The Importance of Ethics in Building Great Products
Being ethical is a critical part of being a successful maker. Especially for indie makers, maintaining an ethical presence allows them to develop strong customer relationships, and cultivate a culture of trust around their product. One common misconception about ethics is that it is a subject you study, and does not necessarily apply to startups or products. Indeed, the “hustle” and “move fast and break things” cultures which have become popular in Silicon Valley reject the notion that being ethical is the most important part of building a product. However, I would argue that being ethical is indeed the most important part of building a product. Naval Ravikant, co-founder of AngelList, recently remarked on ethics by stating “Ethics isn’t something you study; it’s something you do”.
Every individual has their own ethical code — the set of principles by which they live their lives. For some people, they value integrity above all else: they are not willing to compromise their beliefs for the benefits of others. Some people value community above all else: they want to do what is best for the community at all times. These values are developed from within, rather than from a textbook. In startups especially, the specific ethical codes which founders use vary, and there is no specific guideline for how to be ethical. That being said, it is still incredibly important for founders — and makers — to ensure that they have a strong moral code, and integrate that into their product.
Before exploring the benefits of ethical building, it is first important to explore why people default to being unethical while building products and startups. Many founders act in an unethical manner — even if it is just for one decision — because it seems like the easiest decision to make in the moment. Perhaps a founder raises a new round of capital because they don’t want to fire their team, even if the capital will not help them achieve their goal. If most people are presented with an immediate solution and a solution that will take a long time to implement but will be better for the project over the long-term, most people would choose the immediate solution. Many founders make decisions that are not in compliance with their own personal moral code because it is easier to do in the short-term — their problem is solved. However, this method of short-term thinking has a few significant impacts on a company or side project.
Ethics and Solid Foundations
This leads us to the first benefit of being ethical: it is better for the company in the long-term. Indeed, making a bad decision that will help resolve a problem immediately may seem more favorable in the moment, but bad decisions always come back and have unintended consequences. To use the previous example, if you raised capital just so you could save your team, you would likely be in the same position a few months later because you have ignored the cause of the lack of capital, in favor of saving your team — if your sales funnel was bad, raising capital will not assist you in improving it, but hard work will.
Peter Thiel famously said, “As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.” That is to say, if you build a culture on being unethical, your project or startup will suffer in the long-term. You will have to deal with your bad decisions in the future, and they will likely cause even more harm to your growth than you thought. Simply put, making an ethical decision is best for the company in the long-term because it is more likely to stabilize your company and help you build a strong foundation, especially in the early stages. A great example of the long-term benefits of being ethical can be found in Warren Buffett, CEO of Berkshire Hathaway. Buffett firmly adheres to his personal set of principles — his “inner scorecard”. The investor Guy Spier wrote in his book “The Education of a Value Investor” about Buffett’s scorecard, stating “Indeed, he has told Berkshire’s shareholders that there are things he could do that would make the company bigger and more profitable, but he’s not prepared to do them.” For example, Spier stated, "he resists laying people off or selling holdings that he could easily replace with more profitable businesses.” Buffett was willing to sacrifice immediate growth and profit over being unethical — he wants to build long-term relationships based on trust.
Being ethical is also a major competitive advantage, especially for makers. Most people are short-term thinkers and care more about immediate gratification than a big payout in the future. Although Silicon Valley runs on making promises about future compensation — stock options are a great example of this — founders are often more concerned about what will help the company solve a problem now rather than put the company on a good track in the future. This mindset is easy to adopt because, after all, founders and makers are presented with difficult decisions every day. Ravikant is also famous for saying “Ethics is what you do despite the money. If being ethical were profitable, everyone would do it.” In sum, being ethical is about ignoring the short-term payoffs, and focusing on the long-term prospects. Most people aren’t ethical because they care more about instant rewards, but making decisions that compromise a project’s values in the name of making a profit can harm the project in the long-term. Those who adhere to their ethical code at all times, however, are distinctive, and because most other people are playing a short-term game, they have a lot more to gain.
Ethical ads companies, for example, can compete with Google because — among other reasons — they are focused on maintaining quality and building trust with their consumers. Many people prefer ethical ads over endless tracking offered by platforms such as Google Analytics, and so the people pursuing the ethical ads project are at a major advantage. Ethical companies can compete in already saturated markets by appealing to people’s innate ethical standards.
Trust and Relationships
To explore this further, being ethical allows you to build better relationships based on trust, which can have a number of benefits. Business is all about trust — making promises and following through on those promises. If you are ethical from the start, then you can build solid relationships with customers, prospective employees, current employees, investors, and more because there is an inherent state of trust. These people know that you will always do what is right, rather than what solves a problem immediately.
Trust compounds, and as you continue to follow your ethical code, you will realize significant benefits. Perhaps the most notable product of building relationships based on trust would be that it will help them attract new customers. If a consumer is faced with the choice of an ethical product versus an unethical product, most will choose the ethical product because it appeals to the values they feel are important. This is a prime example of the competitive advantage of being ethical in action — if you show you care about your customers, people will be more likely to use your product.
Further, building relationships based on trust will allow a company to increase customer retention. If the company is faced with compromising their ethics to make a quick profit over maintaining a strong relationship with its customers, then making the tough decision to stick with customers will be admired. Customers will want to continue using your product over competitors’ products because they know that the company is always looking out for them — making decisions in the best interests of the company and its customers, not immediate profits. The trust built up by being ethical will also increase the likelihood that existing customers will recommend the product to others. Most people care a lot about personal recommendations. After all, a lot of the products we use today have been sourced through personal recommendations. People will be more likely to recommend a product to their friends or family if they know they operate ethically and put the customers first, which will help the company expand their customer base and cultivate new relationships with prospective customers.
Another benefit of being ethical is that it allows products to build a better quality team. Building a business based on ethics and putting the interests of customers first will encourage more ethical people to join the business. People who are ethical want to work with others who value ethics and building positive customer relations. A great example of this is in the programming industry. Good programmers looking for a new job usually have a lot of offers available to them due to the lack of talent available in the market, and so good programmers usually choose the company working on the best product with the best culture — they want to work with “A” players. Building a solid reputation of being ethical will make it easier for you to close the best people for that reason, and bringing on more ethical people to the team will have significant benefits in the long-term.
On the same note, being ethical also makes it easier to retain employees. If an employee is working for a company that practices the values they care about, they are more likely to stay with that company for longer. This is because of the aforementioned rule that ethical people want to work with ethical people. Even if an ethical employee is presented with a great job offer at a larger company, they may be more likely to stay with their existing employer because they value their ethics more than a large bonus on their paycheck. This is especially important when you are building a startup, where losing critical team members early on can be seen as a poor signal to investors, and can indeed cause the company to fail. Being ethical reduces the likelihood of this scenario, and allows the company to cultivate and maintain more positive relationships with their customers.
Ethics for Makers
How can I build an ethical product? As aforementioned, the way in which you build an ethical product will be based on the specific values that matter to you. Therefore, when you are starting a new project or company — or are looking to embody more ethical values in your existing project or company — you should take some time to reflect on what values matter to you. These will be different for everyone: there is no rulebook to being ethical. However, when you have these values written down and you know why they are important to you, then you will have a clearer understanding of how you should approach building your company.
Building an ethical product makes decision-making easier. If you are presented with a decision that is unethical but immediately profitable and a decision that is ethical but unprofitable in the short-term, then having your personal values defined beforehand will make it easier for you to make an effective and informed decision. If you are presented with bootstrapping your company versus raising money from a VC who doesn’t share your values, then you would know that bootstrapping would be the best decision. Perhaps it would be more difficult in the short-term — VC money can help a lot in growing companies — but if they didn’t share your values, it would be likely you would end up making a lot of unethical decisions in the future to earn a profit that would make you feel uncomfortable. Ethics are the foundation of your moral compass; after you reflect on what values matter most, it will make it easier to make tough decisions because you know you are making them in alignment with your values.
Another key element of being ethical is correcting your path when you notice something is wrong. Sometimes our moral compass does not detect a problem in a feature that we have developed, but other people may notice an issue in that feature. A great example of this was the recent negative PR that Superhuman received after a long essay entitled “Superhuman is Spying on You” was written, which highlighted privacy concerns around their read status trackers. Various news outlets started to publish stories about the feature shortly after the essay was posted. The feature was initially designed to help people know when their emails had been read — a feature valued by enterprise customers, investors and founders, which Superhuman was targeting.
Despite the fact many people liked the feature, the fact that it tracked the location where an email was opened concerned many users and resulted in Superhuman receiving a lot of negative publicity. After this happened, Rahul Vohra, the founder of Superhuman, corrected the issue and made changes to the feature to make it more ethical, and published an article about the problem within 24 hours. Superhuman cared about building strong customer relationships, and so when they realized many customers did not like their read status feature tracking locations, then they stopped offering the feature. They may have made a bad decision implementing the feature in the first place, but their commitment to their ethics and adopting a customer-first mindset allowed them to quickly correct course and regain confidence from their customers.
Being ethical in building a product is all about doing what is right, irrespective of the rewards presented to you if you compromise your values. The early decisions that you make will have a significant impact on the future of your project or company, and so it is critical that you make them in alignment with the values that you want your company to embody. It is important to note that being ethical is not a one-time event — it is a continuous process. Although it may seem more lucrative making a decision that would compromise your ethics but result in a major profit, those decisions normally don’t work out in the long-term. If you want to stand out in a competitive market, be different than everyone else. Be ethical.