Ethan Mollick Profile picture
Mar 3 8 tweets 6 min read
My sister @JMollick produced #TheDropout - the new Hulu series on Elizabeth Holmes. In addition to being entertaining, it also shows some drivers of success in entrepreneurship.

So: a 🧵 of research on Theranos, and what honest investors & founders can learn from the lies. 1/
Much of the fraud was explained by "Symbolic Action." In a classic paper, Zott & Huy find that founders who skillfully use symbols do better, since folks view the symbols as indicators of real ability. They identify four categories of symbolic action, all exploited by Holmes 2/
The first category is showing personal capability, and the paper describes multiple ways of doing this: you can look the part of the entrepreneur; you can conspicuously show connections to top schools; or you can show that you are personally "all in." Elizabeth did all three. 3/
The 2nd category is showing that you are organized like a real professional organization. Common ways for entrepreneurs to indicate this are to have professional office spaces and the trappings of what people expect to see in a real firm. Elizabeth was very aware of this. 4/
The third category is to show symbols that your business can achieve its goals. The three classic ways to do this are to show off half-working prototypes, win industry awards, and show that you have received money from prestigious funders. 5/
Finally, we have a demonstration of key stakeholders, because if important people back your company, it must be good right? See the Theranos Board! (Of course, this didn’t convince real biotech VCs, who would have wanted to see stakeholders in the medical field.) 6/
And Holmes also was very good at pitching. This paper shows how she pitched Theranos using powerful techniques:
🖼Framing: Why the world needs improvement
💉Filling: Vivid images of how she would solve it
👥Connecting: Showing others trusted her
💪Committing: Showing dedication
Unethical startups are more likely to raise 💰 but also tend to waste it, hurting overall innovation. By comparing 2 sets of books, this paper identifies Chinese startups that got grants via fraud. Frauds were less likely to hire quality people & to conduct significant innovation

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More from @emollick

Mar 2
If this story is widespread, it is a big problem for web3. Lots of research shows at the start of new industries (like web3), the whole space need to undergo a process of legitimation: becoming normal to outsiders. Failure to be accepted can doom industries- think VR in the 1990s Image
The issue is that industries are embedded in webs of connection. They need to be taken seriously by established firms who will use their solutions in their business; by regulators who will integrate the industry into the legal framework; by employees who want to build careers…
Fighting everyone leads to bad outcomes. Outsider industries like nanotechnology or solar became legitimated when companies worked with regulators, the public, and other partners to build coherent stories for the entire industry. Otherwise, even promising technologies can fail. ImageImage
Read 4 tweets
Feb 25
Volkswagen killed 290 US kids, and led to low birth weights for 38,686 more, by cheating on diesel emissions.

Also an illustration that air pollution is much more dangerous than we think: just 1 cheating diesel per 1,000 cars upped infant mortality by 1.7%. via @jenniferdoleac ImageImage
If we understood the health damage of fossil fuel cars, we would be pushing for electric vehicles much, much more: "moderate amounts of car pollution impair population health at all pollution levels and across the socioeconomic spectrum." Here's the paper:… Image
Another study demonstrating the danger of car emissions: when electronic tolls were introduced in New York, congestion at toll plazas dropped, lowering pollution. The rate of premature births to mothers near the plaza dropped by 8% & low birth rate by 10%!… Image
Read 4 tweets
Feb 23
Short digital detoxes actually seem to backfire: a day-long break from social media does not make you feel any better & may even lower your sense of connection, according to preregistered experiments. Instead, the researchers had to deal with people cheating on their 1-day detox.
A week-long experiment where the treatment group reduced their online social media use by 50% also had no impact on either well-being or ability to concentrate (though people assigned to reduce social media use thought they could concentrate better - even though they couldn't!)
Careful studies on the effects of social media & screens on well-being find a lot of these null & small effects. For example, this study of 355k teens shows the impact of screen time on well-being for adolescents is only a little larger than the impact of eating potatoes 🥔
Read 4 tweets
Feb 15
Fellow academics, what is a powerful concept from your field that, if more people understood it, their lives would be better?

This paper surveyed every economist in Sweden and found the overwhelming choice in economics was "opportunity cost." The paper:…
In entrepreneurship, one contender is disciplined experimentation for assumption testing. Whether you are starting a company or exploring a career, you should think of cheap tests that you can run before you commit to reduce your uncertainty & improve odds
In learning, I think a very useful concept is "desirable difficulties" - the idea that, just like any other kind of training, you need to be challenged to learn. This is a problem because being challenged makes us feel ignorant, so we think we learn less!
Read 4 tweets
Feb 13
We don't talk enough about a core reason for the fracturing of elite control in politics: the end of board interlocks, the bedrock of the ancient "old boys networks." Sociologists have studied them for a century, now they are rapidly unraveling. Summary:…
The end of board interlocks (where directors sit on multiple corporate boards) was caused by the scandals that led to the Sarbanes-Oxley Act of 2002, and the Act itself. It made sitting on multiple boards risky.

100 directors sat on 5+ major boards in 1974, now only one does.
Elite control via overlapping boards of directors has been concern for so long that soon-to-be Supreme Court Justice Louis Brandeis wrote a book about it in 1914. Highly connected board members also had links to government and charities, allowing elites to coordinate their action
Read 4 tweets
Feb 5
The problem with unmoderated online spaces is that a few people will always ruin them. Most conflicts between Reddit can be traced to a handful of active users with a history of angry comments. A mere 0.1% of all Reddits generate 38% of attacks on others, and 1% accounts for 74%.
A second paper shows that, while unrepentant trolls often need to be banned, most other conflict can be fixed by quickly removing bad posts & educating people about why the content is gone. Trolls aside, giving these explanations reduces future bad behavior by most users.
Here is the paper on community conflicts on the web:…

And here is the one on moderation:… (which basically boils down to an XKCD comic, as is fitting)
Read 4 tweets

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