Which is grammatically correct, and why?
- This device does two things: create the whatzit and set the squorple in place.
- This device does two things: creates the whatzit and sets the squorple in place.
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The second choice works better, although both have issues.
The sentence begins with a grammatically complete clause, This device does two things." What happens after the colon involves a kind of ellipsis, and in each of the two given options, the omitted word makes all the difference.
In the second (favored) instance, the missing word is it.
This device does two things: it creates the whatzit and sets the squorple in place.
Now the second part of the sentence is a clause, with an explicit subject and a compound verb.
Omitting the it leaves us with a slightly awkward, but unambiguously comprehensible statement.
In the first example, it's hard to tell exactly what might fit in the ellipsis. To is a possibility, as it would turn the verbs from implicit infinitives into explicit infinitives. But how do we construe the infinitives? Are they used as nouns, appositive to "things"? Or could they be used as adverbs of purpose, modifying things? The former seems more likely, but the infinitive sense of the verbs squints, perhaps a greater syntactic sin than the omission of "it."
creates
The subject is This device, which is singular.
You can also convince yourself by adding it.
This device does two things: [it] creates the whatzit and sets the squorple in place.