Dorothy Crenshaw November 8, 2023 | 05:03:15

Sam Bankman Fried, FTX, And The Limits Of PR

Of all the opinion journalism about former FTX CEO Sam Bankman Fried’s quickie conviction, Ginia Bellafante’s article struck me. It explores the gap between how tech insiders and investors saw the tech whiz kid and the way a jury of regular people did. It even includes accounts of testimony at his trial that Mr. Bankman-Fried refused to wear a suit when investor Anthony Scaramucci asked, because, he claimed, “T-shirts were crucial to his ‘brand.'”

In other words, it’s all about image. The most important corporate function? PR.

Apparently Bankman Fried took that literally. According to The New York Times, FTX lacked crucial elements of corporate governance, including a chief financial officer, a human resources or compliance department, or a board of directors. Instead, a significant portion of its resources was dedicated to a public-relations manager who arranged interviews and managed Bankman Fried’s public appearances.

The Lessons of Theranos, Unlearned

The quick collapse of FTX and its boy wonder is also reminiscent of another high-flying tech CEO who prized personal PR above all  things — Elizabeth Holmes, the disgraced founder of Theranos. Anyone who works in PR for high-growth tech businesses knows that the media are eager to cover colorful founders, especially if they’re young. If they’re female, they’re irresistible. Investors were taken in by Holmes’s charisma, and even tech journalists showed surprising credulity when it came to the Theranos blood-testing story.

There’s also a media herd mentality in sectors like Silicon Valley. Media coverage brings more media coverage. Holmes became a business celebrity, and everyone wanted a piece. Few questioned the absence of peer-reviewed research on the Theranos technology, and the culture of secrecy was covered as a Holmes quirk. It took a hard-nosed investigative reporter outside the bubble, John Carreyrou, to bring down the house of cards.

Don’t Use PR for Evil

It’s true that in the exalted world of high-growth technology companies, public image can make a brand. In a new or emerging sector like biotech or crypto, it’s particularly compelling. A public face can make the esoteric accessible and build confidence in a brilliant future even if the products or underlying tech isn’t quite there. The promise of positive media coverage and a strong brand reputation can seem like the keys to success.

But Sam Bankman-Fried’s crash and the collapse of FTX serve as stark reminders that the image, and an excessive focus on optics, can hide a much uglier picture.

Strategic PR can position a young business in a new or emerging sector. It can help build credibility, attract investors, and lay the groundwork for market demand generation. But it should never come at the expense of core operational functions. And it certainly shouldn’t be used as a smokescreen to hide critical deficiencies or mask a charade.

Obviously, a high-growth tech company, like any organization, should prioritize accountability and sound corporate governance. A public image should reflect a foundation of ethics and good business practices rather than paper over failures. In the long run, it is the substance of a company’s operations and its commitment to delivering value that will determine its success, not a glossy exterior.

A preoccupation with PR over essential governing functions is empty and fruitless if there’s no substance behind it.

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