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July 29, 2020

 

Hey <<First Name>>,

Big tech is testifying before Congress today. Given that big tech has helped the markets reach record highs over the last decade, the break up of big tech could have rippling effects. 

Here's Elizabeth Warren's take on how to break up Big Tech. On the other side, see what Bill Gates thinks.

THE STORIES 

👩🏽‍💻 Solitary Alignment

💰 Finance can cure cancer

STARTUPS

👩🏽‍💻 Solitary Alignment

 

WHAT 

  • Conventional wisdom says that startups perform better when they are founded by a team, and solo founders are often greeted with skepticism (Paul Graham goes so far as to say being a solo founder is one of the mistakes that kill a startup)

  • However, a study of 3,526 companies over a seven year period found that startups founded by a single founder survive longer and generate higher revenue than those founded by two or more founders

  • Why is this the case? Solo founders don’t have to deal with the social dimension of managing founder relationships and can also make decisions more quickly than teams do. 

  • Obviously there’s a tradeoff between the speed of unilateral decision making and the quality of decisions made after deliberation with multiple founders.

  • However, considering that many startup decisions are what Jeff Bezos (a very successful solo founder) calls “two-way doors”, the speed at which solo founders make decisions, get results, and adjust their strategy accordingly could make up for any subpar decision making by a solo founder.

WHO

  • Jason Greenberg is an Assistant Professor of Management at NYU Stern. His research mostly focuses on social networks and entrepreneurship.
  • Ethan Mollick is an Associate Professor of Management at Wharton. Before entering academia, he was a co-founder of eMeta, which helped pioneer the bane of my existence: the paywall (🤬!)

WHY SHOULD I CARE 

  • Many investors and aspiring entrepreneurs alike operate under the assumption that founding teams are better than solo founders

  • So this research showing that solo founders actually outperform teams on many dimensions is useful knowledge for aspiring entrepreneurs who may not have or want to work with a team of co-founders

  • Investors should also care because this knowledge could allow them to overcome their bias against solo founders and make better investment decisions

TL;DR 

  • Research has found that startups founded by a single founder have a higher likelihood of success (survive longer and generate higher revenue) than startups founded by teams

READ MORE HERE


FINANCE

💰 Finance can cure cancer

 

WHAT 

  • Let’s cancel cancer 🙅‍♂. But how can we end a monstrosity that has cost us 609,640 lives and $147.3 billion in 2018?

  • Andrew Lo, Professor in Financial Engineering at MIT, argues that we can solve this health crisis through the unconventional means of finance. 

  • Let’s take an example: You are a newly-minted trillionaire. Would you bet $200 million on a drug that had a 5% chance of success with an uncertain payoff?

  • No? How about this: a $30 billion bet on 150 drugs, where there was a 99.59% probability that at least 2 drugs succeeded. Sounds a lot more appetizing 🍜

  • You could structure this investment as a bond with a AA-rating (AA means low risk). Only 10% of US Households would have to invest $3000 each for this low-risk investment to pan out. 

WHO

  • Andrew Lo is a Professor of Finance at MIT’s Sloan School of Management and Director at MIT’s Laboratory for Financial Engineering.

WHY SHOULD I CARE 

TL;DR 

  • We can make finding a cure for cancer a smart investment (increase expected return and lower expected risk) through securitization. It’s a win-win for everyone.  

READ MORE HERE
 

PROFESSOR'S CORNER

This recommendation is a new book by Professor Ethan Mollick whose entrepreneurship research we referenced in our first article. The book is called The Unicorn’s Shadow: Combating the Dangerous Myths that Hold Back Startups, Founders, and Investors.

  • Using hard data, the book seeks to separate fact from fiction when it comes to understanding what makes a good entrepreneur and a good startup
  • Holding up entrepreneurs like Bill Gates and Mark Zuckerberg as the archetypal entrepreneurs is not only inconsistent with the stories of most successful founders but also can “be detrimental to the dreams of hardworking entrepreneurs who don’t look like them or come from the same academic or socioeconomic backgrounds.”
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