Over the years, ethicists have paid particular attention to entrepreneurs, partly because there is some evidence that entrepreneurs may be special folks with unusual appetites for risk, significant overconfidence, and optimism untethered to reality. And partly because the competitive pressures faced by entrepreneurs often create special incentives to commit unethical actions.

One of the more insightful and interesting takes on this topic is George Brenkert’s 2009 article in the Journal of Business Venturing. In this short blog post, we cannot do Dr. Brenkert’s nuanced article justice. We apologize in advance for inadequacies in that regard. But it is roughly fair to point out that Dr. Brenkert argues that simple rule-based ethical approaches are inadequate for the entrepreneurial world, that entrepreneurs often have to break the rules in order to take advantage of business opportunities, that entrepreneurs are often celebrated for being “tricksters” and wily competitors, and that in the context of business, sometimes rules are made to be broken.

As an example, Dr. Brenkert suggests that it can be justifiable for entrepreneurs intentionally to “positively exaggerate the status of the project in terms of how far along it is, the capabilities of the firm, the size of the firm, other funding sources, etc.” when speaking to potential investors, customers, employees, and even the public. These exaggerations can create a “self-fulfilling prophecy,” says Brenkert, by inducing investors to invest, customers to buy, and employees to work hard. These “are the very people who can make the entrepreneur’s (mis-) representations actually come true.”

Brenkert is aware that moral landmines abound with this approach, but is optimistic that entrepreneurs will generally be virtuous and that any harms done by the misrepresentations will be insignificant.

Given our focus on behavioral ethics, we emphasize that Brenkert’s article doesn’t mention the self-serving and overconfidence biases, which cause entrepreneurs (and everyone else) to tend to be overly positive in their representations and unduly conservative in their predictions about the damage their exaggerations might inflict. Because of these biases and the miscalculations they may cause even well-intentioned entrepreneurs to make, investors may lose shiploads of money, customers may buy worthless products, and employees may get taken for a ride. Check out the Theranos, WeWork, and Uber scandals that have occurred in the years since Brenkert wrote his article. Had Elizabeth Holmes, Adam Neumann and Travis Kalanick been straight arrows instead of tricksters, many people would be much better off.

All this is brought to mind by the fact that Robinhood, the fintech company offering a stock trading app aimed at young retail investors, has recently filed for an IPO. Founded in 2013 by Stanford graduates Vlad Tenev and Baiju Bhatt, Robinhood allows investors to trade for free.

Robinhood offers a very valuable service to investors—free trading! And it has shaken up and democratized the stock markets. However, it is also quite arguable that the firm’s entrepreneurial founders have made ethically questionable decisions.

Robinhood originally misled its users as to how it makes its money, which is mostly from “payment for order flow,” which means that although Robinhood does not charge its customers to do a trade, it refers their trades to the brokerage firms who pay them the highest rebates and not the firms who would give the customers the best price. Customers who trade less tend to do better, but Robinhood makes more money if its customers trade more, so a not clearly-disclosed conflict of interest exists.

Robinhood “gamified” trading (with digital confetti and all), encouraging excess trading by customers with gambling addictions.

And Robinhood added options trading, which is particularly profitable for Robinhood but especially dangerous for its unsophisticated customers who can easily rack up large losses in short periods of time.

Robinhood’s founders talk incessantly about their good intentions and how proud they are to have introduced an entire generation of investors to the financial system, but the self-serving and overconfidence biases cause them to underestimate the morally problematic aspects of their decision making.



George G. Brenkert, “Innovation, Rule Breaking ad the Ethics of Entrepreneurship,” Journal of Business Venturing, 24: 448-464 (2009).

John Carreyrou, Bad Blood: Secrets and Lies in a Silicon Valley Startup (2018).

Cyrus Farivar, “Gambling Addiction Experts See Familiar Aspects in Robinhood App,” NBC News, Jan. 30, 2021, at https://www.nbcnews.com/business/business-news/gambling-addiction-experts-see-familiar-aspects-robinhood-app-n1256213.

Sveinn Gudmundsson & Christian Lechner, “Cognitive Biases, Organization, and Entrepreneurial Firm Survival,” European Management Journal, 31: 278-294 (2013).

Jared D. Harris et al., “Ethics and Entrepreneurship,” Journal of Business Venturing, 24: 407-418 (2009).

Sheelah Kolhatkar, “Robinhood’s Big Gamble,” New Yorker, May 17, 2021.

Richard Nieva, “Robinhood’s No-fee Model Has Real Costs: ‘That is What Scares Me,” CNET, May 3, 2021, at https://www.cnet.com/personal-finance/robinhoods-no-fee-model-has-real-costs-that-is-what-scares-me/.

Dinah Payne & Brenda Joyner, “Successful U.S. Entrepreneurs: Identifying Ethical Decision-making and Social Responsibility Behaviors,” Journal of Business Ethics, 65: 203-217 (2006).

Eric Solymossy & John Master, “Ethics Through an Entrepreneurial Lens: Theory and Observation,” Journal of Business Ethics 38: 227-241 (2002).

Rakesh Sharma, “Robinhood IPO: What You Need to Know,” Investopedia, June 6, 2021, at https://www.investopedia.com/assessing-the-robinhood-ipo-5187047.

Brad Stone, The Upstarts: Uber, Airbnb, and the Battle for the New Silicon Valley (2018).

Rose Trevelyan, “Optimism, Overconfidence and Entrepreneurial Activity,” Management Decision 46(7): 986-1001 (2008).

Reeves Wiedeman, Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork (2020).


Image Credit

Marco Verch under Creative Commons 2.0 license.