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Who's to blame for the fiasco?

The Saturday Essay
Who's to blame for the fiasco?
By Alex Wilhelm • Issue #7 • View online
Welcome to The Saturday Essay, a relaxed weekend writing project from technology and financial journalist Alex Wilhelm.
The Saturday Essay publishes once per week, on Saturday, discussing business, economics, and politics.

Ethics, greed, and where they meet
The violent implosion of’s corporate brand only came after its business hit the skids.
It’s worth considering whether we would have found out how callous the company’s CEO was had’s business not entered a sharp decline.
What happened? The company’s 2021 revenue declines led to layoffs, and those planned cuts led to the somewhat insane decision to fire a huge group of staff en masse over Zoom.
That choice allowed a clip of the CEO’s speech firing the workers to get taped, and shared broadly. The fact that the video became an instant Internet sensation led to a firestorm of criticism, and, finally, the company’s CEO getting forced into what currently appears to be a soft exit.
Would we have found out about Vishal Garg and his awful treatment of employees and investors had he not managed to make a series of mistakes that finally led to his public embarrassment? Probably not.
That should tell us something.
When was hot, its erratic CEO was not only considered Just Fine by the company’s backers, but more than laudable; he was still investment-grade from their perspective. Evidence of that can be found in the eight-figure cash bonus that Garg secured after his company’s 2020 performance was tabulated, per reporting.
I vociferously doubt that Garg was a daisy in 2020 and a monster in 2021; people don’t change much. So, the CEO that was willing to affect a self-pitying tone while axing hundreds of staffers was the same CEO recently busy securing huge payouts for himself.
What went wrong?
As made it deeper into 2021, the impressive financial performance that the online mortgage vendor presented in documents detailing its SPAC-led combination was coming undone.
A recent filing from its SPAC partner concerning its recent financial performance is illustrative. Here’s a riff on what the company anticipated regarding its third-quarter results back in November:
We expect Total net revenue during the third quarter of 2021 to be in a range of approximately $310 million to $320 million, representing a 22% to 26% increase over the second quarter of 2021. This result is driven by increased Funded Loan Volume and the increase in Gain on Sale Margin.
That looks good, but with $679.6 million in H1 2021 revenues, it’s clear that’s revenues were on the decline in the third quarter. Indeed, the company’s Q3 revenue declines from its H1 2021 pace came after it posted top line erosion of “$171.8 million between the first and second quarter” of the year.
Looking ahead things are not much better:
Gain on Sale Margin compression, combined with declining loan volumes, is expected to result in declining revenue through the fourth quarter of 2021. We expect that our net loss will further deteriorate in the fourth quarter of 2021 compared to the third quarter of 2021 and will exceed our third quarter loss.
This is the business landscape that led to’s decision to fire a large chunk of its staff.
It had hired on anticipation of the macro climate staying static – low interest rates drove a refinancing boom, boosting Better’s results; when rates began to rise, that lucrative business declined – and when it did not the company had more staff than it needed.
Now you can make your own decisions about what a company should do in that situation. Personally, I would give the $25 million that I was recently paid back to the company to help keep those staffers aboard at least through the end of the year. The coward’s approach is to simply fire lots of people ahead of the holiday season, throwing hundreds and hundreds of families into financial turmoil to help the company’s numbers in the near-term.
But you know, do you.
What keeps sticking in my throat like a piece of bone is that if had simply fired its staff in a less onerous fashion, nothing would have happened. All the CEO had to do was dismiss the folks via email and the controversy would have been a few embarrassing headlines on TechCrunch and other business publications, noting the huge human cost levied on the working person by a wealthy executive and his even wealthier backers.
Instead, a PR mistake – let’s be clear about what this was – brought embarrassment, and a resulting torrent of further leaks that finally led to Garg’s toppling. It took a lot of private stuff going public to get him off the throne. More specifically, it took a lot of private stuff that the company’s investors were already aware of becoming public for Garg to face any sort of repercussion.
The lesson? Investors are in it for the dollar, and that mission stuff that startups love to chat about is incredibly secondary tertiary quaternary to the singular demand of high-end returns. Investors won’t strip a CEO of their power until well after the point that individuals are being chewed up by their organizational ineptitude, so long as the numbers are pointing up.
Who should we be mad at?
Garg, certainly. The man’s behavior is indicative of someone far from in control of their emotions. I’d hazard to argue that the ability to think clearly, and with something near to empathy are reasonable things to expect from any leader, corporate or otherwise. He fails those marks.
We should also hold everyone who enabled him accountable.’s investors knew that he was volatile, and not in control of his anger. We know that because some of Garg’s investors were on the receiving end of his outrageous behavior! And what did we hear from those investors? A flat lot of nothing, so far as I can tell.
What moral courage.
Of course, you may decide that investors’ only job is to generate returns for their backers. And that’s fine. But if your highest moral perspective stops at shareholder profit, get out of my life.
Will anything change?
Er, no.
The folks now stuck with shares in a company that is going to struggle to hire, and actually managed to torch its consumer brand with an internal business fiasco, could learn something from this. But I doubt that they will. Why? Because if they were willing to let Garg stampede over staff and themselves in the hopes of driving marginally better incomes for their own paymasters, they have done so before. Even more, they are likely currently allowing other leaders to treat workers like serfs in hopes of keeping ahold of their middle-difficulty employment.
I sincerely do not believe that Garg is an outlier in his behavior.
This is the terrifying lesson in the story: It’s fine to treat workers like single-use plastics, just don’t do it over Zoom – just don’t get caught and go viral. Then you make the company look bad, and, by extension, its backers.
However, from where I sit, simply managing’s CEO part-way out the door doesn’t absolve the company’s owners for how the business treated the folks doing the actual work. Indeed, I won’t forgive them.
If you are going to invest. If you are going to take board seats. If you are going to arrogate to yourself primacy and control over the livelihoods of hundreds of staff, you have to act like an adult. Not like a greedy child.
Here’s the investor list, in case you want a rundown of who to trust less than before.
P.S. The company won awards for being a great place to work. Maybe discount similar entries you see in the future.
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Alex Wilhelm

A weekly essay digging into economics, startups, and fun. Written by Alex Wilhelm, a medium-quality nerd and S-1 fanatic.

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