Laura Huang on Finding Your Edge, Harvard Research on How Investors Pick Founders and Turning Adversity Into Advantage - E35

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"I think from the inside out, that's where it's important for people to realize that they can empower themselves, that there are ways, even within an imperfect system, even within systems that are changing, but changing slowly or may not change at all, even when there is a myth of meritocracy, that there are ways to empower ourselves and that's through being able to guide and redirect these perceptions." - Laura Huang

Pooja Sinha: [00:00:30] Laura Huang is an associate professor of business administration in the Organizational Behavior Unit. Prior to joining Harvard Business School, she was an assistant professor of management at the Wharton School, University of Pennsylvania. Professor Huang’s research examines early-stage entrepreneurship, and the role of interpersonal relationships and implicit factors in the investment decisions of financiers such as angel investors and VCs. Her work studies the subtle signals and cues that often impact the behavioral perceptions of investors, which can lead to implicit bias in the investing process. Her research has been published in several academic journals including the Academy of Management Journal, Administrative Science Quarterly, and the Proceedings of the National Academy of Sciences, and has also been featured in the Financial Times, The Wall Street Journal, USA Today, Forbes, and Nature. She has won a number of awards for her research, and was named one of the 40 Best Business School Professors Under the Age of 40 by Poets & Quants.

Jeremy Au: [00:01:36] Laura, what a pleasure to have you on the show!

Laura Huang: [00:01:39] Thank you so much. Great to be here.

Jeremy Au: [00:01:42] It's so fun to see again, after half a year, crazy year where I saw you explaining the book, "Edge," at the Harvard Club in New York, and I'm excited to share your story and research with a much larger audience now.

Laura Huang: [00:01:57] Thank you. Great to be here. It's a pleasure.

Jeremy Au: [00:02:00] So for those who haven't had opportunity to know you or take classes from you at Harvard Business School, what has been your leadership journey so far?

Laura Huang: [00:02:10] I think my leadership journey has been one where this is not something like an end goal that I had anticipated getting to. When I think about my own journey, I'm not someone who ever really knew what I wanted to be when I grow up. There's some people who, from a really young age, knew that they wanted to be a doctor or knew they want to study biology or knew they want it to be a chemist or a veterinarian. For me, I never really knew what I wanted to do. So I think my career journey and my leadership journey has been very, very similar in the sense that I've done lots of different disparate things. So I've worked in consulting. I've worked in banking. I've worked in general management. I was an engineer by training, so I did start out in engineering.

So my undergraduate degree was in electrical engineering. That was mainly because growing up, I really loved math. It was something that I liked and that when I was trying to figure out what to major in, someone basically said to me, "Well, if you like math, maybe you should try engineering." So that's what I did, but I very quickly realized that I actually wasn't a very good engineer, except that when I was graduating, the only thing I was really qualified to be was an engineer. So I started that, but very quickly into that engineering role where I was working in research and development, someone pulled me onto a technical marketing team and they said, "Hey, you're actually pretty good a translating between the technology and the sales and marketing team," and that's how I first got pulled into the business world, that I got pulled into this technical marketing team.

Then from there, one of my managers actually said, "Well, you should consider an MBA." So I got an MBA. While I was doing an MBA, I realized that I did actually... I started doing some research with a professor. It was sort of my first introduction into research and research projects. I also dabbled in some entrepreneurship helping some people out with startups, but ultimately when I finished my MBA program, I had tons of student loans to pay off. So I asked everyone, "What's the quickest way to pass student loans? What's the quickest way to pay off student loans?" And everyone said, "Go into I-Banking." So I went into investment banking and I worked in investment banking for two years before I left, sort of pursued another interest, something else that came along and that has been really my leadership journey that's led me from being an engineer, to working in technical marketing, to getting an MBA, to working in investment banking, to getting a PhD, becoming a professor at Wharton and then again, in a very opportune way, from Wharton moving to HBS, which is where I am now.

Jeremy Au: [00:04:58] What an amazing journey. there's so many questions that jump out from this conversation.

Laura Huang: [00:05:03] Well, amazing, but not always pretty. It wasn't always as smooth as it may sound.

Jeremy Au: [00:05:10] Yeah. People really appreciate you just being frank about the real messiness of a career for everybody, right?

Laura Huang: [00:05:16] Yes. There's definitely some messiness in there. It sounds like it was a very linear trajectory, but in many, many ways, that's very post-talk rationalizing how it all fits together into a cohesive narrative, but there were definitely times at which I was like, "I'm not sure what I want to do. Is this the right next move? How do I actually decide? what am I going to decide?" and all of those questions that we tend to ask ourselves during these journeys.

Jeremy Au: [00:05:41] What's interesting is that you've had a longstanding interest in research on entrepreneurship and startups. Now, how did you first get started on that path?

Laura Huang: [00:05:51] I've always been interested in technology and innovation and entrepreneurship. I did dabble in it, as I mentioned a little bit, like working a little bit on startups and helping others who had started companies. I had co-founded in some small ways, a couple of startups that actually didn't ever go anywhere. But the recognition that I had at some point was that I am actually not very risk-seeking in the sense that a lot of entrepreneurs are risk seeking. What I enjoyed more was the ideas that went into it, the problem solving, certain challenges associated with entrepreneurship more than I was able to really fully throw myself into entrepreneurship. So there was that piece of it, but there's also the piece where I was really curious. And again, throughout my career, I've been really curious about the people side of things, the people issues, the decisions that people make.

One of the things that I think I loved about entrepreneurship was also that there's so much risk and uncertainty. Even though I didn't want to engage directly with that risk and uncertainty, I was so curious about what was happening. I was curious about how entrepreneurs were making their decisions. I was curious about how investors make their decisions, about which startups to invest in. So it came from this very deep seated interest in trying to understand what was happening within the entrepreneurship process. All of the dynamics, the people, the interactions, the interpersonal interactions, all of that is what I kept going back to and kept seeing myself questioning and wanting to learn more about. Ultimately, that's what I study now is all of these decisions and these interpersonal interactions and the soft factors and how they play out vis-a-vis the hard factors and the quantitative data that exists. So it ultimately, became less about entrepreneurship and more about entrepreneurship in this context where there's extreme uncertainty and how do we manage in those circumstances?

Jeremy Au: [00:08:02] That's amazing. So much about founders is that so much wisdom that we talk about is honestly, just proverbs and heuristics at best, right? It was like, "Oh, try to make sure they're chasing you, not you chasing them. Is time your enemy? Is time your friend?" Just not very quantitative. Just friends giving people advice. So it's almost like folklore or folk wisdom. I'm just kind of curious, how would you articulate the importance of research on entrepreneurship, which has historically been defined as unquantifiable, an art, not a science, an undefinable thing?

Laura Huang: [00:08:40] Yeah. Some of the earliest work that I did was exactly in that area, trying to understand this uncertain unquantifiable ecosystem, the entrepreneurial ecosystem. So one of the first projects, one of the first things I studied was the role of gut feel, gut feel and intuition in entrepreneurship. How do people use their intuition? Are there circumstances in which you might want to use your intuition? We often think that intuition is something that's emotional and quick and biased and based on your rustics and shortcuts, and that we need data to actually support what our instincts or what our intuition is telling us What I found was that in some instances, really what you want to do is follow your intuition, your instincts entirely and throw out the data. A lot of investors, in fact, make decisions based on that. They make investment decisions based on their intuition.

So some of my earliest work was around, how do we quantify the unquantifiable? How do we quantify what intuition and gut feel actually looks like? What goes into it? Is it around the entrepreneur? Is it perceptions about the entrepreneur and how trustworthy or competent or passionate they are? Is it intuition around the business model and how scalable and how big it can be? How do we actually think about what intuition really means? So I think research and entrepreneurship is hard in that sense. It's not like we are studying financial models or accounting models or things that are very discreet, but in fact, there's just a lot of this nuance. What we're really studying is that nuance. We're studying the criteria for which investors use to make their decisions. We're studying how entrepreneurs make sense of context and pain points and problems and solutions.

We're looking at resources and how resources are distributed. And again, what really attracted me to this area and what I still love about this area of research is that so much of it is based on the implicit. It's based on these interpersonal interactions. It's based on things that we know are so important, but yet, we sometimes just don't study because it's hard to pin down. And yet in entrepreneurship, 65% of startups fail not because of all of the things we teach in business school, like strategy and marketing and accounting and finance, but in fact, 65% of startups fail because of these nuanced people issues. So that's sort of how I look at the research and I think that's the value of that research

Jeremy Au: [00:11:19] I think that's exactly spot on because it's hard to measure. It's hard to research. Therefore, it feels like it doesn't get the ball rolling on research at all. I'm just wondering what hurdles have you faced along the way in your professional journey and research?

Laura Huang: [00:11:33] Yeah, so many professional hurdles. I know we're going to talk a little bit about my most recent book where I talk about obstacles and constraints and hurdles, both in entrepreneurship, as well as in the workplace and in life. I didn't intend to write the book initially, but a lot of it was based on sort of hurdles that I, myself, had experienced, as well as hurdles that I saw my parents experiencing or others around me experiencing. For example, growing up, I saw time and time again, both my parents who are immigrants to the United States from Taiwan, I saw them getting passed over for promotion, after promotion, after promotion. I remember seeing my father during one of these promotions where he didn't get the job, the person who was hired over him, the person who became his boss, that my father was actually doing his job, doing that person's job and everyone knew that. It was because this person wasn't actually qualified to be doing that job.

So I asked my dad, I said, "Why is it that you think you got turned down to that promotion?' And he said, "I don't know. It's probably because of my accent or the way I communicate or something like that." So from a really young age, even though I couldn't actually pinpoint what it was, I knew that outcomes and success were based on things like perceptions and stereotypes and all of the sorts of barriers and obstacles that I ultimately faced as well. So I tell lots of stories in my book about the types of obstacles that we face, that we generally face, everything from having doors closed in our face, to not being allowed because if who we are, how we communicate or because we don't belong to the right networks, just not having those opportunities.

But how can we empower ourselves? How can we actually turn those obstacles and flip those things in our favor to create an advantage for ourselves? So that's what my research the last couple of years has really been about is, how do we take these perceptions and slip them in our favor? We need to do this regardless of whether it's in the workplace or in life.

Jeremy Au: [00:13:44] Let's dive into that. So how do we flip adversity into strengths?

Laura Huang: [00:13:50] Yeah. So the title of my book is, "Edge," and it's about how to gain an edge, but edge actually stands for the framework that I talk about in the book for how we turn adversity into advantage, where the E the D the G and the E actually stand for the pieces of this framework. So the E stand for enrich and it's about first and foremost, knowing how we enrich and provide value in any circumstance or situation that we're going to be in. So it is about our weaknesses and our strengths and our underestimating strengths, but it actually is more than just about strengths and weaknesses. It's more than just about self-awareness because it involves knowing, not just being self-aware about our own value and how we enrich, but understanding that whatever context that we're going to be in, whatever situation that we're going to be in, people's perceptions are going to dictate how we actually enrich and provide value, that they're going to perceive us as either providing more or less value.

So again, it goes back to these interpersonal dynamics and these perceptions. So I talk about in the first part of my book, where each of the parts of my, both the E-D-G-E, are each a section of my book, but I talk about in the enrich section around, how do you actually understand how do you enrich and provide value vis-a-vis others? And also, understanding that a lot of times those doors are going to be close to you and that's why the D, the delight piece, is so important because a lot of times, we don't have the opportunity, as I mentioned, to show how we enrich and provide value because either we don't belong to the right networks or the right groups, and we don't have the opportunities. So when we're able to delight, that's the equivalent of being able to crack that door open just a little bit, so that we have the opportunity to show others how we enrich and provide value.

So delight is sort of hard to bottle up and explain all at once, but I'll sort of give one quick example to kind of explain what I mean by delight and delight can actually open doors or crack open doors for us. So I sometimes talk about delight as, or sort of ask people, "Think about the first time that you were in an Uber or the equivalent." Lots of countries have different equivalents of Uber. What is the equivalent of Uber in Singapore? It's Grab. That's right, Grab.

Jeremy Au: [00:16:29] And Gojek in Southeast Asia.

Laura Huang: [00:16:31] Yes, that's right. Gojek and Grab, which both of them actually were alumni incidentally. They were actually good friends. So when we think about Grab and Gojek and Uber, think about the very first time that you were in, let's say, Uber. I know sometimes when I say the word, "Uber," in particular outside of other companies, there's lots of like, "We think about management issues," but just putting that all aside for right now, just the very first time you were in an Uber, for me anyways, it was this experience of, "Wow." I remember thinking, "Whoa, what is happening? What is going on? This is so cool, but also terrifying. I'm in a stranger's car. This is their car. I don't know who they are. They're not a friend of mine. I'm in their car and they just picked me up. And now, they're going to take me to where I need to go and I'm not going to hand over any money like I would with a taxi driver or a taxi cab."

But it was this feeling of, just for a couple of seconds, sitting up and thinking like, "What is happening? What is going on?" It's this momentary feeling of surprise and not entirely sure what's kind of going on, and that's delight. It's not necessarily positive or negative, but if you're able to sort of inspire that feeling in a counterpart or someone else, regardless of whether it's someone you've known for 10 or 20 years or it's someone you've just met, when someone stops for a second and they're surprised, that's when they want to learn more or ask another question or learn just something about what's happening. That's the equivalent of cracking that door open, so you can engage in a conversation, or engage in showing them how you enrich and provide value, or being able to interact with that counterpart in a deeper, richer fashion. So I talk about the D and what that means and how that actually helps you gain an edge.

The G stands for guide, which is to say that even when you enrich and delight, you need to constantly be guiding the perceptions that others have about you, guiding those perceptions of who they think you are and slipping them in your favorite, turning them to show them who you authentically actually are. I talk in my book, everything about how you interact with someone through questions and answers, or how you hone your ability to see those underlying perceptions or stereotypes that they might have about you, so that you can continue to enrich and delight. The final E stands for effort, effort, and hard work. This comes last in the framework that I've developed over the course of my research. We often think that hard work comes first, that if you put in the hard work, that it will speak for itself.

But in fact, we know deep down, that hard work, even though we know it's critical, that it often leaves us frustrated because you can take two different people who work equally as hard and one will inevitably be more successful than the other and that's often because success and outcomes aren't determined by that hard work. And in fact, they're determined by perceptions and attributions and subtle signals and cues. So that's why effort comes last because when you know how you enrich and delight and guide, that's when your effort and hard work actually work harder for you. That's when you get those tailwinds. That's when you reap the benefits of your hard work because you understand the way in which perceptions and attributions and signals and cues actually operate so that you can enrich delight and guide, so that effort pays off.

So that's sort of just a quick snapshot of the book. It's hard to summarize four huge sections where each of those I talked lots about what they mean and how you do it and lots of tips and strategies and how-tos, but overall, that's sort of the framework around how we can ultimately, gain an edge, ultimately, how we can take obstacles and adversity and stereotypes and negative perceptions and turn them to our advantage so that we can gain that edge.

Jeremy Au: [00:20:58] The truth is people do have to buy the book. It's 4.6 stars out of five from Amazon, and I enjoyed it as well. I think what's interesting is that I think a lot of founders entrepreneurs really find that the language resonates. For me personally, I think the part that resonated was, like you said, the effort being the last reminds me of my time in judo. It's about the plan of action. If you're resisting someone with all your effort, it's just going to be a matter of mass and strength, but it's really about how you are mindful of the angles and guiding your opponent to the conversation. That's how you succeed in judo.

Laura Huang: [00:21:33] I think there's definitely some judo strategy. There is definitely some overlap or some interesting pieces of that in terms of understanding who you are and understand the ways in which you guide and the ways in which you can turn things in your favor

Jeremy Au: [00:21:51] what's interesting is that founders always find themselves in a never ending story of David Goliath. In their founding, David versus Goliath in terms of the product market fit and convincing to early team, and then they're fundraising. They feel like David versus Goliath again. Then funnily enough, you also start hearing the stories of founders becoming Goliaths over time. They are the ones or now the leaders or champions of industry. So what have you seen for the professional development of people who are looking to start from the beginning? How should they be mindful of how they think about their own professional development and skills building?

Laura Huang: [00:22:31] I think there's two big things that I talk about. Speaking of that enrich section, I talk lots about your basic goods, and first and foremost, understanding those basic ingredients that really make you, you. When you're able to understand that, a lot of this journey, even as I sort of talked about my own journey in the beginning, it's about not necessarily saying, "I'm going to go from point A to point B to point C," but I talk about going for directionality. You take those basic goods and you go in a direction because what happens is when you go in a direction, it leads you to a course that makes sense for who you are while you still leave yourself open to opportunities, that you're not so rigidly following one path that you ignore or you miss out on another path that could take you in some amazing and beautiful and sublime directions.

So go for directionality. How do you know what that direction is that direction is through these basic goods? So I talk lots about what does that mean and how do you think about your basic goods and how do you actually craft and define what those basic goods are for yourself? There's no sort of formula to this. Everyone has their unique set of basic goods. So I offer sort of a perspective in questions in ways that you can define that for yourself. The second thing that I talk about is this aspect of pruning and growing. I talk about a lot of times as we continue to grow, when you talk about David and Goliath, as you get bigger and bigger or more and more successful, a lot of times, that's where we derail. We derail because we don't prune in order to grow.

So if you think about a tree, in order for a tree to grow really tall, you can't just continue to grow in all through the journey. You have to kind of prune away, you have to prune away the pieces that are not as necessary so that you can go stronger and taller and bigger in the areas that you yourself, in the direction that you yourself are deciding. So a lot of times when we think about our careers or when we look at are... We continue to add more and more and more without thinking about how do we focus and prune away so that we do have, we continue to go in that direction? What can guide us, what guides us in knowing what to prune away and where to grow again, it's those basic goods. It's those core elements that really make us who we are. So there's a variety of different principles that I offer in the books for thinking about our own trajectories and our journeys, and how do we guide ourselves in being the most successful versions of ourselves that we can?

Jeremy Au: [00:25:13] I love what you shared about pruning because so many founders struggle with the transition to becoming CEO, or CTO, or C-suite. It's such a difficult journey for everybody. I think that pruning us back is something that's really understated because it's kind of like the messy part after the founding story.

Laura Huang: [00:25:30] Yeah. A lot of times, that's what's missing because we spend so much time and effort doing things in those early stages. What makes you successful in early stages is not necessarily what's going to make you successful in the later stages. Things shift and change, so that's that directionality piece. Continue to grow and direction, but making sure that you're pruning so that you're taking account of that because a lot of founders when they get to that later stage, they're no longer seeing that. They're not seen as a growth CEO. They're not seen as a scaling CEO. They're seen as that product CEO who're able to get them to a certain point. So they do want to continue to evolve and grow as a company. This is something that's important for them to consider and think about and make sure that they're integrating into both their strategy, as well as their day to day.

Jeremy Au: [00:26:17] What I also appreciated about your book is that you have a very realistic view of the world. I love StrengthsFinder, but people don't look at me based on my StrengthsFinder portfolio and just my strengths. They look at me as, they see who I look like, they see what I'm dressed like, they hear my accent, what language I'm speaking, my logos on the LinkedIn profile that the scan before meeting me. I think you talk a lot about those aspects about it, which is the reality of the first impressions: language, accent, being a minority, being a woman, being an immigrant. You talk about all these different aspects that are reality. People make those judgements and decisions upfront. I really appreciate you kind of not only acknowledging it, but also talking about how to strategize and be intentional about it. I think that's something that a lot of people thinking about; diversity and inclusion obviously from a systemic perspective. How would you give advice to people who are thinking about how to position themselves, that they feel like they're the minority for whatever reason; accent, gender, nationality, et cetera?

Laura Huang: [00:27:26] Yeah. Before I even started writing the book, I was doing research on inequality and disadvantage and people who are underestimated. As I was presenting this research, I got asked that question a lot. What can we do about this? What are ways that we can level the playing field? Or what are ways we can prevent against these stereotypes and biases? What we see in organizations so much is structural or system level solutions. What I mean by structural or system level solutions, it's things like, "Well, let's try and have more equitable hiring practices, or let's even use algorithms to help us with hiring, or let's try and get more diverse and inclusive top management teams or mentors, or thinking about this pipeline." But these are all outside in solutions. They're solutions that individuals who are experiencing bias and perceptions and being underestimated are almost being told like, "Yes, we know that the system is imperfect, but just wait. We're trying to change things. We're trying to use algorithms. We're trying to get more diversity and inclusion," and it's very frustrating.

So the solutions that I offer are very much around these, what can we do from the inside? Because these outside in solutions, they're also critical. We should have diversity and inclusion in top management teams. We should have more equitable hiring practices, but that can't be the entire solution because we've been talking about these things for a really long time, decades even, and they've either not changed or they've changed far too slowly, or they maybe have changed, but created unintended consequences. So I think from the inside out, that's where it's important for people to realize that they can empower themselves, that there are ways, even within an imperfect system, even within systems that are changing, but changing slowly or may not change at all, even when there is a myth of meritocracy, that there are ways to empower ourselves and that's through being able to guide and redirect these perceptions.

We spoke earlier about kind of qualitative and soft judgements versus quantitative and more hard judgments. Well, if this world and success and outcomes were determined entirely based on numbers and quantitative, well, things would be fair, but yet, there'd be nothing we could really do about it. So just because things are determined based on implicit and soft factors, that's sometimes the poison, but it's also the antidote. Because things are determined based on soft factors and implicit signals and cues, we can also empower ourselves to understand these perceptions and signals and cues, so that we can redirect and we can guide and we can delight and we can really be able to turn things to an advantage and show people and redirect them to who we authentically are, so that we can have these deeper, richer interpersonal interactions. So I think that's very much the key that I talk about is, how do we empower ourselves also from the inside out, as well as the outside in?

Jeremy Au: [00:30:36] That's so true. You are a testimonial of not just working on the structure of outside in approaches, but also working on the inside out. I really appreciated your personal anecdotes throughout the entire story as well. I think I just wanted to ask you one last question, which is that now that you've kind of met each individual staff and you shared your own story, now at Harvard Business School, I was kind of curious, has there anything there surprised you about teaching at HBS as a professor now? What was it like? Because it was at one end of the scale to the other end of the scale, and then right after that question would be what's next for your research?

Laura Huang: [00:31:15] Yeah. I think I'm surprised on a daily basis actually. I think there's so many things that have surprised me about. I expected that I would have really bright, intelligent students, but I think I was really just taken aback around how truly vulnerable and deep thinking and emotional, and how much I would really engage with my students on a personal level as well. I learned just as much from my students, if not more, than what I hope to teach things at HBS, which are called, My Takes, where they share their personal journey and their personal stories. It's one of my favorite parts of being at the school, is just being able to see my students in much more depth than I normally, at any other institution, have gotten to know my students. Where normally, it's very much this teacher-student relationship, but that's probably one of the things that on a daily basis, there'll be something that will surprise me about a certain student or a certain interaction or certain way that we do something.

I've always loved teaching, but I think part of also being at HBS has been this realization that my teaching is so much more difficult, but also so much more rewarding. So that's also hard on a daily basis sometimes is that even though I love teaching, there are some times where there's this thin line between love and hate sometimes and it becomes so difficult that I have to step back sometimes and really think through and understand that there's so much more depth to it. I think what's next is like continuing to... The reason why I went into this in the first place is I've always been, like many of us, just want to have an impact. At some point, I realized I, as an individual, I could have impact across the next 30 years by doing my own career and my own job, the things that I'm going to do and try and impact as much as I can.

But with teaching, something that I really love to do is that I impact 90 students at once who then all then go on to have their careers and have impact. So it's really around this exponential or this cumulative sort of thing where if I'm able to share my ideas and understand the ideas of others and together, on a scale of 90 at a time, rather than just me as an individual one at a time, that impact is also, both incremental and exponential. So I'm going to continue, hopefully studying perceptions and decisions and how we can really continue to think about how we gain an edge, how individuals can take these perceptions and turn them to their advantage.

Jeremy Au: [00:34:15] Thank you so much, Laura.

Laura Huang: [00:34:15] Thank you. I appreciate it. Great joining you today.

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