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Teaching Principled Entrepreneurship

Luke Sykora, Stanford University October 23, 2019

When Cloudflare founder and CEO Matthew Prince visited their classroom to discuss his company’s interaction with neo-Nazi trolls and the resulting media firestorm, the students in Stanford Engineering’s “Principled Entrepreneurial Decisions” course had a jump start. The week before, they had each defined individual principles that could guide their own future leadership decisions. They’d been spurred along by Ray Dalio, founder of Bridgewater Associates and author of the bestselling book Principles, who spent hours of class time working one-on-one with students as they tried to capture actionable guidelines for their future personal and professional behavior. (The principles in Dalio’s own book range from “Be radically open-minded and radically transparent” to “Never allow the idea meritocracy to slip into anarchy.”)

Before Matthew Prince spoke a word, instructor Jack Fuchs walked the class through a written case study he’d developed based on prior interviews with Prince. The case described how Cloudflare, an internet security company, attempted to remain content-neutral though a series of interactions with controversial online material. It then explored why Cloudflare stopped providing services to the neo-Nazi outlet The Daily Stormer in the wake of a particularly repugnant blog post, one that viciously mocked Heather Heyer, the Charlottesville counterprotester who was run over and killed by white supremacist James Alex Fields, Jr. in August of 2017.

The big question: Even in the most flagrant cases of incendiary speech, should a single person in charge of a single internet infrastructure company be able to effectively decide whether a company deserves to be on the Internet?

Watching the students engage with the Cloudflare case and the issues it raised about free speech, democracy, and the responsibilities of the various layers of internet infrastructure, Fuchs felt something click.

“They were reflecting on their own assignment and on their own values and principles,” says Fuchs, a lecturer in Stanford’s Department of Management Science and Engineering who has held numerous leadership and board roles at growing technology companies. “As they were talking about the Cloudflare case they were bringing their own principles in and using that framework to discuss what decision they would make if they were in Prince’s position. That was when I really started to feel I was onto something.”

“You want to have protagonists who are willing to learn, who are willing to expose themselves and have three-quarters of the group disagree with them — and love it.”

—Jack Fuchs

Initially, Fuchs had envisioned a course focused simply on the tough, pragmatic decisions that need to be made when you’re running a growth-driven entrepreneurial company. At the same time, his colleague Tom Byers — faculty co-director of the Stanford Technology Ventures Program — was spearheading a new effort to emphasize applied ethics in entrepreneurship education. They started brainstorming how the two ideas might come together, and Fuchs ended up developing a course that examined not just the decisions business leaders make but also the principles that underlie those decisions. To do so, he created a series of unique case studies about a wide range of leadership issues that he debuted during Stanford’s winter 2019 quarter. He has since developed cases for European entrepreneurs as well, teaching them at ESCP Europe and at the Technical University of Munich.

As he prepared to teach a second iteration of his Principled Entrepreneurial Decisions course in Stanford Engineering in early 2020, Fuchs stepped back to distill a few strategies for entrepreneurship educators who want to help students think beyond firm survival or growth, toward the principles and values that make a venture worth pursuing and that make leading a company truly meaningful.

  1. Find self-reflective case study protagonists

Fuchs was determined to bring the protagonists of the cases he developed into the physical classroom for a live discussion — so much so that, when he taught a version of this course to German executives, he actually developed five German case studies so that he could deploy this method overseas.

As he decided who to bring into the classroom, he was intent on finding the sorts of leaders who would be especially open to criticism and dialogue. In the end, that meant he wrote up 13 cases, and only used 9 in the class. In situations where a leader seemed intent on editing out the most heightened moments of tension, and portraying their decision as the “right” decision, he anticipated unproductive class sessions.

“You want to have protagonists who are willing to learn, who are willing to expose themselves and have three-quarters of the group disagree with them — and love it,” Fuchs says.

  1. Consider your terminology

“Rightly or wrongly, ‘ethics’ often has a connotation of right and wrong,” says Fuchs. “‘Values’ tend to be idiosyncratic to individuals and organizations. Values can and should differ among organizations, and there is no right and wrong, per se. ‘Principles’ are more actionable rules of conduct that inform decisions, and those principles are very much specific to a person or to a company.”

Principles are tradeable currency. They can be written down, debated, prioritized, dismissed or adopted.

For his purposes, focusing on principles seemed to make the most sense.

Principles are tradeable currency. They can be written down, debated, prioritized, dismissed or adopted. By clearly articulating a principle — “It’s always wrong to lie to customers” or “Social media companies are responsible for all their users’ content” — it’s easier to step back and look at the idea objectively. Where might the principle help guide a decision? Are there situations where that principle is less important than a conflicting principle, or is there a need for principles to evolve?

“I want principles that are explicit enough to inform decisions,” Fuchs says. He gives the example of the cliché “the customer is always right” as a poorly stated principle. “It doesn’t inform decisions. What if the customer is being unreasonable?” he asks. A more actionable principle, and one he brought up in the class, comes from Aperia Technologies, a truck tire inflation company founded by two Stanford engineers: “When we set an expectation with a customer, we own it.” One can imagine a leadership team actually using that principle in a debate about whether to approve an expensive accommodation for a customer with a valid complaint.

None of this is to say that the terms “ethics” and “values” are best kept out of discussions of entrepreneurship, but rather that the concept of “principles” can give students a tool to approach complex decisions without presupposing a universally correct answer or ethical system.

  1. Go beyond crisis management

​When one thinks of the role of principles in decision-making, crisis moments like the Cloudflare case spring to mind — controversial, high-stakes, very public decisions that need to be made in the heat of the moment. And yes, principles can be very useful in those circumstances. “By developing your principles in advance, you will make better decisions during a crisis,” Fuchs finds. “Your principles will not necessarily dictate a clear answer, but rather they will allow you to debate and resolve a crisis through the language of principles, prioritizing them within the context of the crisis.”

But Fuchs was careful to present cases that were less dramatic as well. “Principles can be as fundamental as how a leadership team is formed and how it runs, or how a company interviews and recruits. Principles can be related to how your company deals with operational situations, organizational approaches (broadly defined) and external relationships with customers, partners, investors, and the community at large.​”

“Principles can be as fundamental as how a leadership team is formed and how it runs, or how a company interviews and recruits.”

—Jack Fuchs

One case he developed focused on how a pharmaceutical CEO balanced commitments to investors, employees and patients participating in clinical trials during the 2008 economic downturn, while another explored how a sales executive navigated a series of career-defining moments as she took on roles at several enterprise technology companies.

In the former case, says Fuchs, the principle that helped the CEO prioritize among competing stakeholders was: “Our company exists to serve patients.” Thus, the CEO sacrificed both investor and employee interests to preserve the patients’ access to medicine in the clinical trial. 

  1. Cast a wide net for students

To provide the broadest possible range of perspectives and individual principles, says Fuchs, it adds to class richness to include students outside of the usual business-friendly arenas. In his case, that meant drawing in not just MBA candidates and engineering graduate students, but education graduate students and humanities undergrads.

“We had people who came to the class with deep skepticism of business,” he says.

As long as they demonstrate a self-reflective attitude, having some students who aren’t “business-friendly” can be an asset. That skepticism can help surface alternative principles that might not be considered by the business and entrepreneurship boosters in the room.

  1. Model respectful yet pointed debate

“I had one student say that if he was on the board, he would have fired the CEO for the decision that he made,” Fuchs recalls.

While it may have been an intense moment, Fuchs didn’t find it inappropriate. After all, he’d selected his class guests to optimize for personalities that could handle this sort of exchange.

“It’s totally fine if most people disagree with the CEO; that’s great,” Fuchs continues. And often, he takes the lead. “Whenever there’s an opportunity for me to criticize the person in some way I want to make sure I do, because I want the students to feel comfortable,” he adds. “I learned early on at Berkeley [where he also lectured for a decade] that I need to model the willingness to have confrontational behavior, but to be respectful in that confrontation and allow the class to mirror that balance.”

“Keep the discussion on the level of principles,” he advises. “That, ironically, makes it less personal. You’d think that just discussing whether or not to do a product recall wouldn’t be personal, but that can get personal.”

Asking students to weigh in on the principle that informed a product recall, rather than the product recall itself, helps keep the debates productive, and students can speak their minds without cornering each other and the guests into argumentative postures. (This approach to debate works just as well in company meetings as in classrooms, Fuchs has found. “If principles are explicit, communicated, owned and followed by a company, during debates about difficult decisions, the discussion is informed by thoughtful debate about those principles, rather than by arguments about which specific decision to make,” he adds.)

The goal is that students leave the course with a framework of values and principles that are unique to them, a value system that feels chosen rather than imposed.

For his own part, in the classroom Fuchs tries to interrogate principles proposed by both the guests and the students, while avoiding putting his own thumb on the scale too much. “I want to make sure that I am not somebody who says: This is something that worked for me once, so you should do it that way all the time,” Fuchs says. “If I’m nuanced in how I’m portraying things, it allows the class to also be nuanced.”

The goal is that students leave the course with a framework of values and principles that are unique to them, a value system that feels chosen rather than imposed, and one they can rely on whether they ultimately become entrepreneurs or find themselves tasked with very different sorts of professional decisions.

“I try not to use words like ‘never’ and ‘always,’” says Fuchs. “I strive to help students and entrepreneurs find what works for them.”