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The Student Role in Shaping Entrepreneurial Ethics

Maurice Chiang, Stanford University October 2, 2019

When I arrived at Stanford as a first-year student in 2015, the mythos of Stanford dropout-turned-CEO Elizabeth Holmes pervaded campus. With over $400 million raised from names like Rupert Murdoch and Betsy DeVos, and with a valuation of over $9 billion, her company Theranos seemed indestructible. They were revolutionizing blood diagnostics. However, just one month into my freshman year, John Carreyrou’s iconic exposé dropped, ultimately leading to the dissolution of Theranos.

Stories of Silicon Valley’s ethical lapses continued to pile up during my years as an undergraduate. There were the controversies at Uber during former CEO Travis Kalanick’s tenure, and serious privacy lapses at Facebook under Mark Zuckerberg’s watch. Just this September, uBiome – a microbiome-focused startup I’d been following – filed for bankruptcy amid a federal investigation of its insurance billing practices. That news has further reinforced my sense that the problem doesn’t revolve around a few bad actors. Rather, it is something more systemic, stemming from the lack of attention tech company founders are giving to questions of principles and values.

Stories of Silicon Valley’s ethical lapses continued to pile up during my years as an undergraduate.

Over the past two years, as the president of ASES – a Stanford-led global student entrepreneurship organization – it also became clear to me that ethical dilemmas don’t end with the Silicon Valley elite. When teaching how to pitch investors, for example, many entrepreneurship groups emphasize providing a polished vision of a product that may not in fact be ready. This “fake it till you make it” approach that student entrepreneurship organizations teach has its advantages, allowing you to get a feel for user and investor interest, but it also raises questions. When pitching investors, for example, when does optimism cross the line into misrepresentation? And how can startups hold onto core values while being open to investor and market feedback?

These and other observations forced me to ask how my own generation of entrepreneurial leaders might be better prepared to brave ethical dilemmas. This year, while working as the Teaching Assistant for the Mayfield Fellows Program with professor Tom Byers and Management Science and Engineering lecturer Ann Miura-Ko, I discovered that they, too, were asking similar questions about the role of ethics in entrepreneurship. I soon joined Byers’s Principled Entrepreneurial Action and Knowledge (PEAK) initiative, which aims to embed applied ethics into the core of entrepreneurship education.

Given that much entrepreneurship education takes place outside of the classroom…I wanted to find out if students were interested in learning about principled decision-making in their groups and initiatives.

As the PEAK team explored what could be done, we first looked at the current landscape. We identified some great movement within the individual technology disciplines themselves towards ethics education. On the Stanford campus, classes like Data Privacy and Ethics and Ethics in Bioengineering are providing crucial resources for students. However, technology-specific discussions will inevitably miss many ethical questions related to the process of funding, scaling and managing a rapidly growing company, questions that cut across all technologies and disciplines. In response, Byers has been exploring how principled decision making can be integrated into the entrepreneurship classroom. Courses like Management Science and Engineering lecturer Jack Fuchs’s Principled Entrepreneurial Decisions, meanwhile, have begun modeling what a more introspective, principles-driven approach to entrepreneurship education might look like.

Given that much entrepreneurship education takes place outside of the classroom, though, I wanted to find out if students were interested in learning about principled decision-making in their groups and initiatives. To answer that question, I interviewed dozens of students and student leaders around the world, connecting with local ASES-affiliated groups in places like the Philippines, Australia, Greece and India, as well as other entrepreneurship organizations on the Stanford campus.

The Status Quo

As I spoke with fellow student entrepreneurship leaders at Stanford and around the world, their responses brought two points into focus.

  1. Ethics has been a back-burner issue.

When asked if our ASES programming integrated an appropriate amount of values-based education, the global ASES-affiliated leaders I spoke with indicated that we did so poorly, rating our efforts 5.2 on a scale of 10. One of our former directors put it bluntly, stating that “ethics are not something that we focus on in our organization.” The general sentiment was that we were doing a “below average” job at catalyzing conversations about principles in entrepreneurship – despite many of our members indicating that they often “think about ethical tensions” in their work.

From the Young Entrepreneurs Society in Sydney to the Entrepreneurship Cell in Delhi, the international student group leaders we surveyed indicated that teaching principles and values in entrepreneurship was crucial.

  1. Students recognize the need for engaging with ethical questions.

Despite admitting that the current efforts were inadequate, our ASES members at Stanford indicated, when polled on a 1-10 scale, that values were important to them in entrepreneurship (9.3/10). Leaders of other major entrepreneurship organizations at Stanford responded similarly: The Stanford Social Entrepreneurial Students Association, the Stanford Pre-Business Association, the Business Association of Stanford Entrepreneurial Students, and Stanford Women in Business all indicated that they’d like to, among other things, “place a greater focus on educating their members,” “focus on ethics programming,” “engage in discussion about ethics,” and “set an example for best practices.” The feeling is not limited to the United States, either. From the Young Entrepreneurs Society in Sydney to the Entrepreneurship Cell in Delhi, the international student group leaders we surveyed indicated that teaching principles and values in entrepreneurship was crucial, giving it an average score of 8.5 out of 10 in terms of importance.

Filling the Gap

Our initial outreach indicates that there’s an obvious gap between student interest in the ethical aspects of entrepreneurship, and actual programming to address that demand. How might student groups and initiatives fill that gap? So far, I’m particularly optimistic about five strategies that seem likely to make an impact.

  1. Develop or adopt plug-and-play tools for applied ethics education

Imagine teaching calculus without a textbook – it’s possible, but without clear, structured course content, it would be a lot more difficult. That’s the situation student leaders are facing today. Almost all student groups I spoke with indicated they didn’t have “formal” ethics programming. I would like to see students work with educators to create tools and frameworks that enable student leaders to more easily catalyze these conversations.

There are tools that educators have created in the past – Mary Gentile’s “Giving Voice to Values” being one of the more prominent – but none that I know of have successfully implemented a unifying framework for principled entrepreneurship.

Almost all student groups I spoke with indicated they didn’t have “formal” ethics programming.

Such a framework (whether taking the form of a book, manual or digital resource) would guide students through the process of formulating and executing an entrepreneurial venture, raising questions at each juncture about how values and principles should play a role. These tools could leverage the power of engaging case studies to stimulate interactive discussions and focus debate on real-world problems. Student entrepreneurship groups might even co-create these tools with educators, ensuring that they serve as versatile, teachable, contextually flexible “how to” guides.

  1. Emphasize the strategic advantages of ethical entrepreneurship

To disrupt the way things are currently done, students must have a strong reason to adopt new paradigms. One strategy to encourage adoption would be to reframe values-based entrepreneurship as a competitive advantage.

Although nascent, there is a growing body of evidence to suggest that non-monetary values and principles can provide a competitive edge. In 2015, for example, research by Yung-Ming Shiu and Shou-Lin Yang published in the Strategic Management Journal indicated that a legacy of corporate social responsibility activities can provide “insurance-like effects” when a firm faces a negative event.

One strategy to encourage adoption would be to reframe values-based entrepreneurship as a competitive advantage.

As a direct case study, we can also look to the competition between Zenefits and Gusto. Zenefits grew at all costs (in fact becoming the fastest growing company in Silicon Valley), going so far as to allow unlicensed brokers to sell health insurance to consumers. It ended up in trouble, facing regulatory investigations and angry investors and customers. In the meantime, Gusto grew more slowly, but prioritized ethics and values; when Zenefits later faced regulatory settlements and layoffs, Gusto continued on a steady path of growth, and was able to pick up former Zenefits customers.

  1. Experiment with various institutional supports

At Stanford, the PEAK team has worked with a student leader committee to get a pulse on how institutional changes might encourage student entrepreneurship groups to actively discuss ethics. Although we’re still in the early stages, I believe that rethinking institutional support may be a key part of the narrative. Institutional involvement could mean, for example, tying engagement with principled entrepreneurship to certain funding sources. Another approach might mimic something like the Fair Trade certification, allowing groups that adopt a set of ethics-related training practices to benefit from positive acknowledgement by a parent institution. Student committees and school administrators might also look at recruitment incentives. Could schools offer early access to new member recruitment or priority at club fairs to groups that offer ethics programming?

  1. Incorporate applied ethics into pre-existing programming

In many cases, the most effective way to elevate principles and values is to simply incorporate those concepts into events and programs that are already taking place. In the Mayfield Fellows Program, for example, we frequently leverage the power of student-designed, real-world case studies to teach entrepreneurial strategy, breaking the class up into two groups to debate opposing viewpoints. This year’s teaching team integrated more ethics-related questions into the case studies. It proved a remarkably efficient way to reframe business decisions as, at times, ethical dilemmas.

In many cases, the most effective way to elevate principles and values is to simply incorporate those concepts into events and programs that are already taking place.

Interactive experiences that take place in accelerators and bootcamps can also be adapted this way. A main part of the ASES Bootcamp – a program for Stanford first-years and sophomores – involves groups of students building a business and mock-pitching to real investors. Should the evaluation criteria for their businesses and pitches include some measure of principles and values? If so, members of the program would be incentivized to think carefully about those issues.

  1. Engage with emerging technologies

While the ethical implications of new technological innovations are already being addressed in many classrooms, student initiatives can play a complementary role. Student-run debates around emerging areas of tech venture creation, such as artificial intelligence, blockchain, genetic engineering and autonomous vehicles, could frame these issues in ways that are practical rather than simply academic, directly exploring the roles and responsibilities of tech company founders. For example, how should a founder in the autonomous vehicle space think about their responsibility to drivers and pedestrians? How should they engage with government regulators? How might they establish principles that allow them to prioritize human safety, while also driving innovation and staying ahead of competitors? These sorts of debates could be as engaging as they are instructive.

Bringing Entrepreneurial Ethics Beyond the Classroom

Unlike many other disciplines, entrepreneurship is learned as much outside of the classroom as in it, and student entrepreneurship organizations and student-led initiatives play an outsized role in training the next generation of innovators. While many useful discussions can happen in the classroom, they need reinforcement from the larger student community.

Students I speak to want a different future, and some are demanding change, even if they sometimes feel ill-equipped to create it by themselves.

Given the role that student entrepreneurship groups play, institutions of higher education have an obligation to rethink how they allocate and deploy resources through these organizations. Student leaders, meanwhile, would be well served by focusing on how to ignite an engaging, action-oriented conversation around principled venture creation.

Students I speak to want a different future, and some are demanding change, even if they sometimes feel ill-equipped to create it by themselves. I expect the mandate for change to only grow stronger as PEAK and other like-minded efforts engage with students and entrepreneurship educators in the coming years.

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