Professor Johann Peter Murmann's Blogs

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	Welcome to My Blogs I have created a number blogs to publish useful information. One is a Teaching Blog dedicated to providing past, present and future students useful information. I have also created a blog for the Courses I am teaching. A third one is a Research Blog dedicated to disseminating useful information to other researchers and scholars. There is also a blog that has collected all of Charles Tilly's Writings on Methodology. Below you find all entries across all my Blogs. Posted by Johann Peter Murmann

	Economics: Is the discipline in crisis? Drake Bennett of the Boston Globe is reporting on the soul searching that is going on the field of economics and finance after the professions inability to foresee the crisis. THE DEEPENING ECONOMIC downturn has been hard on a lot of people, but it has been hard in a particular way for economists. For most of us, pain and apprehension have been mixed with a sense of grim amazement at the complexity of what has unfolded: the dense, invisible lattice connecting house prices to insurance companies to job losses to car sales, the inscrutability of the financial instruments that helped to spread the poison, the sense that the ratings agencies and regulatory bodies were overmatched by events, the wild gyrations of the stock market in the past few months. It’s hard enough to understand what’s happening, and it seems absurd to think we could have seen it coming beforehand. The vast majority of us, after all, are not experts. But academic economists are. And with very few exceptions, they did not predict the crisis, either. Some warned of a housing bubble, but almost none foresaw the resulting cataclysm. An entire field of experts dedicated to studying the behavior of markets failed to anticipate what may prove to be the biggest economic collapse of our lifetime. And, now that we’re in the middle of it, many frankly admit that they’re not sure how to prevent things from getting worse. Read Full Story “Paradigm lost: Economists missed the brewing crisis. Now many are asking: How can we do better” on Boston.com Posted on Dec 21, 08 \| in Research Weblog

	Radical Rethinking of Cash Management The Economist summarizes the profound implications of the financial crisis for the management of cash in firms. SELDOM has corporate strategy been turned on its head so quickly. Barely a year ago, cash was a dangerous thing to accumulate: activist investors stalked companies, urging boards to return it to investors, to pay special dividends or to buy back shares. Ever since the 1980s the fashion had been to make companies as lean as possible, outsourcing all but your core competencies, expanding your just-in-time supplier system around the globe, loading up with debt to “leverage” your balance-sheet. Old-style defensive conglomerates, such as Arnold Weinstock’s General Electric Company, were dismantled. Companies that hoarded cash—even ones as good as Toyota and Microsoft—were viewed with suspicion. More... Posted on Nov 26, 08 \| in Teaching Weblog

	BP does not try to run its rural service stations in Australia Excerpt from BRW: For an expanding independent petroleum retailer, customer relationships are everything. Biq organisations are usually considered to be more efficient than smaller enes - but rarely more customer-friendly. Case in point, big banks. sharehelders love their taut back offices and fat profits; customers hate their skinny front lines and rate them well below small credit unions and building societies in satisfaction surveys. It is a business theory that influences how oil companies distribute fuels in Australia. In cities, drivers have choices and can seek out the service station offering the cheapest petrol. In the country, the distance between service stations is qreater and what people expect from them - mechanical repairs and farm deliveries as well as fuel - is more varied. Accordingly, the local arms of some of the world's biqgest companies run city statiens themselves but use independent operators elsewhere. "I don't think we have the ability to understand and build the sort of relationship with customers that is really important in rural Australia," 'BP Australia's vice-president of wholesale reseller and retail, 'Dean Salter, says. However, ene of Salter's independent operators, led by a predecessor in his position, is trying to prove that big orqanisations can be intimate as well as efficient. Read Full Story. Posted on Nov 23, 08 \| in Courses Weblog

	Short History of Modern Finance In it's appraisal about the current state of capitalism (Capitalism at Bay) the Economists gives a useful summary of want went wrong. Without doubt, modern finance has been found seriously wanting. Some banks seemed to assume that markets would be constantly liquid. Risky behaviour garnered huge rewards; caution was punished. Even the best bankers took crazy risks. For instance, by the end of last year Goldman Sachs, by no means the most daring, had $1 trillion of assets teetering atop $43 billion of equity. Lack of regulation encouraged this gambling (see article). Financial innovation in derivatives soared ahead of the rule-setters. Somehow the world ended up with $62 trillion-worth of credit-default swaps (CDSs), none of them traded on exchanges. Not even the most liberal libertarian could imagine that was sensible. Read the Short History of Modern Finance courtesy of Economist.com Posted on Oct 26, 08 \| in Teaching Weblog

	Paulson on the diversity of firm in the financial industry Trying to imitate high-status Newtonian physics, management scholars over the past fifty hear have tried to formulate general laws about the behavior of organizations. In his statement after the passing of the $700 billion bailout of the financial industry, Paulson in my view correctly emphasized that the salient fact about most industries is the diversity and not the sameness of firms within them. More... Posted on Oct 03, 08 \| in Research Weblog

	THE RECKONING: As Credit Crisis Spiraled, Alarm Led to Action Background:The NY Times reports on the what triggered Paulson and Bernacke to seek an immediate 700 billion fund to prevent the American markets from collapsing. Read full story on NYTimes.com. Posted on Oct 02, 08 \| in Teaching Weblog

	Risk will always equal potential reward Greed, as it periodically does when traders and bankers forget the lessons of the past, clouded judgments. Some very smart people talked themselves into believing in the repeal of one of the fundamental laws of economics: risk will always equal potential reward. The idea that risk can be eliminated and high yields guaranteed is as idiotic as the idea that gravity can be suspended. Remember Long-Term Capital Management? Ten years ago it figured out how to eliminate risk using highly sophisticated computer programs and rolled up annual returns averaging 40 percent — until it collapsed in a heap. Read more by John Steele Gordon on the Financial Mess: Greed, Stupidity, Delusion — and Some More Greed here. Posted on Sep 22, 08 \| in Teaching Weblog

	The F.A.Q.’s of Lehman and A.I.G. Doug Diamond and Anil Kashyap of the University of Chicago explain the recent financial crisis. For most of the last 20 years we have been studying banks, monetary policy, and financial crises. So for us the events of the last year have been especially fascinating.The last 10 days have been the most remarkable period of government intervention into the financial system since the Great Depression. In talking with reporters and our noneconomist friends, we have been besieged with questions about several aspects of these events. Here are a few of the most frequently asked questions with our best answers. Read more on NYTimes.com Posted on Sep 18, 08 \| in Teaching Weblog

	Scorecard: Wesfarmers after Coles Acquisition In the 1990s and early 2000s, Wesfarmers showed how a corporation could be successful with a similar strategy as GE in America: buying and selling unrelated businesses. But then private capital entered the acquisition market, bidding up the price for Australian corporations that were up for sales. Wesfarmers found it more difficult to pursue it disciplined strategy of finding acquisitions that you be managed more effectively and unlock shareholder value. Almost two years ago Wesfarmers but the underperforming Coles supermarket chain. Plenty of commentators were worried that Wefarmers, breaking its traditions, overpaid for Coles and would never be able to improve the performance of Coles as the Perth-based conglomerate had done with earlier acquisitions such as Bunnings. More... Posted on Sep 12, 08 \| in Courses Weblog

	Management Wisdom Courtesy of Jeff Pfefer Jeff Pfeffer has spent the past twenty years figuring out what management ideas have some systematic data behind them and what ideas are make for a good story but are simply wrong. Guy Kawasaki (who wrote a fantastic little book on entreprepreurship, The Art of the Start, which I am using in one of my classes) has sat down with Pfeffer and asked him questions on his book What were they thinking?. Read the interview. Posted on Sep 09, 08 \| in Teaching Weblog

	Charles Tilly 1929- 2008 I don't know anyone who has come in contact with Charles Tilly and who was not inspired by him. For those who have never met him, here are wonderful tributes to this exemplary scholar. Social Science Research Council Tribute Website Tributes by Scholars NY Times Obituary More... Posted on Aug 31, 08 \| in Research Weblog

	Alcaltel & Lucent: The French American Merger does not realize the promised benefits WHEN Alcatel, a French maker of telecoms equipment, announced its plan in 2006 to merge with Lucent, an American rival, reactions were mixed. There was general agreement that bigger was better and that the combined firm would benefit from greater geographical reach. But there was also scepticism that its French and American managers would be able to get along. With good reason, it seems: on July 29th Alcatel-Lucent announced its sixth consecutive quarterly loss and the resignations of Serge Tchuruk, its French chairman, and Patricia Russo, its American chief executive. Their firm’s troubles stem in large part from its internal clash of cultures. Read more on Economist.com Posted on Aug 22, 08 \| in Courses Weblog

	What Don Quixote Can Teach Managers and Entrepreneurs Miguel de Cervantes. 2003. Don Quixote. HarperCollins Publishers, New York. Translated by Edith Grossman. When I first encountered Don Quixote, I thought that a manager or entrepreneur could not possibly learn anything from this lunatic Spaniard. But on reflection I realized that Don Quixote provides some valuable insights into leadership and the challenge of dealing emotionally with the uncertainties inherent in any new venture. Let me briefly summarize the book: More... Posted on Aug 18, 08 \| in Teaching Weblog

	Taming Your Inner Homer Simpson My Kellogg students will remember that I asked them to rate their intelligence vis-a-vis the average member of the class. I routinely had 75 percent of all student who rate themselves above average. That is 25% too many. A colleague of mine warned me that 90% academics feel undervalued by their institution. But until now I read Dahlia Lithwick review of Richard Thaler's and new book Nudge: Improving Decisions About Health, Wealth, and Happiness I did not know that 94 percent of professors at large universities to believe themselves better than the "average professor." Read Lithwick excellent review of the book. Posted on May 12, 08 \| in Teaching Weblog

	Adrian Finlayson on the Difference of Being a Consultant and Being a CEO "It's much harder doing than telling. Things take a lot longer than you initially think, and along the way you have to manage a broad stakeholder base, including your team, investors and the board. A chief executive is a management consultant who has to implement his own recommendations." More... Posted on May 08, 08 \| in Courses Weblog

	Dell Needs to Change its Business Model In SMI we are doing a case study of how Dell developed a market positioning and orgnanizational strategy that allowed it to outcompete all other firms in the PC industry. Dell seemed unstoppable and. The Economist reports on the current troubles of Dell and how the returned founder of the firm tries to turn the firm around and restore it to glory, i.e. growth and profitability. Read Story September 5, 2008 update: Dell plans to sell all its factories Posted on May 05, 08 \| in Courses Weblog

	The Latest Reasoning about our Irrational Ways Elizabeth Kolbert reviews in the New Yorker the latest on findings on how people behave in irrational ways when making economic decisions. Read her Reviews of two new books. “Predictably Irrational: The Hidden Forces That Shape Our Decisions” (Harper; $25.95); by Ariely, Dan; “Nudge: Improving Decisions About Health, Wealth, and Happiness” (Yale; $25); by Thaler, Richard H. Posted on May 03, 08 \| in Teaching Weblog

	LaudaMotion’s New Business Model for Car Rentals: 1 Euro a day if drive at least 30 kilometers Laudamotion is gambling that it can charge advertisers rather than rental customers for the cost of renting out small car in a city. If you drive more than 30 kilometers a day in a metropolitan area, you only pay 1 euro. The service is presently available in some major German and Austrian cities. Will LaudaMotion's novel rental car business model work? Posted on May 02, 08 \| in Courses Weblog

	Danger Looming in Different Market Segment: The iPhone Challenge for Blackberry Blackberry's dominate the business PDA email market. But Apple's iPhone initially designed for consumers may invade the business market as well. More... Posted on Apr 27, 08 \| in Courses Weblog

	Henry Kravis On Creating Value Henry Kravis: The thing that is really important as you think about the private equity industry is that it has changed dramatically. In the late nineties we made a lot of mistakes at KKR. I’m not saying it’s good that we made the mistakes, but we did learn from our mistakes, because we changed the way we do business. The first thing we did was to make sure we acted and thought like industrialists. The days of just financial engineering are over. You have to really operate the business. Our whole approach at KKR since 1999 is that our job begins the day we buy a company. I like to say any fool can buy a company. There’s plenty of financing around. But what do you do with a business to create value? We’ve had an in-house consulting firm since the early eighties, but today we have a very large one. These operating consultants put metrics into every business that we’re involved with, they improve productivity, they shorten the supply chain, they improve sales. We expect everyone at KKR to understand their industry from the bottom up, and talk to purchasing managers, marketing people, salespeople, customers, suppliers, and understand the metrics, understand the best practices, the economic drivers, what drives an industry. Read Full Interview at Columbia Business School . Posted on Apr 25, 08 \| in Courses Weblog

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