “Yeah, yeah this is totally crazy.” You know, there’s a resistance. But essentially you also know that you aren’t going to last very long. Get the hell out of there or get fired. And it was very few people, and I think once you are identified as a resistor you are marked for death, but then also nobody would hang out with you because nobody wanted to be seen as your friend because you were a bad influence. So you had to keep it really quiet.

CA: Now your experience was at HubSpot, but how widespread do you think this kind of corporate culture is now?

DL: I don’t know, but I’ve heard people say that for example, Google is just like this only much, much bigger. They all drink the Kool-Aid. But I don’t know, people at Google didn’t seem like that to me. Apple I think is certainly like that. There are people who work at Apple who just really, really believe, no matter what ridiculous thing Tim Cook says, they believe it. But yeah, I don’t know. I think in startups especially it’s very strong.

CA: You’ve been in tech journalism for a couple of decades. Is this a completely new development or has some sector of the corporate world always had kind of a very strong cultural aspect to it?

DL: Yeah, I think there are some. I remember when I first started covering tech. There’s this old software company called AspenTech that made database software in the 80s and early 90s. You’d see a guy wearing a—what are those stuffy jackets, what do they call them? Like a pilot’s jacket with “AspenTech” on it. Like, what kind of weirdo thinks he’s really cool walking around with an “AspenTech” jacket on? This giant, giant thing. There’s sort of that. I think it’s a lot stronger now. There’s a lot more talk about mission and changing the world. I don’t remember people at Microsoft ever talking about changing the world. They were open about how much money they were going to make. I didn’t think they had to dress it up as this sort of religious thing. But, yes, certainly Microsoft had a strong culture, they definitely did.

CA: In a certain sense, some of them are changing the world because there’s a lot of talk about social media and apps changing the way that human beings interact with one another and think. So it’s not crazy to think that they are, right?

DL: If you’re looking at Facebook or Twitter, look at how profoundly that’s changed, not just my life, but I’m sure yours too. So certainly working at Facebook you can say you’re a small part of a very big thing. And if you’re, say, Google you know that you can have an impact that affects a billion people. That’s a pretty big deal. So I think you’re right, they are.

CA: I want to ask you a couple of questions about the tech economy more broadly. You had an interesting excerpt from the book where you quoted a friend who said “you don’t get rewarded for creating great technology anymore. It’s all about the business model and having a company that scales quickly.” Just getting big rather than being profitable. That’s kind of bizarre to me, the idea that you wouldn’t have to be profitable. The subtitle of the book suggests it’s a bubble, and you’ve written very critically of SnapChat, for example, you’ve suggested they’re massively overvalued. So what’s going on in the economy that this all fits into?

DL: Yeah, I think it’s very much about growth and not about profits. I recently read an expense sheet with all the tech IPOs since 2011, and I was reading the companies that were no longer independent, that had been acquired, and I came up with a list of 60 companies. And of them, only 10 have ever made a profit.

CA: I don’t understand how that’s possible. That doesn’t make economic sense to me. How does that work?

DL: It works because they’re telling the investors in the public markets that, you know, this company is growing really fast, and eventually it will make money. That might be implied. Or public investors just no longer care because they’re so dense with the returns. So look at the recent IPO of Snapchat for example. But they’re losing a lot of money and, I think that it’s correct to say they have not ever made money. They don’t even have a plan to become profitable. Now if you bought their stock and you pay 20 bucks a share, it may go up to 25, and you’ve made a profit, but it’s speculation. It’s not really investing; it’s speculation. And the market has been in an incredible slow run for years and years so you get a load of stuff like that.

CA: That does suggest an incredible mass delusion in a certain sense, doesn’t it?

DL: Well, yeah. The delusion carries down to these venture capitalists who in these late stage private rounds have been paying tremendous evaluations for companies, assuming or hoping that they will get a bigger value in the public market, that they will pay even more.

CA: These guys are supposed to be geniuses though. Do you think generally venture capitalists are often like people with too much money, or not like the sort of brilliant entrepreneurs, the self-image portrays them as?

DL: Well, they’re cocky. I think there’s just a lot more money now in the venture community than there was 20 years ago. I did an analysis recently of the amount of money in 1995 in the venture world versus 2015. I think it was seven or eight times as much money was being invested per year. So it’s just a lot more money looking for ideas. And there really aren’t that many more ideas—or good ideas.

CA: So is this a tulips situation then? You would classify this as a major bubble then?

DL: I think so, I think it’s an incredible bubble created by all the money. The monetary policies have created an asset bubble.

CA: What do you mean by that?

DL: They’ve inflated the value of stocks and assets. Pension funds now have more money to invest, and they put a certain percentage of their assets into venture capital each year. So the amount of money flowing into venture capital went up. So it’s just more money there looking for returns. So venture funds used to be, say, 25 or 50 million dollars, a relatively small pool of money. Now the venture funds being raised are a billion dollars. I saw a VC fund saying it has a billion dollars that it needs to put to work. And they only get paid if they put it to work. So they have to go find a place to put the put that billion dollars. It’s almost like supply and demand. A lot of money.

CA: You’ve had sort of fascinating and amusing adventures in the world of start-ups and the tech economy. Do you think that generally, this is just something amusing that we can laugh at, or do you actually think there are serious social consequences? I know you come from journalism and the whole reason you’ve entered this is that your whole industry kind of collapsed. And partially that has something to do with companies being eaten by tech capitalism—the Tribune company turning into “Tronc” and Chris Hughes’ ill-fated takeover of the New Republic. Should we just laugh at Silicon Valley or should we be terrified?

DL: I think it has very serious consequences. What’s happening is that this is also contributing to the acceleration of income inequality and wealth disparity. You look at the Oxfam numbers which show eight people now control as much wealth as the bottom half of the world’s population. It used to be 200 people, now it’s eight. Four or five of the eight are techies. So you have this massive transfer of wealth in fewer and fewer hands and technology has accelerated. And we’re not creating competition by distributing wealth for lots of people. We’re creating fly-by-night, get-rich-quick companies that distribute wealth to a few hands. So I think it has very, very dangerous consequences which then, beyond the income disparity, lead to things like Brexit and Trump. I think it’s tremendously dangerous. CA: Well, on that pessimistic note, thanks very much.

This article appeared as part of our Silicon Valley Spectacular. Get your collectible print edition in our online store.