The Halo Effect: Why We Keep Falling for Corporate Frauds (and Ignoring the Skeptics)

There is a certain rhythm to corporate fraud. A charismatic figure appears, claiming to be disrupting an industry, armed with a sleek PowerPoint deck and a TEDx talk. Investors throw money at them. Journalists write glowing profiles. They land a Forbes 30 Under 30 spot. And then, inevitably, the house of cards collapses.

Elizabeth Holmes. Adam Neumann. Sam Bankman-Fried. The list goes on. And yet, despite these high-profile downfalls, the cycle repeats. Every few years, a new “visionary” arrives, promising the future, and the world rushes to believe them. Why?

The Halo Effect: When Charisma Becomes Credibility

One of the most dangerous cognitive biases in business is the halo effect—our tendency to assume that if someone is impressive in one area, they must be competent in others. If a speaker is charismatic, well-dressed, and has an expensive-looking slide deck, we subconsciously assume they must be brilliant.

This is why frauds flourish on the conference circuit. The bigger the stage, the slicker the delivery, the more likely an audience is to trust them. Never mind that their actual business may be held together with duct tape and wishful thinking—if they sound confident, people will buy into the story.

Red Flags on the LinkedIn Circuit

A quick way to spot potential frauds? Look at their LinkedIn bio. The most dangerous grifters always have the flashiest titles:

• “Visionary Entrepreneur” – Has burned through three startups, none of which had revenue.
• “Forbes 30 Under 30” – A list so cursed that it has become a predictor of future indictments.
• “Thought Leader” – A self-given title, usually awarded after going viral for an AI-generated quote about success.
• “Industry Pioneer” – If the industry is real, you don’t need to tell people you’re a pioneer.

The bigger the ego, the bigger the fall. If someone spends more time talking about their personal brand than their actual work, alarm bells should start ringing.

Why Humans Fall for It: We Love a Good Story

The reality is that people want to believe. We are wired for narratives, not numbers. If given a choice between a compelling founder story—“I started this company in my dorm room with $100”—and actual due diligence—“the financials don’t add up”—most people will choose the story.

• Holmes had the myth of the genius Stanford dropout revolutionizing medicine.
• Neumann had the cult of the modern office utopia.
• Bankman-Fried had the illusion of the next financial messiah.

Each time, investors, journalists, and the public ignored obvious red flags because they were emotionally invested in the idea.

The Skeptic’s Dilemma: Nobody Likes a Buzzkill

Here’s the problem: The people who ask the hard questions are never the ones celebrated.

• Skeptics are written off as cynics.
• Short sellers are seen as villains.
• Industry watchdogs are called haters.
• Anyone questioning a rising star is dismissed as jealous, old-school, or just not visionary enough to get it.

Think about the reaction to short sellers before a major collapse. When investors were questioning Theranos, they weren’t praised for protecting the market—they were attacked for “not believing in the future of healthcare.” When analysts flagged WeWork’s insane financials, they were accused of “not understanding the vision.”

And yet, without them, how many more billions would have been lost?

Why This Blog Exists: A Critical Mindset in Biotech and Healthcare

This entire blog started with a critical mindset—calling out the failures and risks in biotech and healthcare. Industries where hype and misplaced optimism can cost not just money, but lives. If a hedge fund backs a fraudulent AI startup, some investors lose money. If a fraudulent biotech company fakes results, patients suffer.

Yet, questioning too-good-to-be-true biotech claims often puts people in an awkward position. If you criticize a flashy new AI-drug discovery startup, you’re accused of “not supporting innovation.” If you ask tough questions about a company promising a cancer cure in five years, you’re “holding back progress.”

But progress isn’t built on hype—it’s built on rigorous scrutiny. And if someone can’t withstand scrutiny, they probably don’t deserve funding, influence, or credibility in the first place.

How to Spot a Fraud Before the Fall

1. If It Sounds Too Good to Be True, It Is.
   • “Curing cancer with AI.”
   • “Revolutionizing finance through quantum computing.”
   • “A world-changing breakthrough” that somehow still requires a pre-revenue valuation of $10 billion.
2. Watch the Language.
   • Real experts talk about challenges.
   • Grifters talk in hype cycles: paradigm shifts, moonshots, game-changing tech.
3. The Bigger the Personal Brand, the More Skepticism Required.
   • A genuine CEO is too busy running a business to post 12 times a week about their “leadership journey”.
   • If they have more inspirational posts than actual product updates, they are likely selling themselves, not a business.

Final Rule: If Everyone’s Cheering, Be the Skeptic

The most valuable trait in business isn’t optimism—it’s healthy skepticism. If someone is universally praised, ask why. If a founder is hailed as a genius, look at the balance sheet. And if a speaker calls themselves a “visionary thought leader”, walk away.

Because the bigger the stage, the harder the fall. And when it happens, the only surprise will be that anyone was surprised at all.