Forget the Myths: How Entrepreneurs Can Succeed in Real Life

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Wharton’s Ethan Mollick talks about his new book 'The Unicorn’s Shadow' and the myths that hold entrepreneurs back.

Mark Zuckerberg, Bill Gates and Jeff Bezos are wildly successful entrepreneurs, but they shouldn’t serve as the only models for aspiring founders. In fact, holding these men as the highest goalpost can be detrimental to the dreams of hardworking entrepreneurs who don’t look like them or come from the same academic or socioeconomic backgrounds. The latest research on startups offers quantitative evidence of something that Wharton management professor Ethan Mollick has long believed: Great entrepreneurs are made, not born. That’s the overarching message in his new book, The Unicorn’s Shadow: Combating the Dangerous Myths that Hold Back Startups, Founders, and Investors. Published by Wharton School Press, the book offers hard data to guide founders and correct popular assumptions about what it takes to build a winning company. Mollick, who is also co-founder and faculty director of Wharton Interactive, a simulation learning platform, recently sat down with Brett LoGiurato, senior editor at Wharton School Press, to discuss the book and his work at Wharton Interactive. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation appears below.

Brett LoGiurato: What originally drew you to your area of research? And how did you come to Wharton?

Ethan Mollick: I came here through a little bit of a roundabout path. I started off as a consultant, and then with a college roommate launched a startup company in the early days of the internet. We invented the pay wall. I literally made every mistake possible in the company. It was ultimately successful, but I basically did everything wrong. So, I thought, “I’m going to go get an MBA and figure out how to be an entrepreneur.”

I went to MIT to get an MBA, and I realized nobody really knew the answers. I decided I’ll figure it out or help figure it out, so I got a Ph.D. That’s been my mission ever since: figuring out how to make entrepreneurship and innovation more science-driven, more accessible.

LoGiurato: You wrote this book to dispel some of the myths of entrepreneurship. What are some of the most common assumptions that aspiring entrepreneurs get wrong?

Mollick: Entrepreneurship has historically been full of myths because we haven’t had data. People have been making decisions based on gut feel and intuition and trying to pattern match. Some of the patterns they’ve been matching have been those of very successful past founders. But the problem is, those successful past founders tend to look very similar to each other. They’re often male, young, college dropouts with a technical background. Think Bill Gates or Mark Zuckerberg. The research shows that that is not the best or only model to be a founder. As a result, people who might otherwise enter entrepreneurship are [discouraged] because they look at founders that are famous and that they see in the movies, and they don’t resemble those people. They think they can’t be founders. But the evidence shows that that’s not right at all.

“Entrepreneurship has historically been full of myths because we haven’t had data.”

LoGiurato: The book has an eye-catching title, The Unicorn’s Shadow. Let’s talk about that.

Mollick: A unicorn is the nickname for a private company with over a $1 billion valuation. That’s Uber, Airbnb — all these pre-IPO companies are unicorns. Because these unicorns are the public face of what you get to be if you’re a rock star in the entrepreneurial world, they have an outsized influence over the entire industry. They cast a shadow in their own shape over everything else. People want to be like these companies, so they find themselves emulating these organizations.

The research shows that not only does this usually not lead to success, but it also discourages a lot of people who might otherwise enter entrepreneurship because they don’t see themselves as being in the mold of these unicorns.

LoGiurato: What’s one thing you want readers to take away from your book?

Mollick: There’s this feeling that entrepreneurs are born and not made. That is, by and large, completely incorrect. And if an entrepreneur can be made, that means an entrepreneur can be taught. One of the most exciting sets of evidence that we’ve had in the last year has been studies showing that when people learn to be better entrepreneurs, their companies do better. They get higher revenues. They’re more likely to survive. What I’d like people to get out of the book overall is there are skills you can learn to be a better entrepreneur, and I think that we teach those skills in the book.

LoGiurato: You’ve done a lot of different kinds of research, on everything from crowdfunding to the persistent issue of gender gaps in different areas of the startup world. What data has surprised you the most?

Mollick: I would say that there are a couple of interesting, surprising things. One piece of good news. One piece of bad news. The good news: I study crowdfunding, and it turns out that when large groups of people get together to make decisions, they’re actually pretty rational decisions. They also tend to reward risk-taking. [Individual investors] are more conservative and less likely to fund really interesting, innovative projects that the crowd will.

On the downside, I, and a lot of other researchers, have been looking at gender gaps in entrepreneurship, especially the persistence of funding gender gaps and why women receive much less venture capital than men. Those [gender gaps] have proven to be amazingly stubborn and persistent across many different measures, different cultures and different approaches. I think we’re still trying to untangle the problem and offer better solutions.

LoGiurato: Penn is rated as one of the top schools for aspiring entrepreneurs. A recent analysis found Penn to be fourth, and a number of graduates have gone on to lead startups, raising at least $1 million. What do you think helps make Penn and Wharton students so successful?

Mollick: I’d like to claim it was all due to our teaching, but I think it goes beyond that. I think the secret story of the success of entrepreneurship is not the lone genius who comes up with an idea, but it’s the manager who builds a team, who successfully leads an organization, who considers strategy and finance and all these other pieces. We are one of the top business schools, so we teach how to do those kinds of things. Those skills are valued in startups just as much as they are in the corporate world.

“If an entrepreneur can be made, that means an entrepreneur can be taught.”

LoGiurato: You co-founded Wharton Interactive with Sarah Toms, another Wharton School Press author. Talk to us about the origins and the goals of that effort.

Mollick: The way we teach today in the schools is very similar to the way Socrates taught about 2,500 years ago. The Socratic method — sage on a stage, we call it, where you stand up and you say things — can be very compelling. Cases can be compelling. Lectures can be compelling. But we’ve had a massive technological change in the last few decades that has enabled new forms of teaching. That’s combined with a games industry that I’ve been studying for a very long time, and I’ve been building games for a long time. Games offer really compelling templates for teaching and for educating.

We’ve combined this interactivity of games and simulations with new modes of teaching, and we’ve used that to create very new experiences — simulations that teach you. Interactive tools that bring the classroom into the real world, and vice versa. We’re really trying to transform education in a fundamental way.

LoGiurato: How has Wharton Interactive changed the way that you think about teaching and expanded your capacity to reach new learners?

Mollick: When you teach entrepreneurship, usually most classes in most universities end with a pitch. The end of your entrepreneurial experience is a pitch, and pitching is really cool. That initial pitch for your idea usually happens a few months into your startup. But the really interesting stuff often happens in your startup eight months, 10 months, 12 months in, where we know a lot about how to grow a company, how to scale it, how to hire. Those are things that don’t come up in pitches.

One of the things that we’re doing that’s really exciting is we’ve built a real-time simulation where students help run a fake business. We’ve built a fake Gmail, fake Slack, fake Dropbox. You run a business over the course of three weeks in real time and get that experience in what it’s like to actually deal with customers and suppliers and financial issues and lawyers. That lets us go deeper and further into the startup process.

The simulation, which we call the Looking Glass Simulation, has been running for several years. It’s almost like a flight simulator for running a startup — or Dungeons & Dragons for managers — in that you actually run through and live through these scenarios in advance.

I find that people who go through the simulation rate it as much more effective than other kinds of teaching techniques. But what’s cool is I’ve had students reach out to me two years after playing the simulation, as they run their own startups and they’re raising venture capital, and they talk about events that happened in the simulation as if they happened to them in real life. Trying to really give people that experience, that sort of Inception moment of having lived through this before, is a really big benefit.

“New ventures are the key to economic growth, and they’re often the key to individuals raising their socioeconomic status.”

LoGiurato: What’s the most surprising thing that’s happened during one of the simulations? What have been some of the unexpected benefits or hurdles when conceiving some of the simulations?

Mollick: We do a lot of interesting simulations. I have personally built, with partners, two board games, a couple of single-player games and some elaborate multiplayer games. Our most elaborate right now is an escape room that teaches you to be a better leader while you pilot a ship landing on Saturn. We have had executives walking around in space helmets, talking in walkie talkies as they try to repair the hull of their failing spaceship. At the same time, we’re watching everything they do to see how they lead and communicate and talk with each other. We have lots of interesting, kind of wacky events happening on a regular basis.

Entrepreneurship is the engine for the growth of the economy. All new jobs come from startups. New ventures are the key to economic growth, and they’re often the key to individuals raising their socioeconomic status. And talent is everywhere. We have a big world full of talented people. But opportunity is not well distributed. The flip side of Wharton being one of the best places in the world to start being an entrepreneur is that it’s really easy to start a company from Wharton, but it’s less easy if you don’t have access to the resources, education and connections here.

I think one of our big missions in Wharton, and one of the big missions with the book, is to try and take what we’ve learned, what we know about entrepreneurship, and make that accessible to more people – to democratize opportunity, and not just democratizing the ability to start a company.

LoGiurato: What was the hardest thing about writing the book?

Mollick: The world’s awash in entrepreneurial wisdom. There are lots of successful entrepreneurs who will tell you their gut feelings about how they succeeded. There are lots of successful and very persuasive venture capitalists who have written manifestos on what it takes to run a startup company and have active Twitter accounts that are full of information. But that’s based on wisdom. That’s based on one person interpreting the experience of their success or the successes they’ve seen.

Our research shows that most of those interpretations aren’t actually correct. If you interviewed people about why they failed their company and then compare that to the real reasons, there’s a huge gap because people tell stories that are not necessarily related to what actually happened. What’s gone on in places of academia, but especially here at Wharton, has been a revolution in empirical analysis of entrepreneurship. What I hope to do with the book is give you the latest research from just even the last few years on what it takes to be a successful startup. It doesn’t substitute for the wisdom, but it helps to have some real knowledge there, some real data to go along with it.

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