TRANSFORMING LIVES IN AN UNCERTAIN WORLD

Sharon Alvarez

Most predictions are wrong because the future is unpredictable. That is the bedrock of Sharon Alvarez’s research on entrepreneurship and business formation.

“Technically, the term in economics is ‘Knightian uncertainty,’” explains Alvarez, Thomas W. Olofson Chair in Entrepreneurial Studies in the Joseph M. Katz Graduate School of Business. “Named after economist Frank Knight, it is based on the idea that simple human interactions trigger changes on a massive scale, and those changes are unpredictable. The COVID-19 pandemic is a great example. In 2020, it was impossible to predict what would happen in a year.” 

The uncertainty principle flies in the face of risk-based probabilities, the model for most business school education. Managing risk inherently involves anticipating problems within existing frameworks.

Uncertainty is not a bleak concept.

“My work talks about agency in times of uncertainty and deviates from the notion that we just react to the world,” she describes. “The world is uncertain, and we human beings are the ones who create things in the world and make them available. Entrepreneurship is human in nature. It’s about the agency of the human being, not about the world acting on us.”

Alvarez believes that business schools try to predict the future by teaching risk management. For her, the importance of entrepreneurship lies not in predicting the market, but in getting products into the market, an inherently uncertain process.

Alvarez works to impart that sense of agency and entrepreneurship to her students.

“At universities, we have a lot of privileges, so we also have obligations to transform the lives of students,” she says. “We don’t get to just transform the lives of those who come in perfectly prepared from the perfect background, but we oftentimes get to transform the lives of students who don’t come from backgrounds that make it easy for them—such as first-generation college students and students from marginalized groups.”

Along with other groups, Alvarez points out, women entrepreneurs continue to face barriers, receiving roughly 3% of the investment from banks or venture capital firms.

“If you think about the investor investing in the person and not necessarily the product, perhaps the investor feels men are better at handling uncertainty than women,” she explains. “That’s not explicitly expressed, but when you probe deeper you find interesting assumptions.”

Beyond her work at Pitt, Alvarez is president of the 20,000-member Academy of Management, made up of academic researchers around the world. With such a large platform, Alvarez hopes to affect the teaching of entrepreneurship.

“The academy has been primarily research oriented but there are now more professors of practice who are teaching oriented. I’m really proud that under my term we are able to bring in more teaching faculty,” says Alvarez. “Teaching is where we transform lives. We’ve chosen that responsibility, and transforming lives involves far more than learning technical skills.”