So we’ve all agreed: Zenefits will be the (guilty) scapegoat for all that went wrong in tech for the last five years
You don’t have to read everything Pando has written in the past few years to know some of the things we’re not big on.
Bro-ish behavior, breaking laws, the cult of disruption, Silicon Valley companies hiring dangerous political operatives, and dictating your business strategy based on how much money you can raise. To name just a few.
You only have to read Farhad Manjoo’s excellent piece on Zenefits last week that detailed how staff were told to turn their t-shirts inside out when they went to bars, or the Journal’s latest story about how Zenefits HR had to circulate a memo asking people not to have sex in the stairwells anymore to know this was a company right up there with “Boober” and the college emails of Evan Spiegel.
It’s less salacious but no less comical that an HR company allegedly failed to pay employees for unused vacation time and overtime under California law.
Less funny is its pattern of playing fast and loose with insurance licenses in the state, including developing software that allowed sales reps to shortcut the process for becoming legal, and mocking those who scored higher than required to pass the tests.
Remember: We’re talking about health insurance. In case you think it’s something that doesn’t need regulation, let’s remember who is on the other side of a healthcare premium. All of us. Your elderly parents. Your sick kids. Remember the scandal where Tim Armstrong blamed sick children at AOL for jacking up the company’s insurance costs?
So, yeah, I don’t have a lot of sympathy for Zenefits former management (some of whom are still there, including former COO and now current CEO David Sacks) and frankly the board and investors who didn’t act sooner.
That said, it’s becoming clear that the media has decided Zenefits will be both the poster child and scapegoat for these last few years of “fastest growing evah!” boasts, when the bros took over Silicon Valley, changing laws by breaking laws, and exhibiting atrocious bad behavior at everyone from workers to women to industry incumbents.
Manjoo opened his piece with this: “If you’ve never heard of the human-resources start-up Zenefits, get ready to never forget it.” At first I thought, nicely worded. But no one who hadn’t heard of Zenefits is going to remember them "just" because they broke some insurance regulations and abused the office Kegerator. The stories of bad behavior just keep coming. And unlike smaller companies that flamed out, a lot of media outlets-- including us-- wrote the boasts that Zenefits board, investors, and team all laid out there for us.
Manjoo’s piece was the best thing he’s written while at the Times, in my view. I don’t think it’s a coincidence he’d previously written a pretty glowing piece about Zenefits.
We saw the same thing in the wake of the dot com bust. One reason the media turned so intensely on startups-- and that anger continued into the early Web 2.0 days-- is that so many people wrote the glowing stories fed to them by investors and entrepreneurs. And were wrong.
Industries always need a guilty scapegoat: Someone to take all the blame, and absorb all the anger. Think of Martha Stewart with insider trading. Think of Bernie Madoff. Think of Henry Blodget. Think of that poor Pets.com sock puppet. Think of Frank Quattrone. One person we can heap all of our collective guilt by association onto, that we can punish loudly and publicly. It’s not that Zenefits’ founder Parker Conrad doesn’t deserve it. He does. But I worry how much else is going on at other companies, unnoticed, while we continue to whip Zenefits.
Zenefits happens to make a particularly good scapegoat. Take if from a publication that’s frequently called a “buzzkill” when we write about companies that do bad things. I’ve learned what kinds of bandwagons people like to jump on.
Theranos was shocking, but it didn’t quite work as well. It wasn’t a company we all knew or understood, and while the revelations were alarming, the company wasn’t quite comical and offensive enough for the news to get mainstream pick up. It was mostly just the press and Google Ventures who bared their teeth.
And while Uber has arguably shown even more recklessness than Zenefits, it doesn’t make a good scapegoat either, at least yet. It still appears to be working and growing. Until we all agree something is bad -- the media, the rest of a company’s management team, the board, lawmakers-- no one can be the scapegoat. It’s less about what they actually do and more about agreeing we’re all going to go after the same one. People are still divided on what Uber’s fate will be in another five years. There are too many knowledge gaps between what the company says and what seems to be the obvious empirical truth.
There are constant examples of this, but the most egregious is in China, where Uber has boasted of tripling market share even though it’s in a fraction of the markets as its largest competitor. The very positioning that Uber is “crushing it” in a country where it has 11% market share, rampant fraud, and is all but guaranteed to be eventually banned, boggles the mind. Or a simpler example: Uber repeatedly saying drivers are making more money despite steep cuts in what they are paying them. Uber says something conclusively enough, and it makes you doubt reality. “They couldn’t just lie, could they…?”
The other problem with Uber as a guilty scapegoat is that it’s a consumer brand beloved by many millions of riders. Riders don’t want to believe the reason they can get around so cheaply is because Uber is screwing over drivers. They want to believe it’s venture capital subsidies. If Uber is bad, way more of us are complicit.
As Seth Myers said when he compared Uber to the Sopranos and Voldemort, he hates when brands he loves like Uber, Chick-fil-a, or the NFL do horrible things. He said something like “I could eat at KFC and take a taxi to a hockey game, but I don’t want to.” (I’d love to quote it exactly but every instance of the video-- including embeds on our site, Re/Code, and Seth Meyers site itself-- all mysteriously no longer work.)
But Zenefits. Well, hating Zenefits is easy. Most of us never make a decision to use it, and many of those in the industry loathed it more than anyone else. In fact, I’ve heard from sources that many leaders in the insurance industry are openly pressuring states to bring criminal charges against Conrad. They want more than his ouster, more than humiliation. They want somewhere between an assurance that something this reckless won’t happen again to personal satisfaction of seeing a guy who bragged he’d eat all their lunches do a perp walk.
Said one source in the industry: “If Parker hadn't been so glib about drinking everyone’s milkshake there wouldn't be 100 major brokers pressing every state DOI to do something about Zenefits.”
Until someone valued at more money, breaks more laws, hurts more people, betrays bro-ier behavior, Zenefits is the new Pets.com. Everyone can sleep better now.