Ethan Mollick is Now on Substack

Who is Ethan Mollick?

Ethan Mollick is an Associate Professor at the Wharton School of the University of Pennsylvania, where he studies and teaches innovation and entrepreneurship. He is also author of The Unicorn’s Shadow: Combating the Dangerous Myths that Hold Back Startups, Founders, and Investors. His papers have been published in top management journals and have won multiple awards. His work on crowdfunding is the most cited article in management published in the last seven years.
Prior to his time in academia, Ethan cofounded a startup company, and he currently advises a number of startups and organizations. As the Academic Director and cofounder of Wharton Interactive, he works to transform entrepreneurship education using games and simulations. He has long had interest in using games for teaching, and he coauthored a book on the intersection between video games and business that was named one of the American Library Association’s top 10 business books of the year. He has built numerous teaching games, which are used by tens of thousands of students around the world.

https://mgmt.wharton.upenn.edu/profile/emollick/

Here is the Interactive (that’s the name of the site, hence the capitalization) website, and it has a lovely little pun for its title. Here is his Google Scholar page, and here is his academic page. He doesn’t have a Wikipedia page, but here is an interesting Twitter thread about Wikipedia written by him. And if you insist on a Wikipedia page, well, you have to qualify to be able to read it. Can you eat glass? Here is a tweet by him, it’ll allow you to make progress on following Ethan Mollick on all platforms.

In short, Ethan Mollick is that all-too-rare example of a person who is consistently interesting, and from whom you’ll get to learn a lot. And he is now, as I mentioned, on Substack.

His first post on Substack tells you how to be more creative, and if I may be allowed to paraphrase his advise, it boils down to chilling and sleeping. That’s the kind of under-rated advice the world really needs right now!

The sleep suggestion is important. It is really clear that sleep is critical to successful idea generation, especially in the context of making entrepreneurs more creative. The effects go beyond just creativity, however. People who are sleep-deprived not only generate lower-quality ideas but become bad at differentiating between good ideas and bad ones. Worse still, research shows that sleep-deprived individuals become more impulsive and are more likely to act on the bad ideas they generate. That means that a chronically sleep-deprived person would be more likely to come up with bad ideas, think they are good, and suddenly quit their job to pursue them! So, creativity starts with a good night’s sleep, and if you can’t manage that, a 75-minute nap has been found to do almost as a good a job in putting people in the right frame of mind to be creative.

https://oneusefulthing.substack.com/p/how-to-be-more-creative

And as a bonus, he says you can hurry your creativity along by having more coffee!

The world needs more people who are interesting, helpful, creative and interested in making the world progress. Please do follow Ethan Mollick wherever possible, and learn how to help make the world a more interesting, and therefore better, place. What else is there in life, no?

Veritasium on FFT’s and Nuclear Testing

If you think you “get” international economics, try deciphering China’s data

I wish you good luck:

What is finance for?

… is a question that is not asked often enough, not taught enough and not reflected upon enough.

Noah Smith reminds us that this question is very underrated:

We often forget this fact in the modern world of hedge funds and trading platforms, but finance is supposed to actually finance stuff. Ultimately, the purpose of finance is to channel capital to productive businesses so that the economy can grow. The “high finance” of fancy derivatives and ETFs and hedge funds and junk bonds and all that stuff is just a superstructure that’s built on the foundation of real productive assets. Sometimes the superstructure can outgrow the foundation and collapse, as we saw in 2008. But the foundation is still there.

https://noahpinion.substack.com/p/what-if-crypto-justdies

That’s it, that’s today’s post.

If you are a student of finance (and even better, financial economics) I urge you to bring this paragraph up for discussion in class. Please.

What Should The Fundamental Unit of Analysis Be, And Why?

https://indianexpress.com/article/opinion/columns/ews-verdict-underscores-that-judiciary-has-been-a-reluctant-supporter-of-caste-based-reservation-8255165/ (Highlight added)

As you might imagine, I’ve been asked about the EWS judgment in class during random question time. And it is something that I’ve been thinking about myself, naturally.

But I have been thinking about a very basic question, and I haven’t yet landed upon an answer that satisfies me. This post is more a request for help, suggestions and reading material, and I do hope some of you end up helping me!

When we’re analyzing something – it could be reservations (affirmative action) or something else altogether – what should we choose as our unit of analysis? Should it be the individual or the group? Whatever one’s answer, why? What are you optimizing for when you choose your answer?

More: say you choose to change your unit of analysis, either while analyzing the same problem, or a related one. Say it is the hijab ban controversy. Or maybe the question of banning beef. Or the Sabarimala issue. Or pick any issue of your choice in any country of your choice – I’m not interested in what your (or my!) opinion is on any of these controversies. I’m interested in what our choice of unit of analysis is, and why. I’m also interested in whether we are tempted to change our unit of analysis depending upon the context, and if yes, on what basis.

I’ve spoken about this with some folks privately, and the best answer I’ve gotten so far is that of “agency”. I’m paraphrasing the argument here, but in effect, one should use an individual as the unit of analysis if that individual has agency – that is, the power to bring about meaningful change in their own circumstances. In the case of the hijab controversy, for example, this line of thinking would imply that we should be leaving the choice to wear (or not wear) the hijab to the individual in question.

Whereas in the case of reservations, it should be the group that is the unit of analysis, because you can’t change your caste, and societal structures impose costs on you for belonging to a particular caste. No agency, therefore the unit of analysis should be a group.

This argument seemed appealing to me when I first heard it, but the more I think about, the more I ask myself if the hijab example really is a good example of agency. You may agree or disagree with me when I say this, but I would argue that girls don’t necessarily have agency in this case. Whether it is rules or laws or norms, they take away this agency no? Again, this isn’t about what is “right” in the case of the hijab controversy – it is an important question, but not the one I’m trying to get at here.

This is, by the way, an important question to ask in economics, with many implications for how research is conducted and policy is designed and implemented. But the importance of this question is much more than that, with implications for fields as diverse as management, sociology, politics and more.

I’m hoping to learn more about how to think about this and why, so please do let me know what you think!

Do border regions have better food?

Do border regions have better food? What exactly counts as a border region? The parts of the United States near Canada? The best food in Italy is not obviously at the (rather skimpy) borders. China and India might be the best food countries in the world, but because they are so large most of their cuisine is not “border cuisine.” So I say no.

https://marginalrevolution.com/marginalrevolution/2022/11/requests-from-benedikt.html

As always, read the whole post – and in particular, the Wikipedia link to James Steuart (not a typo). But given my deep love of all things gastronomical, I wanted to expand on this point a bit.

  1. Tyler’s first question is worth thinking about (what exactly counts as a border region?), and the way I choose to define it more or less defines the direction in which this post is going to go. A border region, for the purposes of this post, is where a confluence of two or more cultures is observed. That is a ridiculously loose definition, I know, but this is a blogpost, so please let’s go with this for the moment.
  2. Does that definition necessarily mean better food? Well, that requires a definition of the phrase “better food”, but more variety and a greater degree of syncretism can reasonably be expected.
    • Think Massaman curry in Phuket, for example. Read this paragraph from that Wikipedia article to get a sense of what I’m trying to get at. This spice, frequently used in both Chinese cuisine and coastal Indian cuisine(s) is another good example.
    • Will the food in Chennai be necessarily better than in the interior parts of Tamil Nadu? Not necessarily, but it will be more varied in terms of influences, and especially as a tourist, that’s a good thing. It’s a good thing in general too, if you ask me!
  3. A confluence of culture is likely to be positively correlated with greater commerce, and that is likely to imply higher rent for real estate. Higher prices will imply a greater incentive to be better at making and selling food, so the quality will likely be higher (so long as you know where to look and how to choose). You could make the same point for costs of labour.
  4. More trade is also likely to imply fresher ingredients, and therefore better food.

What else am I missing?

So my answer would actually be yes, but it very much depends on how you define “border cuisine”.

Externalities, R&D and Public Policy

Amol Agrawal, author of the blog Mostly Economics, linked to a very interesting article from CEPR recently:

How knowledge spillovers operate between academia and private firms remains an open question. This column exploits the Laboratoire d’Excellence, or LabEx, a large-scale funding programme of public research in France implemented in 2010–2011, to understand the spillover process. The authors find strong spillovers through the contracting channel, the mobility channel, and the informal channel, with the contracting channel playing the central role. As financing public research is an indirect way to spur private sector activity, comparing it with more direct instruments would be interesting.

https://cepr.org/voxeu/columns/knowledge-flows-public-labs-private-firms

That publicly funded research and development is a good thing is something I’ve spoken about on this blog before, and I’ve also written about how it could (potentially) be made better. I’ve also written about the fact that India needs to up its spending on publicly funded R&D. But all that, eventually, does beg a rather obvious and important question: how?

That is, imagine that you are the newly appointed czar in charge of deciding how and where a lot of money is to be spent on R&D in India. What you say goes, and you would (naturally) like to make sure you get the maximal bang for your buck. Which states will get more money, and which states will get less? Which geographical clusters within these states will you prioritize and why? Which industries will you focus upon, and why?

These are not easy questions to answer, far from it. There will be economics, politics, geopolitics, sociology, finance, history and geography-based aspects to consider, and there may well be other nuances to this question. Today’s post is about a very simple, specific question, which the authors of the piece that Amol linked to focus upon:

Once there has been some knowledge that has been gleaned, or developed, as a consequence of spending on R&D, how to ensure maximal spillovers into private firms? And even more specifically, through which specific channels will these spillovers be conducted?

Let’s put that into simple English: a university has developed knowledge that is of use to industry. How will this knowledge reach industry? The authors of this piece highlight three different ways (there are others):

  1. The contracting channel: there is direct, explicit cooperation between the academic institution and the private parties. This could involve “subcontracting research by private firms, contracts signed for PhD supervision or for joint research projects”.
  2. The mobility channel: Researchers who worked on the knowledge project in academia could move to the private firm.
  3. The informal channel: events, dinners, conferences etc.

The research mentions that the contracting channel was the most dominant:

We find evidence that firms more exposed to the shock start more PhD co-supervisions with public labs (panel a) and increase their outsourcing to the public research sector (panel b). Both these effects are consistent with the contracting channel being at play. We also find that researchers are more likely to move to the more exposed firms (panel c) and that these firms are more likely to hire fresh PhDs (panel d), evidence of the mobility channels. All channels thus seem at play, but the reports written by the funded units suggest a central role played by the contracting channel.

https://cepr.org/voxeu/columns/knowledge-flows-public-labs-private-firms

But that, of course, was for France. What might the story be like in India? A simple search on Google Scholar and Elicit.org didn’t throw up much that was useful and of recent vintage, but if any of you have any academic references that might be of help, please do send them my way.

In my personal experience, though, as someone who has worked in academia and industry when it comes to analytics, I would say that the mobility channel is by far and away the most dominant. While the contracting channel grows a little bit every year, it is nowhere near enough. And don’t get me started about the under-utilization of the mobility channel – while there is some movement of some faculty members, it can (and should) be a lot more, and in a variety of ways, not just a full time switching of careers.

The development of knowledge clusters, and the free (two-way!) flow of both people and knowledge between academia and industry needs to dramatically increase, and this increase needs to happen with every passing year. Funding R&D is one thing, but this – the exchange of people and ideas – is a relatively low-cost intervention with only upsides.

We should be making this happen!

Incentives Matter, the International Trade Edition

A chart and a paragraph from The Economist to get us started today. First, the chart:

https://www.economist.com/finance-and-economics/2022/11/06/who-wins-from-the-unravelling-of-sino-american-trade

I’ve been a student of economics for a little more than two decades, and the one thing that is quite familiar to me in this chart is how large China’s share is in US imports (that’s what the “17” at the bottom right of the chart represents. Spend some time going over the rest of the numbers on the right of this chart, and come to the realization that China is about 50% more than all of the other nations on this chart combined.)

Being a student of economics in these past two decades makes it inevitable that some notions of how the world works and functions will get deeply ingrained. And the idea that China will be much larger in everything compared to, often, the addition of all other countries performances has become a useful rule of thumb. Note that I am not advocating forming such a rule for the future – I’m simply saying this has been the case for the past two decades.

But as the Nobel Laureate said, the times, they’re a-changin’:

Yet Mr Trump’s tariffs seem to have played an important role. According to recent analysis of industry data by Chad Bown of the Peterson Institute for International Economics, a think-tank, China’s share of America’s imports rose from 36% to 39% this year in goods not covered by tariffs. For goods subject to a 7.5% tariff, however, China’s share sank from 24% to 18%. And for those hit by a whopping 25% tariff, which covers lots of it equipment, China’s share of imports fell from 16% to 10%. Overall America is now much less dependent on Chinese goods, from furniture to semiconductors.

https://www.economist.com/finance-and-economics/2022/11/06/who-wins-from-the-unravelling-of-sino-american-trade (Emphasis added)

This post isn’t about whether Trump should have imposed those tariffs or not, nor is it about whether those tariffs have been worth it. That is an important topic, but we’re going to skip over it in today’s post. Today is just a reaffirmation of a principle of economics:

When something becomes more expensive, there will be lesser demand for it.

That, of course, is just another way to state the law of demand. You can draw a curve, if you like, or you can phrase it the way I did, or you can write out a paragraph that gives an application of the law, like The Economist did. But the next time you read people opining about whether Policy X will work or not, ask yourself how the incentives have been realigned as a consequence of the new policy.

By how much will demand go down (elasticity), should this policy be implemented or not (geopolitics), and what might be the impact of this policy on China and America and other nations (international trade) are all excellent questions, and they will keep all manner of professionals busy for decades to come.

But again, that’s for another day. Today’s post is about helping you realize that the law of demand is one way to understand incentives, and (don’t stop me even if you have heard this before) it is about chanting a mantra that all economics students would do well to internalize:

Incentives Matter

The Long and Winding Road For The First Time

I’ve been on a Beatles spree this week, and have no desire to stop – please feel free to send along thousands of more videos my way!

Safed Jhooth

…’twas too tempting a title to pass up for this twitter thread, because “A White Lie” just doesn’t sound as good.