Image: Aimee Blase

Star Wars Episode VIII, The Last Jedi, garnered mixed reviews from audiences, but the most powerful reaction may have come from Mark Hamill, the actor who has portrayed Luke Skywalker since the original Star Wars release in 1977. Hamill lamented that his character originally stood for hope, but had transformed from an idealistic Jedi into a cranky recluse by the time of the sequel.

While some of the creative decisions in The Last Jedi displeased fans and even Hamill himself, Skywalker eventually joins the battle against the power hungry First Order and sacrifices himself for the greater good. While the character is unquestionably heroic, he has also shed some of his unbridled optimism and focuses on teaching the film’s protagonist about “balance in the force.” My interpretation of balance in the force includes the ideals of integrating our best and worst characteristics so we can be whole people, being honest with ourselves, and not dwelling in delusion.

These concepts from Episode VIII echo in venture capital and entrepreneurship, where delusion can often be rationalized as a cost of doing business and lying viewed as a necessary evil when attempting to achieve audacious goals. Rather than embrace “radical candor” as a means to arriving at a practical view of reality, I’ve seen venture capitalists prop up entrepreneurs with toxic positivity, pretending that everything is awesome all the time until the moment they pull the financial plug. In turn, entrepreneurs can take the same approach with their employees, customers, investors, and board of directors.

As a person who wants my praise to be credible, I’ve never been comfortable with fake compliments and I’ve often struggled to fit into an industry where cheerleading, “ruinous empathy,” and “manipulative insincerity” can be dominant modalities. Key moments in my career have reinforced this inner conflict.

As background, I started in venture capital in 1992, and I’ve spent most of my career as an investor. Following business school, I became an entrepreneur and after learning to bring new products to market at an enterprise software company, I co-founded the first cash-back rewards program for online shopping, a company called SmartFrog.

My co-founder and I raised a small amount of angel capital for SmartFrog, and then failed to raise a larger investment round from professional venture capital firms. We ran the company for a little over a year, and we were lucky to be able to sell the business to Cybergold, a small public startup in the rewards space.

Our first hire at SmartFrog was a young, talented utility player named Casey Bradstreet. Casey was smart, tough, and full of enthusiasm — she was willing to take on anything. I enforced high standards with Casey and things weren’t easy for her, because our entire company was trying something that nobody had ever done before.

A few years after we all left Cybergold, I reconnected with Casey and she said something that made a critical impression on me:

“When we worked together, I thought you were really tough on me. It wasn’t always fun. But after my next few jobs, I realize now that you’ve been the only person in my career so far who actually cared about my development, and I’m better off for having received constructive feedback, even if some of it was difficult to hear at the time.”

Positivity can be motivational, empowering, and exciting. It can cause people to try outrageous things they wouldn’t otherwise attempt, like running a startup. It can rally teams to meet product development timelines, accept lower compensation with the hope of building long term equity value, and most importantly, “believe.” When based in reality, positivity can be an incredible force.

But sometimes being positive is just… bullshit. In my experience with teammates like Casey, positivity worked best when tethered to disciplines like driving improvement and accomplishing tangible goals.

In the short term, positivity can deliver incredible results; but positivity can turn to negativity over the long term if there is no substance to back up the emotional highs, rhetoric, and mythology. The venture industry is littered with examples of toxic high fliers, like Fyre Festival, Theranos, WeWork, FTX, and many more that failed the test of time.

This is where honesty comes in. Everything in life has good and bad, especially startups and venture capital. Being positive without focusing on what can be corrected and improved leaves us vulnerable—just as Luke Skywalker realized the Jedi were blindsided because they were arrogant about ignoring the Sith. Honesty can be applied to hiring and firing, investment decisions, strategy, and even when to exit a portfolio company.

I’ve come to believe that honesty in venture capital and entrepreneurship requires adopting three principles:

• Getting beyond fear of conflict and rejecting the need to be popular
• Embracing a “data-based” view of the facts by integrating multiple perspectives from trained experts
• Using empathy and compassion to deal with people humanely, but never as an excuse to avoid facing reality

The last one is especially difficult, because true empathy is necessary to support startup founders. The entrepreneur’s job is tougher than the VC’s. Entrepreneurs deserve empathy. But even in the worst possible circumstances — such as terminating an employee — experts indicate that honesty is preferable. According to Patty McCord, the former chief talent officer at Netflix:

“people sue their employers because they think they’ve been treated unfairly…because they weren’t told the truth when they should have been about their performance…”

At its worst, toxic positivity can be unkind and manipulative, holding back progress. Barbara Ehrenreich describes this outcome in her 2009 book Bright-Sided, which focuses on economic injustice. Ehrenreich noted:

“there is a whole industry in the United States invested in this idea that if you just think positively, if you expect everything to turn out alright, if you’re optimistic and cheerful and upbeat, everything will be alright.”

Like Mark Hamill’s character in The Last Jedi, it’s key to see things as they really are, not just as we wish they were. If we want to improve over the long term, honesty is a necessity. Even when it’s uncomfortable.

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Also check out:

• “I Have A Bad Feeling About This…” — Yoda and Obi-Wan Kenobi offer lessons for corporate innovators & startup CEOs
• “You’re Changing The Deal” — Is there a creed in venture capital?
• Han Shot First — Why corporate VCs must give before they get
• “It’s a Trap!” — The myth of the mid-stage round
• Darth Venture — What VCs can learn from the management style of the Sith