Walk the line

Entrepreneurs often walk the blurry line between the inventive and the unethical

A few days ago, The New York Times had an article by Noam Scheiber headlined ‘The Shkreli Syndrome: Youthful Trouble, Tech Success, Then a Fall’. As the headline indicates, it took a biographical look at the much maligned Martin Shkreli. It talks of how Shkreli as a high school student was always skipping class, breaking rules, and getting into trouble. And that this sort of behaviour is true for a lot of successful entrepreneurs. On a personal side note, while I am not any sort of successful startup guy, that is roughly how my high school life went too, indicating that just a rule-breaking teenage life is not enough of an indicator for startup success. However, what differentiates Shkreli, and a few others of his ilk, is that they never went past that high school mindset even when running their businesses. Until they eventually cross some lines that should not have been crossed, they end up being very successful entrepreneurs. And then, if left on their own, they always end up crossing those lines.

The article also mentions two very interesting papers published in peer-reviewed journals. One was in the Quarterly Journal of Economics published by the Oxford University. The paper by Ross Levine and Yona Rubinstein, titled ‘Smart and Illicit: Who Becomes and Entrepreneur and Do They Earn More?’ is used by Scheiber to support his narrative of entrepreneurs like Shkreli. I found something else in the paper (or rather in its abstract) that was useful. A way to answer the question: Who is an entrepreneur, and when is it a startup and not just a business? Entrepreneurs are the ones who are being “smart and illicit”, in other words taking intelligent risks that skirt conventions and oftentimes rules. Those who run businesses are just people who depend on skill or labour. In this sense it reminds me of a framework Karthik Shashidhar, author of the new pop economics book ‘Between the Buyer and the Seller’, has often used in his columns and blog posts — of “studs and fighters”, with studs being those who think up new ways of doing things or solutions to a problem while fighters are those that will convert the solutions thought up by studs into easily repeatable processes. Every system needs a good mix of studs and fighters. Such is the case with startups and businesses too.

The other paper that Scheiber’s article mentions is from the

Journal of Business Ethics . Titled ‘Personal Motives, Moral Disengagement, and Unethical Decisions by Entrepreneurs: Cognitive Mechanisms on the Slippery Slope’, and by Robert Baron, Hang Zhao, and Qing Miao, the paper is primarily about the sort of moral disengagement while chasing financial gains that entrepreneurs like Shkreli display. However, deep in the paper one also finds an answer to a question that is often asked about Indian entrepreneurs and startups. Why do we always indulge in so much jugaad? I quote, “Entrepreneurs frequently face strong temptations to engage in various forms of unethical behavior. Their new ventures possess very limited resources, they frequently operate in highly dynamic environments, and — in many cases — they must adapt, often quickly, to highly aggressive actions by competitors. Thus, temptations to ‘cut corners’ in various ways are frequent.”

What startups and entrepreneurs can take away from Scheiber’s article and the two papers is this. It may be so that entrepreneurship self-selects for people with a bit of a rebellious streak in them and are willing to work around conventions rather than be constrained by them. But entrepreneurs need to watch out for not being so disengaged with ethics that their sidestepping of conventions turns to something illegal or criminal instead. Shkreli-like stories never seem to have happy endings.

In this weekly column, we discuss the startup workplace. Thejaswi Udupa heads product and technology for an online building materials marketplace