Ethical entrepreneurship

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Topics
• The nature of start-ups
• Start-up funding
• Betrayal of Trust
• Flood of Money
• Tech start-up culture
• Start-ups as disruptors
• Socio-economic impact
• Ethical innovation

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The nature of start-ups

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Start-up

A start-up is the largest group of

people
that you can convince of a
plan to change the future.

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Raison d’etre
The raison d'etre
of tech start-ups is
innovation.
More specifically, innovation enabled by
technology.

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Areas of concentration
• healthcare
• mediating transactions between businesses, suppliers and consumers
• logistics
• surveillance
• banking and finance
• automation (task and IT)
• digital creation.

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Tech start-up cycle
• Firms face the tech start-up cycle
from birth of concept to buyout or
IPO
• The cycle takes them through several
funding stages from different types of
investors
• The purpose is so they develop and
refine their product/ service and Source: wikiperdia
acquire both mindshare and market
share

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Requirements for successful ‘exit’
• Need to innovate, find a niche in an increasingly crowded scene
• Need to create value both for customers and investors
• Ultimately, investors want to recoup their investment
• sell to other investors
• sell to firms who want to acquire the product/service, or to the public
through an IPO

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… requirements
• The product must be technically feasible, meet regulatory
requirements (usually on consumer safety and data privacy), must
meet user expectations
• Rather than achieving the perfect product, most settle for a MVP
followed by iterations of refinements and improvements
• Especially true for software apps or services defined by software
• The business model must be bankable, and customers must be
monetizable
• But what about ethics?

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Start-up funding

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Traditional banks
• Startups find it difficult to secure funding from traditional banks
which lend to businesses and shy away from the risk that start-ups
present
• Banks want to see a track record of earnings and profits, a healthy
balance sheet (current health), and evidence of continued earnings
stability.

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Private equity
• Start-ups have to turn to other sources of finance
• Startups are often funded by a few big companies as investors, and
mentored by a few big names
• Big names often take up positions on the corporate governing board.

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Spin-offs & incubators
• Established firms increasingly encourage their employees to innovate
• develop ideas unrelated to the firm's core offerings
• they provide funding, space and time-off work
• Advantages to the firm
• Constant stream of innovation so firm can pivot to emerging markets
• Avoid technical and publicity risk if the startup fails
• Avoid regulatory/ public scrutiny for products that 'push the envelope'
• Provides a double 'corporate veil', a level of indirection for assigning
accountability and responsibility for consequences.

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Grow fast, lose money, go public,
cash out.

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Betrayal of trust

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Founders and their boards
• Founders of start-ups are often young people who spot a need in an
underserved market, or a better way of doing things and have burning
passion for taking their ideas to fruition
• Their ideas capture the imagination of the public, and more
importantly the trust and confidence of their investors who sit on
their corporate governance boards
• Sometimes, suspension of healthy skepticism and questioning about
claims, as well as a betrayal of trust leads to a massive loss of
shareholder capital.

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Theranos
• The fall of Ex-Theranos CEO Elizabeth Holmes
https://www.youtube.com/watch?v=PvznWSEKoEE

• Theranos – Silicon Valley’s Greatest Disaster

https://youtube.com/embed/3CccfnRpPtM?start=0%20&end=551

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Flood of money

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Cheap money
• In a recent times, a flood of money has poured into start-ups because
of 'cheap' money offered by private investment banks and private
investors wanting to maximize their returns on capital
• In the case of WeWork, it was too much money too fast, leading to
some spectacular disasters.

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WeWork
• Rise and fall of WeWork
https://www.youtube.com/embed/X2LwIiKhczo?end=616
• WeWork - The $47 Billion Disaster
https://www.youtube.com/embed/QHQTzeve7OM?end=551

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Tech start-up culture

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Toxic culture
• The culture of start-ups has often come under criticism. In some cases, it
has been called 'toxic'
• Lack of work-life balance (e.g. 996 ethic)
• Emotional abuse
• Disrespect of cultural differences
• Lack of diversity in hiring (women and minorities are under-represented)
• Sexual harassment
• Poor HR policies and practices
• Autocratic leadership
• One-dimensional view of the raison d'etre
• Jack Ma's endorsement of the 996 culture in China's tech startup culture
https://edition.cnn.com/2019/04/15/business/jack-ma-996-
china/index.html

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Start-ups as disruptors

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Disruption
• The mantra of start-ups is disruption of old ways of doing things and
current mindsets
• Creative destruction
• ‘Growth’ at any cost

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Move fast,
break things along the way.

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Government & regulation
• Laws have been slow to catch-up with the innovations and
disruptions introduced by start-up companies.
• Worse still, governments and the public have been influenced to
accept that innovations require less regulation and bureaucracy in
order to succeed.
• Governments often want their start-up industry to succeed badly
because of competition with other countries and the jobs that are
now increasingly being created by this part of the tech industry.

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… government
• Big firms like Google, Facebook and Amazon spend a lot of money and
effort influencing legislators, the public and people in their own industry
for laws favorable to their businesses
• Infrastructure improvements
• Tax benefits
• Talent visa regulations
• Change existing laws
• Light-touch regulation
• Startups are enjoying a honeymoon from laws and regulations over how
and what they do
• Maybe there are no current laws that govern the kinds of things they do
• These companies are doing things that have never been done before
• Analogy has been drawn to the railroad, oil, and steel ‘robber’ barons/
titans of industry of the US. during the ‘Gilded’ age of the late 19th century
https://www.youtube.com/watch?v=AeWE_FaIP6k

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It's easier to ask for forgiveness
than permission.

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Socio-economic impact

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Social impact
• Especially with tech companies dealing with the social web, the
technology we create has significant social implications, often
unanticipated by the people who created, use or regulate it.
• Is tech creating new habits to the detriment of social norms?
• checking social media updates and/or many times a day
• continuously looking down at our phones
• interacting virtually with people through a screen
• making comments and judgements without a second thought

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Changing habits
• There is no doubt that technology is changing and reshaping the way
we do things, and in the process the nature of our relationships with
people, nature and the physical world
• Technology makes it easier to do the things we like to do over and
over again, thereby reinforcing habits that give us pleasure and utility,
and creating new ways of behaving.

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… changing habits
• Ironically, in a connected world, apps may be making us prefer
socializing in the virtual world than the real world
• It remains to be seen whether the social distancing under Covid-19
will make this even more acceptable or otherwise.

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Habits affect ethical values
• “We are what we repeatedly do. Excellence, then, is not an act, but a
habit.” – Will Durant
• Tech, in changing our habits, may even be changing our sense of
ethical values
• Are we thinking enough about how technology is shaping our
behavior, and therefore who we are?

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Impact on local economy
• Local governments want to attract tech firms as an anchor of their
economy because of the jobs it will create, and the opportunity to
attract new investment
• Willing to offer
• relief or holiday from local taxes
• cheap and guaranteed access to land or office space
• upgraded infrastructure especially roads, power
• upgraded amenities

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Dis-amenities
• However, the arrival of tech firms often brings its own share of woes
to the local community
• Traffic congestion
• Increasing rents and real estate prices
• Displacement of disadvantaged segments of society
• Displacement of locals as new people take up residence and employment
• Crowding out of locals in access to amenities
• Widening of social and economic disparities in the community
• Loss of the cultural and moral identity of the community.

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Ethical innovation
How should tech startups innovate ethically? Is there a better way?

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Shannon Vallor
The challenge of ethical innovation

• What moral skills and virtues

do we need in order to meet
the profound political,
existential and spiritual
challenges driven by new
technologies?
• How can we more effectively
cultivate them?

https://www.youtube.com/watch?v=5zqDx2q7oTY

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Is Ethics Incompatible With Entrepreneurial Rule
Breaking?

https://poetsandquants.com/2018/08/27/are-ethics-incompatible-with-entrepreneurial-rule-breaking/

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Advice from the trenches
• Fix the big bugs now, and not ‘kick the can down the road’.
• Take responsibility for the ‘bads’ that result from the product.
• Treat employees right.
• Take responsibility for impact on society.
• ‘Walk the talk’ about inclusion, discrimination, sexual harassment,
work-life balance.

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Ethical design: is it possible?
• Put ethics into the design of the product right from the start, not
tack it on later
• Ethical by Design: How to Build Good Technology
https://www.youtube.com/embed/3RlFhHycMm8?start=862&end=
1420

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Ethical Design: How to build good technology

https://www.youtube.com/watch?v=3RlFhHycMm8
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The Ethical OS
• The Ethical Operating System (Ethical OS) is a
practical framework designed to help makers of
tech consider and anticipate risks or scenarios
before they happen.
• It outlines emerging risks and scenarios to help
teams better future-proof their tech.

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Tech Risk Zones

https://ethicalos.org/wp-content/uploads/2018/08/Ethical-OS-Toolkit-2.pdf
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Parting words
You are invited to explore the work and thoughts of the people in the Omidyar Network
https://omidyar.com/responsible-technology-2/

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Media
• Dan Lyons – Inside the Tech Start-up Bubble
https://www.youtube.com/watch?v=oO836hHCmZA
• Dan Lyons - 5 Myths About Working at a Startup
https://www.youtube.com/watch?v=ByZQCTQXd6s
• Tik Tok - No. 1 Social Media App
https://www.youtube.com/watch?v=b72HkiH0N4o
• Anil Dash: Working Towards Ethical Startups - Anil Dash
https://www.youtube.com/watch?v=EF4lcOFefsA
• Erika Cheung (Founder at Ethics in Entrepreneurship)
https://www.youtube.com/watch?v=vlfQO9MxoyI
• Ethical by Design: How to Build Good Technology
https://www.youtube.com/watch?v=3RlFhHycMm8

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Articles
• Fleddermann, C.B., Engineering Ethics, 4e, Ch. 8, Prentice Hall, 2012.
• Martin, M.W. and Schinzinger, R., Introduction to Engineering Ethics, 2e,
Ch.10, McGraw-Hill, 2010.
• Theranos whistleblower Erika Cheung
https://www.forbes.com/sites/jilliandonfro/2019/10/29/whistleblower-
erika-cheung-theranos-scandal-was-canary-in-coal-mine/#5fd1d0682130
• The New Rules of Ethical Design in Tech
https://ethics.org.au/the-new-rules-of-ethical-design-in-tech/
• Able, Allowed, Should; Navigating Modern Tech Ethics [read the comments
section also]
https://medium.com/facebook-design/able-allowed-should-navigating-
modern-tech-ethics-50f54f0df7d6

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Questions
1. In what ways are ethical, social, and technical issues connected? Give some examples.
2. What are the key technological trends that heighten ethical concerns?
3. What are the differences between responsibility, accountability, and liability?
4. Should tech firms be held accountable and responsible for the outcomes that they are
instrumental in producing? Is it every firm, the ones who created the technology, the large
behemoths?
5. What are the five steps in an ethical analysis? How is this incorporated into technical
design?
6. Identify six ethical principles and explain how they are relevant to start-ups.
7. What are meant by privacy and fair information practices?
8. How is the Internet challenging the protection of individual privacy and freedoms?
9. What role can informed consent, legislation, industry self-regulation, and technology tools
play in protecting the individual privacy and freedoms of Internet users?
10. Why is it so difficult to hold software services liable for failure, injury, loss and harm?

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