Uncertainty and

Analytics
Introduction to
Entrepreneurship Analytics

Nile Hatch

Nile Hatch Entrepreneurship Analytics

© 2005 - 22 ENT 402
Probability of startup
success
Traditional entrepreneurial
education persuades more
entrepreneurs to launch to
“thicken” the tails
Probability of startup
success
Modern entrepreneurial
education kills bad ideas
earlier and shifts the
distribution.
Risk

• Roll two dice one time

• What is going to happen?

• What are the possible options?

• What are the possible outcomes?

 Uncertainty Typology
Set of outcomes

Closed Open

Risk / Ambiguit Environmental Uncertaint

Closed (insurance, gambling) (make or buy decision)
Set of
options Absolute Uncertaint
Creative Uncertaint
Open ( nding a solution to a problem)
(commercialization of
innovation)
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Dollar Auction
American Auction

• Highest bidder wins

• High bidder pays the highest bid

• Shout out your bid and we will record them

in order of speaking

• Bids are binding

• Venmo — @Nile-Hatch
Dollar Auction
Dutch Auction

• Price is counting down from a high level

• First bidder = high bidder and pays that bid

• Shout out your bid

• Venmo — @Nile-Hatch
Dollar Auction
Dutch Auction

$0
2.09
1 00
99
80
79
69
59
49
39
29
19
9
0
1
2
3
4
5
6
7
8
Dollar Auction
Second Price Auction

• Highest bidder wins

• Winning bidder pays the bid of the next

highest bidder

• Shout out your bid

• Venmo — @Nile-Hatch
Dollar Auction
American Auction (variation)

• Highest bidder wins

• Winning bidder pays their highest bid

• Every bidder pays their highest bid

• Shout out your bid

• Venmo — @Nile-Hatch
Dollar Auction
Sunk Cost Auction with Collusion

• Same rules

• I will turn away for 60 seconds

• You may collectively plan and execute your

bidding

• Shout out your bids

• Venmo — @Nile-Hatch
 Why would anyone
pay more than $1 for

?
What is the optimal bid
in the sunk cost
auction?
 How do you make
sound decisions in an
uncertain world you do
not fully understand?
 “If we are to have
any hope of sifting
through the myriad
of voices and the
philosophies of men
that attack truth, we
must learn to
receive revelation.”
 How can we nd
answers to questions
that perplex us? …
You don’t have to
wonder about what is
true. You do not have
to wonder whom you
can safely trust.
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 Thinking Matters

• There is nothing more practical than a good theory (folk

theorem)

• Every manager is a theorist. The better the theorist the

better the manager. (Clay Christensen)

• Mostly you have been taught the theories of others; now

you must build your own theories to clarify uncertainty
Uncertainty Resolution
Innovation Approaches
Awareness of Customer/Market
$20,000
Always Enter
Profit

$0

$−20,000

40 50 60
Number of Customers
Uncertainty Resolution
$30,000
Innovation Approaches
Customer Uncertainty Resolved
$20,000
Awareness of Customer/Market
Always Enter
$10,000
Profit

$0

$−10,000

$−20,000

40 50 60
Number of Customers
Competition Capability
$30,000
Innovation Approaches
Entry Barrier Seekers
Competitive Advantage Seekers
Always Enter
$20,000
Profit

$10,000

$0

40 50 60
Number of Customers
 Integrated
$30,000
Innovation Approaches
Integrated Approach
Customer Uncertainty Resolved
Enter Barrier Seekers
$20,000
Competitive Advantage Seekers
Awareness of Market/Customers
Profit

Always Enter

$10,000

$0

40 50 60
Market Size (demand intercept)
 Shift the distribution
through cognition

• Anticipate and understand uncertainty

• Resolve uncertainty through experiments

• Anticipate and understand competition

• Obtain competitive advantages through quality innovation

and competition
The Course
 Learning Outcomes

By the end of the class, you will be able to

• conduct experiments to resolve uncertainty

• create demand curves, cost curves, and pro t functions

from primary data

• make evidence-based entry and competition decisions

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Policies and Expectations

• Honor code

• Academic honesty

• Respectful environment

• New venture ownership

 Learning Methods
• Readings and reading quizzes

• Lectures

• Homework

• Cases

• Analytics projects

• Analytics of your team project in ENT 411

Progression of Learning
Example of Revenue

• Read the chapter Revenue

• Reading quiz on Revenue

• Class discussion of Revenue

• Homework on Revenue

• In-class demonstration cases on Revenue

• Skills case on Revenue of a Dollar Theater

• Individual project on Revenue

 Learning Assessment
1 Reading quizzes 10%

2 Homework 20%

3 Analytics Skills 30%

Revenue (Dollar Theater 7.5

Cost dynamics (Tesla 7.5
Competition (Smart Cookie 7.5
Commitment (Unpro table servant) 7.5%

4 Entrepreneurship Analytics 35%

Revenu 7
Pro tability 7
Competition 7
Final project 14%

5 Participation and Professionalis

(Individual and team engagement) 5%
%

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